Prescription (Scotland) Bill

The Convener

Agenda item 2 is consideration of the Prescription (Scotland) Bill. We have a couple of panels with us representing the legal profession. I welcome John Paul Sheridan, who is the convener of the obligations sub-committee of the Law Society of Scotland, and Robert Howie QC of the Faculty of Advocates. Thank you very much for coming, gentlemen. I open the session by passing over to Neil Findlay, who has the first two or three questions.

Neil Findlay (Lothian) (Lab)

Good morning. We will try not to fall into cliché and stereotype when talking about lawyers and money—I am sure that we will get those gags over with early.

Section 3 of the bill will extend five-year prescription to obligations to pay money. Will you comment on the general principles of section 3 and the specific exemptions in it?

John Paul Sheridan (Law Society of Scotland)

The general view is that parties—or anyone—should be able to move on with their circumstances after five years, so they should not be chased for debts after that time. For example, if someone has a credit card debt or bank overdraft, they should be able to arrange their affairs so that they cannot be chased after that five-year period. That legal principle is applicable in most countries around the world.

The vast bulk of the exemptions are not because of any legal or logical reason for the debt to be treated any differently. The principle should be whether it is fair to the common good if, after a period, people are able to avoid paying council tax and other taxes, social security payments and the like.

The Law Society’s previous response indicated that council tax should not be exempted because, as we understand it, in England and Wales council tax is prescribed after six years, which is the English-equivalent limitation period.

We have come across situations where there can be particularly harsh results, because council tax is subject to joint and several liability. There could be two tenants, one of whom has paid their fair share. They could split up and move away, but be chased seven, eight or nine years down the line. However, we understand that there might well be political reasons for such debt not being treated in the same way as, say, a commercial debt arrangement.

That is the general statutory exclusion. Certainly tax and social security are reasonably common exemptions.

Neil Findlay

What about child maintenance?

John Paul Sheridan

Again, there is no legal or logical reason for treating that differently from any other debt. It is a matter for the committee, which is better able to assess political dimensions than I am, but I see no reason in principle why that should not be exempted.

Robert Howie QC (Faculty of Advocates)

I have relatively little to say about this. The Faculty of Advocates takes the view that these are political considerations and, as such, it expresses no view on them.

Neil Findlay

In its response to the bill, the faculty highlighted various drafting points in relation to section 3. Can you summarise them briefly?

Robert Howie

The short answer is no, because they are detailed, which is why we have put them down in print. With respect, I think that there is little benefit in discussing individual drafting matters, because I know from many years of unhappy experience that that tends not to work. It is better to look at why it is being contended that the drafting has become unclear, as was suggested with regard to the original drafting. You should bear it in mind that the faculty is talking about the original draft of the bill, and certain changes have been made in order to meet a number of the objections that we made with regard to the drafting. As a result, a number of our objections are no longer relevant.

In any case, as these items tend to be rather detailed, they are best read in print. You have the benefit of legal advice, and you can operate on that principle. I suspect that I would not be putting your time to the best use by saying it all again, perhaps using different language, because someone might say, “Yes, but the other word is here. What’s the difference between this word and that word?” Of course, that is exactly the kind of thing that we are talking about.

I do not know whether you are intending to ask about this, but an almost ideal example is the proposal to change the reference to “neglect or default” later on in the bill. We have said that we do not see the need to change it, because everybody knows—or, at least, all lawyers know—what neglect and default mean as a result of the House of Lords case that tells you what they mean. If you had not been brought up with Cranmer since you were so high in a good Presbyterian country, you might be a bit bemused by some of this or not have an immediate grasp of it, but there is a House of Lords case that tells you what the answer is. Once you have been told the answer as it applies to a Scottish appeal, why change it? It looks as though you are trying to achieve some change in meaning when my understanding is that you are not.

That just demonstrates part of the difficulty with talking about drafting changes. With respect, as I have said, they are best looked at in print.

Neil Findlay

Your brevity is welcome.

The Convener

Thank you for sparing us, but in your view are these drafting errors a significant issue?

Robert Howie

I would call them drafting questions. I would like to avoid the word “errors”, because it is an exercise in hypocrisy to talk very much about “drafting errors”. Everyone knows that this is fearsomely difficult. You think that you have got it right, but as those who do this sort of thing commercially will say, you can guarantee that the one thing that happens is the one thing that you did not draft for. That problem is writ large when it comes to parliamentary draftsmen. It is very easy for us to sit in court and say, “Well, that wasn’t terribly clever drafting”, even though that might frequently be the case.

However, this is simply a drafting matter; it is not hiding a particularly substantive issue. That kind of issue was lurking in one of the drafting questions that we had highlighted, but it has since been corrected. We mentioned the matter, and the commission changed the drafting as a result.

The Convener

That is good.

Section 5 relates to the start date for five-year prescription in relation to the obligation to pay damages, and it reverses the effect of a Supreme Court case—the Morrison case. The SLC consulted on four options for section 5, and decided to use option 3. Which option do both of you favour, and why? Are there any drawbacks to the option that has been used in section 5? You can give some examples to illustrate your point, if you like.

10:15  

John Paul Sheridan

The Law Society favoured option 3, although we would not have had any significant problems with option 2.

To summarise the issue, the case of David T Morrison & Co Ltd v ICL Plastics Ltd involved an explosion at the plastics factory in Maryhill a number of years ago. Everyone had understood the law to mean that the five-year period started from the date it was known that there had been a loss and that the loss had been caused by someone else.

There had obviously been a loss—everyone knew that there had been an explosion—but it had taken a number of years to work out what had happened. There had been prosecutions for deaths and a fatal accident inquiry, and a number of years had passed. Everyone had taken the view that there needed to be both a loss and an awareness of who had caused the loss before the five years started to tick. However, in that case, the Supreme Court said that it was the awareness of the loss that was key. That ruling has been followed on a number of occasions and has led to some problems or what people view as harsh results.

Another case that features heavily in the Scottish Law Commission report is Gordon v Campbell Riddell Breeze Paterson LLP. I hesitate to go into that in too much detail, because I am conscious that my fellow panellist appeared in the Supreme Court in that case and probably knows a great deal more about it than I do. The case was to do with a farming tenancy. The landlord had issued notices to remove the tenant. It turned out some years down the line that those notices were defective. The court said that, when someone incurred costs in trying to remove a person, that was a loss.

I have a slight concern that the way in which the bill has been drafted means that it does not deal with that particular problem. It is a question of what “loss” is. Take, for example, a standard case in which somebody has bought a house and paid the solicitor and the surveyor. Years later, it could turn out that there is a problem in that they do not own part of the ground or there is a difficulty with the building. According to one view, the person incurred the loss when they paid the professional fees to the solicitor or surveyor. That would not be the intention, but according to one view of the wording of the bill, the loss would have been incurred at that time. I have a slight concern about that.

Generally, the Law Society is of the view that the bill provides more clarification and puts the law back to what was understood prior to the decision in the Morrison case.

Robert Howie

I have to declare an interest. You have already heard part of it, but I was the losing senior in both of the cases mentioned. I have to be a little careful about what I say about them.

Section 5, as I understand it, is directed to a rewrite of Morrison, so as to restore the law to what it had previously been. There was something known as the actionability test. One had to be aware of the fact that the “act, neglect or default” was the source of the problem—there was something legally exceptionable that had caused the loss.

In Morrison, as Mr Sheridan said, everybody knew immediately that there was a horrible hole where there used to be a wall. However, it did not follow that they knew that the reason the hole existed was down to the negligence of some third party.

With respect to Mr Sheridan—it may have been a slip of the tongue on his part—the law was not that you needed to know the identity of the person responsible. You never needed to know that. That is why there were building contracts with about five sets of defenders—it was known that one of them was responsible, but not necessarily which one. The fact that it was known that one of them had to be responsible meant that the time was running. The responsible lawyer did not hang around and let his client wait before suing. They got in, sued and then could sit back and think once it was safe.

Section 5(5) is designed to restore the actionability test. As Mr Sheridan said, it is not directed immediately to the Campbell Riddell problem, which was about what is “loss” for this purpose. Presumably, that is because the commission considers that “loss” should continue to mean whatever it is that it came out of the Campbell Riddell meaning.

The trouble in the Campbell Riddell case was that the loss could be said to have arisen as soon as the unfortunate landlords had paid their solicitors their fees for drafting the notices that turned out to be defective a year later. Therefore, one year had gone before they knew anything about it.

There are still worse examples than the rather harsh outcome for the unfortunate landlords in that case. The classic example involves the situation in which there is a trust defect in drafting that emerges only after a generation, when someone dies at the age of 98, and time has long since run before anybody knew that there was even a problem. The other example, which is perhaps more common, involves cases in which a terrible mistake has been made in conveying land, which shows up when somebody sells the house 22 years later, and there is nothing to be done about it. As I understand it, section 5 is not designed to address such cases. It is designed to reverse the outcome in the Morrison case and to change the law in relation to the Dunfermline District Council v Blyth & Blyth Associates case, which is the one that says that it is not necessary to know the identity of the defender.

The result of that is that the time for prescription will start running a lot later than it does now. The faculty was of the view that that was no bad thing. We were in the same position as the Law Society but the opposite way round—we were not really concerned whether Parliament chose to legislate in favour of the second option or the third option, as long as it legislated for one of them. We had a marginal preference for the second option; I understand that the Law Society had a marginal preference in the other direction. It is entirely marginal, and if it seems proper to Parliament to legislate for the identity of the person to be known, we would not complain about that.

The Convener

Do members have any follow-up questions?

Neil Findlay

Can you explain what practical differences the proposals in the bill will make in situations in which there has been a conveyancing error?

Robert Howie

Let us assume that a conveyancing error is made that is fatal but the matter is not noticed at the time, the document goes on to the registers and nobody bothers to look at it again for 20 years until the owner wants to sell the house. As matters stand, loss is looked at with hindsight and paying the lawyers is considered to be the first item of loss, because that payment was wasted. The person bought—if I can use that word—a good title to their house, but they did not get it; they got a piece of paper with words on it that was quite worthless, legally speaking. Because the money was thrown away, it can be said, in retrospect, that that was a loss. The person knew perfectly well that the action that they took in paying their lawyers led to loss, because their pockets were lighter as a result of doing so. However, that means that time starts running against the person, and by the time they find out that anything is wrong, they discover that time ran out 10 years ago.

Section 5 is designed to say that it is necessary to know—constructively or actually, but I will use the shorthand for the moment—the three sets of facts, the first of which is that loss has actually occurred. Of course, the idea is that that is meant to hold up the date until the person finds out that there is a problem when they try to sell their house, which is a loss that was caused by act or omission. In the house-sale context, that is unlikely to be terribly difficult—it is more of a problem elsewhere.

I go back to the Morrison case. What happened there could have been no one’s fault. Let us imagine that the gas system was simply designed wrongly but not negligently—in other words, it was not possible to point to a fault that was objectionable or which no ordinarily skilled designer would have included in the design if they were acting with ordinary care. It was just that the state of science when that system was put in was such that it was not known that there was a problem there. The design was wrong and caused the system to blow up, but that was not anyone’s fault. The case was one in which we had to try to find out that it was somebody’s fault—or, at least, that is what we all thought that we had to do, until I made the nasty discovery in London.

That is not the real problem in the conveyancing case, in which nobody has any reason to believe that there has been loss at all. Section 5 seeks to say that until someone knows that they have a loss that has been caused by an identifiable person’s fault, and the identity of that person—in this case knowing that identity will not be difficult either—time will not run against them until they know the later of those things. It will move time running from the point at which they paid their lawyers in the first place, 20 years ago, to when they find out that there is a problem and they are told that it is because somebody made a terrible mess of the conveyancing. It will move the date quite dramatically in such cases.

Neil Findlay

What is the role of the insurance industry in that, as far as using delaying tactics is concerned? Does that mean that the egg timer is running down for all the time in which it prevaricates and delays?

John Paul Sheridan

If we look at the Law Commission’s submission, we can see that, generally, insurers favoured retaining the decision in Morrison as being the applicable law.

Robert Howie

As did the solicitors.

John Paul Sheridan

Yes—as indeed did the firms of solicitors that are viewed as being the insurer firms. The society takes a neutral view of that, as it has solicitor members who act on both sides of such matters. Personally, I do not act for any insurers. I tend to act in pursuing claims of this nature and therefore, understandably, favoured lengthening the prescription period. The general view among members of the society’s obligations committee was that the prescriptive period should be extended because the decision in Morrison was unfair and harsh and the position should be returned to what it had been previously.

Neil Findlay

I have a personal interest in a case with which some of you may be familiar. It is known as the Happy Valley Road conveyancing case, and the Law Society of Scotland has been involved with it. It does not relate particularly to prescription; it relates to the owners of property who have never done anything wrong but who have been badly let down by the insurance industry and the legal profession and still do not have title to their property, as far as I am aware. Anyway, I will divert away from that.

Robert Howie

We need to be a little careful of instantly jumping to the assumption that the insurance industry is always delaying things.

Neil Findlay

I did not say “always”, but in this case it has.

Robert Howie

In the kind of example that I was giving you in relation to the conveyancing flaw—the Morrison type of case—the insurers could do nothing, for good or ill, about changing the time at all. The problem is wholly independent of anything that they do. The issue that may arise with delays is one that was canvassed by some respondents, which was about delay in prosecution of actions and whether prescription should keep being interrupted permanently by actions that are raised and which may take an awful long time to go. Then, when they are thrown out, let us say, we start a new period of prescription for an immensely long period of time away. However, with respect, it is a little too easy just to jump to the conclusion that the insurance industry is always out for its own fell purposes—to delay things in order to secure prescription. Frequently, it is not doing anything.

Neil Findlay

You said that; I did not.

The Convener

I wonder whether that leads into David Torrance’s question on the Hugh Paterson case.

David Torrance (Kirkcaldy) (SNP)

Good morning, panel. The committee is aware of a parliamentary petition from Hugh Paterson, which provides an example of a situation in which 20-year prescription has operated harshly. The petition relates to a situation in which a solicitor makes a significant mistake when applying to register a change of ownership of a house. Furthermore, the mistake is not discovered until 20-year prescription has extinguished the associated right to sue the responsible solicitor for damages. How common is that type of situation at the moment? Can such cases be successfully dealt with by measures other than reform of 20-year prescription?

The Convener

Do panel members know that case?

10:30  

Robert Howie

I have no immediate knowledge of the case, but I take it that it is an example of the genus that we have just been talking about. The fact that I know nothing about it probably makes it a lot easier to say something.

There is a difficulty here. The critical purpose of 20-year prescription is to ensure certainty. In that regard, as it seemed to the Faculty of Advocates, there are different interests at play from those that are at play with a short negative prescription, in relation to which one can see grounds for extending time in the interests of pursuers. However, the whole point of the 20-year prescription is to bring things to a final halt. That is the critically important thing, generally on the basis of the public interest. There will be hard cases—Mr Paterson’s might be one of them; I do not know—in which people go over the 20-year period and find themselves simply without remedy. That brings into play the classic adage of the hard case making bad law if you legislate on the basis of it. One has to legislate on the basis of the general cases and accept that, unfortunately, from time to time, there will be hard ones.

I cannot answer at all the suggestion whether there would be other ways of getting around the kind of problem that arises in Mr Paterson’s case, because I just do not know enough about it.

John Paul Sheridan

I do not have anything to say beyond that, other than that we are supportive of having a final cut-off point at 20 years. I have read Mr Paterson’s petition, but I do not know the full circumstances. However, as Mr Howie says, there will always be problematic cases and I do not think that we can design a law that covers everything.

The Convener

Is it not right, though, that if you discover that there has been an issue only after 20 years—say, when you sell the property—you should still be able to do something about that in law?

Robert Howie

With respect, no. Indeed, as I understand it, what is being proposed by the SLC would make it even clearer that you cannot do anything about it. The object of the exercise is to secure an absolutely certain cut-off date that the insurance industry and, indeed, all of commerce that insures itself against risks can work against. What you cannot have is a situation in which liabilities can keep on running. That feeds into the question about whether 20-year prescription should be able to be interrupted, to which the Faculty of Advocates certainly said no. The reason for that is that, if you can interrupt it—by “interrupt it” I mean stop it and restart it again from the beginning—you have a situation in which you never know when liabilities are going to end. I think that the SLC had an example of a situation in which a liability would last 39 years. That makes the liabilities difficult—certainly expensive and perhaps even impossible—to insure against, and that is not in anyone’s interest.

It seemed to members of the Faculty of Advocates that, therefore, the crucially important thing was bringing about a final end date. Undoubtedly, some people will suffer because of that. There will be bad cases and there will be cases where, if they came before any of us, we would be sitting there trying to find some scheme or other that we could use to get around the issue or recharacterise it somehow—that is what lawyers are paid to do, and that is when our professional ingenuity would be put to a test. However, with regard to the purposes of determining how one legislates on the general case for the good of the public at large, I suggest that allowing the period to be interrupted is not the best way of approaching it. Legislation for individual cases has been found in the past to be legislation that proves to be the most problematic, to put it politely.

David Torrance

Section 8 would change the start date of 20-year prescription for the obligation to pay damages. You expressed some concern about how that would work in relation to omissions to act and on-going breaches. The SLC said in oral evidence to the committee that the language that is used in section 8 would be familiar to the courts from the Prescription and Limitation (Scotland) Act 1973 and that it therefore could not see a difficulty here. Are you now content on that point, or do you remain concerned?

Robert Howie

We remain concerned. We are concerned that it is difficult to say when an omission stops and nothing happens. How do I distinguish between nothing happening any longer and an omission carrying on? It is just not possible. It may be that what was being done by someone is no longer being done by them, but other effects from elsewhere mean that nothing appears to be happening or nothing is being noticed to be happening. There is a concern about an importance attending the need to notice or to be able to notice what is going on, but in relation to the technical and legal breaches that we have been talking about, how is an ordinary member of the public to know that that is or is not happening? It cannot be done.

I grant that it might be a problem that cannot be fixed and that this is possibly as good as we can get because one cannot distinguish the end of an omission. The Faculty of Advocates was nervous that in the case of omissions in particular, it would not work readily. It may be a fair point for the SLC to say that it cannot be made to work readily.

John Paul Sheridan

The Law Society had similar concerns about on-going breaches and omissions cases. We put that in our previous submission and our draft response to the bill, too. Like Mr Howie, I am not sure that there is a solution.

David Torrance

Section 8 proposes a new start date for the 20-year prescription on the obligation to pay damages. That date will be earlier in some cases—and never later—than under the current law. Is there a risk that, under section 8, there will be more cases where the obligation to pay damages is extinguished by the 20-year prescription without the right holder ever having been aware that there was a problem in the first place? If so, is section 8 a good idea?

John Paul Sheridan

The answer to the first part of your question is yes. The current law provides a prescription of 20 years from when the obligation became enforceable and the proposal under section 8 is 20 years from the date that the act or omission took place, which will always be at the same time or earlier. There will be situations where people have no awareness of a problem. Whether that is a good idea takes us back to our earlier discussion about certainty and the whole purpose of having the 20-year cut-off point, which is to have finality. If such certainty is deemed to be good, then yes, it is a good idea.

Robert Howie

The faculty was fairly firmly of the opinion that securing certainty was an advantage and that tying the prescription to the act or omission was wiser than trying to tie it to loss, because loss would simply mean that the date one starts from bounces off farther into the future, so we could end up with 39-year or indefinite obligations, which are thoroughly undesirable. Therefore, we felt that section 8 was an advantage.

We are not persuaded that the problem to which Mr Torrance refers will be particularly significant statistically or in seriousness. Most of the cases of damages will be covered by five-year prescriptions in respect of discoverability and all the rest of it. There comes a point at which one has just got to say that an end has to be reached. I was about to say, “Enough is enough”, but it is probably unwise to use that phrase right now.

The Convener

You have just used it.

Robert Howie

True. An end has to be brought to the process. We thought that that would be an advantage because the number of cases that would present the problem that is of concern will be very limited. Such cases will mostly be caught by the five-year prescription or extensions of that.

Stuart McMillan (Greenock and Inverclyde) (SNP)

Good morning, panel. I want to return to section 6, although you have touched on some of that in your answers in respect of the 20-year prescription. Mr Howie, you were quite clear that you do not feel that there should be any interruptions. Mr Sheridan, can you clarify the Law Society’s position?

John Paul Sheridan

The Law Society is happy for there not to be any interruption to the prescriptive period of 20 years, which is different from the approach to the five-year period. We are at one with the faculty on that.

