Thread: 20 year claim limit in Scotland & other ramblings

This article was written by a solicitor from Burness, one of the top Scottish law firms:

Scottish law articles in association with Burness

Prescription and limitation in contract
The terms prescription and limitation are often used synonymously but do in fact refer to two distinct principles, explains senior projects solicitor Adrian Huett. Prescription is a rule of substantive law whereby certain rights and obligations are created (positive prescription) or extinguished (negative prescription) after a specified period of time. Limitation is a rule of procedure – and so must therefore be raised by the defendant in proceedings – whereby certain rights and obligations (while remaining in existence) become legally unenforceable after a specified period of time.

Scottish law
The current law is found in the Prescription and Limitation (Scotland) Act 1973 (as amended). The provisions on negative prescription set out when contractual rights and obligations are extinguished. There are two time periods: the short five-year period and the 20-year long-stop period. Both run from the date on which the obligation became enforceable and this will vary depending upon the nature of the obligation.

For example, the date upon which a claim under a contract (eg a claim for loss and expense under a building contract) becomes enforceable will depend upon the terms of the contract and will always be a question of fact and circumstance. However, it will usually be when the dispute crystallises, ie when a claim has been made by one party and rejected by the other. Thereafter, the pursuer has five years from this date in which to make a claim otherwise their right – and the defender’s obligation – will be extinguished.

In contrast, a claim for breach of contract generally becomes enforceable when there is a concurrence of liability (ie the breach) and actual loss. Again, the pursuer then has five years to make a claim. However, given that a pursuer may not realise that they have suffered a loss until some time after the breach (eg where there is a latent defect in a building), the five-year period will not start until the pursuer becomes aware, or could with reasonable diligence have become aware, of that loss. This qualification is subject to the 20-year long-stop which applies irrespective of the pursuer’s knowledge.

Accordingly, if an owner discovers a defect in their building three years after completion then, provided that defect could not reasonably have been discovered earlier, they have until year eight to make a claim against the contractor for breach of the building contract. However, if the same defect is discovered 18 years after completion then the owner has only two years to make a claim before their right is extinguished.

It follows that correctly identifying the nature of the obligation is key to understanding when the prescriptive periods apply and, consequently, when rights and obligations will be extinguished under Scottish law.

English law
The current law is principally found in the limitation act 1980 (as amended). This sets out when contractual rights and obligations become unenforceable. There are two time periods since English law divides contracts into two categories: there is a six-year limitation period for simple contracts, and a 12-year limitation period for contracts executed as deeds.
Only one limitation period will apply to any contract and that will run from the date on which the cause of action accrued. In a claim under a contract, this will be when the dispute crystallises. The claimant will then have either 6 or 12 years in which to make a claim otherwise their remedy will be time-barred.

In a claim for breach of contract, this will be when the breach occurred and again the claimant will have either 6 or 12 years in which to make a claim. It should be noted that, unlike Scottish law, time will run from the date of the breach and not from the date of any resulting loss. Moreover, the start of the limitation period will not be deferred merely because the claimant was unaware of the breach. As a result, a claimant’s remedy may become time-barred before they realise they have suffered a loss or even before such loss has materialised. In order to address this injustice, the English Law Commission has published proposals which allow claims for breach of contract to be made within three years from the date of discoverability, subject to a ten-year long-stop. The proposals largely mirror the provisions of the Latent Defects Act 1986 which allows claims for negligence (other than actions involving personal injuries) to be brought outside the usual six-year limitation period but within three years from the date of discoverability, subject to a 15-year long-stop. The proposals are unlikely to be on the statute book for a number of years, however.

Conclusion
Whether prescription or limitation applies will depend upon whether the contract is governed by Scots law or English law. In either case, once the solicitor has established the relevant time period and has decided to proceed with the claim, he must then be sure to stop the clock by raising either court proceedings or arbitration proceedings.

Source: Burness May 2003

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wow, this is interesting.

I used to have a account with Lloyds which was closed 3 yrs ago. They were a sharp thorn in my side for a number of years prior to that. Here was me thinking I would only be able to get them for a couple of years.

If I'm reading this right, can we really go back as far as 20 yrs in bonnie Scotland?

Originally Posted by dazzaboy2

wow, this is interesting.

I used to have a account with Lloyds which was closed 3 yrs ago. They were a sharp thorn in my side for a number of years prior to that. Here was me thinking I would only be able to get them for a couple of years.

If I'm reading this right, can we really go back as far as 20 yrs in bonnie Scotland?

It says what it says. The author is a partner at Burness - they're one of the top Scottish law firms (with one of the poshest offices too). I'd be very surprised indeed if it was incorrect. Unfortunately, I haven't managed to get my hands on a copy of the Prescription and Limitation (Scotland) Act 1973 (as amended) yet for total verification.

Originally Posted by bandonbhoy

This article givesus much comfort, but does the bank need to admit that thye do indeed hold records of customers accounts for last 20 years

No. It just states that you can claim back up to 20 years.

