In the recent appeal court case of Linda Gordon and Others v Campbell Riddell Breeze Paterson LLP, the Court of Session has taken the opportunity to provide some further clarity on Morrison v ICL Plastics Ltd, the important time-bar decision by the Supreme Court in 2014.

Decision

The case concerned notices to quit which were served by the Defender, a firm of solicitors, in order to end several agricultural tenancies on behalf of the Pursuers. The notices were to take effect on 10 November 2005. On that date the Defender wrote to the Pursuers advising that the tenants were refusing to quit and that there was a potential dispute with the services rendered by the Defender. On 24 July 2008, the Scottish Land Court ruled that there were defects in certain of the notices. The present action was raised on 17 May 2012.

The Defender argued that the five-year time bar (contained in the Prescription and Limitation (Scotland) Act 1973) applied. Their obligation to pay damages to the Pursuer had existed for more than five years before proceedings were raised (i.e. from at least before May 2007, when legal fees were paid to the Defenders in relation to the Land Court proceedings).

The Pursuers relied on section 11(3) of the Act which states that where the creditor (i.e. the Pursuers) was not aware, and could not have reasonably been aware of loss or injury, then the obligation on the other party to pay compensation will become enforceable on the date when the creditor became, or with reasonable diligence could have become, aware of the loss or injury in question.

Based on the Morrison case, the Defender argued that section 11(3) applies only to cases of latent damage, i.e. where the problem is not manifest and the claimants are justifiably unaware of any loss they have suffered. The Pursuers distinguished Morrison on the facts. In Morrison the fact of loss was obvious – damage to a building was caused by an explosion at a neighbouring property. In this case, loss was not so clear – the damage was purely financial and at the time seemed to be no more than expenditure on legal fees.

The Court of Session rejected the Pursuers' appeal and followed the decision of Morrison. Following Morrison, section 11(3) applies only to latent damage. This case was time-barred. Lord Jones' judgment (which was upheld) stated, "it is not relevant that the Pursuers may not have regarded legal expenses as a 'loss' until a later point in time."

Comment

The case illustrates the wide-ranging impact that the Morrison decision has had on the law of time-bar in Scotland. Whilst some may disagree, it is not always the case that payment of legal fees is a loss. On the basis of this decision, on paying legal fees, a claimant has five years to decide whether or not someone is at fault and to raise a claim, failing which it is time-barred. A hard case indeed.

© MacRoberts 2016

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