Stuart McMillan

In response to the SLC’s discussion paper, Brodies suggested that an interruption should be possible. Do you have any comments on that suggestion?

John Paul Sheridan

No. There is a representative of Brodies on the next panel, so I will let them answer that. Certainly, that is not the view of the society as a whole.

The Convener

They are suitably primed now.

Stuart McMillan

Section 7 states that the 20-year prescription period that applies to certain property rights will no longer be able to be interrupted, but it can be extended, although only to allow on-going litigation to finish. In response to the consultation on the draft bill, the faculty suggested that the approach in section 7 might not work as well for property rights such as servitudes. Can you explain why that is the case and say whether there are any alternative approaches that might work better?

Robert Howie

The faculty’s concern is that servitudes are rights that run with the land and keep on going indefinitely into the future. Prescription must not be allowed to stop continuing property rights simply by saying that they continue until an action finishes and then are apparently somehow prescribed at the end of the action. If there are land rights that are meant to continue, are those not meant to be rights that, broadly speaking, relate to property and are therefore meant to be imprescriptable?

You do not lose your rights to property simply because you are not litigating about them. Therefore, if someone has a dispute about them and that dispute is still going after 20 years, why is it that the rights last only until the end of that litigation? Should not the right to servitudes continue in any event, whatever the outcome of the litigation? If the outcome of the litigation is that the person does not have a servitude right, there is nothing to talk about; if the outcome is that there is a servitude right, why has it been declared that they have a servitude right when, apparently, under the bill, that right has automatically been prescribed now that the 20-year period has passed? That seems to us to be wrong.

Stuart McMillan

Do you have anything to add to that, Mr Sheridan?

John Paul Sheridan

No.

The Convener

Gents, as you are doing so well at explaining things in plain English, will you explain what the issue is over the contracting out of prescription? I will then ask for your views on that.

John Paul Sheridan

The contracting out position is that, under the 1973 act, parties cannot agree to put the five-year period on hold, so they have to raise proceedings and serve them in order to interrupt the five-year period. The bill proposes that parties will be entitled to enter into a contract to suspend the period without the need to raise proceedings. The proposal in the bill is slightly narrower than that in the original discussion paper, in that the period is restricted to only one year. Parties will be able to put the process on hold for only a year, which would extend the prescription period from five years to six.

The Law Society does not see any reason why the period should be restricted to one year. If the parties want to agree to put things on hold for two or three years, we do not see any particular reason in principle why that should be objectionable. There can be all sorts of reasons why investigations might need to continue. There can be issues about loss or calculations, or different remedial solutions might have to be considered, which might take longer than a year. The purpose of section 13 is to prevent people from having to incur the costs of raising proceedings. If the process can be delayed for only one year, people might end up contracting out for a year and then still need to raise proceedings anyway because the issues have not been resolved.

The Convener

So basically, both parties would agree to put things at a standstill for only a year under these proposals.

John Paul Sheridan

Yes, that is what—

The Convener

And your argument is that you should be able to agree to almost any period you like.

John Paul Sheridan

It would be subject to the 20-year maximum but yes, I have no particular problem with anything along the lines of two, three, four or five years, for example. I do not see any problem with that.

The Convener

So long as both parties agree to it.

John Paul Sheridan

Yes.

10:45  

Robert Howie

The faculty was much more antagonistic to this idea. We said that there had to be tight restrictions on the so-called standstill agreements if you were to allow them at all. We would very much favour the agreements being restricted to no more than one year. The danger is that if you allow them on an open-ended basis, they will be abused roundly. What will end up happening is that provisions to extend will be put in contracts if you do not have, for example, the restriction in section 13(2)(a) of the 1973 act, which says that you can do it only after the period has commenced. The importance of that is that it stops people writing it into standard form contracts right at the start; otherwise, they would say in effect, “I will write in a provision in my standard form contract because I have lots of money and you do not, and I am bigger than you are. I will use my commercial power so your obligations to me last for 40 years and mine to you last for 40 minutes.” We regard that as thoroughly undesirable. Unless you have a restriction—for example, about when you can make these agreements—that is what we fear will happen. We are not persuaded that legislation against unfair contract terms will be able to get at that problem. People will draft around it—they do that regularly.

We are also concerned that the other danger is that, if you do not restrict the period of time for which you do it and the number of times that you do it, it will become an excuse for procrastination—for Fabian tactics, for delaying for foul reasons or fair. It is an invitation for nothing to happen. In fact, it will invite the very problems that prescription is there to prevent—evidence going stale, actions not happening on time, people being persecuted with old claims that cannot be proved because everybody has forgotten what happened and the documents have been lost. Generally, all the reasons that we have prescription in the first place are in danger of being thrown out with the bath water.

Lastly, it seems to us that there is a question about the logical sense in having legislation in which Parliament says, “We have produced a carefully calibrated balance between the interests of pursuers and defenders and we say that it is five years”—or 20 years or whatever number you care to insert, with whatever rights of extension you care to insert—but then says, “However, parties can contract out of it on an open-ended basis whenever they want.” One might ask why Parliament was bothering to legislate in the first place, because it is a free-for-all.

The current legislation simply prohibits it—sorry, I say that with a certitude that may mislead you. There is not actually any real authority about it, but the general understanding is that it is simply prohibited under section 13 of the 1973 act. The faculty was of the view that that should still be the general ruling proposition and that, if standstill agreements are to be allowed, they should be very tightly controlled to deal with the kind of case where it is necessary to try to obviate the need to go into court immediately because of some particular difficulty—cases where the whole thing is likely to be sorted out but the difficulty is getting somebody to sign up at the end. We need to be able to allow for such cases, as opposed to it being an excuse for putting the matter off and off and off until eventually somebody says, “I am not playing any more,” so that it is in fact being used as a weapon to delay them long enough until the evidence is gone and then you refuse to agree the next time, and they are caught.

I also suspect that the argument about people being required to sue in a great number of cases for lots of things on a protected basis can be readily exaggerated. It does happen, and it is certainly true that the construction industry is particularly notorious in that respect, but it does not in fact take up much resource. What tends to happen is that you raise your action against all the people and they serve the thing, they get protection, and run around to all the defenders and say, “It is all right—you do not need to waste time defending this; we are going to agree to stop this. We will call it if we have to sist it. Once we have the time bar broken, we will stop and everybody can sort it out.” It is not actually that much of an imposition and we fear that you may be producing something worse to cure a minor problem by allowing anything other than the tightest of rules on standstill agreements.

Basically, we consider that if Parliament has decided that these are the rules under which people’s rights are to be extinguished in these circumstances, they should not be entitled to be altered by parties “agreeing” to something when the agreements may be more or less in somebody’s interests. This is a situation in which, in some respects, Parliament may have to protect people from themselves.

The Convener

Mr Sheridan, Mr Howie vehemently disagrees with you; do you want to respond?

John Paul Sheridan

On the first point that Mr Howie made, I think that we might have been speaking at cross-purposes to some extent, because it is not the Law Society’s position that people should be able to contract out of something in advance. The example that he gave is a good one. We are not suggesting that a bank will have a bunch of solicitors on its panel who say, “You’re responsible for 30 years.” The bill covers that.

I do not accept the suggestion that there would be some sort of free-for-all. Both sides would have to agree to a standstill agreement. If, for example, the insurers thought that it was unreasonable to continue the period, they would not need to agree and proceedings would need to be raised. If both parties must agree to the extension of the period, I see no reason in principle why parties should be prevented from agreeing a contractual position.

Mr Howie suggested that there is not a big problem in practice. That is not the society’s experience. There are several hundred claims a year. Construction is a good example. Another is banks and lender claims—several hundred actions are raised and served, which wastes time not just for the solicitors and parties who are involved but for judicial resources. I see no reason in principle why there should not be agreement among commercial parties or individuals.

The Convener

Do you want the final word on this, Mr Howie?

Robert Howie

With respect, as far as judicial resources are concerned, the position is in danger of being misunderstood, because of course the whole point of the approach, if it operates properly, is that judicial resources are never involved; all that happens is that the case goes into court to be called—if it has to be in the Court of Session; in the sheriff court it does not even need that, because it is simply served. The case might never see a judge, because people promptly sist the things, to ensure that neither time nor money is spent that can be avoided.

I suspect that m’learned friend Mr Sheridan and I have a fundamental difference of view about the right thing to do and that the legislators will have to do what they are there to do, which is to make up their minds which way to jump.

Neil Findlay

The number of difficult cases might be small—let me take us back to the conveyancing case that I mentioned, as well as the Paterson case—but such cases are fundamental to confidence, particularly in the conveyancing system. Do we just say, “Oh, well, these are just odd cases, and in the big scheme of things they do not really matter”? Ultimately, when such cases get a high profile, people say, “These people thought that they had purchased a property and everything was fine, because they had engaged a professionally qualified solicitor, but what they expected did not materialise”, and the conveyancing system is called into question.

John Paul Sheridan

I do not know anything about the Happy Valley Road case that you are talking about, and I am not sure of the full details of the Paterson case. However, I accept your point in principle. There has to be an element of confidence in the conveyancing system as a whole. The Parliament has looked at the land registration process, including deeds and so on, and I understand that there is an incentive to register all land on the land registry within the next seven or eight years. That might do something to resolve the issue.

I am not sure what the solution is, because if there is a cut-off point of 20 years, as a point of general principle, there will still always be people who do not know that there is a problem until after the period has elapsed. People can buy homes and own them for 30, 40 or 50 years without ever looking at the title deeds. I am not sure what the solution is to that.

Robert Howie

I suspected that we might be asked how many of these hard cases there are. When Campbell Riddell was in the inner house, Lord Malcolm observed that there would be more such harsh cases than had perhaps been thought when Morrison was decided. I bent my mind to devising a way whereby one could get, on the basis of scientific evidence as opposed to anecdotal material from the likes of me, an idea of how many such cases there are. I regret that I do not think that there is a way of doing that. One of the reasons is that, if cases are abandoned for Morrison or Campbell Riddell-type reasons, it will happen in private, quietly. Nothing will appear above the waterline. What will be seen in court is a document that is indistinguishable from the document that would go in if a pursuer had won on a settlement, if a defender had won on a settlement, or if the case had gone away for umpteen reasons. There is simply nothing that would give it away. The best that you could do is rely on anecdote, and Morrison and Campbell Riddell have done quite a lot of damage, and will kill quite a lot more cases yet.

The difficulty that you have, particularly with conveyancing cases, is that you are talking about losses that happen at such long terms that, if you used that as the determinant of where you were going to fix your ultimate long negative prescription—what we have been talking about is a vicennium, or 20-year period—you would end up with a period so long that applying it across the board as the general cut-off for all obligations would pick up all the other obligations that had not been picked up by the five-year period, and the sets of five years could carry on not four times but 10 times. Let us say that 50 years was the ultimate cut-off date. You would find yourselves in the kind of difficulty and with the kind of cases that you will find if you look up 17th and 18th century law books. When we had 40 years as the period of long negative prescription, cases were fought on and on and on. The whole reason why things were pulled back in the 1970s to 20 years was to make a major reduction from the 40-year period, because it was felt that people were trying to pursue obligations at 35 years, when everybody was dead, half the evidence was lost and it was a hopeless endeavour for a court to work out what to do.

The difficulty is that the issue simply demonstrates the old adage about hard cases and bad law. If there is a particular problem in relation to conveyancing, that would suggest that the place to attack it is not the general law of prescription, which is what you are considering here, but in legislation relating to conveyancing. However, I would caution that the problem may just be impossible. It is a function of this: if you have any line drawn in the sand to show the point beyond which your rights are extinguished, there is always some poor soul who will find himself in some case on the wrong side of that line through no fault of his own, and there is nothing that human power can do about that.

Neil Findlay

I agree. I do not think that the remedy is in prescription.

The Convener

Those are all our questions for you, Mr Howie. We still have the second panel to go. Thank you for your time.

10:57 Meeting suspended.  

10:59 On resuming—  

The Convener

I welcome our second panel this morning—Douglas McGregor of Brodies LLP, Craig Connal QC of Pinsent Masons, Fenella Mason, head of construction and projects at Burness Paull LLP, and Iain Drummond of Shepherd and Wedderburn. Mr Drummond—am I right in saying that your firm has not given us any written evidence so far?

11:00  

Iain Drummond (Shepherd and Wedderburn)

That is right—we participated in the earlier workshop stage, but we did not provide a written response.

The Convener

Okay. It was suggested earlier that you might be the wild card on the panel. We have no idea what you are going to say.

Moving to questions, you have all been invited because you are involved in construction and engineering disputes and perhaps come at the matter on a different tack from the previous panel. We will start off with a question from Neil Findlay.

Neil Findlay

At the start of the session with the previous panel, I asked about section 3 and the extension of prescription to all obligations to pay money. What comments does the panel have on that section? Do you approve of what is being proposed and do you agree with the exemptions?

Fenella Mason (Burness Paull LLP)

Prescription is not something that regularly troubles us in the construction arena, but I agree with the commission’s approach and the introduction of the five-year prescriptive period in relation to statutory obligations to make payment. The Scottish Law Commission has approached the matter by distinguishing between statutory obligations, which are more akin to private-law rights, and public-law rights such as taxes, which have been carved out as exceptions.

One of the few experiences that I have had in the arena of statutory obligations to make payment was with clients in relation to Scottish Environment Protection Agency invoices, which look like contractual invoices but do not prescribe. That did not seem to be terribly fair, because the invoices came about through what looked like a contract and were operated in a way that was like a contract. However, although the invoices had not been followed up, and the client organisation had been bought and sold and so papers were lost, it was still exposed to an imprescriptable claim. Therefore, I agree with the approach that has been taken.

Douglas McGregor (Brodies LLP)

We also agree with the approach that the commission has adopted and have no difficulty with the proposed exceptions that have been agreed. We have not been privy to the submissions that were made to the commission by various bodies about the exceptions, and in an ideal world there probably would not be any exceptions to a general rule, but the decision has been taken and we do not have any problem with it.

I heard the previous session, in which there was some talk about preserving the status quo. That is potentially a good reason for including some of the exceptions. We should perhaps make the point that the number of exceptions should be limited. This is meant to be a general rule about statutory payments; if we get into a situation in which every statute introduces a new exception to the general rule, that might cause problems. Therefore, we would like there to be a limited number of exceptions, but we have no difficulty with the ones that are in the bill.

Iain Drummond

I will not deploy my wild card just yet; I agree with what has been said, and Shepherd and Wedderburn does not have any particular issue with the approach that has been taken. The exceptions that are listed are really policy exceptions, and I can understand the policy behind them. It is clearly a matter for Parliament to decide whether they are correct.

Craig Connal QC (Pinsent Masons)

I have nothing useful to add on the matter. I am not particularly representing a construction industry focus. My position is more general, but I agree with what the other panellists have said.

Neil Findlay

In terms of construction, can the panel give examples of the kinds of areas that they would be involved with in relation to payments between two parties? Would it be the type of arrangement that exists between a main contractor and subcontractor? As a construction lawyer, what would your involvement be in disputes around payment?

Fenella Mason

Normally, disputes would relate to private rights, so the answer to your question would be yes. This is about disputes between the contractor and his employer, between the contractor and his subcontractor or between the design team.

Neil Findlay

Are disputes in those areas an increasing phenomenon?

Fenella Mason

Things seem to be very busy, but that seems to be something that is cyclical. We tend to see more disputes when the economy is buoyant, and we are very busy with construction disputes at the moment.

Neil Findlay

I realise that this is going wider than the current topic, but I am very interested in the matter. It seems to me that it is becoming standard practice in contracts—some main contractors see disputes as part of the process. Some people recently told me, “We do work for company X, but we know that we will be in dispute with them, irrespective of how well we do the job, of the quality and standard of our work or of the timescale that we do it in.” Companies seem to operate on the basis that they will have disputes.

Fenella Mason

I am not sure that I would say that parties go into a contract intending to have a dispute, but they probably go into one without putting enough money into it. If there is not enough money in the contract, people will end up in a dispute. They will be desperate for more money, so they will not price any risks that are inherent in the job.

Iain Drummond

I tend to agree with that. People in the industry are talking about two particular issues, the first of which is how tight the margins are. With margins at between 1 per cent and 3 per cent, even a fairly minor problem can eat up the margin for the contractor, so they have to find some way of making it back.

The other problem is, as Ms Mason has highlighted, the lack of attention to design and planning. Everything is done in such a rush now that the temptation is often to skimp on those aspects. Construction is, apart from anything else, a complex business. There will be problems, and it will be difficult to sort them out when the margins are so tight. Contractors would say that, in the olden days, when margins were better, they were able to resolve difficulties with their clients and perhaps allow some of the margin to be swallowed for the sake of future relationships. However, that sort of thing is much more difficult at the moment.

Neil Findlay

Was that culture partly behind the collapse of Carillion?

Fenella Mason

It is difficult to say, but my sense is that a lot of it had to do with overoptimistic bidding. The market is very competitive.

Neil Findlay

I am sorry to deviate, convener, but since the witnesses were here, I had to ask the question.

The Convener

That is okay. I like to give a bit of leeway, and the questions were interesting.

Who comes after you, Mr Findlay? Have you finished your questions?

Neil Findlay

I am sorry, convener—I have another question, which is about the start date for the five-year prescription in relation to paying damages. In response to the reversal in the Morrison case, the Scottish Law Commission consulted on four options for section 5 before deciding on option 3. What would be your preference? Are you happy with option 3 being favoured?

Iain Drummond

I am certainly in favour of option 3, which I think represents the best balance in respect of curing the current situation and moving back to what the law was before the ICL Plastics case. It also includes the new ingredient of needing to know the identity of the person in question. I know that concern has been expressed that that will unduly lengthen the time before the five-year period starts to run, but in my opinion it is actually quite a short hop between paragraphs (b) and (c) in proposed new section 11(3A) of the 1973 act, which would be inserted by section 5 of the bill. Once the party with the potential claim knows that

“the loss, injury or damage was caused by a person’s act or omission”,

the gap between that and knowing the identity of the person tends to be short.

It is fair to say that someone who does not pursue their rights within a certain period should lose those rights, but the corollary is that you must allow that person to discover that the loss has occurred due to someone’s “act or omission” and to know the identity of the person so that they can pursue their rights in court. The balance, therefore, is a fair one.

The concern was discussed earlier that the five-year period might be moving on too much. The Law Commission pointed out that the fact that the 20-year period is, arguably, becoming shorter acts as a balance to that. I think that the commission feels—I agree—that that is a counteracting aspect that helps to keep the balance.

Fenella Mason

I agree with that. We were horrified by the Stockline decision; it seemed unfair and unduly harsh. The proposed reform strikes a much fairer balance between the two parties.

Douglas McGregor

Brodies also opted for option 3 when we responded to the consultation. We are quite happy with the bill.

The Convener

Mr Connal, did you go for option 3?

Craig Connal

No, I did not. Committee members should understand that this area of law is every lawyer’s nightmare. Such matters are very difficult, and whatever the Scottish Government says, under the bill they will continue to be difficult. Prescription gives everybody nightmares. It is the least favourite question to be asked.

Perhaps I can illustrate the position by disagreeing with something that Mr Howie said earlier. I will use the Stockline example. The place blew up. Generally speaking, the conclusion would be that such things tend not to happen due to an act of God: there is likely to be some fault somewhere. I suspect that many people took the view that proceedings ought, if it were at all possible, to have been raised against somebody within five years of the incident. There might have been a debate about who, and more than one target might have been identified.

One of the difficult questions that arises in such areas—I am sorry to raise a broader issue—is what the five-year period is intended for. I raised that question with the commission. If you follow the average case through and you know that there has been a loss, you know that it was somebody’s fault and you know who that somebody is, what policy purpose does the five years fulfil? That is quite a long time to wait just to start proceedings, which then take more time.

I do not necessarily agree with Mr Howie that proceedings nowadays will take ages, because other policy initiatives, of which the committee might be perfectly aware, are designed to make court proceedings more efficient and speedier.

It is quite a difficult exercise. Mr Drummond talked about balance, and the commission has referred to trying to strike a balance between competing interests. Everybody’s anecdotal material is different, but in my experience, over a depressingly large number of years in contentious work, 20-year prescription cases, in any form, are pretty rare animals. I do not know how many times I have been asked about a 20-year prescription, but it is not many.

