David T Morrison & Co Ltd (t/a Gael Home Interiors) v ICL Plastics Ltd & Ors (Scotland) [2014] UKSC 48

Following a fatal explosion at ICL's Glasgow factory in 2004, Morrison's neighbouring shop was damaged. Morrison sued in 2009. The Supreme Court held its claim had prescribed under the five-year period, ruling that time runs from awareness of loss alone, not its cause.

Facts

On 11 May 2004, a serious explosion occurred at ICL’s factory at Grovepark Mills, Glasgow, killing nine people and injuring many others. The blast caused extensive damage to a neighbouring shop owned by David T Morrison & Co Ltd (trading as Gael Home Interiors). Morrison was denied access to its premises until June 2004 due to police cordons and the Crown Office’s control of the site. Morrison averred it could not have obtained an expert report on the cause of the explosion until after mid-August 2004. In August 2007, ICL companies pleaded guilty to breaches of health and safety legislation, and a public inquiry chaired by Lord Gill reported in July 2009 identifying the tragedy as avoidable and attributable to failures by ICL.

Morrison raised proceedings for reparation on 13 August 2009, more than five years after the explosion. ICL admitted liability in principle but pleaded that the obligation to make reparation had been extinguished by the five-year short negative prescription under section 6 of the Prescription and Limitation (Scotland) Act 1973. Morrison relied on section 11(3), arguing the prescriptive period did not begin to run until it knew, or could with reasonable diligence have known, that the damage had been caused by negligence, nuisance or breach of statutory duty.

Issues

The central issue was the correct interpretation of section 11(3) of the 1973 Act, specifically the meaning of the words “loss, injury or damage caused as aforesaid”. The court had to decide whether the postponement of the prescriptive period required the creditor to be aware only of the occurrence of loss, or additionally to be aware that the loss had been caused by an act, neglect or default (and, on some readings, that it was actionable). A subsidiary issue concerned the relevance of the evidential principle res ipsa loquitur.

Arguments

ICL (Appellants)

ICL argued that section 11(3) required only awareness that loss had occurred, and that Morrison plainly had such awareness on the day of the explosion. As a fall-back, ICL contended that even under the established Scottish case law, Morrison had constructive knowledge of a prima facie negligence claim by operation of res ipsa loquitur.

Morrison (Respondent)

Morrison contended that time did not run until it had actual or constructive knowledge that it had suffered loss caused by some actionable wrong, following the line of Scottish authority commencing with Dunfermline District Council v Blyth & Blyth Associates and developed in Greater Glasgow Health Board v Baxter Clark & Paul and Glasper v Rodger. As a fall-back, Morrison argued that the requisite knowledge was factual: loss, an act or omission, and a causal link.

Judgment

The Supreme Court, by a majority (Lord Reed, Lord Neuberger and Lord Sumption, with Lord Hodge and Lord Toulson dissenting), allowed ICL’s appeal.

The majority’s reasoning

Lord Reed held that section 11(3) is properly interpreted as postponing the prescriptive period only where the creditor is unaware of the occurrence of loss, injury or damage. The words “caused as aforesaid” are adjectival, connecting the loss to the cause of action described in section 11(1), rather than importing a separate requirement of awareness of causation. Lord Reed concluded this was the more natural reading of the statutory language, and that had Parliament intended to require awareness of causation, it would have said so expressly, as it did in sections 18(3), 22(2) and 17(2)(b) of the same Act in relation to limitation of personal injury claims.

Lord Reed rejected the reasoning of Lord Clyde in Greater Glasgow Health Board v Baxter Clark & Paul and Lord Hope in Glasper v Rodger, noting that the earlier interpretation produced “unlikely consequences”: prescription would run at different times for different creditors depending on the quality of legal advice received, contrary to the legal certainty that prescription is designed to promote. He also observed the difficulty of determining when a creditor could be said to be “aware” of a breach of duty in advance of judicial determination.

Lord Reed further rejected the intermediate interpretation favoured by Lord Hodge and Lord Toulson (requiring awareness of loss and its factual cause but not actionability), holding that the words “as aforesaid” could only refer back to “caused by an act, neglect or default” in section 11(1), and that it would be arbitrary to postpone the period until the creditor knew what caused the loss but not who was responsible.

Lord Neuberger agreed, emphasising that the natural reading of “caused as aforesaid” was adjectival and that surplusage arguments should not compel an unnatural construction. He rejected the suggestion that the long-standing Scottish authorities warranted preserving an erroneous interpretation, particularly where the leading textbook (Johnston, Prescription and Limitation) had signalled that the point remained live.

Res ipsa loquitur

The majority agreed with Lord Hodge that on the correct interpretation of section 11(3), the principle res ipsa loquitur is irrelevant, as the subsection is concerned with awareness of loss, not with the establishment of negligence.

The dissent

Lord Hodge (with Lord Toulson) would have dismissed the appeal, holding that section 11(3) required awareness of both (i) loss and (ii) the acts or omissions which caused it, though not the actionability of those acts or the identity of the defender. He emphasised the discoverability policy of the provision and the injustice of cutting off claims before a pursuer had sufficient information to instruct proceedings.

Implications

The decision resolves nearly three decades of Scottish case law by overturning the established interpretation of section 11(3) that traced back to Dunfermline District Council v Blyth & Blyth Associates (1985) and was elaborated in Greater Glasgow Health Board and Glasper v Rodger. Under the majority’s interpretation, the five-year short negative prescription under section 6, read with section 11(3), begins to run when the creditor becomes actually or constructively aware of the occurrence of loss, injury or damage, regardless of whether the creditor knows the cause of that loss, the identity of the wrongdoer, or that the loss is actionable.

The practical significance is considerable. Pursuers in Scotland faced with latent or unexplained damage must act with greater urgency: awareness of loss alone starts the clock. The decision prioritises legal certainty and the policy objectives of prescription (preventing stale claims, protecting defenders, and enabling parties and insurers to organise their affairs) over discoverability concerns.

The majority accepted that the change of interpretation might affect litigants, but noted counsel’s agreement that pursuers were unlikely to have delayed proceedings in reliance on the earlier authorities. Lord Hodge’s dissent expressly urged Parliament to reconsider implementing the Scottish Law Commission’s 1989 recommendations, which would have expressly required awareness of causation and the defender’s identity. The decision therefore leaves open a legislative question as to whether the discoverability formula in section 11(3) should be reformed to align more closely with section 17(2)(b) governing personal injury limitation.

The judgment also clarifies that res ipsa loquitur, being an evidential rule concerned with inferences of negligence, has no role in determining when the prescriptive period begins to run under section 11(3).

Verdict: Appeal allowed. The Supreme Court held (by a majority of 3-2) that section 11(3) of the Prescription and Limitation (Scotland) Act 1973 requires only actual or constructive awareness that loss, injury or damage has occurred, not awareness of its cause. Accordingly, Morrison’s claim had prescribed five years after the explosion on 11 May 2004, and the action raised on 13 August 2009 was time-barred.

Source: David T Morrison & Co Ltd (t/a Gael Home Interiors) v ICL Plastics Ltd & Ors (Scotland) [2014] UKSC 48