The bank may or may not hold details going back this far.


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There are plenty of people out there (my Mother for one) who routinely save all their bank statements, and have a nice archive going back through the mists of time. Those people could potentially clobber their banks for a fortune if they added the contractual rate of interest. The problem with that of course is that there is still a £750 small claims limit in Scotland, so it might take a while.

Thanks for your input Advocate.

There are a couple of things however which I think need to be clarified:

As to the question of when the party becomes "aware" that they have a claim, it is necessary for individuals to exercise reasonable diligence in protection of their rights. The banks have been pretty clear in their terms and conditions as to what charges will apply on default and so it is not possible to argue that the banks have in some way "concealed" the charges which they are to apply.

It may be true that they've been clear about what charges will apply, but no-one is challenging the banks on the basis that they didn't know charges were going to be applied. The legal challenges are coming from the fact that it's become apparent relatively recently that their charges are actually penalties, and therefore not enforceable.

The law in relation to unfair contract terms has been in place since 1999 and the law on penalty charges has been clear for decades. As a consumer you could easily have sought advice on the lawfulness of the bank charges by consulting a legal adviser or citizens' advice bureau.

It's difficult to see how consulting CAB would help in deciding about the lawfullness of bank charges - since the banks vehemently insist that their charges are not penalties, and - so far - not a single bank has been prepared to go to court to justify them. (I know, lots of banks make a pretence of fighting court actions - but that's not the same as going all the way)

I don't think that a consumer with no legal training could in any be expected to be familiar with the UTCCR1999, or the law as it relates to penalty charges, and I so I think it's perfectly reasonable that when it's pointed out to them today that they've been getting ripped of by their bank , the Prescription & Limitation (Scotland) Act allows them to seek proper redress.

As a consumer you could easily have sought advice on the lawfulness of the bank charges by consulting a legal adviser or citizens' advice bureau.

1 year ago, any, and I mean ANY solicitor consulted on penalty charges would have patronised an "ordinary" consumer right out of his office. As for the CAB, they STILL to date do not advise to reclaim charges, and instead advise to "enter into a dialogue with the bank" or to go to the Ombudsman.

My apologies. Post deleted as the response does not apply to the Scottish legal system.

If the charges are penalty charges, they have been so since they were first applied.

This is not correct. You have to remember that the charges banks levy for various things have rocketed over the years, while the cost to them has plummeted. There was a time when the bank charged a couple of pounds for returning a cheque because it actually did use up a load of resources, because the entire process was manual. If a cheque was presented without there being sufficient funds to clear it, the branch had to dig out the person's file, check the balance, type out a letter and post it to the customer. As banks have become more and more autmotated, they've reached the point where the overwhelming majority of transactions - authorised, unauthorised, paid or otherwise - are handled entirely by computer. This means of course that the cost to the bank for an individual transaction is now so small that it cannot be expressed in terms of pounds and pence (instead they use 'CPM', which means 'cost per thousand', the M denoteing the Latin term for a thousand, 'Mille'). Over the years of course, the banks reralised that this was a rather nice earner, which is why every so often you get a letter saying that their charges have gone up by another fiver.

I really don't think that the issue is whether or not you could "with reasonable diligence have become aware" that penalties are unlawful has much bearing. The real issue is whether or not you could have known that your banks charges are penalties, and that's something which is much trickier, since they don't publish details of their income from chrges, and they vehemently deny that they make any profi from them.

Originally Posted by Advocate

This is just nonsense and deeply patronising to the legal professions involved.

Great legal argument there.

Happy to be proven wrong, any cases you can quote to support this?

Because, as far as I am aware, the people who have brought the penalty charges to the public eye are, amongst others: Laura Saunders v Yorkshire Bank, with the help of Bankchargeshell. Stephen Hone, of Penaltycharges, Dave Smith of this forum, and a few others. Incidentally, the only case LOST so far was Henry v Natwest, where he had a barrister to represent him, and, by Henry's own account, he felt that "his barrister had lost interest by that point".

I am afraid it also panders to easy stereotypes and portrays a naivety about the nature of advising clients on legal problems.

Well, I have won 4 claims relating to penalty charges so far, one of them in court. How many have you?

Deeply patronising to your profession it may be, in your opinion anyway. It doesn't make it false. ;-)

Sorry, Robert, I have said my piece now, I'll leave you to it.

Originally Posted by bandonbhoy

So would someone in Scotland be able to claim charges from a bank with two sets of headquarters, from the one in Scotland five years of back charges, then claim from the english headquarters for the sixth year?

I don't see the advantage with this - why not just claim through the English system?

Why do you think you need an English Address to claim in England? You only need that if you're using moneyclaim. All you need to do is use the N1 form from the county court instead, which is very similar to the Scottish small claim form. True, you might have to go to England for a hearing, but judging by the number of people who've got their money back so far, that seems to be a remote possibility.