Five-year cases are always on the table somewhere in the mix, so an extension of the five-year period—potentially, by quite a long time, by the time one has all the elements—would impact on far more cases, just in terms of volume of claims, than a change to the 20-year period. It is quite difficult to find that balance. The commission has decided to fix that.

The issue of identity is quite well illustrated by the Stockline case. In that case, a person might well have thought, “The building has blown up and I’m injured, so I have a claim”. Really, the only question was who was responsible. There was an obvious target, and further investigation revealed another less obvious target in relation to the gas systems and so on.

Undoubtedly, though, option 3 has scope for substantially extending the period, although broadly speaking, the world is going the way of tightening time limits. You will see that the average personal injury case ends after three years if people do not get off their mark and sue. Other statutory provisions use one year, and most people who have contracts that have bars on claims have shorter periods.

I felt that the balance had tilted a bit more, but that is just a personal view.

The Convener

Thank you for that.

11:15  

David Torrance

Section 8 proposes a new start date for 20-year prescription that, in some cases, will be earlier than the current law, and never later. What are your views on that?

Iain Drummond

I agree with that approach. It has the benefit of certainty, which is the overriding aim of the change to the legislation. In the sphere of work that I and Ms Mason are in—disputes in building contracts—it will probably shorten the 20-year prescription period. I do not think that that will create a problem in practice; I do not believe that lots of cases will fall foul of the new slightly shorter period.

At the moment, the difficulty is usually with the five-year period. In my career to date, I think that I have only once had an issue with a potential 20-year period. It is not a big issue, so I think that the approach that is being taken is important. If you asked most people who practice what the point is of the 20-year period, they would say that it is a long-stop. Most people—even solicitors who practice in this area—will not appreciate that the period can start quite a lot later than they think it would. There is then the possibility of the period being interrupted. However, because it is a true long-stop and it is certain, I favour the approach that is being taken.

Fenella Mason

I agree that it is a difficult area and that we are now moving towards looking at when the wrong occurred, as opposed to the previous situation, when there had to have been damage. In my area of work, the 20 years would previously have started when cracking occurred in the building. Now, the 20 years will start from the wrongful design that allowed the cracking to occur.

Let us take as an example a big infrastructure project—the Queensferry crossing. Let us assume that, back in 2008, one of the bridge’s designers created a doomed or defective design. The structure did not open until 2017. It is not unusual for it to take 10 or 12 years for a problem to manifest itself, by which time it would be too late, because it would be more than 20 years since the wrongful design was created. I suppose that it is exactly the same for Mr Paterson’s example of defective conveyancing—the right to pursue an action has gone.

It is harsh and difficult, but we have talked around and around it, and we have come back to the same position, which is that we have to draw a line somewhere. The problem is that after 20 years, records and witnesses cannot be found, people will have died and people will have left the company, so it becomes incredibly difficult to pursue an action. Overall, the change is the right thing to do.

The Convener

Do you think that it is the right thing to do because it is difficult to do something else?

Fenella Mason

The proposal is simpler and cleaner, and it is logical.

The Convener

Your example of the bridge was very good, because the projects are long-term projects. Mr Howie seems to think that it is right to set a limit. In a case where problems may emerge some years down the line, is it right to set a 20-year limit?

Fenella Mason

For us, there is a marked difference between the position of the designer and the position of the contractor. With the contractor, it is much easier to see that 20 years from the date of the wrong is fair, because the wrong will be when the contractor completes the structure and hands it over. On the Queensferry crossing, for example, the 20 years would start for the contractor in 2017, but the designer on such a big project will have done a great deal in advance, before anybody ever puts the project in place. There is a disparity there, but I cannot see a way of dealing with that in legislative reform.

The Convener

There is a disparity, and we would have no idea that the designer had done something wrong until, for example, the bridge was open and had been in operation for years.

Craig Connal

I agree with the principle of the 20-year period. We have to acknowledge that it is simply a question of policy. Most jurisdictions have some kind of long stop and they just take a view on that. Other jurisdictions have a period of less than 20 years. Twenty years is not particularly short or out of place. I think that it is the right thing to do. If you have a simple rule, once everybody knows that they can gear themselves up and inspect the bridge to find out what the situation is.

The reality of trying to deal with claims after a very long period is quite significant. We had a case, as I mentioned in my submission to the committee, in which somebody was complaining about something that was done on a document 47 years previously. Everyone wondered, “Who was that? I can see initials on the document, but this person is dead and anyone who worked with them has gone.” Papers get destroyed, and even in the electronic world it can be very difficult to track random emails from a long period ago.

There was a case involving the Kingston bridge in Glasgow that I have a vague recollection of—I cannot remember now why—and it caused enormous problems because, under the previous law, it was said that no loss had been incurred until many years after the event, and that therefore time had not started to run, so people were trying to traipse back into history. You will encounter great difficulties in getting a just solution after that time. It is just a question of policy, and I think that 20 years is the right period.

Douglas McGregor

We agree that that is the right policy, for the reasons that have been given, as it provides clarity and certainty. It is also more in keeping with the idea of the 20-year period as a long-stop. In the bill, we have a package of reforms to the 20-year period that all, taken together, create that long stop period. It is worth pointing out that, as far as the 20-year prescriptive period is concerned, awareness of loss has never been an issue. It is not like the five-year prescription, where the period is delayed by lack of awareness. For the 20-year period, awareness has never been an issue. What is looked at is the fact of loss, injury and damage having occurred; that in itself is a separate argument that people have in cases from time to time, but it is not as if the awareness issue is being removed by the bill.

David Torrance

The Law Society and the Faculty of Advocates have previously expressed concerns about how section 8 would work in relation to omission and continuing breaches. What are your views on that topic, including the comments by the Scottish Law Commission’s representative during our first evidence session today?

Iain Drummond

Rather like the previous panel, I struggle to see a solution to that. An omission is, by definition, something that has not been noticed. It is an act that has not been done that ought to have been done. If it has not been done, it is difficult to know that it is absent. I do not see a solution, but I agree with the approach that is taken in section 8. That is probably all that I can say.

Craig Connal

I listened to what was said earlier, which I found quite interesting. The only reconciliation that I could make is that, if you are dealing with a claim that arises from the involvement of some former professional, such as a surveyor or a lawyer, there is usually a time when that person ceases to be involved in the matter; the omission would presumably cease when their engagement finished, so in practice it might not be as repeatedly difficult to deal with as has been suggested. Beyond that, however, I have nothing useful to add.

Douglas McGregor

I agree. Omissions are harder to deal with than acts, but I do not think that there is any way in which the bill can deal with or address that problem.

The Convener

I should mention to the witnesses that not everyone ought to feel that they must answer every question.

Neil Findlay

Are the panel members all defending cases from people who are claiming, or are you on both sides—both prosecuting and defending?

Fenella Mason

We are all on both sides.

Stuart McMillan

Section 6 addresses whether the 20-year prescription will be able to be interrupted and whether it can be extended to allow continuing litigation or other proceedings to finish. What are your thoughts on that?

Iain Drummond

I have probably answered that already. Most practitioners would consider the 20-year prescription to be a pure long stop—it starts and finishes and that is it. They would not readily appreciate that it can be judicially interrupted by proceedings. I agree with the commission’s approach that that goes against the policy of it being a true long stop, so I agree with the approach that is being taken.

Douglas McGregor

In the consultation, we suggested that one possible alternative—I think that it was referred to earlier—might be that the 20-year period could simply be suspended for the period of the court action so that there would be a period that had run before the action was raised, the period of the court action and the remainder of the 20-year period. That is only one possible alternative and there are benefits to it in the sense that it is a halfway house between what we have at the moment and what the commission proposes.

However, our real problem and the reason that we raised the issue in the first place was the concerns that we had about the possibility of rights prescribing during litigation. The commission is dealing with that elsewhere in the bill, so that concern flies off. In those circumstances, we accept that the proposals that the commission has made fit better within the framework of the 1973 act and we are content with the decision that the 20-year period should not be capable of any interruption or suspension.

Fenella Mason

I agree. The current situation of restarting the clock makes no sense. The 20-year period should run and that should be it.

Craig Connal

I have nothing to add to that.

Stuart McMillan

I have a question on the back of what Mr McGregor and Ms Mason said. Mr Drummond, your position is just to continue. Do you agree or disagree with your colleagues on the panel or do you have anything further to add?

Iain Drummond

My position is the same, actually. The 20-year period should start and run over those 20 years continuously, which is what the commission proposes. I did not mention the subsidiary point, which is that there ought to be a short extension at the end if proceedings are on the go, for example. We cannot have a situation in which rights are litigated prior to the end of the 20-year period and then end just because the 20-year period comes to an end. That is good common sense.

Stuart McMillan

Section 7 says that the type of 20-year prescription that is applicable to certain property rights can no longer be interrupted. Again, there is the possibility of an extension to allow continuing litigation or other proceedings to finish. The Faculty of Advocates has suggested that that approach might not work as well for property rights such as servitudes. What are your thoughts on that issue?

Fenella Mason

Property law is not my area, but I listened to what Mr Howie said and was in complete agreement with him. It made complete sense.

Craig Connal

I agree. It makes logical sense. I do not think that the intention of the drafting was to cut off any right. That was not the way in which it was structured. However, I do not have any concrete examples to offer the committee.

The Convener

The witnesses heard the earlier discussion about contracting out. What are your views on that?

Douglas McGregor

We agree entirely with the commission that the option of contracting out should be available to parties. It would be available only in relation to the section 6 five-year and section 8A two-year prescriptive periods under the 1973 act. We agree that it should be limited to one chance at varying the period, that the variation should be a maximum of one year and that it must be made during the statutory prescriptive period.

Our only remaining concern is about the language in section 13, which talks specifically about extending the prescriptive period and provides parties with the right to do that. It does not talk about suspending the prescriptive period. Our view is that suspending the period is often a more attractive option for parties. It would also work better with the one-year restriction, because parties would have more certainty about the length of time for which they were agreeing to suspend the prescriptive period.

11:30  

When you are looking to extend a period by no more than one year, there needs to be some knowledge of the start date and the end date of the prescriptive period. Allowing only extensions will cause problems in the future. We are keen that the bill should be amended to allow extension, possibly alongside suspension; both can operate successfully, but we would like to make sure that suspension is a possibility.

Craig Connal

I endorse what Mr McGregor said about suspensions. I discussed that with him before we joined the committee; I had not considered that before, but as soon as he told me about it, I thought that it was an excellent point. In reality, such things arise. People have not worked out a precise start date and end date and, when we are talking about extension, we are actually talking about pressing the pause button. In my experience, what happens is that you think that your claim is against A and everybody thinks that A is probably the right target, but it might be against B, so then you start to worry about the time bar so you pause on B until A gets sorted out.

For that reason, I agree with the Law Society’s comment about timing. I do not see why the period should be restricted to one year in all cases; there might be cases in which a longer period could be agreed. I certainly do not agree with the faculty’s view that this is some kind of abusive process.

Everyone’s experience is different, but these things tend to arise in discussions between lawyers on both sides. If someone was bothered that a lay party was going to be bulldozed into something unwise, no doubt, as in other legislation, it could be written in that it would be possible only if the party had independent legal advice or something of that kind. However, I suspect that that is an unnecessary precaution. Such issues are usually discussed between lawyers in a messy situation in which there is good reason to press the pause button. I think that it is an excellent idea.

The proposed solution is commonly used in England and Wales and, although that is no reason to do anything, it is a practical solution. Mr Howie was right to say that judicial resource is not usually deployed to deal with such claims when they are commenced, but it is not always easy to do that in the Scottish system, where proceedings have to be served to break the time bar—in England, they are just issued and passed to court—and that might mean having to find someone when you are not sure where they are because they have changed address, or their company has changed or whatever. Being forced to rush about and do that can mean worry and expense.

The option is therefore worth while. The issue of how big a difference in cost it would make could be exaggerated, but the option is worth while.

Fenella Mason

We are in favour of the introduction of a standstill agreement and we have had experience of English clients and lawyers asking us for a standstill agreement. We are all talking about the problem and we do not know the cause of the defect that has emerged; we want to investigate it but we do not want to litigate. Our advice on that has to be that we cannot do it; we have to litigate to stop the clock running. That sets the scene and it can set parties against one another when they have been working together. A standstill agreement would be a welcome introduction.

There is another point about contracting out that causes us real concern. For some reason, the Scottish Law Commission has not picked up this point in its report; it has been sort of dismissed. However, it was picked up in the 1989 report. It is in relation to the parties’ ability to shorten the prescriptive period; we come across that issue regularly.

I understand that the commission is reluctant to get into the issue because of the distinction between prescription and limitation. You are all probably looking blank now; indeed, a lot of lawyers look blank, too. To my mind, the distinction is pretty artificial. The commercial reality is that parties need to be able to price for risk, and in the big infrastructure jobs that we see, they will accept around a 12-year period. Everyone knows that that is the position, and we do not want parties arguing over whether the clause in the contract that says, “We’re on the hook for only 12 years” is prescription—and therefore void and null, because it is an attempt to contract out—or limitation, which is allowed. If the language is incorrect, it might fall foul of the legislation. We know that the purpose of the legislation is to produce certainty and avoid stale claims, but it is not there to interfere with the freedom to contract.

A real opportunity has been missed in this legislation. The wording in the draft bill in the 1989 report is, to my mind, very adequate to deal with this problem, and it makes it clear that one can, by contract, limit one’s exposure. That provision is not in the bill, and I think that it is a great shame that we have not taken the opportunity to reassert that.

The Convener

That was very useful.

Iain Drummond

I tend to agree with most of what has been said, but I want to pick up on two points. First, I think that limiting the standstill agreement to one year would, in practice, undermine the utility of such agreements. I can think of three cases that my small team is handling in which the investigation of building and engineering defects is taking far longer than a year, because they are so complex. If these agreements were restricted to a year, the tendency would be to not use them and to raise proceedings in a protective way, as happens at the moment. That would be my concern: if we are going to have standstill agreements, we must ensure that they have a commercial utility.

Secondly, I absolutely agree with the point about there being no reference in the bill to restricting the limitation period. In its report, the commission specifically picks up on contractual limitation clauses not only in the area of conveyancing but in building contract claims, and it says that it does not want the provisions in section 13 to disturb the ability of commercial parties to enter into contractual limitation clauses. However, my concern is the same. Section 13 does not make that clear, and I think that, in future, there will be arguments in the courts over whether, in particular, proposed new section 13(4)(b) of the 1973 act, as inserted by section 13 of the bill, strikes down contract limitation clauses, which the commission has said is not the intention. I would prefer section 13 to be clarified so that it specifically says that contractual limitation clauses are not intended to be struck down by the provision.

It is perhaps a general rule that it is not particularly good statutory drafting to include a “for the avoidance of doubt” provision, but that sort of thing already happens in the bill in, for example, proposed new section 11(3B) to the 1973 act, as inserted by section 5(5). After the provision in proposed new section 11(3A) setting out the facts that a litigant needs to know for the five-year period to start running, proposed new subsection (3B) says, almost for the avoidance of doubt, that the individual does not need to be

“aware that the act or omission ... is actionable”.

I would prefer to see a similar provision in proposed new section 13(4)(b) of the 1973 act that preserves contractual limitation clauses.

The Convener

Does everyone else agree?

Douglas McGregor

I do not necessarily agree, but I see the problem that is being talked about. The view that we formed was that the bill as drafted would not prevent contractual limitation clauses, but clearly others have formed a different view. As that will no doubt become an argument at some date, there might be some advantage in clarifying matters, just to prevent any dispute from arising in the future.

Fenella Mason

That is the problem. It leaves scope for argument, which is unnecessary and unhelpful.

Iain Drummond

These clauses are in widespread use across private finance initiative contracts, building contracts and so on. The practice comes from English law, but it is now established here, and if there is no clarity to protect it, it will give rise to a lot of arguments.

Craig Connal

I have not come across the argument about this particular section and where it falls foul, but that might be down to the random nature of people’s general practice. As the committee will be aware, it is commonplace for contracts of every kind that everyone will enter into to contain a provision that basically says, “If you want to complain, you must make a claim or whatever within a particular period.” In the main, that does not seem to have caused any problems. I have nothing more to add on the matter.

The Convener

I thank Ms Mason for raising the issue. If anyone wants to write to us with further thoughts on the matter, please feel free to do so.

As members have no more questions, I thank our witnesses very much for their time. We have had a couple of very interesting evidence sessions this morning.

11:41 Meeting suspended.  

11:42 On resuming—  

The Convener

Item 2 is stage 1 evidence on the Prescription (Scotland) Bill. This is the third of our evidence sessions on the bill, and we have before us today Dr Andrew Simpson, a senior lecturer in the school of law at the University of Aberdeen, Dr Eleanor Russell, a senior lecturer in law at Glasgow Caledonian University, and David Wedderburn, who is described as a forensic architect. I would like to know what a forensic architect is.

David Wedderburn OBE (Royal Incorporation of Architects in Scotland)

I am dual qualified. I have a degree in architecture from the University of Aberdeen, a law degree from the University of Edinburgh and a masters in construction law from the University of Strathclyde.

The Convener

Thank you. Today, you are representing the Royal Incorporation of Architects in Scotland.

Welcome to you all. We have a number of questions to get through. I will start off with a question that is probably for Dr Simpson and Dr Russell. Do not feel that you all have to answer all the questions. If you want to say something, just indicate that you do.

Under the Prescription and Limitation (Scotland) Act 1973, five-year prescription applies to those obligations on one statutory list and not to those obligations on the second statutory list. Sections 1 to 3 of the bill would extend the scope of the obligations covered by five-year prescription. In particular, section 3 would extend five-year prescription to all statutory obligations to pay money. Do you agree with the general rule in section 3 that applies five-year prescription to statutory obligations to pay money, and do you agree with the exceptions to that general rule that are also set out in section 3?

Dr Eleanor Russell (Glasgow Caledonian University)

As you have just explained, the short negative prescription applies only to obligations that are set out in paragraph 1 of schedule 1 to the 1973 act, and that list is exhaustive. If a particular obligation is not stated on that list, the short negative prescription of five years—the quinquennium, as it is known—does not apply to the obligation. There are many statutory obligations to pay money that are not included in that list, and many of those are discussed in the Scottish Law Commission’s discussion paper and report.

I will give some examples. The recipient of legal aid will come under an obligation to the Scottish Legal Aid Board if he or she is successful in legal proceedings. That is clearly a statutory obligation to make payment, but it is not included in paragraph 1 of schedule 1 to the 1973 act.

Under the Insolvency Act 1986, a director who has engaged in wrongful trading comes under an obligation to contribute to the company’s assets. That is another statutory obligation that is not included in paragraph 1 of schedule 1 to the 1973 act.

The 1973 act as it is currently drafted has obvious omissions, and there is no principled reason for excluding some such obligations. Paragraph 1 of schedule 1 to the act sets out particular statutory obligations to make payment that are subject to the short negative prescription, but there is no general catch-all provision for statutory obligations to make payment.

Section 3 of the bill will, therefore, plug a lot of gaps. It also represents a considerable rationalisation of the law. Schedule 1 to the 1973 act includes statutory obligations under particular legislation that it will be possible to repeal if the general default position is put into legislation. A catch-all for all statutory obligations to make payment will also obviate the need for repeated updating of legislation as new schemes appear on the statute book, so it is very much to be welcomed.

As for the proposed exceptions in paragraph 2 of schedule 1 to the 1973 act, the reasons for exempting some obligations from five-year prescription and making them subject instead to 20-year prescription are a political matter. I have no problem with any of the exceptions that are in the bill, but they involve political decisions for the committee and the Parliament.

Dr Andrew Simpson (University of Aberdeen)

I agree and have little to add. The Scottish Law Commission was correct to talk about limiting the provision to statutory obligations to make payment because of the risk of catching a range of other obligations that public bodies might owe and that we would not want to be caught by quinquennial prescription.

The distinction that the commission drew in its report is broadly right. It said that it was aiming to capture private law obligations to make payment that are laid down in statute, as opposed to public law obligations. The commission is also right in saying that it would be difficult to state such a test in legislation. It is fundamentally a political matter to determine, case by case, whether further obligations should be included in paragraph 2 of schedule 1 to the 1973 act.

David Wedderburn

I do not have anything to add. The question did not exercise the RIAS.

The Convener

That is fine.

Stuart McMillan (Greenock and Inverclyde) (SNP)

The SLC consulted on four options for section 5 of the bill before deciding to use option 3. As a matter of policy, which option do you favour and why? Are there any drawbacks to the option that is set out in section 5? If you wanted to provide examples of specific types of cases to illustrate your points, that would be helpful.

