Claim by way of plea is ‘effective’ to interrupt prescription in relation to an obligation

The Inner House of the Court of Session held that a claim need not be made by a formal conclusion or counterclaim, in a case was about a disputed insurance claim arising from a fire.

Lady Paton, Lord Drummond Young and Lord McGhie heard that the home of the defender, Lady Iam Hazel Virginia Whitehouse-Grant-Christ, was badly damaged by fire in February 2000.

The defender had arranged insurance for her property with the pursuers, Ecclesiastical Insurance Office PLC, and following the blaze she immediately intimated a claim.

There was no dispute as to the accidental cause of the fire and reports were obtained with a view to agreeing quantum, but by letter of 2 October 2000 the pursuers intimated that the claim was rejected on the basis that they were entitled to repudiate the policy on grounds of non-disclosure.

The defender did not accept that there had been any relevant non-disclosure and the pursuers accordingly raised the present action for declarator that they were entitled to avoid the policy.

The defender resisted the declarator and set out her reasons for disputing the pursuers’ right to avoid the policy, though she did not submit a formal counterclaim for payment until some ten years after the event.

However, in May 2002 she had intimated adjustments by way of a document called “adjustments for the defender”, which included a plea in law, numbered “9”, stating that an order for specific implement should be granted requiring the pursuer to perform its contractual obligations in accordance with the policy.

Thus the substantive dispute before the appeal judges, in the reclaiming motion from a decision of the Lord Ordinary, was whether a claim made by way of a plea in law and not in any formal conclusions was sufficient to interrupt the prescription provided by section 6 of the Prescription and Limitation (Scotland) Act 1973.

There was a further dispute over a claim by the defender for defamation and whether that could be allowed to proceed when made outwith the three-year period provided by section 18A of the Act, and there was also a general plea about delay.

The grounds of appeal were described as falling under three distinct heads: first, had the defender’s claim for indemnity under the policy been lost by prescription; second, should the defamation claim have been allowed late; and third, should the pursuers’ case be dismissed under any human rights provisions because of the “long delay”.

The argument under the first head turned on the proposition that plea 9 was “effective” to interrupt the running of the prescriptive period.

For the pursuers, it was pointed out that the argument based on plea 9 had not been presented to the Lord Ordinary and accordingly it could not be said that his decision was in error.

However, it was submitted that even if the court was prepared to consider the argument based on plea 9, it had to fail because it was not a “relevant claim” within the meaning of the Act.

It was contended that before a claim could be accepted as a relevant claim within the meaning of section 6 it required to be made by way of a conclusion in an initiating writ or in a proper counterclaim, but the judges disagreed.

Delivering the opinion of the court, Lord McGhie said: “It is an unattractive proposition that a party robustly maintaining a claim by way of defence in a litigation designed for the sole purpose of establishing whether that claim is maintainable against the other party should find her whole defence set at naught because of a technical rule that she did not present it in the correct way. There is accordingly some attraction in the idea that merely asserting a defence based on a claim for payment should have been enough to interrupt the prescription.

“The contention that a clear claim made by way of a formally stated ‘plea’ to a court of proper jurisdiction is not to be regarded as a relevant claim for the purposes of prescription appears to us to demonstrate an unduly technical approach to construction. This is not required by either the language or the purpose of the section. Taking a practical approach we are satisfied that plea 9 was sufficient to interrupt the running of prescription.”

In relation to the claim of defamation, the Lord Ordinary held that there was “no timeous claim” under section 18A, and the appeal judges rejected the defender’s argument that he “exercised his discretion wrongly” under section 19A.

Lord McGhie said: “We are entirely satisfied that the Lord Ordinary was entitled to conclude that there was no adequate explanation for the delay in bringing the proceedings. While it may only be the initial three-year period of failure to raise an action which positively requires some justification, we have no doubt that, in exercising his discretion, the Lord Ordinary was entitled to look at the whole period of delay.

“The defender did suffer from ill-health over that period, but it was not contended that this prevented her from attending to all business affairs throughout the ten years in question. Her own pleadings demonstrate an involvement with various official bodies over that period, as set out in the counterclaim… We are satisfied that the failure to provide a good explanation for the delay.”

The third head of argument in respect of delay was based on the proposition that although it was on the defender’s motion that the action was sisted, the action should be dismissed on the ground of delay and the pursuers “failure to prosecute their claim properly”.

The essence of the argument was that, as it was their action, the pursuers should have taken active steps to avoid delay.

They made no attempt to recall the sist, which led to the delay of about ten years for which the pursuers should be seen to be responsible.

It was also contended that there was a breach of the defender’s right to a fair trial under article 6(1) of the European Convention on Human Rights because the court itself should have taken steps to make sure the action proceeded.

But the court ruled that the defender’s contentions had “no merit”.

The judges put the case out By Order to determine further procedure in light of the opinion.