Illustration of the prescription (extinction) of claims in court
- Suppose poor James borrows £1,000 from his friend rich Jean. They agree that no interest is payable on the loan and it will be repaid on 30th June 2017. Somehow, perhaps in tune with the maxim “neither a borrower nor a lender be”, their friendship cools and they see less and less of each other. When 30th June 2017 arrives poor James forgets to repay the money and rich Jean is feeling too rich to ask for it back. Five years pass by which time rich Jean is feeling less rich. In 2022 she remembers about the £1,000 she lent her erstwhile friend poor James over five years ago. He refuses to repay the money. Can she legally enforce the debt? No.
- This is a rudimentary example of the operation of what the law calls “prescription” which establishes a time limit within which Jean must raise her claim in court in order to make poor James repay the debt. If she fails to do so within the time-limit the law prescribes (“the prescriptive period”) then her ability to pursue the claim in court is lost. This might seem unfair. But there are good reasons for having some such time limit even although there may be scope for different views about the appropriate length of time. The rationale for having some cut-off point was outlined in an Australian High Court case (judicially approved in Scotland) as follows (with paragraphing supplied).
The rationale for prescription (extinction) of claims
“For nearly 400 years, the policy of the law has been to fix definite time limits … for prosecuting civil claims…Courts and commentators have perceived four broad rationales for the enactment of [prescription] periods.
- First, as time goes by, relevant evidence is likely to be lost.
- Second, it is oppressive, even ‘cruel’, to a defendant to allow an action to be brought long after the circumstances which gave rise to it have passed.
- Third, people should be able to arrange their affairs and utilize their resources on the basis that claims can no longer be made against them. Insurers, public institutions and businesses, particularly limited liability companies, have a significant interest in knowing that they have no liabilities beyond a definite period… Even where the cause of action relates to personal injuries, it will be often just as unfair to make the shareholders, ratepayers or taxpayers of today ultimately liable for wrongs of the distant past, as it is to refuse a plaintiff the right to reinstate a spent action arising from that wrong.
- The final rationale for [prescription] is that the public interest requires that disputes be settled as quickly as possible. In enacting [prescription] periods, legislatures have regard to all these rationales. A [prescription] period should not be seen therefore as an arbitrary cut off point unrelated to the demands of justice or the general welfare of society. It represents the legislature’s judgment that the welfare of society is best served by causes of action being litigated within the [prescriptive] period, notwithstanding that the enactment of that period may often result in a good cause of action being defeated.”
- The implausible tale of poor James and rich Jean given above is a stark example of how prescription may operate to exclude a claim. But, of course, in a real case the facts will usually be more complex and questions of whether or not a claim has “prescribed” can become highly technical. An example of that is provided by a recent case in the Appeal Court in Scotland which may spiral into an appeal to the Supreme Court in London.
Background to the case which may now go to the Supreme Court
- Solicitors are human. So, in acting for clients they sometimes make a mistake. Sometimes the mistake may cause loss to the client. Such cases are generally called “professional negligence” cases. The case in point is a professional negligence case against two law firms (“Firm 1” and “Firm 2”) who, one after the other, formerly acted for the clients concerned. One of the key aspects of the case was the question as to when the “prescriptive period” started running in relation to Firm 1. If the prescriptive period expired before the action against Firm 1 was ever raised in court then the action against Firm 1 falls at the first hurdle.
- In the tale of poor James and rich Janet and their loan agreement it was clear enough that 30th June 2017- being the date when the debt should have been repaid – is the appropriate start date from which the prescriptive period should run. After all, rich Janet knew from the start (even if she subsequently forgot) that the debt was due on 30th June 2017. But things are not always so clear-cut.
- Suppose clients are instructing a solicitors’ firm to do some legal work for them. Suppose the solicitor involved makes a mistake. Suppose that mistake ends up causing a loss to the clients. It would be unfair if the prescriptive period started running as from the date of the mistake. After all, the clients might well not know any mistake had been made. Indeed, the solicitor might well not know either. So legislation provides a different rule for identifying the start date for prescription in this sort of situation.
- Until quite recently the relevant statutory wording was generally interpreted by the courts to the effect that in such cases the prescriptive period starts when the client was both (a) aware that she had suffered a loss, and (b) that the loss had been caused by fault or negligence.
- Recently however the relevant statutory wording has been authoritatively re-interpreted by the Supreme Court in a 2014 case called here Morrison for short. In Morrison it was held that the prescriptive period start date is simply the date the client knew she had suffered loss – and nothing more.
- This re-interpretation by the Supreme Court in Morrison has proved a difficulty for the clients in the case now expected to end up in the Supreme Court. The clients’ “Firm 1” former solicitors became aware of a problem in relation to the work they had done for the clients – and were alive to the possibility of a professional negligence claim. Accordingly, quite properly, they wrote to the clients concerned advising them to seek advice elsewhere (which they did by going to “Firm 2”):
“ … [you should] take immediate steps to select a firm to advise you in relation to … [the tenant] and your concerns regarding our firm … you will obviously be seeking advice regarding the actings of our firm, and it may be necessary consequently for my firm to obtain separate advice for our own benefit in relation to those actings … ”.
- The terms of this letter in the context as a whole were considered enough to make the clients aware that they had suffered a loss – even if it was not clear what the loss was and nor that it had been caused by negligence. So, the prescriptive period started running in relation to a claim against “Firm 1” when the clients got the letter making them aware they had suffered loss. That was more than five years before the action against “Firm 1” was raised in court. So they were too late for a claim against “Firm 1” (albeit not too late in relation to ”Firm 2”).
- It is clear enough from the opinions of the Appeal Court here in Scotland that the judges were uneasy with the UK Supreme Court’s re-interpretation of the statutory provisions as to when prescription started running in a case such as this. But they felt bound to follow the reasoning of the Supreme Court and so rule that the claim had prescribed. The case report ends as follows:
“It was acknowledged [by the UK Supreme Court] that the benefit of the certainty achieved by the majority’s approach [in the UK Supreme Court] might come with the creation of “hard cases”. This action suggests that … the hard cases may be more common than anticipated.”
- We will see what happens if and when the Supreme Court comes to re-appraise its decision in Morrison.
Note: This material is for information purposes only and does not constitute any form of advice or recommendation by us. You should not rely upon it in making any decisions or taking or refraining from taking any action. If you would like us to advise you on any of the matters covered in this material, please contact Paul Neilly: email@example.com