Dr Russell

I am happy to endorse the commission’s proposal to go for option 3 and the approach that the bill adopts. I am sure that everyone is aware of this, but I say for the benefit of all who are present that option 3 proposed to return the law to the pre-Morrison v ICL Plastics position but to add a requirement for awareness or constructive awareness of the defender’s identity.

I whole-heartedly endorse that approach for a number of reasons. First, there is the logical argument. David Johnston, who was one of the commissioners behind the bill, is undoubtedly the leading authority on prescription and limitation in Scotland. In his book, he rightly points out that there is something odd about saying that an obligation is enforceable before one knows against whom it can be enforced.

Secondly, there is a comparative argument. Many jurisdictions around the world have adopted option 3—it has been adopted down south, in England and Wales, and in France, Germany, New Zealand and South Africa. Although we need not blindly follow what is happening in other jurisdictions, we can learn from it and must ask why so many of them are adopting option 3. In essence, it is on grounds of fairness.

That leads me to my third point, which is that it is not fair that time should run when one does not know who was responsible for the act or omission. The decision in Morrison v ICL Plastics is undoubtedly harsh on creditors, as is the more recent decision in Gordon v Campbell Riddell Breeze Paterson LLP.

Another reason for my preference for option 3 is that it will reduce expense and administrative costs. At present, creditors or pursuers are often forced to litigate against a multiplicity of defenders simply because they do not know which one is at fault. That problem is particularly acute in the construction industry, where it might not be clear whether the root of the problem is a construction defect or a design defect. Actions might well be raised against a panoply of defenders—the main contractor, various subcontractors, the designer, the architect, the engineer and the surveyor—all of whom are put to the trouble, time and expense of having to investigate the claim against them and intimate the claim to their insurers. An awful lot of resource is wasted in that way. Therefore, option 3 is preferable on that ground, too.

A further point relates to the matter of symmetry. Under the limitation provisions in the 1973 act, which apply to personal injury actions, the identity of the defender is one of the things of which the pursuer must be aware before time runs against him. For example, time will not run against the victim of a hit-and-run accident until he knows who was driving the car. To introduce a requirement of awareness for the prescription provisions will introduce an element of symmetry so that a solicitor who advises a client will know that, regardless of whether he or she is dealing with the short negative prescription provisions or the limitation provisions, actual or constructive awareness of the defender’s identity will be required.

That is a fairer approach. It certainly favours pursuers but, in addition, it will benefit all those people who could be sued at the moment although there is no merit in the claim against them. As is happening in the construction disputes that I mentioned, many people are being sued needlessly and option 3 will avoid that happening.

As far as drawbacks are concerned, the obvious drawback is that the actual wrongdoer will be exposed to the risk of liability for a longer period. However, that must be considered in the round. Option 3 will favour pursuers or creditors, but other proposals in the bill will favour defenders. We must look at the overall balance of fairness in the scheme as a whole.

For all those reasons, I support option 3.

The Convener

Mr Wedderburn, you must have something to say on the matter.

David Wedderburn

Yes. The RIAS is in favour of option 3, as it will give certainty to the people who are likely to be in the frame. That will not only allow people to make provision but will mean that professional indemnity insurance—PII—cover is a little more certain for the insurance industry. At the moment, the risks for insurance companies that are associated with a potential claim are much broader and indeterminate. Especially once an action has commenced and people have discovered the identity of the relevant people, option 3 will allow other parts of the team to get on with their lives and the relevant people to notify their insurers, which is a benefit.

10:15  

Dr Simpson

I agree with option 3. Dr Russell is right to draw attention to the fact that it provides fairness within the scheme of the bill as a whole. What we see in section 11(3) of the 1973 act as it is proposed to be amended is an exception to the general principle that an obligation to pay damages becomes enforceable on the date when the loss, injury or damage occurred. Section 11(3) is an exception that says that knowledge is relevant when the three-limbed test that the Scottish Law Commission proposes is satisfied.

It is worth emphasising that creditors have to exercise reasonable diligence in trying to acquire knowledge. We are not asking simply whether the creditor would have known

“(a) that loss, injury or damage has occurred,

(b) that the loss, injury or damage was caused by a person’s act or omission, and

(c) the identity of that person”;

we are asking whether the creditor exercised reasonable diligence. Would someone who had exercised reasonable diligence have known those things? That is what causes the prescription to run in relation to obligations to pay damages.

In some ways, it is quite a limited exception to a general rule. Knowledge is not relevant across the board to start prescription running; it provides an exception that respects fairness.

Stuart McMillan

That takes me to my next question. The Faculty of Advocates has expressed concerns, including that the new wording might increase litigation over the meaning of the words. Do you have any thoughts on that point?

The Convener

Should we say what wording we are referring to?

Stuart McMillan

It is in sections 5(2) and 5(3) of the bill, which introduce drafting changes to the 1973 act. It specifically changes reference to an “act, neglect or default” of the defender to an “act or omission” of the defender.

Dr Russell

I am aware that the Faculty of Advocates has expressed concern about the proposed change of terminology from “act, neglect or default” to “act or omission” and that there has been some concern about how “omission” might be interpreted.

It is useful to point out that the term “act or omission” is found elsewhere in the 1973 act. It appears in relation to the limitation provisions, where—in relation to personal injury, which I have referred to already—time runs from the date of injury or, in the case of a continuing act or omission, from

“the date on which it ceased”.

The change is not going to create any new problem, as the courts are familiar with dealing with acts or omissions. There have been cases such as Kennedy v Steinberg, which was a medical negligence case in which the issue was a doctor’s on-going omission to take a patient off a drug. The term “act or omission” is nothing new—the courts are familiar with it—and it would introduce a degree of symmetry and consistency across the prescription and limitation provisions, which can only be a good thing.

The Convener

The panel are all nodding.

David Wedderburn

Yes.

The Convener

Let me take Dr Russell’s example of cases in the construction industry. If foundations are not put in properly and, some years later, they start to sink or it all goes wrong, it could be argued that that was neglect but it might not have been an omission, which, in layman’s terms is forgetting to do something or just not doing it. Doing something wrong is different from an omission, is it not?

Dr Russell

The courts would have to address that on a case-by-case basis. The other panellists may have a view on the matter.

David Wedderburn

An inspecting architect missing something is regarded as neglect, but it is also an omission and would be picked up by the new wording.

Dr Simpson

The wording might also be slightly broader than the phrase “act, neglect or default”, as it would catch what the convener is describing as an omission to observe proper standards.

The Convener

It is not an issue legally?

Dr Simpson

I do not think so.

Stuart McMillan

Dr Simpson, in your earlier comments you mentioned the “loss, injury or damage” that has occurred. The Law Society picked up on that issue in its submission.

The first requirement in the test that is set out in section 5 is that “loss, injury or damage” has occurred. In its written submission, the Law Society identifies a potential uncertainty in relation to that requirement, saying that it is unclear whether the requirement would be treated as satisfied when there has been expenditure on professional fees but not at the same time an awareness that that constituted a loss. It refers to the case of Gordon v Campbell in that regard.

Do you agree with the Law Society that that is a potential issue? Is there a need for greater clarity in the bill?

Dr Simpson

I am not convinced that there is a need for greater clarity in the bill, to be honest. The Scottish Law Commission has looked at the Gordon case. It did that before the decision was handed down by the United Kingdom Supreme Court on the appeal, and the commission’s report expressly mentions that it could not take that decision into account.

The appeal upheld the decision of the extra division of the Court of Session for broadly the same reasons and so, on one level, it looks likely that the problem will be dealt with, as the Scottish Law Commission thought, by the insertion of that wording.

I would add only one caveat. Obviously we preserved the test that was used in Gordon v Campbell of loss, injury or damage having occurred; that is preserved in the revised wording of subsection (3A). The key question, if the case were going to be decided today, would be whether the trustees—the pursuers who were making the claim—also had sufficient awareness that

“the loss, injury or damage was caused by a person’s act or omission”

in late 2005, when the claim started to run.

I am not sure how familiar committee members are with the details of the case. If it would be helpful, I can say a bit about it.

The Convener

If you can do so briefly, that would be useful.

Dr Simpson

In essence, a defective notice to quit certain agricultural land had been served on tenants. The notice was served, I believe, in November 2004, and in November 2005 the tenants refused to get out. It was argued that the trustees—the pursuers in this case; the trustees who owned the land that was tenanted—had knowledge of the loss when they knew that the tenants would not voluntarily hand over the fields.

What happened next is an important part of the case. Using different solicitors, the trustees—the pursuers—raised an action in the Scottish Land Court to try to get the tenants removed on the basis of the notices, which, as it turned out, were defective. In 2008, the Land Court held that the notices could not be used and were indeed defective. Court proceedings then commenced in May 2012.

You can see the importance of the question. If prescription started to run when the tenants refused to get out, in November 2005, the five-year period would have elapsed by 2012. However, if prescription started to run only in 2008, when the Land Court handed down its decision that the notices were indeed defective, there was still an opportunity to enforce the claim in 2012. That was the nub of the issue.

The problem was, when did the trustees become aware that there was loss on the law as reformulated in the earlier decision? It was held at all levels of the decision—at first instance, by the extra division of the inner house of the Court of Session, then by the UK Supreme Court—that the trustees became aware of the loss in 2005, which meant that it followed that the claim had prescribed. It was felt that that was potentially rather harsh, because they argued that they became aware of the loss only when the Scottish Land Court handed down its decision and that they had actually sustained loss when the court handed down its decision to the effect that the tenants could not be removed on the basis of the defective notices.

The question for the court then was when did they become aware of loss, but the questions for the court now would be when did they become aware of loss, when did they become aware that the loss, injury or damage was caused by a person’s act or omission and when did they become aware of the identity of the person, so there are extra barriers put in.

On the facts of the case, the Scottish Law Commission believes, and has good reason to believe, that the trustees would not have become aware that the loss, injury or damage was caused by a person’s act or omission until 2008, or at least until a later period. Lord Hodge, who delivered the judgment in the Supreme Court, was a little careful in his comments on that and he just said that reform was being considered by the Scottish Parliament.

There is an argument to the effect that the second limb would have saved the trustees in Gordon v Campbell Riddell, but it is just an argument. One has to be conscious that other evidence was led in the case and it might be argued on some of that evidence that the pursuers could have been aware that the loss, injury or damage was caused by a person’s act or omission, and that they were not just aware from 2005 of that loss but aware that it was caused by someone whom they could identify.

It is possible that the pursuer might not have been saved in the Gordon case, but the extra tests improve the fairness of the law, overall, so I would still defend it. I would be a little bit careful in saying wholesale that the pursuer would have been saved. As the SLC said, he probably would have been, but I caveat that a little bit.

The Convener

Does anyone else want to comment? Dr Simpson has covered the issue comprehensively.

Stuart McMillan

My final area of questioning has been touched on earlier, in part.

In its written submission, the Law Society comments on the third part of the new test that is set out in section 5, namely that the pursuer must know the identity of the defender or defenders. The Law Society makes two points on that. First, it says that, with complex contractual or corporate structures, it can sometimes be difficult to identify the correct defender and mistakes can be made. It questions whether the prescriptive period would start to run only from the point at which the correct defender is identified.

Secondly, the Law Society raises the possibility that different prescriptive periods might run for different defenders if the pursuer becomes aware of the identity of one defender before another. Will you comment on those points? Is there a need for greater clarity about those issues in the bill?

Dr Russell

If there is more than one defender or, in effect, co-debtors, a natural consequence of the reformulated wording in section 5 is that there is a possibility of separate prescriptive periods against debtor 1, debtor 2 and debtor 3, according to when the awareness of the identity of those people becomes known, actually or constructively, to the creditor. There is a clear possibility of a different terminus or starting date in respect of the different obligations owed by each debtor.

As far as identifying the wrong defender is concerned, time will not run in relation to the obligation owed by the right defender unless the constructive awareness provision can be engaged; reference was made to that earlier. If the creditor ought to have become aware of the correct defender or debtor, time will start to run, because awareness includes both actual awareness and constructive awareness. If the correct defender ought to have been identified, time will run, as long as the awareness could have been acquired by the use of reasonable diligence, to which Dr Simpson referred.

10:30  

David Wedderburn

In the construction industry, where a multiplicity of subcontractors do different things at different times, there is a great likelihood of different prescriptive periods and of people becoming aware only later of particular actions of a particular sub-sub-subcontractor.

Bill Bowman (North East Scotland) (Con)

If people were jointly and severally liable, how would the provisions work? Could they be identified at different periods but end up being jointly liable?

Dr Simpson

I presume that, if someone identified a defender who was jointly and severally liable, they would sue that defender. If the committee would like me to check this further, I would be happy to do so, but I imagine that the rights in relation to the people who could have been co-defenders, such as rights of recovery against the defender, would start to operate and they would be subject to the same rules of prescription.

Bill Bowman

Would that apply even if such people were not involved in the neglect and if they were liable just because of a financial link?

Dr Simpson

I would need to think about the basis of liability. If people were not liable because of their neglect, we would need to think further about the basis of the neglect in each case.

The point about joint and several liability is extremely interesting. It does not undermine any provisions in the bill, but it would be interesting to see the exact effects. I do not want to speculate too much on that, but I would be happy to look at the issue further.

The Convener

If you want to write to us after the meeting with further thoughts, feel free to do so.

David Torrance (Kirkcaldy) (SNP)

All my questions are on section 8 of the bill and 20-year prescription. For the obligation to pay damages, section 8 proposes a new start date for 20-year prescription. Do you support the policy behind section 8? What are the reasons for your position?

The Convener

Who wants to go first? Shall I pick on someone?

Dr Russell

I am happy to support section 8. The purpose of the long negative prescription is to produce a long stop. It is designed to secure certainty and finality so that, at a certain stage, a potential defender can dispose of his files, dispense with his records and rest assured that he is no longer at risk of civil litigation.

Our current rules on the long negative prescription, which set the starting date at the date of loss, are quite unusual. It is quite unusual for the starting date—the terminus—for the long negative prescription to be the same as that for the short negative prescription; it is more usual to find a difference. The bill takes the starting date for the long negative prescription back to the date of the act or omission, which will in most cases be earlier and, particularly in construction matters, will be significantly earlier.

In a previous evidence session, a witness spoke about a defective design leading to loss many years later—maybe 16 years later. Under the current law, the 20-year prescriptive period does not start to run until the date of loss, which would be 16 years after the date of the act or omission in such a case. The bill takes the starting date for the long negative prescription back to the date of the act or omission, which means that the designer in that hypothetical example would be free of the obligation sooner. That might be considered to be harsh to the creditor, but one has to consider the overall scheme, fairness to all parties and the basic rationale for the long negative prescription, which is to secure certainty and finality. There must be a final cut-off point so that people are not being sued 36, 37 or 38 years down the line.

David Wedderburn

The RIAS is particularly pleased with this proposal. I know of two or three examples; one of them concerns a building that was constructed in about 1981, and either the architect or contractor—we do not know which—omitted some tanking. The building was well drained round about and the water table was never raised. In 2015, in terrible weather, it was finally raised and the building flooded. Trying to track down those involved was difficult. The contractor had gone out of business and everyone had died; the architect was the same. The owner had a right but it could not be vindicated, so it was pointless.

Having a real long stop, with a starting point and a clear end point, is good. The idea of not having interruptions is also good. Protecting people who have commenced proceedings before the end of the period provides a good balance.

Dr Simpson

I have little to add other than to say that I agree with my colleagues. The underlying policy, both for section 8 and for section 7, which we may go on to talk about, is that we need to have certainty and we need to deal with the situation in which there is destruction of evidence, which necessarily happens after a certain period of time. It is important to have a long-stop date, and it is better to have a clear long stop in the legislation. I think that the balance in the proposals is right.

David Torrance

Concerns have been expressed by stakeholders, including the Law Society of Scotland and the Faculty of Advocates, about how section 8 will work, in relation to “act or omission” and on-going breaches. The Scottish Law Commission, however, said in oral evidence that the language that is used in section 8 will be familiar to the courts from part of the Prescription and Limitation (Scotland) Act 1973 and so it could not see a difficulty. Do you wish to offer a view on that?

The Convener

Does anyone want to offer a view? If you do not want to, you do not have to.

Dr Russell

I will repeat what I said earlier. The term “act or omission” is familiar to the courts already. It appears in section 17 of the 1973 act in relation to the limitation provisions—the triennium for personal injury actions. It is nothing new and nothing with which the courts have not previously grappled. I am sure that they will be able to deal with it adequately under the bill.

David Torrance

The committee is aware of a parliamentary petition that provides an example of a situation in which 20-year prescription has operated harshly. The petitioner tried to sue his solicitor for defective conveyancing work only to discover that the obligation to pay damages had been extinguished by the 20-year prescription.

The new start date that is proposed in section 8 will be earlier in some cases than under the current law and will never be later. Is there a risk that we will, through section 8, see more harsh cases like that one? If so, should that affect the policy that underpins section 8?

Dr Simpson

There are dangers around a long prescription period. I say at the outset that I am not familiar with the case that you mention. In the interests of certainty, which has to be the underlying policy of any regime of prescription, there has to be a cut-off point.

I think that the issue that David Torrance has raised is about an error that was made in conveyancing at a very early stage, having not been detected for 20 or more years. David Torrance is nodding. That is therefore one of the genuinely hard cases that have been generated by the doctrine of prescription. It is regrettable, but in order to provide certainty—which is a valid concern for the legal system, too—there has to be a long stop.

The Convener

The case that we are referring to is the case of Mr Hugh Paterson. Does that ring any bells with you?

Dr Simpson

I am afraid that it does not.

The Convener

Dr Russell is nodding.

Dr Russell

Yes—I have heard about Mr Paterson’s petition. I do not know a great deal about the details, but I think that the essential problem was with the conveyancing. Mr Paterson did not discover the error until more than 20 years later and, because the issue of awareness is not relevant to the running of the long negative prescription, he has found himself on the wrong side of the prescription provisions. Undoubtedly, we all have sympathy for Mr Paterson, but that example simply has to be categorised as a hard case. As we know, hard cases make bad law.

The thinking behind long negative prescription is that it should not be subject to personal matters affecting a particular creditor. That is why matters of fraud and error do not apply in relation to long negative prescription and why matters of legal disability do not stop long negative prescription running. It is designed to be a long stop.

Irrespective of where we draw the line, there will be hard cases. It is conceivable that people would still fall foul of prescription, even if we were to return to the days of the 40-year-long negative prescription. In those circumstances, a person who had bought a house when they were aged 25 and there was a problem with the conveyancing, and who did not sell that house until they were 70, would still find themselves on the wrong side of the line. The interests of certainty and finality have to prevail. That is the underlying rationale of long negative prescription—it represents a final determinate cut-off. Sadly, some people will find themselves on the wrong side of that line.

The Convener

I guess the point is that you either have no cut-off or you have a cut-off and have to decide what it is.

Dr Russell

Yes—exactly. It is considered to be in the wider public interest that we have finality in relation to the existence of obligations, and that the courts are not clogged up by trying to deal with antiquated claims in which all the evidence has been lost and the witnesses have died or have forgotten what had gone on.

Dr Simpson

We have had this discussion before in the Scottish legal system—although that should not constrain this debate in any way, of course. Fundamentally, what motivated the introduction of ever-wider doctrines of extinctive prescription was the issue of destruction of evidence over time. I am pretty sure of that from my own work. Destruction of evidence is key and, given that evidence is often lost over long periods of time, the period—which was originally set at 40 years, as Dr Russell rightly said—was reduced some time ago to 20 years. Again, there is some arbitrariness in respect of what period one sets—it could be set at 21 years or 19 years. I am not at all suggesting that the period should be changed, but the idea of a firm cut-off point is extremely important.

Bill Bowman

I have two questions on interruptions and extensions to the 20-year prescription under section 6, which says that 20-year prescription can no longer be interrupted and can be extended only to allow on-going litigation or other proceedings to finish. For the Official Report, what are your views on that section of the bill?

Dr Russell

I whole-heartedly support the proposals in the bill. I share the view of the Law Society of Scotland and the Faculty of Advocates that interruptions to the long negative prescription by way of relevant claim or acknowledgement should not be permissible. They are simply inconsistent with the concept of a long-stop prescription.

The possibility of extension makes sense if someone were to raise proceedings 19 years down the line. Clearly, that person has not abandoned their rights. Prescription is often referred to as abandonment of rights: someone who is currently in the process of litigation is clearly not abandoning or sleeping on his rights, so it is only correct that the proceedings should be allowed to finish.

