Introduction

The case of The Firm of C&L Mair against Mike Dewis Farm Systems Ltd ([2022] ScotCS CSOH_47) adjudicated by the Scottish Court of Session on July 1, 2022, presents significant considerations regarding the commencement of prescriptive periods in Scots law, particularly in scenarios where the alleged loss is contingent upon future events. The plaintiff, The Firm of C&L Mair, proprietor of Townhead Farm in Dumfries, engaged the defendant, Mike Dewis Farm Systems Ltd, for the supply and installation of a slurry tank as part of a broader farm improvement project. The crux of the dispute arose when a failure in the embankment led to ground movement, resulting in damage to the slurry tank. The plaintiff sought damages based on alleged breaches of contractual and duty obligations, while the defendant invoked prescription under the Prescription and Limitation (Scotland) Act 1973 as a defense.

Summary of the Judgment

The Court, under the opinion of Lord Braid, examined whether the commencement of the five-year prescriptive period had elapsed before the plaintiff could assert a claim for damages arising from the defendant's alleged breaches. Central to the Court’s analysis was whether the plaintiff had suffered actual loss or if the loss was merely contingent upon the occurrence of the embankment slip in September 2016. The Court concluded that the loss did not materialize until the embankment slip occurred, thereby setting the start of the prescriptive period at that point in time. Consequently, the defendant's plea of prescription was rejected, allowing the case to proceed to trial on its merits.

Analysis

Precedents Cited

The judgment extensively referenced several precedents to elucidate the nuances of when damnum (loss) occurs in Scots law, particularly in cases involving contingent losses:

• Dunlop v McGowans (1980 SC (HL) 73): Established that prescription begins with the concurrence of injuria (wrongful act) and damnum (loss).
• Law Society v Sephton & Co (A Firm) [2006] 2AC 543: Distinguished between bilateral transaction cases with quantifiable damage and purely contingent liabilities, holding that the latter do not amount to damnum until the contingency materializes.
• Khosrowpour v Taylor [2018] CSOH 64: Applied similar reasoning to affirm that contingent losses do not commence the prescriptive period until actual loss occurs.
• Midlohtian Council v Raeburn Drilling and Geotechnical Limited [2019 SLT 1327]: Demonstrated that inevitable loss, even if not known at the time, constitutes damnum.
• Kendall v Royal Bank of Scotland plc [2019 SC 168]: Emphasized that inevitable loss typically results in damnum having already occurred.
• Kusz v Buchanan Burton [2010 SCLR 27]: Contrasted with cases where loss was contingent and did not amount to damnum.

These precedents collectively influenced the Court's stance on contingent loss and prescription, underscoring the importance of the actualization of loss in triggering the commencement of the prescriptive period.

Legal Reasoning

The Court undertook a meticulous examination of when loss, in the sense of Scots law, is considered to have occurred. It anchored its analysis on:

• Section 11(1) of the Prescription and Limitation (Scotland) Act 1973: Specifies that the prescriptive period begins when the loss occurs.
• Concurrence of Injuria and Damnum: Building on Dunlop v McGowans, the Court affirmed that both a wrongful act and a resultant loss must coexist for prescription to commence.

Applying these principles, the Court assessed whether the plaintiff had incurred actual loss by the time the contract was executed and paid for in 2012 or only upon the embankment slip in 2016. Recognizing that the slip was a contingent event not inevitable from the outset, the Court determined that damnum did not materialize until the slip occurred.

Furthermore, the Court differentiated between immediate loss incurred through wasted expenditure and contingent loss dependent on future events. While expenditure based on defective advice can constitute immediate loss, as seen in cases like Khosrowpour v Taylor, in the present case, the loss was purely contingent upon an unforeseeable event.

Impact

This judgment reinforces the principle that in Scots law, prescriptive periods related to contractual and duty-based claims are tightly linked to the actualization of loss. It clarifies that contingent losses, which hinge on future uncertain events, do not commence the prescriptive clock until those events occur. This has profound implications for both plaintiffs and defendants:

• For Plaintiffs: Emphasizes the necessity to accurately ascertain and document the point at which loss occurs to preserve rights against prescription.
• For Defendants: Highlights the importance of timely defense against claims, understanding that prescription may not begin until loss is realized.
• For Legal Practitioners: Provides clearer guidance on advising clients regarding the timing of claims and the relevance of contingent events.

Additionally, the judgment may influence future cases involving complex contractual relationships and contingent liabilities, providing a clearer framework for assessing when prescription periods commence.

Complex Concepts Simplified

Prescription and Limitation

In Scots law, prescription refers to the time limits within which legal actions must be initiated. The Prescription and Limitation (Scotland) Act 1973 outlines these periods, particularly emphasizing that for claims related to breach of contract or duty, the prescriptive period generally spans five years from the date when loss occurs.

Injuria and Damnum

The concepts of injuria and damnum are fundamental in determining when a claim becomes actionable. Injuria pertains to the wrongful act or breach, whereas damnum refers to the actual loss or damage resulting from that act. Both must be present concurrently for prescription to commence.

Contingent Loss

A contingent loss is a potential loss that depends on the occurrence of a future uncertain event. In contrast to immediate loss, contingent loss does not trigger the start of the prescriptive period until the contingent event takes place, thereby converting the potential loss into actual loss.

Hindsight in Legal Assessment

The term hindsight in legal contexts refers to the evaluation of events with knowledge of their outcomes. Courts caution against using hindsight to unjustly influence the determination of when loss occurred, ensuring that assessments are based on objective facts available at the relevant time.

Conclusion

The judgment in C&L Mair v Mike Dewis Farm Systems Ltd underscores the critical distinction between actual and contingent loss within the framework of prescription in Scots law. By affirming that the prescriptive period initiates only upon the realization of actual loss, the Court emphasizes the necessity for plaintiffs to clearly demonstrate when they have sustained genuine detriment. This decision not only provides clarity on the application of prescription in cases involving contingent events but also serves as a guiding precedent for future disputes where the timing and nature of loss are pivotal. Legal practitioners and parties engaged in contractual agreements must take heed of these principles to effectively manage claims and defenses related to prescription and limitation.