Following our recent briefing on Munroe K Limited v Bank of Scotland, reporting positive news for lenders in the area of limitation, there is similar good news in this area following new legislation in Scotland.
The Scottish Parliament has now passed The Prescription (Scotland) Act 2018 though the key features set out here are not yet in force, pending a decision by the Scottish Government on certain transitionary features.
The new law provides in its section 5 that the time bar will not start to run until creditors know not only that they have a loss and that someone caused it, but awareness of who caused the loss. Although this might seem rather obvious and indeed is consistent with where Scottish law was some years ago, it was seen a necessary legal change following the decision of the UK Supreme Court in Gordon’s Trustees v Campbell Riddell.
The Act will mean that lenders have some protection against time bar defences on those frequent cases where customers defaulted but it was not until some years later that professional negligence is discovered.
Although this new development is good news, two other points about time bar in Scotland are unchanged and are important always to keep in mind. These are:
The relevant time bar period is usually 5 years in Scotland rather than 6 in England & Wales
Scotland has a rule of law called prescription which in effect actually cancels debts (rather than just preventing their enforcement through the courts, like limitation, which also exists). This means great care is needed in Scotland around any equivalent of standstill agreements. contact information: For further information or to discuss any aspect of the legal summary above, please contact Mark Higgins at mark.higgins@irwinmitchell.com or on 07795 504476
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