10:45  

Dr Simpson

I agree with Dr Russell about the need for introduction of the extension provision. It is a long stop in order to be consistent with the underlying policy, which is to bring about certainty. I think that that is sound.

David Wedderburn

I, too, agree and will add a further point in relation to professional indemnity insurance. As a retiring architect, there will be a period during which I will know which contracts are at risk and when they will expire, so I can therefore arrange run-off cover.

Bill Bowman

Thank you. In its response to the SLC discussion paper, Brodies said that it should still be possible to interrupt the 20-year period, and that the period should restart not from the beginning but from where it left off. As it is the only alternative to section 6 of the bill that is mentioned by stakeholders, other than the current law, do witnesses have any comments on that suggestion?

Dr Russell

Yes. I believe that Brodies’ concern was that rights might prescribe during litigation. That has obviously been dealt with by the extension provision, under which the long negative prescription can be extended only to allow existing proceedings to come to a conclusion. My understanding is that Brodies is now content with what is in the bill.

Dr Simpson

My view is the same.

The Convener

Section 7 says that it will no longer be possible for the 20-year prescription that applies to certain property rights to be interrupted and that it can be extended only to allow on-going litigation to finish. Although that mirrors the approach in section 6 for personal rights, the Faculty of Advocates has suggested that the approach in section 7 would not work well for property rights such as servitudes. Does the panel agree with that and, if so, are there any alternative approaches that might work better? Dr Simpson is thinking about that one.

Dr Simpson

I am. I have not read all of the faculty’s commentary, so what I say is not informed by that commentary. However, I am very happy with that provision. I am aware that servitude rights, such as rights of access that are constituted by one property in favour of another, are subject to the long extinctive prescription. I cannot see a problem with that under the provisions in the bill. I am happy that such rights should be subject to that long stop, for the sake of certainty. If the committee wants me to look at joint and several liability, I will be happy to comment in an email, if that would help, given that I am not familiar with the faculty’s commentary.

The Convener

That is fair enough. Does Mr Wedderburn have any thoughts on that?

David Wedderburn

No—I have nothing to add.

The Convener

No? I thought that you might have.

Dr Russell

I have read what the Faculty of Advocates said and what Mr Howie said in his evidence to the committee, and I agree with what was said, particularly in the faculty’s written submission. It seems anomalous that, if a person litigates about a right of servitude that they have not actually exercised for 19 years, it should prescribe after the 20-year period has elapsed on conclusion of the proceedings. That is something that could usefully be revisited.

The Convener

Thank you. I have questions on standstill agreements. When the Scottish Law Commission proposed the general possibility of being able to contract out of prescription, it got a mixed response. Section 13 of the bill contains a narrower proposal that would allow a single extension to the five-year period via a one-year standstill agreement. Section 13 also says that a contract to remove or shorten a statutory period of prescription would be invalid. Do you support the proposals in section 13, including permitting one-year standstill agreements? It would be helpful if you could explain the reasons for your views.

Dr Russell

I am happy to support the proposal that standstill agreements be permitted. They will help to facilitate investigation and settlement of claims. It is in everyone’s best interests to avoid the need for adversarial litigation. There is the fear that such agreements could be abused and, in essence, used as a delaying tactic. That is why the very important safeguards in the bill should be there.

A standstill agreement, or an agreement to delay the running of the prescriptive period, should not be entered into in advance and should be entered into only once the prescriptive period has started to run—in other words, once a dispute has arisen. Such agreements should be subject to a time limit; a one-year limit is proposed in the bill, which I support because it seems reasonable. It should also be possible to utilise the provision only once. I agree with the Faculty of Advocates that there should be a requirement that such agreements be entered into in writing. That is a very sensible proposal that I endorse. There is a place for standstill agreements, but we need to be careful that they are not abused. I think that the safeguards in the bill will prevent that.

The Convener

It would be an agreement, so both sides would need to agree.

Dr Russell

Absolutely.

Dr Simpson

I agree with the caveat that such agreements should be in writing, which makes a lot of sense. I have no problem with standstill agreements. It is quite clear from the Scottish Law Commission’s report that there is the possibility that people might in practice try to achieve that end through various devices, anyway. Standstill agreements provide a mechanism whereby the process is definitely possible, and therefore they promote legal certainty. I endorse that approach happily.

David Wedderburn

So do I. In the construction industry, in particular, there are often contracts of unequal power. I like the safeguards, because if they were not there the powerful part of the contract would set in and start extending the prescriptive period without restrictions. The safeguards will lead to fairness.

The Convener

Can you explain that point a bit further?

David Wedderburn

Yes. One could consider entering into such an agreement only once there was a dispute, so it could not be set up in the original contract. Due to the one-year limit and the fact that it will be possible to enter into such an agreement only once, the length of time cannot be extended, which would be another temptation for the more powerful contracting party.

The Convener

Section 14 would introduce an explicit statement in legislation that, when there is a question about whether a right or obligation has been extinguished by prescription, the burden of proof lies with the pursuer. What are your views on that proposed change?

Dr Russell

I am very happy to endorse the proposal. The current law is uncertain and there are conflicting dicta as to whether the pursuer or defender bears the burden of proof. For example, in the case of Strathclyde Regional Council v W A Fairhurst & Partners, the court said that the defender bears the burden or onus of proof. Whereas there are other cases, such as Pelagic Freezing (Scotland) Ltd v Lovie Construction Ltd and Grontmij Group Ltd, and Timothy R Richardson v Quercus Ltd, in which the court took a different view and said that the pursuer bears the burden of proof. Therefore, there is some uncertainty. It is perhaps surprising that the 1973 act did not address that issue and make specific provision on it—I think that the Court of Session judges have said that not providing for that was a somewhat surprising omission.

Sometimes, it is said the person who makes an affirmative statement bears the onus of proof, but that is problematic because it would depend on how pleadings were framed. A pursuer could say, “My right subsists,” which is obviously an affirmative statement, but they could equally say, “Your obligation to me has not prescribed,” which is a negative statement. Therefore, that proposition takes us no further forward and we need statutory clarification of where the burden rests.

The proposal in the bill is to place the burden on the creditor. It is important that the terminology that is used is “creditor” rather than “pursuer”, because the question of the onus of proof could arise in a counter-claim, in which the creditor will obviously be the defender in the main action. That is why the bill says that the burden of proof should rest on the creditor. I endorse that proposal. It makes perfect sense. I would not suggest, or endorse any suggestion, that the burden should vary depending on whether we are dealing with a two-year, five-year, 10-year or 20-year prescriptive period. A uniform approach should be taken and the approach that is taken in the bill is eminently sensible.

Dr Simpson

I completely agree that it is very important that we have some clarity on the matter. The Scottish Law Commission set out options 1, 2 and 3—that the burden should be on the creditor, that it should be on the debtor or that it should switch. In the first instance, we definitely need some clarity and this is an excellent opportunity to provide that. As to where the burden of proof should lie, although I respect the view that there should be a switch and can see some merit to it, for the reasons that Dr Russell gave I am not convinced of it.

To be honest, when I saw the options, I was originally unsure as to whether the burden should be on the pursuer or on the defender. I found some of the reasoning that Morton Fraser gave in its response to the Scottish Law Commission discussion paper interesting in that regard. It commented:

“It seems unfair that a defender should be allowed to assert a defence that an action has prescribed and then sit back and leave the pursuer to prove that this is not the case.”

Of course, the language of “creditor” and “debtor” helps to address that to some extent.

The matter has clearly become a bit of a moot point in the courts. The senators of the College of Justice came to the view that option 1, 2 or 3 needs to be implemented. On balance, I am not terribly sure whether I would go with option 1 or 2, but there is a preponderance of opinion in favour of option 1 now.

David Wedderburn

I have little to add, other than to say that it is essential to have some clarity, which the bill provides, and it is appropriate to choose the creditor as the person on whom the burden of proof lies.

The Convener

If members have no other questions, do any other witnesses have anything to add that we have not covered?

Dr Russell

I point out that the bill proposes a reformulation of the fraud and error provision in section 6(4)(a) of the 1973 act. It might have been appropriate for it also to address section 6(4)(b) of the 1973 act, which relates to legal disability.

Legal disability has the effect of stopping the short negative prescription from running but has no impact on the running of the long negative prescription. It is defined in section 15(1) as

“legal disability by reason of nonage or unsoundness of mind”.

You are probably aware that the Scottish Law Commission produced a discussion paper in 2006 on personal injury actions: limitation and prescribed claims, which was followed by a report in 2007. At that time, the commission was highly critical of the terminology of “unsoundness of mind” and took the view that it was outdated language. The Scottish Government then conducted a consultation and agreed with what the Scottish Law Commission had said about the terminology being outdated and about the term “unsoundness of mind” being potentially insulting.

11:00  

I would endorse that and I think that the opportunity could have been taken here to update the language along the lines that have been proposed by the SLC to the effect that legal disability be defined as referring to somebody who is incapable within the terms of the Adults with Incapacity (Scotland) Act 2000. I think that in Scotland in 2018, we should not have language such as “unsoundness of mind” appearing in statutory provisions. The opportunity could have been taken here to tidy that up, given that we are seeing slight changes to other definitions, such as changes to the term “relevant claim” so that it includes claims in receivership and administration. Updating the language would also have been appropriate.

Dr Simpson

I certainly agree that it is worth revisiting the language.

Bill Bowman

Would changing the language change the meaning or the impact of that section?

Dr Russell

The term “unsoundness of mind” is considered to be insulting and offensive and I do not think that it has any place in this day and age.

Bill Bowman

But it would work in the other way that you said.

Dr Russell

Yes. Section 1(6) of the Adults with Incapacity (Scotland) Act 2000 would be a much more useful test to use.

Bill Bowman

But is it a different test? That is what I am getting at. Would it change the impact?

Dr Russell

No—it is really about a change of language. The language that is currently employed is frankly insulting and offensive. It certainly has the potential to cause offence.

The Convener

What is the new wording that you are suggesting?

Dr Russell

Somebody who is incapable within the terms of section 1(6) of the 2000 act. That proposal appears in the SLC’s 2007 report. It is a matter of terminology rather than a matter of substance, to take up Mr Bowman’s point. The terminology is just not appropriate in the modern world.

The Convener

That is very useful. We are here to consider potential amendments—that is our job, and you are here to help us with that.

I thank you all for your time. It has been a very interesting session. I also thank you for the language that you have used, which has been easy to follow, and some of the examples that you have used have been very useful as well.

I will suspend the meeting to allow the panel to leave.

11:02 Meeting suspended.  

11:04 On resuming—  

The Convener

Item 3 is consideration of the Prescription (Scotland) Bill. This is the fourth of our evidence sessions on the bill. We have with us today Mike Dailly, who is a solicitor advocate and principal solicitor at the Govan Law Centre, and Mike Holmyard, who is a money advice consultant with Citizens Advice Scotland. We have two Mikes, so that could be interesting. I welcome you both to the meeting.

Neil Findlay (Lothian) (Lab)

The Scottish Government has suggested that the exceptions for council tax and business rates are likely to be unchanged, which makes those debts subject to 20-year prescription, but it has been suggested that some councils may treat such debts differently and apply a five-year prescription. What is your experience of pursuing such debts?

Mike Dailly (Govan Law Centre)

It is unfair to have a 20-year prescription period for council tax. The period is six years in England. If you go back to the Scottish Law Commission’s discussion paper, you will see that the idea—which is laudable—was to have clarity, simplicity and certainty, and to have all legal obligations subject to a five-year prescription. That principle is absolutely correct. I say that in an ideal world, it would be five years for council tax—it would be five years for everything. However, Govan Law Centre appreciates that the bill does not make provision for that, and that there are exceptions.

What we suggest as a compromise for the committee to think about, if we are not going to get the ideal period of five years, is that the statutory obligations that have been excepted should be subject to five years’ prescription, with a test of whether there have been exceptional circumstances. The exceptional circumstances test that we propose is to establish whether wilful, false or misleading information has been given by the debtor, which has resulted in a material delay in enforcing the debt. That is the situation in Malta for tax, in relation to which there is a six-year prescriptive period that can be extended if wilful or misleading information has been provided. The second scenario is where the creditor can show that there has been a delay in enforcing the obligation that was not a material delay caused by its sitting on the debt.

The ideal situation would be a five-year prescription for everything. If we are not going to have that, it cannot be right to have exceptions for 20 years for all the different categories, because that will not fulfil the Scottish Government’s aim of achieving simplicity, fairness and clarity.

Neil Findlay

Did you say that the period is six years in England?

Mike Dailly

Yes, for council tax.

Mike Holmyard (Citizens Advice Scotland)

CAS agrees that five years is long enough. Our advisers encounter issues when they talk to clients about council tax debts that are 15 or 18 years old, and the client has no recollection of whether the debt has been paid and cannot get bank statements dating back to that time.

Also, the council, on the other hand, may have changed its systems during that time. The old debt could be on a previous system and the council cannot prove that the debt is owed by producing a statement of account, but sheriff officers are still pursuing the debt. In relation to fairness, as with any other type of debt, it is quite difficult for a consumer to contest whether a debt that carries on for that length of time is still due.

Neil Findlay

Have either of you had discussions with the Government on that issue?

Mike Holmyard

No.

Mike Dailly

No. I completely agree with Mike Holmyard’s point about old council tax debts that are still kicking around. How come we have 20 years for that, when the Parliament has had to rectify the old poll tax debts, which kicked around for a very long time? In England and Wales, the liabilities were extinguished. We did not do that in Scotland, which was wrong—we finally got round to doing it not long ago, through the Scottish Parliament. It is incongruous to say that people should not have been subject to a 20-year period for poll tax debt and so on, but that we will extend the period for council tax debt.

Mike Holmyard

We should remember that every payment that is made during the five-year prescriptive period just extends the period, so a council tax debt that starts now could still be being collected in 18 or 19 years, just because payments have been made and the five-year prescriptive period has been renewed. It is good to have a 20-year long stop, but with a five-year prescription a debt can still carry on for a very long time.

Neil Findlay

There must be some basis of truth in the Law Society of Scotland’s suggestion that some councils are deliberately not pursuing debts because of the 6 per cent surcharge that is added to the debt, which is a benefit to them. Do you have any experience of that? Is it happening?

Mike Dailly

What I have seen happen in relation to council tax debt is local authorities going for sequestration. If the person is a homeowner, that approach can be pernicious: if the homeowner has more than £3,000 of debt, the local authority can petition for sequestration. That happens every day in Scotland. When it happens and there is equity in the property—there often is, particularly among people who have exercised the right to buy—the trustee in bankruptcy has a legal obligation to realise the assets on behalf of the creditors, so they end up creating homelessness.

Neil Findlay

If it looks as though we are not going to get this change, why not push as hard as we can to get it? I know Mr Dailly of old—he is a campaigner. I am sure that if we push hard at this stage and campaign hard, we can get it done. I hope that we are not throwing in our hand, at this stage.

Mike Dailly

No. Citizens Advice Scotland and Govan Law Centre are in complete agreement that the Scottish Law Commission is correct in its original premise about the purity of the principle of having five years’ prescription. Why not have five years? It seems very peculiar that the period will be six years in England and that, as Mike Holmyard said, when the debtor makes a payment, the debt then continues for another five years, which means that the 20-year prescription is unnecessary for council tax.

If we are not going to get the five-year limitation, as we would prefer, it would be better, rather than the 20-year long stop, to have a compromise and make the fall-back position exceptional.

The Convener

Thank you for that. The role of the Delegated Powers and Law Reform Committee is to scrutinise the bill and to suggest amendments, so you never know what might happen.

The Law Society of Scotland suggests that the exception for council tax and business rates is unfair for other reasons. For example, it refers to unfairness to people who believe, in good faith, that they have paid their council tax, but many years later end up being sued in respect of their own share and the shares of other people, due to there being joint and several liability.

The Law Society of Scotland comments on the difference of approach in Scotland to council tax and business-rate debt from that in England, where—as Mr Dailly has said—a six-year period applies. What are your comments on its views? You have dealt with the six-year period, but what about the difference of approach and the issue of joint and several liability?

Mike Dailly

I agree with the Law Society’s point that the complication with council tax is that, if two people are living in a property, whether as tenants or as owner-occupiers, they are jointly and severally liable for the tax.

We know that it is common for relationships to break down and for people to get into other relationships, which creates the uncertainty that the Scottish Government’s originally framed request to the Scottish Law Commission was intended to remove. The bill is about clarity, simplicity and fairness; it achieves those things in some respects. Through the process of consultation and lobbying, however, the beautiful butterfly of the bill as a concept in the discussion paper has, perhaps, turned out to be a moth.

The Convener

A butterfly and a moth—let us figure that one out. Perhaps Mr Holmyard can work it out?

Mike Holmyard

No. I am not going to go there.

I agree with the Law Society’s point about joint and several liability. It can be difficult in marital and relationship breakdowns when one person seeks advice because, as far as they know, they have paid in good faith towards the council tax, but the other partner has not. That person can be pursued for the other person’s share of the council tax for up to 20 years after the last payment. That does not seem to be fair.

Stuart McMillan (Greenock and Inverclyde) (SNP)

The effects of section 3 of the Prescription (Scotland) Bill and section 38 of the Social Security (Scotland) Bill is that five-year prescription would apply to overpayments of devolved social security benefits, but a 20-year prescription would apply to overpayments of reserved benefits.

We are considering a prescription bill, so one would presume that prescription is a devolved matter. The Scottish Government could, I presume, therefore decide not to allow the Department of Work and Pensions the exception from five-year prescription that it wants for reserved benefits.

Which approach do you favour in relation to prescription and reserved social security debt? Is it the five-year or the 20-year period? It would be helpful if you could provide examples.

Mike Holmyard

Clearly, for the reasons that we have already outlined in relation to council tax, we want a five-year prescription period, fitted as best it can be in the system. We would like a five-year prescription period for DWP debts. It will not make sense to someone who is claiming a Scottish benefit and a United Kingdom benefit that they can be pursued after five years for one debt but not for another. Consistency is needed; we agree with the Child Poverty Action Group on that point.

In giving advice, we often came across an example of where things go wrong with DWP debts. People who are claiming their state pension come to see advisers when they get their first payment, which was short of what they had been expecting because there has been a deduction for overpayment of benefit many years previously, or for repayment of a social fund loan. Many people cannot remember having claimed the benefit; they had claimed it for a short time and then got into work and worked all the way to retirement age. In the meantime, the overpayment or social fund loan was festering away and not being dealt with.

Going back to the DWP to ask for evidence is very tricky. Often, it does not have records to show how the situation has come about. Also, claimants have by that point long lost any documents to show that they were making payments towards the overpayment or loan.

10:15  

Mike Dailly

To go back to what the Scottish Law Commission said, one of the reasons for having prescription as a matter of public policy is, as Mike Holmyard has illustrated, that evidence and recollections from witnesses deteriorate over time. I agree with Mike Holmyard—we should go back to first principles and the period should be five years.

In response to the specific point that Stuart McMillan raised, we should think about the issue from the point of view of fairness. If somebody who receives social security benefits thinks that they have suffered an injustice or that a mistake has been made, they normally have a month to seek a mandatory reconsideration, although the period can be extended in certain circumstances. In general, people have a month to appeal. The UK social security system is utterly geared towards a fairly restrictive position, whereby people have very little time to challenge anything. However, in the bill we are providing for a 20-year prescription period when it comes to reserved benefits. That is completely unfair and inequitable.

You are right to say that the law of prescription is devolved to the Scottish Parliament. The same applies to pursuing matters through the courts in this country. I hope that the committee seeks to amend the bill, and I encourage it to do so, so that we have a five-year prescription period for all social security benefits, because that would be fair.

Mike Holmyard

I agree.

Stuart McMillan

When it comes to reserved benefits, which we have no control over, are you suggesting that the prescription period should be the same as for the devolved benefits?

Mike Dailly

One of the difficulties that we always have is with the provision in social security legislation that allows for deductions to be made from benefits. I fully accept that the Scottish Parliament cannot legislate in that regard, but we should maximise what we can do with the powers that we have to bring about uniformity in prescription. Otherwise, people who receive a combination of devolved Scottish benefits and reserved UK benefits will be in a right guddle.

