A recent case at Edinburgh Sheriff Court has looked again at the manner in which the prescriptive period (i.e. the time period after which a claim expires, often referred to as 'time bar') in Scotland can be interrupted.
In Macdonald -v- Clydesdale Bank plc, Sheriff Ross considered the case of a property developer who sought damages against his former lender arising from the renewal of certain loan facilities in August 2009. The pursuer's case was founded upon alleged misrepresentations made to him at that time which induced him to renew his facilities with the Bank. As a result, he claimed that he required to pay substantial charges and additional interest that he would not otherwise have paid.
The action was raised on 6 December 2016, some seven years after the alleged misrepresentation. The lender raised a plea of prescription on the basis that more than five years had elapsed since the date of the alleged misrepresentation and the contract which it was said to have induced. It was accordingly incumbent on the pursuer to show that the prescriptive period had been interrupted in some way such that the claim was not extinguished.
The defender sought to rely upon two provision of the relevant legislation. First, it was argued that any period during which a creditor was induced by words or conduct of the debtor to refrain from making a relevant claim should be discounted. Second, it was argued that where loss arose from a continuing act or default, the prescriptive period would begin only from the date when the act ceased.
In relation to both arguments, the pursuer failed. The court went into useful detail in relation to the reasons why.
The Sheriff's view on written pleadings
The Sheriff makes clear at the outset of his discussion that the onus in this situation rests with the pursuer, who must show that they can bring themselves within the five year period. It was not sufficient for the Pursuer to rely upon simply attacking the defender's position. It was incumbent upon them to put forward a positive case as to why they fell within the exceptions to the rule. The sheriff levelled some criticism at the pursuers' pleadings in this regard.
The pursuer's position
Insofar as the pursuer's written pleadings set out their position on prescription, this amounted to the following:-
- That they had been induced to enter a contract by a misrepresentation in 2009. That misrepresentation continued to influence the pursuer, and accordingly induced the pursuer not to raise proceedings during that period, which extended to the end of the parties' relationship in 2012.
- That the defender could have corrected the misrepresentation at any time, but chose not to. In so choosing, the effect was that the pursuer remained unaware of his claim. This in turn meant that the pursuer was induced not to raise proceedings.
- That the misrepresentation represented a breach which was ongoing during the parties relationship and ended only upon termination of their relationship in 2012. The prescriptive period should accordingly run from then.
The Sheriff's decision
There was some evidence that the pursuer was aware of the claim prior to 2012, but the Sheriff did not consider that his decision required to rest on that. Instead, the court rejected the pursuer's position on prescription in all respects, without the need for evidence:-
- In relation to limb 1, the Sheriff explained that the misrepresentation which is said to have induced the contract is the foundation of the pursuer's claim. It cannot also be the reason why he did not raise his claim timeously. These are two distinct matters which the pursuer was conflating in order to extend the prescriptive period.
Put another way, if the misrepresentation induced the contract the pursuer would have suffered loss from the date of the contract. That was in 2009 and this was the date from which the period runs. In order to bring himself within an exception to that rule, the pursuer would require to show further representations within the five year period prior to raising the action which induced him not to raise proceedings.
- In relation to the duty to correct the misrepresentation, the Sheriff held that there was no such duty pled. Even if there had been pleadings to support such a duty, the sheriff would have had some difficulty with it. The court considered that such a duty would essentially mean that cases founding on misrepresentations would never expire on the basis that there would be a continuing duty to correct the misrepresentation and timebar would not start to run until corrected. The sheriff characterised this as an 'illicit attempt to circumvent the 1973 Act'.
A similar argument was advanced based on implying such a duty into the contract. This was also rejected on the basis that no such duty could be implied as the misrepresentation preceded the contract and was not part of the subject matter of it.
- The sheriff also took the view that the argument in relation to an ongoing wrong was incorrect. There was only one wrong, the alleged misrepresentation. All loss and damage flowed from and is referable to that wrong. Under the law as it stands, the pursuer is fixed with knowledge of both the loss and the wrongful act from the date that loss started to occur (i.e. when the contract induced by the wrong was agreed). It was accordingly not 'ongoing' in the sense anticipated by the statute and the pursuer could not succeed on this ground.
The Sheriff recognised that parties had become confused over the fact that the wrongful act which gave rise to the claim was also being used as the justification for why the prescriptive period should be extended:
'This confusion arises because, unlike most reported cases of prescription, the wrongful act here is of the same type of act covered in [the statutory provisions], namely induced error leading to reliance. As such 'induced error' is both the wrongful act and the excuse for not raising the action timeously. It is both the delict which founds the case and the statutory exemption which extends the time bar. The pursuer has blurred the boundaries to keep his case alive.'
The case demonstrates some of the uncertainties and complexities which still exist under the law as it stands. It is a timely case given that the Scottish Government has indicated that it intends to implement the Scottish Law Commission's recommendations on Prescription in the coming Parliament. A number of the issues raised in this case will be addressed in that legislation, and the case gives food for thought as Parliament considers the clarity which is required in this area.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.