Scottish businessman's claim for compensation for damage caused by explosion was out of time, says Supreme Court

Out-Law News | 04 Aug 2014 | 4:03 pm | 3 min. read

The owner of a Glasgow shop that was damaged during the fatal explosion at the ICL Plastics factory in 2004 has lost his claim for compensation in the Supreme Court, which found that he had begun his legal action after the five year period he had in which to do so had already ended.

David Morrison, owner of Gael Home Interiors, had argued that although he had known that the explosion had caused damage to his shop he had no way of knowing the cause of that explosion or that ICL Plastics was at fault. He began his claim in relation to the May 2004 explosion in August 2009.

The 1973 Prescription and Limitation (Scotland) Act sets a five-year time period from the data of the action giving rise to the claim within which a claim must be brought. The Supreme Court judges, by a majority of three to two, said that this time period began at the point that the person making a claim became aware that they had suffered loss, whether or not they were aware that it was caused by a breach of legal duty by another.

In his leading judgment, Lord Reed said that the question depended on the interpretation of the relevant provisions of the 1973 Act. Although judges in the lower courts had previously found that the person bringing the claim had five years in which to do so after becoming aware of the cause of the loss, rather than simply that the loss had occurred at all; the latter interpretation was "the more natural reading as a matter of ordinary English".

"More significantly, I am inclined to think that, if the draftsman had intended to require awareness of the cause of the loss, injury or damage before the prescriptive period would begin to run, that would have been a matter of such importance that he would have been likely to make that intention clearer," he said.

There were other "compelling" reasons in favour of the five-year period running from the Date of discovery of the loss, he said. Firstly, the "sheer oddity" of postponing the period according to the nature of the person making the claim's knowledge meant that "prescription [would] run more or less quickly according to the creditor's awareness of the law" and whether or not they received accurate advice from their solicitor, he said.

"That runs contrary to the legal certainty which is the objective of prescription, and seems unlikely to have been the intention of parliament," he said.

"More fundamentally, in what sense can the creditor be 'aware' that there has been a breach of duty, in advance of a judicial determination of the issue? Does being 'aware' require certainty of success in a claim, or probability, or something less? In practice, even if the creditor has received legal advice, he is likely, at best, to be aware only that he has good prospects of success," he said.

Lord Hodge, dissenting, pointed out that for almost 30 years a "consistent line of Scottish case law" treated the 1973 Act as "imposing a requirement of knowledge of causation".

"The law, by introducing discoverability tests in [the 1973 Act], has also recognised the injustice of cutting off a claim before the pursuer had or could with reasonable diligence have had sufficient information for a sufficient period to allow him to obtain legal advice and instruct the necessary investigations to raise legal proceedings to assert his right," he said.

"In my view, 'awareness' in [the 1973 Act] does not require certainty but it needs more than mere knowledge of possibilities. The pursuer must know the specified facts with sufficient confidence for him to be able to take the necessary steps to prepare a legal claim based on them, by obtaining appropriate legal and other advice and collecting evidence of those facts to present to a court or other tribunal," he said.

Both judges referred to a report issued by the Scottish Law Commission in 1989, which recommended that the legislation be changed to require knowledge of both the person at fault, and the fact that "the loss, injury and damage was attributable in whole or in part to an act or omission". However, these changes were never made.

"If the Commission's recommendations had been acted upon, Morrison would have been able to pursue its present claim," said Lord Hodge. "In light of the decision in this case, which has changed the law as it was previously understood, I would urge that those recommendations should be given fresh consideration."

Scottish litigation expert Craig Connal QC of Pinsent Masons, the law firm behind Out-Law.com, said that the time barring of otherwise good claims was "the stuff of nightmares for lawyers".

"The Supreme Court recognised in this case that their decision might have adverse consequences for some clients," he said.

"There will be some who have been in no hurry to get into court, thinking that the start date of the Scottish five-year period did not happen until they knew both that they had suffered a loss, which usually comes first, and that it was due to someone's fault. Now they will be waking up to the realisation that this time started from the knowledge of loss. Has the five years elapsed? If so, their claim may be dead in the water," he said.