Stuart McMillan

Is it not the case that a devolution issue could arise from that, whereby the Scottish Parliament could be considered to be meddling in a reserved area—I see that Mr Dailly is smiling—given that we do not have power over the 85 per cent of social security benefits that remain reserved? Could that give rise to a constitutional argument between the Scottish Government and the UK Government?

Mike Dailly

I think that we have already got one, haven’t we?

Stuart McMillan

We have got more than one.

Mike Dailly

It will need to get in the queue.

I take your point, which is fair and proper. What I would say is that we must do everything that is possible and perhaps get the Scottish Government to look at the bill again. The committee should consider what could be done and put that to the minister when she comes to the committee.

Mike Holmyard

I would like to clarify that, under the system that operates in England, the DWP has six years to recover debts through the courts. After that, as Mike Dailly has said, a deduction for overpayment will be taken from on-going benefits. The DWP can do that at any time after six years. In addition, under the Welfare Reform Act 2012, the DWP has the power to do a direct earnings attachment, which means that it can go to the employer of anybody who is working and ask them to make a deduction from the person’s wages without a court hearing or anything like that.

In England and Wales, the DWP has six years to recover debts through the courts, so it would make sense for there to be a five-year period in Scotland for the same thing. As I have said, the DWP will still have other powers that it can use to recover money, which would hopefully deal with the UK-wide issue.

The Convener

Neil Findlay has a supplementary.

Neil Findlay

I used to work in housing, but that was a while ago, so I cannot recall all the limits on the backdating of benefits. For reserved benefits, what is the timescale in which someone can receive a backdated payment, whether there has been an official error by the department or another issue? How long is that period, normally?

Mike Holmyard

Sorry, but I do not know off the top of my head.

Mike Dailly

It used to be a year, but I would need to double check.

Neil Findlay

Even if it is a year—given the atmosphere in the benefits system, the period has probably been chopped since then—if the department makes a benefit error, the individual can go back only a year for their entitlement yet, if the individual makes an error, the department can go back for 20 years.

Mike Holmyard

Yes.

Mike Dailly

I think that it is less than a year. As I say, I used to do social security tribunals. As we have said, there is no logical sense in the DWP having 20 years. At the end of the day, in terms of enforcing in Scottish courts, I cannot see how the prescription period is a reserved matter.

Neil Findlay

There is a basic element of justice and equity in the issue. On behalf of the claimant, you can go back only a year, but the department has 20 years. There is something grossly unfair in that.

The Convener

It is probably worth our checking whether the period is a year before our meeting next week.

Neil Findlay

Yes, it would be.

Stuart McMillan

Mr Holmyard touched on the CPAG evidence, and his reply was helpful, but I would like to hear from Mr Dailly on that. CPAG suggested that it does not favour the exception in section 3 for tax credits. Do you agree with that?

Mike Dailly

Absolutely. I come back to the first principle, which is that the period should be five years as a generality. If we are not going to get that concession from the minister, let us look to make the exceptions exceptional. It is ludicrous to have a period of 20 years for all these exceptions. Why do we need 20 years? For example, on defective products, under the EU directive on product liability, the pan-European period is 10 years. Why have we ended up with 20 years? That is a historical legacy that goes back to acts in 1469, 1474 and 1617, and I can see no basis for sticking to that period.

Mike Holmyard

There is also a joint and several liability with tax credits, which we have discussed in regard to council tax. The same issues could arise there.

Stuart McMillan

My final question is on council tax debt and overpayments, and the differential in the periods for those. What practical difficulties do you face in trying to deal with and help clients with their claims?

Mike Dailly

The difficulty is that nobody has any recollection.

One issue that the bill fails to address is the appropriate date for the start point for the five-year prescription period. That is set out in schedule 2 to the Prescription and Limitation (Scotland) Act 1973, and it is quite a complicated formula. For example, for things such as credit card debts or loans, if the agreement makes provision for when the money is due to be paid, that is the period when the five years start to be counted, failing which, it will be when there is a written demand for payment. At Govan Law Centre, we have cases before the sheriff appeal court in Scotland involving big UK and international companies that buy up debt. They do that because, since the financial crisis, the Basel Committee on Banking Supervision and the European Union have been pushing the banks to get rid of what are called non-performing loans, so the mainstream banks sell the loans to companies that then chase them up. That is a massive international industry.

For example, we have a case involving a client in Glasgow in which it is six years since the last payment was paid. However, the company can say, “Hang on, the start point should be from when we made the written demand.” Therefore, under the existing law, a period longer than five years can be created by making a written demand at a later point. We are arguing that the credit card agreement, which in that example was originally with Virgin and then another bank and then another, makes provision for the last payment.

We get into folk hiring advocates to argue how many angels are dancing on the head of a pin. My colleagues at Govan Law Centre and I think that the solution is to say simply that the start point of the five-year period for debts, for example, could be the last payment made. There is already provision in the legislation for acknowledging stuff that can, as Mike Holmyard said, extend the period, so it is not as if the situation is balanced. However, if we are really going to simplify things, we could just say that the last payment that is made by the debtor is the ticking point. That would create the Government’s policy objective of a creditor having five years to get the money and there being prescription if they cannot get it within five years.

Mike Holmyard

Just to add to what Mike Dailly has just said about the credit cards issue, we also face that issue in our citizens advice bureaux when people come in because they are trying to work out what date prescription should be measured from. If people contact the creditor, they find that they have one view, whereas we obviously have another view. That situation makes it very difficult for a debtor to represent themselves, or even for a lay representative to argue for them, in cases that go to court. We need to get the services of somebody like Mike Dailly who would go and argue on behalf of the client.

On the question of the practical difficulties with council tax debt that goes back 20 years, that money often goes into different accounts for different years because of the way in which it is collected. The debtor might think that the oldest account has been paid when in fact the money went to a more recent account. When the sheriff officer contacts the debtor 10 or 15 years later to say, “You still owe this money,” they cannot understand why the oldest account has remained unpaid.

On the issue of sequestration, which Mike Dailly also brought up, our advisers see clients who have built up council tax debts over 10, 11 or 12 years, apparently without the council having taken any previous action to collect those debts. To be honest, those people had probably got to the point where they thought that they were getting away with it, but then they receive a writ out of the blue that says that they are going to be sequestrated. The clients cannot understand how the council apparently goes from inaction to drastic action that will have an impact on any property that they own. A five-year prescriptive period would force all creditors actively to try to enforce their debt, which would perhaps put off the need for things such as sequestration by councils.

Stuart McMillan

That is helpful. Thank you.

The Convener

In a nutshell, councils would not be able to allow debt to build up, because they would have to act within five years.

Mike Holmyard

Yes, and they have the means.

Mike Dailly

That is what happens in housing law. The Scottish Parliament introduced pre-action requirements for both home owners and people in the social rented sector. That requires social landlords, for example, ultimately to raise proceedings for eviction and payment only once they have gone through a process of trying to help the person. The rest of our system is geared towards sorting out and maximising people’s incomes through getting advice from CABx or other agencies, so the debt situation that we are discussing seems out of kilter.

With the power of technology, I have checked and found that housing benefit can be backdated only for one month, or for three months if the applicant is of pension age.

Neil Findlay

That is for housing benefit, but we are trying to find out about the other reserved benefits.

Mike Dailly

The nub of the issue is that the backdating periods have been shortened over time.

Neil Findlay

Absolutely.

Bill Bowman (North East Scotland) (Con)

Good morning to the panel. I have some questions on the discoverability test. Section 5 sets out the new test associated with the start date for five-year prescription in relation to the obligation to pay damages. The Scottish Law Commission consulted on four options for section 5 before deciding to use option 3. Option 1 was to keep the law on Morrison, option 2 was to go back to the law as understood before Morrison, option 3 was to go back to the old law but to add the requirement that the pursuer must know the identity of the defenders, and option 4 was to leave it to the court’s discretion.

As a matter of policy, which option do you favour and why? Are there any drawbacks to the option that is now set out in section 5? If you have any examples to give, please do so.

10:30  

Mike Dailly

The UK Supreme Court applied the law as passed and as is. The Scottish Parliament reversed the House of Lords Awua judgment on homelessness with the Housing (Scotland) Act 2001. Because of that House of Lords decision in the 1990s, people were not entitled to a secure home. The Scottish Parliament has often corrected a legal position because it is not seen to be fair.

What the bill does in section 5—option 3—is pure common sense. The Morrison v ICL Plastics Ltd case created an absurdity in that you might not know who was the cause of the negligence but the time is still ticking away. You know that you have suffered an injury, but you do not know who you are supposed to sue.

In theory, you could just decide to sue everybody you think might be responsible, but you could still end up missing the correct defender. From a purely logical point of view, therefore, that case showed that the law needed to be changed. The Scottish Law Commission and the bill have come down on the side of pure common sense. Time should start ticking from when someone suffers an injury or loss through fault or negligence and they know who is responsible.

Remember that all this is in the context of section 11(3) of the 1973 act, so it is not a subjective test of whether the pursuer knows these things; it is an objective legal test of whether they ought to have known them. That provision in the bill is absolutely right.

Mike Holmyard

I agree that it makes sense, but damages are not an area in which we advise people, so I defer to Mike Dailly on that.

Bill Bowman

Last week, we heard some oral evidence to the effect that the third part of the new test in section 5, the requirement that the pursuer know the identity of the defender, might increase the complexity of the law in some situations. For example, when there are multiple potential defenders, different prescriptive periods could run in relation to each defender, depending on when each defender became known to or ought to have become known to the pursuer.

We also discussed how the third part of the test might work when there is joint and several liability for a debt. Is there a risk that the third part of the new test will complicate things? Alternatively, should we support it as something that increases fairness in the law?

Mike Dailly

I agree that it creates fairness. We need to put it in context, because the examples that are given of when it would become complicated are not mainstream scenarios. There has not been a multiplicity of defenders in the personal injury cases that I have done over the years. It is more likely to have been two. Sometimes I have ended up suing both and one drops out when we get it sorted. It is not ideal, but it is workable.

The bill is saying that, if the pursuer is not aware of who is ultimately responsible for the fault, negligence or injury, surely it is right and proper that it is when they become aware, or ought to have become aware, that the time period starts running. I do not think that that can be seen as unfair. It could be argued that it could mean more than one time period would be running, but the only alternative is to have one time period for everything, which means that the person who has suffered loss or injury loses out, and that cannot be right.

Mike Holmyard

I would agree but, as I said, we do not advise on that area.

The Convener

I would like to ask about the start date of 20-year prescription, which is dealt with in section 8. The bill proposes a new start date for 20-year prescription. Do you support that? You have touched on five-year prescription, Mr Dailly, but what about 20-year prescription?

Mike Dailly

I would rather leave it as it is. From reading the policy memorandum and the excellent briefing on the bill from the Scottish Parliament information centre, it seems that the rationale is that, because the pendulum has swung in favour of pursuers in section 5, the pendulum is being swung in the other direction for potential defenders in relation to the 20-year period. That is what seems to emerge from the bill, and it makes sense, but I am not sure that it works like that in real life.

What is the problem with the current position with 20 years? The provision in section 6 of the bill would remove interruptions to the 20-year period, and I am certainly more sympathetic to that, because that could be a fair compromise.

The issue will probably arise only in unusual cases, but if it arises it will be catastrophic. For example, if the law is changed so that there is just a simple 20-year period, in the case of latent defects in buildings that come to light only 20 years down the line it will be game over for the consumer under that provision. I am not suggesting that there are lots of cases like that, but there will be some cases like that. Why do we not just leave the current position as it is? The Govan Law Centre’s stance is that there is no need for section 8. By all means, let us have section 6. That would be a much better outcome.

Mike Holmyard

We have no opinion on section 8 either, but section 6, which provides for a long stop on prescription, is certainly something that we would be pushing for.

The Convener

In the case of defects in buildings that could appear after a long time, is it not fair that there would be some sort of cut-off?

Mike Dailly

But maybe there would be, convener. This happens all the time in financial services—although we have created a financial compensation scheme that covers scenarios in which companies go out of business. If we do nothing about the 20-year period under the existing law, what comeback is there if a business is no longer trading? If the business is trading, it will have insurance, one would have thought.

When you drill down, it is about equity. We are not talking about any old mistake; it has to be negligence. Let us say that the negligence of the builder causes a defect in a building, which only comes to light 20 years down the line. Why, in principle, should that builder not be liable? That must be the logical approach, because the alternative is to say, “Well, it’s tough luck for the home owner.”

The Convener

So, would you have no limit?

Mike Dailly

No, I think that we should just leave the law as it is. What we are suggesting is that you simply delete section 8. We have no difficulty with section 6, which is the compromise, as I said—because the period can be interrupted so that it can be more than 20 years—but if you just keep the law as it is, I think that we will be happy. As I said, the reason for section 8 seems to be a peculiar idea that we need to do something for businesses because of the ICL Plastics case.

The Convener

Some concerns have been expressed by stakeholders, including the Law Society of Scotland and the Faculty of Advocates, about how section 8 would work in relation to omissions to act and on-going breaches. The Scottish Law Commission said in oral evidence to the committee that the language used in section 8 would be familiar to the courts from another part of the 1973 act, so it could not see a difficulty. What is your view on that?

Mike Dailly

I tend to agree with that opinion; “omissions to act” is a term of art.

Neil Findlay

The Parliament has had a petition from a Mr Paterson in relation to a conveyancing case that went badly wrong for him. At this point, I should declare an interest, because I worked with Mike Dailly on a similar conveyancing case, where two home owners suffered greatly for almost 20 years because a conveyancing issue went badly wrong and they could not get remedy through the normal processes. The issue raised here is about the harshness of such cases and how severe the prescription period is in relation to those cases. Can you comment on that?

Mike Dailly

Yes. As Mr Findlay said, we worked together on the Happy Valley Road cases. There were similar cases in Aberdeenshire and The Herald ran a campaign. We got a satisfactory result—after some years.

Neil Findlay

The potential is there for the problem to arise again and again.

Mike Dailly

I have read about Mr Paterson’s case and he is in a horrendous position—there is no doubt about it. I give this analogy: if you go into a shop to buy a toaster and it does not work, you are entitled to get a new toaster or to get your money back, but if you go into a solicitor’s office to buy a house and it turns out that it is defective, you do not actually own it or there is some other horrendous thing, you can end up not owning the house, but you have to pay the bill—the solicitors can get high-and-mighty expert professors of law to say that it is not negligence, and it goes on for ever. How have we created such a situation in this country?

I have to say that it is the fault of the solicitors and the Law Society of Scotland. The solution to Mr Paterson’s case is not to be found in prescription: it is for the Law Society to introduce a system of strict liability, so that if someone buys a house through a Scottish solicitor and it turns out that the person does not own the house or there is a defect—for whatever reason, because these things are complicated—then that is put right. We could all pay into an insurance policy that could be there to put things right. Such situations do not happen often, but they happen sometimes and then it is catastrophic. The Law Society could introduce that tomorrow if it wanted to. I have suggested that it should do that.

The Scottish Government has commissioned a review of the legal profession. Strict liability is long overdue. It cannot be right that you can buy property in Scotland and spend 20 or 30 years not owning it and becoming ill arguing that the solicitor was negligent because they got it wrong. That is wrong. There should be strict liability.

Neil Findlay

Not just the solicitors but the insurance companies are refusing to take a role. If you buy a toaster, at least you are unlikely to be taken to court by someone wanting to get the toaster back off you.

Mike Dailly

I am a solicitor and I am ashamed that that is our position. It is wrong and I have spoken out about it. I have spoken to the former president of the Law Society and the chief executive and told them that they should do something about it. If the Law Society does not do something, the Scottish Parliament should.

Neil Findlay

We have a draft member’s bill, which could potentially do something.

Mike Dailly

I have probably not won any friends with those comments.

Neil Findlay

What’s new? [Laughter.]

The Convener

You are not here to win friends, Mr Dailly.

Mike Dailly

Apparently not.

The Convener

Do you have anything to add, Mr Holmyard?

Mike Holmyard

I agree. From a consumer point of view, it is totally unsatisfactory that someone does not end up owning a house after paying for a service. Mike Dailly’s solution is probably the best way to deal with it, because there will always be bad cases that arise outwith whatever time limit is set.

10:45  

Tom Arthur

Much of what I wanted to touch on has already been covered. On a point of clarification, Mr Dailly, with regard to 20-year prescription, what are your views on ending the possibility of interruption?

Mike Dailly

I think that we are quite relaxed about it. The legal position at present is that if you acknowledge the existence of the obligation, the 20 years continue. Mike Holmyard talked earlier about how that works for council tax and how five-year prescription in that context would therefore not be such a big thing. I think that we are reasonably relaxed about section 6.

What is much more important is section 8, which we have talked about and which is potentially much more fundamental because, in effect, it extinguishes the right completely.

Tom Arthur

There is one further point of clarification, for the benefit of the committee. What are your views on interruption taking the form of a pause, with the period recommencing, taking into account the time that has already elapsed? There has been some suggestion that that is an option.

Mike Dailly

I think that that is section 13 of the bill. I feel very uneasy and unhappy about that. We can think about it from this perspective: people often do not come to the free law centres, citizens advice bureaux and money advice agencies in Scotland but instead negotiate directly with the creditor. The danger is that if the creditor says, “I am going to do you a favour here—let’s have this pause; let’s have this period of a year,” they will probably agree to that. They will probably say, “Well, I have all these other things going on in my life and I am under stress and under pressure—delay it another year; what do I care?” Our preference would be to not have section 13 but I can see that there is an intellectual argument that in certain circumstances, it could be useful, if parties have equality of arms—I get that.

If we are going to have section 13, I would be happy with that as long as we protected the vulnerable consumer. We could easily do that by requiring, for example, that the consumer must have gone to a solicitor or accredited money adviser who can certify that they have been given advice. We already do that with employment law. If somebody settles with an employer, they cannot just do it themselves; they have to get somebody to give them independent advice. I mentioned accredited money advisers because the consumer does not have to pay for that advice. They could go to a law centre solicitor or accredited money adviser and be given free advice, to make sure that they were not being pushed into accepting the pause.

Tom Arthur

So, to characterise your position, you have concerns but you think that they could be mitigated by having those safeguards in place?

Mike Dailly

Yes.

Tom Arthur

Thank you very much.

The Convener

So that is really about having a way of getting round the danger of the weaker party being abused.

Mike Dailly

Yes.

Mike Holmyard

I agree that there should be a safeguard in place for the consumer, because most consumers are not aware of their rights and can easily sign them away if somebody presents the situation to them in a certain way, as Mike Dailly said.

With debt cases, which is what we primarily deal with, the whole point is whether the debt has been extinguished. Therefore, to ask for the debtor to have the period extended by another year just does not make any sense.

The Convener

Members have no more questions—is there anything that the panel members wish to add that we have not covered?

Mike Dailly

The discussion has been very comprehensive, convener, and I think that the Govan Law Centre and Citizens Advice Scotland are very much in agreement on everything, as we are looking at it very much from the consumer perspective.

The bill is welcome and I think that it does good things but it could do a lot more good things if only the committee could suggest some amendments.

The Convener

We have had some useful suggestions for amendments. I thank you both very much for coming in. It has been a short but useful session—we have covered a lot. I will suspend the meeting briefly to allow you to leave.

10:49 Meeting suspended.  

10:52 On resuming—  

The Convener

Item 2 is evidence on the Prescription (Scotland) Bill at stage 1. This is the last of our planned evidence sessions on the bill. We have before us the minister in charge of the bill, Annabelle Ewing, who is the Minister for Community Safety and Legal Affairs. She is accompanied by three Scottish Government officials: Jill Clark, head of the civil law reform unit, Michael Paparakis, civil law policy manager, and Neel Mojee, who has been here before and who is a solicitor on constitution and civil law. Welcome to all of you.

I will start with a general question, which is directed at the minister. Why did the Government decide to implement the Scottish Law Commission’s report on prescription and what policy benefits will that bring?

The Minister for Community Safety and Legal Affairs (Annabelle Ewing)

Good morning. I refer members to my entry in the register of interests, wherein they will find that I am a member of the Law Society of Scotland and that I hold a current practising certificate, albeit that I am not currently practising.

The policy objectives behind the bill are to ensure that there is clarity, certainty and fairness in the approach to prescription and, in turn, to bring the issues of legal certainty very much to the fore. Of course, all such matters are balancing acts, but it is hoped that, through the hard work of the Scottish Law Commission, working in tandem with many stakeholders during its consultation process, people will consider that the bill has struck a balance between the respective interests of the creditor and the debtor while recognising that the overall objective to be secured is that of providing legal certainty, which is of benefit to wider society. In a nutshell, that is the objective of the bill.

The Convener

What are the gaps in the current law that need to be addressed?

Annabelle Ewing

The Scottish Law Commission made various comments in that regard. In its work on the issue, it has made clear that it is not looking at the law of prescription as a whole; it is looking at the law of negative prescription, and it is doing so because issues have arisen that in its view need to be addressed sooner rather than later. Those include in particular the issues of discoverability and latent defects. I am sure that we will get on to those, so I will not belabour the point at this stage. Issues have arisen as a result of a Supreme Court ruling that has created some confusion in people’s understanding of the existing position under Scots law. The Scottish Law Commission has also anticipated other potential problems, and it feels that it would be helpful, as part of its contribution to keeping Scots law under review, to address those issues in legislation.

Stuart McMillan (Greenock and Inverclyde) (SNP)

The Scottish Government carried out a limited consultation on the proposals in the bill. In a previous evidence session, Jill Clark gave a list of the organisations that were consulted. Given that the Scottish Government consultation might have attracted interest from other organisations and stakeholders, in particular welfare rights organisations, can you explain that decision?

Annabelle Ewing

We adopted the procedure that has been used thus far with Scottish Law Commission bills that come to the Delegated Powers and Law Reform Committee, which fall within your remit and jurisdiction because they are not regarded as particularly controversial. I think that this is the fourth such bill. Stuart McMillan, who was also a member of the committee in the previous session of Parliament, will be able to give me chapter and verse on the other three, but I was involved in one of them—the Contract (Third Party Rights) (Scotland) Bill—as part of my duties in my current ministerial portfolio. There was also the Succession (Scotland) Bill and the Legal Writings (Counterparts and Delivery) (Scotland) Bill.

The procedure that has been used with regard to three of the four bills is that the SLC produces a discussion paper, takes on board the views that are expressed and then proceeds to consultation on a draft bill, after which the Scottish Government proceeds with a targeted consultation. That is the process that happened for the Prescription (Scotland) Bill. The one exception to that has been the Succession (Scotland) Bill, and that was because there had been quite a gap between the SLC processes and the Parliament considering the bill, so it was felt that we were required to proceed with a fuller consultation. However, for the Prescription (Scotland) Bill, we adopted the same procedure that has been followed with other bills of the same type.

Stuart McMillan

The Government consulted a fairly focused number of organisations but, when the committee put out a call for evidence, we were contacted by other stakeholders and organisations. Certainly, the evidence session that we had last week, particularly with Mike Dailly of the Govan Law Centre, was extremely interesting and opened up other avenues for discussion. Were the likes of the Govan Law Centre, welfare rights organisations and Citizens Advice Scotland considered before the Scottish Government undertook its consultation? I am keen to understand the rationale for not asking such organisations.

Annabelle Ewing

I would have to see the list of bodies that the Scottish Government wrote to in the targeted consultation and the list of bodies that responded to the SLC’s consultation processes—the initial discussion paper and the consultation on the draft bill. Obviously, anybody can respond to a consultation, and it is up to them to do so or not, as they wish. I have read the Official Report of all the committee’s evidence sessions on the bill, and I guess that we will get on to the substance of that shortly. However, on the number of people who have been engaged, there have been quite a few, and it is open at all times to Citizens Advice Scotland and others to make their views known.

I understand that Citizens Advice Scotland may have indicated a while back that, rather than commenting on everything, which I think had been its position, it would have to focus on particular issues that were of concern to it. At the end of the day, if individuals or organisations wish to respond to a consultation, their views are most welcome, but we cannot force people to respond; it is up to them to do so or not.

Stuart McMillan

Thank you.

Neil Findlay (Lothian) (Lab)

I am relatively new to the committee so I am not too au fait with the background to the consultations that take place in this regard, but I am concerned about consultations that focus on certain groups or sectors. I do not have the list in front of me, but it appears that the consultation was targeted very much at the business community and professional bodies. Given that the bill deals with people’s debts and benefits, I am quite surprised that we are not bringing in bodies that advocate for and work on behalf of people who are in that position. I am concerned that evidence is being taken too narrowly. The representatives who were here last week gave a different perspective on some of the issues.

Annabelle Ewing

As I say, the consultation approach that has been adopted for the Prescription (Scotland) Bill has been the same as those for three of the other four DPLR Committee and SLC bills. That is the first point to reiterate.

On the point about people with debt, solicitors act for both parties. That point was made in an evidence session with members of the legal profession. Maybe it was you, Mr Findlay, who asked directly, “Do you represent both sides?”, to which they responded, “Yes, we do.” It is important to bear that in mind as well.

We are keen to have as wide a consultation as possible. Individual stakeholders are absolutely free to make their views known, and I am pleased that you had your evidence-taking session last week. We cannot force people to submit evidence. That is the position. The various bodies that have been involved since the start of the SLC’s work include local authorities, so it is perhaps unfair to characterise the engagement as being just with business and people who do not represent debtors. You have already heard at earlier meetings evidence from people who represent different parties, and you have heard from academics. I think that it is fair to say that there has been a wide reach.

Neil Findlay

In order to submit to a consultation, people have to know that it exists—

Annabelle Ewing

Well, I think—

Neil Findlay

Just a moment.

Annabelle Ewing

Sorry.

Neil Findlay

Of course solicitors represent both sides, but the vast majority of people who are subject to, say, benefit overpayments or who have council tax debts will usually be represented through a welfare rights organisation, rather than by a solicitor.

Annabelle Ewing

I suppose that one would have to go and get the evidence to quantify that. In broad-brush terms, that may well be the case. As for the percentages that are involved, one would need to get the statistics to indicate that. However, it is clear that the process of engagement has been wide. As I said, local authorities have been involved and have made submissions to the SLC. I would need to go back and check to find out every single organisation that has been involved; I do not have that information off the top of my head, but I would be happy to supply it to the committee. The committee’s role in calling for evidence also has an important role to play in terms of scrutiny.

Taking all the approaches and looking at them overall, I think that it is fair to say that we will capture all the various views, and that is quite right and proper.

The Convener

We will not labour that point any longer. I think that it arose because we all found last week’s evidence session very useful.

Section 3 extends the five-year prescription to all statutory obligations to pay money. The list of exceptions to the general rule lengthened as a result of the consultation process. We acknowledge the SLC’s point that the policy choice—which is between 5 years and 20 years—is, for several reasons, not as stark as it first seems. However, various stakeholders have suggested to us that the exceptions are essentially political choices for the Government and Parliament. Can you explain to the committee the policy rationale for each of the main exceptions listed in section 3?

10:15  

Annabelle Ewing

You said that the list lengthened, but that section simply restates the status quo of the 20-year negative prescription in Scotland with regard to taxes, social security benefits and maintenance payments. It is not right to characterise that as extending it, because that might be interpreted in a different way.

I understand that Her Majesty’s Revenue and Customs, and now Revenue Scotland, put clear policy objectives to the SLC that in their view justified the 20-year negative prescriptive period. The SLC accepted their position and that is one of its recommendations—and we have accepted all of the substantive recommendations in the SLC’s draft bill. It is to do with opportunity to collect and so forth.

On reserved social security benefits, the bill is again restating the present position, which is 20-year negative prescription in Scotland. That mirrors what happens in the rest of the United Kingdom. Although, on the face of it, there is a six-year short negative prescription in England and Wales, the Department for Work and Pensions made clear in its recent submission of 23 April that it is in a position to pursue well beyond the six-year period. The argument again relates to public policy objectives, but also to what the DWP reiterated in its recent submission about the way in which it seeks to recover overpayments, taking into account that it can deduct from benefits. The DWP said that it has a particular approach to looking at hardship and may extend repayment over a considerable period of time in order to facilitate individual circumstances. It also said that it may have to queue repayment arrangements, because a number of benefits may be involved, and that it therefore feels that public policy is best served by maintaining the status quo.

Maintenance agreements ensure that the moneys that are due from the person who is required to pay the maintenance obligation are secured and that people are made to take financial responsibility for their children.

Those were the first three exceptions. On council tax and non-domestic rates, representations were made by some local authorities to the SLC at the time of its consultation paper, which was published in February 2016. The authorities argued that the public policy considerations for them were essentially the same as those governing HMRC and Revenue Scotland, so the position again maintains the status quo, as they asked. Vis-à-vis what is happening down south, I understand that, while the six-year short negative prescription is apparently in operation, if a liability order is secured within that time it can be enforced by local authorities elsewhere in the UK without limit of time.

I think that what is being argued is that the position in the bill maintains the status quo, that there are public policy considerations for it and that it ensures that the arrangements are broadly in line with what happens elsewhere in the UK, as far as HMRC and the DWP are concerned.

The Convener

You are presumably agreeing with the DWP.

Annabelle Ewing

What has to be borne in mind with regard to the DWP is that it still has jurisdiction over most benefits—sadly, in my view, although perhaps not in the view of the members around this table other than Mr Arthur and Mr McMillan. We do not believe that the UK Government should have jurisdiction over any benefits. However, sadly, that is still the case, so about 85 per cent of spend—

The Convener

We are not really here to get in to that.

Annabelle Ewing

I know, but you asked whether I agreed with the DWP, and I am trying to give you an answer.

Some 85 per cent of social security spend is still decided on the basis of rules that are set furth of here. There are the reserved benefits, and then there is the policy to do with how the benefits system operates, which is also reserved. It is important to note that, with our new social security agency, the legislation on which the Parliament passed last week, we propose to take a different approach from the one that the DWP takes to how repayment takes effect and the grounds on which it can be sought.

What the DWP said in paragraph 13 of its submission of 23 April was troubling. It said that reducing the prescription period to five years

“could also lead to a greater pressure to secure full repayments of debt within a five year period and thus undermine or at least blunt the long-established hardship procedures the Department has to balance recovery against welfare needs. This would place debtors in a worse position than they are now if there is an expectation to pay debts off quicker and hence at an increased rate of repayment.”

Sadly, the Scottish Government does not have any jurisdiction over policy decisions concerning the operation of reserved benefits. The fact that that is a matter for Westminster should be taken into account, as should what the DWP has said, which seems to be a shot across the bows. I do not want to put such vulnerable people in a worse position as far as reserved benefits are concerned, as that would be extremely unhelpful. Therefore, I must look at what the DWP has said, because it is in control of the matter.

The Convener

Mike Dailly, who appeared before the committee last week, has written a blog on the subject. I will read out a paragraph from it.

“In relation to social security benefits, we believe there is no justification for not having all devolved and reserved benefits subject to the five year prescriptive period. It is inequitable that people have a month to appeal a benefit decision, while the DWP would have 20 years to pursue reserved benefit debts.”

What is your response to that?

Annabelle Ewing

As I have said, we do not—sadly—control the way in which the reserved benefits are operated. That is a matter for the DWP. I am sure that members of the committee will know of constituents whose experience of the reserved benefits system has not been positive. However, that is the situation that we face.

We hope to do things very differently here in Scotland; we want our social security system to be based on the key principles of dignity, fairness and respect. The grounds for recovery of overpayment will therefore be different in Scotland. It will not be possible for overpayment to be recovered if there has simply been an error on the part of the social security agency; there will have to have been a fault on the part of the recipient. However, if someone suddenly receives a vast sum of money into their account, they should be aware that it is likely that there has been a mistake and that it is not their lucky day. That will be a key difference in the approach to recovery that is taken by the new social security agency in Scotland.

That is not the position with the DWP. I am sure that members will know of cases in which the DWP has got back to recipients to retrieve sizeable sums of money, when it has made mistakes. We will adopt a different approach. Of course, we now have jurisdiction over all aspects of the matter, so we can do something different.

However, if Parliament were to seek to amend the prescription powers with regard to obligations to repay overpayments of reserved benefits, that would raise issues of legislative competence, which the Scottish Government would have to consider carefully.

The Convener

I have asked a few questions, so I will allow Neil Findlay to come in with a question about council tax.

Neil Findlay

There appears to be some uncertainty about how councils deal with council tax and business rates. Some use the five-year period and some use the 20-year period. Do you accept that there are uncertainties, and will the bill resolve them?

Annabelle Ewing

I understand that thus far some of the larger councils, including Glasgow City Council, Fife Council and South Lanarkshire Council, made representations in February 2016 during proceedings by the SLC, indicating that they wanted to retain the status quo, which was 20-year negative prescription. They also indicated what public policy considerations they felt were applicable, which was basically reiterating HMRC’s and Revenue Scotland’s feeling that there are public policy considerations.

I note that technical questions have arisen in the committee about what the current practice is in each of the 32 local authorities; we will certainly be seeking further information from the Convention of Scottish Local Authorities. Of course, it would be entirely appropriate for the committee itself to write to COSLA seeking such clarification.

Neil Findlay

Do you think that there is uncertainty, or not?

Annabelle Ewing

Having read the evidence to the committee, and from my understanding of the submissions that were made to the SLC, I am saying that the status quo is the position that local authorities are seeking. I note that Mr Findlay has suggested that that is not the position of every one of the 32 local authorities, so we will seek clarification. I imagine that the committee might also wish to seek clarification from COSLA on that issue and on the general public policy considerations that have been raised, but that is up to the committee.

Neil Findlay

The Law Society of Scotland and others say that the exception for council tax is unfair and might discourage councils from collecting debts promptly, and that debts should not be pursued over decades. We know that a shorter period exists in England, so it really is a political choice not to use that. Could you explain the reason for that?

Annabelle Ewing

I will pick up on a few points. First, the status quo has for some time now been that there is a 20-year negative prescription vis-à-vis council tax and non-domestic rates. Secondly, it is not quite correct to say that the position in England is a flat six years; that is not the case. Councils in England can proceed with liability orders that can then be enforced without limit of time. That is important to note.

Neil Findlay

Do you know how often those are enforced?

Annabelle Ewing

I do not have chapter and verse about English court proceedings in front of me, but we can try to obtain that information. However, the fact is that liability orders can be pursued. In terms of the political position, the request came from some of the largest local authorities in Scotland, including Glasgow City Council and Fife Council. It was their request that the SLC reflect on the situation and make the recommendation that currently appears in the bill. That is where we are today, Mr Findlay. If you are suggesting that local authorities do not want that to happen, the need to seek clarification from COSLA becomes more imminent.

Neil Findlay

I am not here to express the views of local authorities. There are many things that local authorities want that the Government ignores. They want more money to run the services that are currently being cut. It is as though you are saying that whatever local authorities ask the Scottish Government for will be delivered, but that is self-evidently not the case. I am asking about the fact that there will be a six-year period in England and Wales and a 20-year period in Scotland.

Annabelle Ewing

I have explained that the six-year period is a bit of a misnomer, because a liability order can be secured and there is no limit on the time for enforcing it.

The Convener

Are you saying that there will be no difference between Scotland and the rest of the UK?

Annabelle Ewing

I am not saying that. I am saying that the position is analogous, and that to suggest that the period is simply six years and then it all stops is not quite correct in describing what happens in practice in England and Wales.

On the point about local authorities, the SLC proceeded with a consultation, local authorities responded, including some of the largest local authorities. Their view was that, in terms of the public policy considerations that had been set out by HMRC and Revenue Scotland, they required the same approach in order to ensure that they had the opportunity to maintain good order with regard to obligations that are owed to them.

10:30  

Obviously, local authorities are very important stakeholders, along with many others. We listen to all views. In terms of local authorities’ budget, we proceeded with a fair settlement of £10.7 billion in the budget, which Mr Findlay did not support. That represented an increase in income and capital, notwithstanding the cuts to the Scottish Government budget from Westminster.

We are digressing, convener. The position is as I have said, so it is important that there be further engagement with COSLA to tease out those issues.

The Convener

We will not get into the budget, Mr Findlay.

Neil Findlay

It was the minister who raised it.

Annabelle Ewing

No. Actually, it was the member who raised the budget.

Neil Findlay

We have received no evidence that I am aware of in relation to the situation in England and Wales, other than that they have a six-year period and that what is being proposed here would be worse. That is the only evidence that I have heard from people who have come before the committee.

If the minister is using the situation in England and Wales to rebut that point, we need evidence from the Government that sets out the situation in England, how debt is recovered after the six-year period, how many cases there are and how what is being proposed is a better system. We have had no evidence of that.

If there is such evidence, I am more than willing to look at it and consider it fairly. We want the fairest possible system. What is being proposed appears not to be the fairest system.

The Convener

Perhaps the minister could write to the committee on that point.

Annabelle Ewing

I will ask officials to do that. We will obtain as much information as we can.

The Convener

Mr Findlay is right: this is the first we have heard of it. All the evidence that we have had is that there is a six-year limit in England and Wales. The business about liability orders is new to us. If you could give us more information, that would be helpful.

Annabelle Ewing

We will obtain as much information as we can and write to the committee.

Neil Findlay

In relation to payments and penalties on reserved social security benefits, can the minister confirm that the exception is within the devolved competency of the Scottish Parliament?

Annabelle Ewing

When you refer to “the exception”, Mr Findlay, what specifically do you mean?

Neil Findlay

I mean in relation to the prescription period relating to overpayments of reserved benefits.

Annabelle Ewing

I think I said this a moment ago, but I will reiterate it. As regards prescriptive periods for obligations concerning overpayment of reserved benefits, any amendment to the status quo would raise issues of legislative competence that the Scottish Government would require to look at very carefully.

Neil Findlay

The advice that we have is that it is within devolved competence.

Annabelle Ewing

As I said—

Neil Findlay

Have you not looked at that already?

Annabelle Ewing

With respect, the bill is presented as it is and for the reasons stated. In particular, there is the practical issue that the DWP has clearly indicated that, if the bill does not take that approach, a different approach might not be so beneficial to individual applicants. One has to weigh up all issues, including the practical impacts of any course of action.

The issue that Neil Findlay raises, as I have already said, raises issues of legislative competence that would require to be considered carefully by the Scottish Government.

Neil Findlay

I will put the question to Mr Mojee, as he is a solicitor. Have you undertaken that consideration? Has your department weighed up potential differences that could emerge on competence?

Neel Mojee (Scottish Government)

I would reiterate what the minister has said.

Neil Findlay

You are allowed to say yes or no.

Neel Mojee

If we were to amend the current exception, that would raise issues of legislative competence that we would need to consider carefully.

Neil Findlay

Several stakeholders have suggested that it would be fairer to debtors and would encourage the DWP to be more prompt in its debt recovery if the exception for reserved benefits and tax credits were to be removed. What do you say to that?

Annabelle Ewing

I have to say that my experience with the DWP is that nothing happens terribly quickly. What I can go on is what the department said publicly in its memo to the committee of 23 April, which I read out. It seems to be saying that given that it has different technical methods of recovery, five-year prescription could mean that some approaches that mitigate the effect on the recipient might no longer be available, which could have a detrimental effect on the recipient. I am sure that none of us wants to do anything that would put vulnerable people in a worse position.

The Convener

Let us move on to forfeiture.

Stuart McMillan

An earlier version of the proposals had a specific exception to five-year prescription for forfeiture, which mirrored the legislation that applies to England and Wales. Why was the provision removed?

Annabelle Ewing

My understanding is that once an obligation is established and is subject to the normal prescriptive period, it can be enforced through forfeiture in certain ways. Customs and excise officers, for example, can seize ships. Forfeiture is an ancillary element; basically, as long as there is the overarching obligation, whatever the due date is, there are ancillary powers of forfeiture.

The removal of the provision was therefore a technical drafting issue. It was deemed unnecessary to repeat the exception, given that if the obligation persists and is subject to the normal prescription rules, the ancillary powers of forfeiture also persist. That is axiomatic.

I am sure that I am not explaining this in the best way—I am getting into legalese—but that was the feeling. Let me put it this way: there was no attempt to change the outcome. It was just a matter of technical drafting, and it was deemed unnecessary to include the specific exception, from a legal perspective.

Stuart McMillan

You mentioned seizure of ships, which is about the seizure of goods. The committee has considered the issue in the context of unpaid taxes. We are concerned that the general exception relating to taxes will not cover all situations in which forfeiture is used in practice, and that removal of the specific exception takes away the opportunity to clarify how prescription applies to forfeiture more generally.

Annabelle Ewing

It is my understanding that everything that had to be captured had been captured, but I undertake to reflect further on that point and report back to the committee.

Stuart McMillan

Thank you.

Bill Bowman (North East Scotland) (Con)

I have some questions about discoverability. Section 5 sets out the new test associated with the start date for five-year prescription, in relation to the obligation to pay damages. The third part of the new test requires the pursuer to know the identity of the defender or defenders before five-year prescription starts to run.

How will the approach work where there is joint and several liability? We are particularly interested in situations in which potential defenders were not involved in the neglect and were linked to the case only financially.

Annabelle Ewing

I have seen references to joint and several liability in the context of tenants and council tax, for example. Joint and several liability is a general principle of Scots law. The bill sits alongside Scots law and does not change the rules of joint and several liability. It looks at the narrow focus of the rules on negative prescription in Scotland and it operates in the context of the current position for joint and several liability. Therefore, one has to look at the facts and circumstances of each case to determine what the legal position would be in that regard.

The bill looks at the position from the point of view of negative prescription to determine the start date from which prescription runs, when the relevant prescriptive period comes to an end and so forth. The bill does not attempt to deal with all aspects of Scots law, including joint and several liability; it just deals with negative prescription. In the instance that you gave, one would need to look at the relevant facts and circumstances of the case to determine the joint and several liability.

Bill Bowman

When there are unknown parties, what determines when the period starts to run?

Annabelle Ewing

They might be unknown, but if you are jointly and severally liable, you are liable for the actions of the others. If one debtor is identified, your prescriptive period in that instance will start to run, assuming that there has been loss as a result of an act or an omission of that person, even if that person is the only party to be identified. In circumstances in which you are able to identify other parties who were involved in the act or omission, there would be different start dates from which the prescriptive periods would start to run. That is clear in the bill.

Bill Bowman

If you discover someone else who is jointly and severally liable—

Annabelle Ewing

If you discover someone else, it is not necessarily a joint and several liability situation; that is subject to the rules on joint and several liability. However, if there are various actors involved in the loss through their acts or omissions, there can be different start dates for the run of the prescriptive period. I am sorry—I did not mean to conflate the two.

Bill Bowman

So you will be able to go after those who are jointly and severally liable.

Annabelle Ewing

As I said, the joint and several liability element is governed by the rules under Scots law. You would need to look at those rules to determine in the instant case that you raised what the position would be. The normal approach is that if you agree or are deemed to be jointly and severally liable, you are jointly and severally liable—that is that. One should always get legal advice about the obligations that one takes on in life.

Bill Bowman

So I would not be disadvantaged by the proposed change if I had to pursue the jointly and severally liable individuals to get payment.

Annabelle Ewing

I am sorry—who is jointly and severally liable? I am getting a bit confused. I thought that I understood your example, but you have veered off. Which perspective are you talking about?

Under the bill, the prescriptive period will start to run for the benefit of the creditor when three things are known: that there has been loss, injury or damage; that the loss, injury or damage has resulted from an act or omission by a particular person or people; and the identity of that person or those people.

Bill Bowman

Let us say that I am making a claim against the person whom I think has done the damage. For some reason, that person does not or cannot pay, so I want to pursue the jointly and severally liable partners. Is there anything in the provisions on the five-year prescription to prevent me claiming against those individuals because I have not gone after them within the five-year period?

Annabelle Ewing

I see what you are getting at. In that hypothetical situation, why would you not know their identity? However, taking the example to its extremes, if you do not know the identity of the other parties, for whatever reason, you could adopt a belt-and-braces approach, but the point of the bill is to provide as much legal certainty as possible. We cannot legislate for every single case.

Bill Bowman

Given that you are thinking about it, do we need further clarity on that?

10:45  

Annabelle Ewing

I am certainly happy to look into the specific example that you have just raised. Let us say that there are two debtors. If you only identify one of them but, for whatever reason, you decide that it is not worth proceeding with legal action against them, you would then be trying to find out about the other debtor, and you might feel that you were running up against the end of the prescriptive period. In an extreme case, the joint and several liability would be such that you could not possibly identify the second party at that time. I think that that would be a less common circumstance, but we shall look into that.

Bill Bowman

The committee heard some oral evidence to the effect that the third part of the new test in section 5 might increase the complexity of the law in some situations, including where there are multiple potential defenders as a result of complex contractual or corporate structures. Do you accept that criticism of the new test? Is that risk offset by other benefits?

Annabelle Ewing

To go back to first principles, the reasoning behind this reformulation of the discoverability test is to seek to facilitate fairness for—in this case—the creditor. That is balanced by other aspects of the bill, which look at the position of the debtor and take into account the wider public benefit of greater legal certainty.

In the instance that you have just outlined, you could sue the different debtors at different times, so there should not be any particular problem.

At present, you would put out a number of protective writs to preserve your prescriptive period if you are not entirely sure whom you should be suing. In doing that, you would stop the prescriptive period from running. That is not really the best use of resources for anybody on either side of a legal dispute or indeed for the courts and society at large. It is not a very sensible way to do it—there must be better ways.

The SLC put forward a number of options in the consultation. The feeling is that, on balance, the option that has been decided upon by the SLC and which is represented in this bill is a reasonable one.

Of course, there is a countervailing issue around the need to pursue reasonable diligence, so there is already a balance written into the new rules. The balance of the evidence suggests that this solution is certainly an improvement on the current position. Of course, the current position was put into doubt as a result of the 2014 Supreme Court ruling in the Morrison case, because people thought that they knew what the rules were but found out that the rules might be something entirely different.

The new test introduces appropriate fairness into the process and I think that it is balanced by the reasonable diligence obligation.

The Convener

I have a question on the start date for 20-year prescription, which is in section 8. Like five-year prescription, 20-year prescription starts from the date that the obligation becomes enforceable. For obligations to pay damages, that is currently when the loss, injury or damage occurs. Section 8 changes the start date of 20-year prescription for the obligation to pay damages: it says that the 20-year period should run from the date on which the defender’s act or omission occurred. This proposed change would be a shift in the law in favour of the defender, clearly, because the new start point would be much earlier than the old one in some cases and would never be later.

In evidence to the committee last week, Mike Dailly of the Govan Law Centre suggested that section 8 was unnecessary. He said that each proposal in the bill should be examined on its own policy merits and that it is unhelpful to regard the bill as something that has to offer benefits to both pursuers and defenders.

How would you respond to that viewpoint?

Annabelle Ewing

I noted Mike Dailly’s view when I read the Official Report of last week’s evidence session. Obviously, other people have other views. If you read the part of the SLC’s report where it narrates the nature of its consultation and how the work progressed, I think that you will find that, thus far, the balance of the evidence that the committee has had before it absolutely supports the provision.

There is, indeed, a recognition of the balancing act that must be engaged in as we strive to reach a fair balance between the interests of both sides to a claim, and also of the importance of looking at the overall picture in terms of legal certainty, which we discussed as a key objective in response to your very first question, convener. That enhances legal certainty and allows fidelity.

In terms of the earlier start date that is likely to be the case in practice, by looking at the last act or omission, it was felt that, in many cases, the loss can arise many years down the line and for the 20-year prescriptive period—the long-stop prescription—to start running from then would elongate the process quite considerably.

You must also take into account the fact that, some years ago, Scotland decided to remove the 40-year negative prescription from our legal system. The proposal reflects the feeling that we cannot go on indefinitely with having obligations extant, and it improves legal certainty.

The Convener

Of course, changing that start date runs the risk of increasing the number of the harsh cases that we have heard about. As you will be aware, those are the cases where an obligation to pay damages is extinguished without the right holder ever having been aware that obligation existed at all. If that is the case, should that risk affect the policy that underpins section 8?

Annabelle Ewing

I note the reference to hard cases, and I know that the committee has an interest in a particular case—the Paterson case—that is before the Public Petitions Committee. It has been widely accepted that, if there is any potential remedy for the Patersons, it is not to be found under the law of prescription. Ultimately, when trying to come up with a situation that improves legal certainty, we cannot rely on the knowledge of any individual creditor, as that would not allow us to have a system at all—a point that was well made by the Subordinate Legislation Committee in its report. That means that we have to decide what our system is, and that—inevitably, as with any system in which there is a hard cut-off date—there will be some hard cases at the margins. However, the point has been made by a number of people who have given oral evidence to you that hard cases do not make the best law.

On the Paterson case, issues have been raised around the Land Registration etc (Scotland) Act 2012. I think that the Public Audit and Post-legislative Scrutiny Committee is examining that act, and it might be that there are some areas where improvements can be made. I regularly meet the Law Society of Scotland. When I had a meeting with it the other week, I asked it to consider what practice rules could be put in place in relation to the particular issue of the keeper of the Registers of Scotland and the need to ensure that the client is aware of that.

Other issues are in train as a result of the case being raised, but the solution will not be found in relation to the law of prescription.

The Convener

That is clear enough.

Some concern has been expressed by stakeholders, including the Law Society and the Faculty of Advocates, about how section 8 would work in relation to omissions to act and on-going breaches. Can you offer any reassurance to the committee in that regard?

Annabelle Ewing

If you are asking about the language of acts or omissions—in particular the word “omissions”—I can say that those are terms of art of Scots law, and this bill operates within the general context of Scots law. These are matters that the courts look at extremely frequently, and I think that other people who gave evidence and made written submissions expressed the view that those were terms of art and that the courts deal with such matters very practically, which means that including that particular phraseology did not introduce anything new.

Stuart McMillan

My question concerns section 6 of the bill and the provision that, although 20-year prescription can no longer be interrupted, it can be extended only to allow for on-going litigation or other proceedings to finish. The SLC suggested in oral evidence that in practice any extension would be fairly short, because courts tend to manage cases actively and do not let them drag on. With the challenges to public sector finances, could there be an impact on the court system in the future if there were longer delays as a result of the 20-year period being extended? Also, does the possibility of an extension to allow litigation to finish undermine the overall effectiveness of section 6?

Annabelle Ewing

First, I do not think that any particular impact is likely to fall on the operation of the Scottish Courts and Tribunals Service as a result of the provision.

On the second issue, the SLC was keen to recognise the practical situation in which there may be an on-going court case towards the end of a 20-year negative prescription period. It would not be appropriate to say, “Sorry, but your case didn’t reach the next stage by X date, so that’s it.” All the work that had gone into that court case, which could have taken years, would suddenly, on very arbitrary grounds, no longer be heard. The SLC desperately wanted to reflect that as a matter of practice but to keep it very tight, so what it said, and what has been reproduced in the bill, is that the period should be extended only until such time as the claim is disposed of or the proceedings are brought to an end, because proceedings could be brought to an end without the claim being disposed of. That will ensure that extensions will be limited, and it reflects the circumstances that would pertain in such situations, so I think that the SLC has got it absolutely right.

Stuart McMillan

I have another question, and I may be stretching things a wee bit. You have said that an extension would be a very short time in addition to the 20-year period. Given your previous experience outwith Parliament, can you say for what length of time such extensions would normally be? Would it be a few months, or a year? I accept that every case is different, but what would the average be?

Annabelle Ewing

Every case is different. It is not really possible to say anything definitive, because I could say something now and further down the line there could be a different set of circumstances, and then you would say that I had not given you the correct information. It is fair to say that such circumstances will not be common, as has been said. We need to reflect, as a matter of practicality, that a question arises about what to do if a case is brought 19 years and 2 months in. Would we just say, “That’s it” when we reach the 20-year mark, even if the case has a wee bit of time to go? It was felt that that was not the most appropriate way forward.

Bill Bowman

My question is still on prescription; it is about property rights aspects. Section 7 of the bill states that the 20-year prescription that applies to certain property rights will no longer be able to be interrupted, but can be extended only to allow on-going litigation to finish. Although that mirrors the approach in section 6 for personal rights, the Faculty of Advocates, supported by other stakeholders, has suggested that the approach in section 7 would not work well for property rights such as servitudes. In light of that evidence, are you minded to reconsider the Government’s approach to section 7?

Annabelle Ewing

We have carefully reflected on that. We acknowledge the concerns that have been raised and are reflecting on whether we need to look at the language to make the position clear. If, having looked at all the concerns, we feel that the language is okay, that will be one thing, but we are going to reflect carefully on that point, so it was useful to tease that out in the evidence sessions.

Bill Bowman

It is work in progress.

Annabelle Ewing

It is.

Bill Bowman

In its written evidence, Brodies LLP has raised concerns about section 12, which defines what a final disposal is in court proceedings. In particular, Brodies says that

“Section 12 ... does not account for the possibility that a court or other body will grant leave or permission to appeal late or will allow an appeal to be lodged late.”

Do you accept that interpretation? Are you minded to propose amendments to section 12?

11:00  

Annabelle Ewing

That is another work in progress. We recognise the concern that Brodies has raised and will reflect on the matter carefully.

The Convener

So, there are a couple of areas that you are considering.

Annabelle Ewing

Yes. We are not against amending the bill, but we need to see whether the language is adequate. If it is not, we will consider amending it, in light of those concerns.

The Convener

Do you have a timescale for that?

Annabelle Ewing

That will be done in time for the stage 1 debate. I suppose that it depends when the stage 1 debate is.

The Convener

It is sometime in June, apparently.

Annabelle Ewing

That is a long lead-in time. Sometimes, it is much shorter. That should allow us to progress work expeditiously.

The Convener

Good.

Tom Arthur (Renfrewshire South) (SNP)

Good morning, minister. Before I turn to my main line of questioning, I seek clarification regarding council tax. Am I correct in understanding that liability orders in England are roughly analogous to summary warrants in Scotland?

Annabelle Ewing

They may be. I refer to my entry in the register of members’ interests: I am a member of the Law Society of Scotland and I do not profess any particular qualification on English law.

Tom Arthur

I appreciate that.

Annabelle Ewing

As we have indicated, we wish to obtain more information on the issue, but the fact is that England has the liability order process.

Tom Arthur

I would appreciate that information. From my limited understanding as a lay person, liability orders and summary warrants seem to have the same objectives. I was struck by the fact that one website—counciltaxadvisors.co.uk, which is accredited by Advice UK—says that

“Magistrates Courts in England and Wales granted over 3.5 million Council Tax Liability Orders”

in one year.

Annabelle Ewing

That is quite a few.

Tom Arthur

It would be interesting to have a better understanding of that method of recovering debt.

Annabelle Ewing

Indeed.

Tom Arthur

Section 13 of the bill seeks to replace section 13—a nice coincidence—of the Prescription and Limitation (Scotland) Act 1973. It pertains to so-called standstill agreements and would allow for a single extension of the five-year prescription period.

The committee has received a range of views on that. There is a suggestion that allowing a standstill agreement would risk abuse by the economically stronger party in a dispute. On the other hand, some stakeholders say that the measures do not go far enough. Indeed, we have taken evidence that suggests that the bill is fine as it stands, but additional safeguards could be introduced, including that any standstill agreement must be in writing and that the debtor in an obligation must have taken legal or money advice.

I appreciate that if one party says that the bill does not go far enough and another says that it goes too far, that might suggest that you have found the perfect balance, in the middle. However, I am keen to hear the minister’s views on the policy arguments about section 13.

Annabelle Ewing

Section 13 recognises the need to balance the interest of legal certainty with the creditor’s interest in getting a result. It was felt that, instead of having some generally applicable wide provision that would allow for extinctions of the prescriptive period, which would defeat the purpose of seeking greater legal certainty, the standstill provision, as it is called, would help to facilitate resolution.

The standstill agreement will be available under specified circumstances, as Tom Arthur rightly said. It will be only of a year’s duration and that period cannot be extended. Importantly, it is also not to be a general contractual provision; it is to be invoked only after the dispute has occurred. Therefore, it is focused on dispute resolution. That is a good thing and I think that we would all welcome it as such.

In other areas we are seeking to facilitate mediation and dispute resolution, rather than all actions going straight to court. That is the motivation behind the provision. There is, again, a balance to be struck in terms of the circumstances under which a standstill agreement can be invoked.

On inequality of arms, it is interesting to note from the SLC’s discussions in the report that some people called for consideration to be given to restricting the prescriptive period. Some stakeholders felt that there might be circumstances in which a creditor was less powerful than the debtor, which would involve a real inequality-of-arms situation. That was a road that the SLC chose not to go down. It feels that the standstill provisions for the short negative prescription meet the overall desire to strike a balance between respective interests.

On the final point about additional safeguards, I note that the matter came up in last week’s evidence. As far as lawyers and solicitors are concerned, it may be that the Law Society of Scotland should be asked to look at the matter in relation to its practice rules, because I have some questions about how that would work. If we say that people must take legal advice, there may be a case in which one large organisation is in touch with another and there is no inequality of arms, but they might use in-house solicitors, which raises the question whether that counts. Would the organisation still be required to take legal advice?

I understand that it is not the intention to get into that kind of scenario, but when we are drafting legislation we have to contemplate as many possible scenarios as we can. I am happy to go away and reflect on the issue, but I feel instinctively that including that in the bill might cause issues.

Tom Arthur

Okay. Staying on section 13, Brodies has argued that rather than just allowing for extensions, suspensions of the prescriptive period should also be permitted. I understand that to be a pause, in effect. There have been various arguments made about that. Is there policy merit in the proposal?

Annabelle Ewing

Having read the genesis of the SLC’s work—the entire report and all the subsequent submissions—I feel that the objective has been to find that balance. Taking into account the overarching objective of legal certainty, I agree with the SLC that the standstill, with the safeguards to be employed as set out expressly in the bill, is a better way of meeting the objective than the suspension that is proposed by Brodies. In fact, the standstill provisions have a good bit of support.

Tom Arthur

Various legal practitioners have suggested that, in its current form, section 13 might raise an issue in relation to contractual limitation clauses. The fear is that although such clauses are common and important in practice, they might be outlawed due to the current wording of section 13. How do you respond to the practitioners’ points?

Annabelle Ewing

I have noted that point, but I do not feel that it is well founded. It is clear to me that contractual limitation clauses would not be affected. The bill is to do with negative prescription, so it is important to bear in mind the very important difference between the definitions of “prescription” and “limitation”. Prescription concerns the existence of the obligation itself, while limitation is a procedural issue concerning the point at which someone must pursue the claimant through court action and so forth. The two issues are entirely separate. There is no intention to impact on contractual limitation clauses. I feel that that is clear in the bill.

Tom Arthur

My final question concerns something that is omitted from the bill. We took evidence that one potential further reform to the 1973 act could be with regard to the definition of “legal disability”. It is currently defined in section 15(1) of the 1973 act as including “unsoundness of mind”. I think that we would probably all agree that that term is somewhat archaic and, indeed, offensive. In the course of our evidence taking, it has been suggested to us that that definition could be replaced with a definition that is used in the Adults with Incapacity (Scotland) Act 2000. What are your thoughts on that suggestion?

Annabelle Ewing

I noted that comment, which I think was made by one of the academics from whom the committee took evidence.

Tom Arthur

Yes—it was made by Dr Eleanor Russell.

Annabelle Ewing

I understand that the same point has been made with regard to other legislation. I go back to the fact that the bill deals with negative prescription and sits in the context of general Scots law principles. If one wants to amend general Scots law principles that apply in many other areas, it would be best to seek to do so through a different vehicle. The danger of seeking to change basic Scots law principles and definitions that apply in other areas in a bill that deals with a particular area of the law is that we end up with a bit of a hotchpotch and unintended consequences.

With regard to the drafting suggestion that the definition in the Adults with Incapacity (Scotland) Act 2000 should be used in the bill, one would need to consider from what point the prescriptive period would run. Should the rules in the bill be used, or should a different set of rules be used, whereby the prescriptive period would run from when the guardian was appointed? A series of other issues would be raised. The bill deals with the negative prescription rules as they apply to the general principles of Scots law. If one wants to amend those other principles, it seems to me that the bill is not the best way to do that, especially if we take into account the unintended consequences to which that could give rise.

The Convener

Dr Russell mentioned the 1973 act. In her evidence, she said that “legal disability” is defined in that act as including “unsoundness of mind”.

Annabelle Ewing

But “unsoundness of mind” is the general concept that I am talking about.

The Convener

Is it defined in the 1973 act?

Jill Clark (Scottish Government)

It is not defined in the 1973 act, which gives the courts some flexibility in how they interpret it.

The Convener

Thank you for that.

Members have no further questions. Would you like to make any closing remarks, minister?

Annabelle Ewing

No—other than to say that I have found it to be a very helpful session. I note the power of work that the committee has done thus far, and I look forward to further engagement with the committee as we go through the next stages. We will get back to you with the information that we offered to provide.

The Convener

It would be helpful if you could get back to us by 11 May. Thank you very much.

I suspend the meeting to allow the witnesses to leave.

11:13 Meeting suspended.  

11:19 On resuming—