David T Morrison & Co Ltd (t/a Gael Home Interiors) v ICL Plastics Ltd & Ors (Scotland)

Factual and Procedural Background

An explosion occurred on 11 May 2004 at Company A’s factory in The City, killing nine people, injuring many others and severely damaging neighbouring property, including a shop owned by Company B. On 13 August 2009 Company B began proceedings seeking damages in negligence, nuisance and breach of statutory duty for the damage to its shop. Company A defended the action by pleading that any obligation to make reparation had been extinguished by the five-year prescriptive period in section 6(1) of the Prescription and Limitation (Scotland) Act 1973 (“the 1973 Act”).

The Lord Ordinary (Judge Woolman) upheld the prescription plea, holding that time began to run on the date of the explosion because the evidential maxim res ipsa loquitur supplied constructive knowledge of negligence. The Inner House (headed by Judge Paton) reversed that decision, concluding that res ipsa loquitur did not provide the requisite knowledge and ordering a proof before answer. Company A appealed to the Supreme Court, where it was permitted to advance the wider argument that the lower courts had adopted the wrong interpretation of section 11(3) of the 1973 Act.

Legal Issues Presented

1. What level of “awareness” on the part of a creditor is required by section 11(3) of the 1973 Act to postpone the commencement of the five-year prescriptive period?
2. Does the evidential doctrine of res ipsa loquitur play any role in determining constructive awareness for the purposes of section 11(3)?
3. In light of the answers to the above, had Company B’s claim prescribed before proceedings were raised?

Arguments of the Parties

Appellant’s Arguments (Company A)

• Section 11(3) postpones prescription only until the creditor knows (or could with reasonable diligence know) that loss has occurred; knowledge of the causal negligence or legal fault is unnecessary.
• Alternatively, if knowledge of causation is required, the circumstances of an unexplained factory explosion invoke res ipsa loquitur, giving Company B constructive knowledge of actionable negligence from the outset.
• Earlier Scottish authorities reading section 11(3) more broadly are wrong in principle, create uncertainty and should be overruled.

Respondent’s Arguments (Company B)

• Consistent with longstanding Scottish case-law, the subsection postpones prescription until the creditor knows (actually or constructively) that the loss was caused by an act or omission amounting to an actionable wrong.
• At a minimum the creditor must know the factual cause of the damage; Company B could not reasonably ascertain the cause until months after the explosion when expert investigation became possible.
• Res ipsa loquitur is irrelevant to the statutory question of awareness because it concerns evidential burdens at trial, not the creditor’s knowledge before litigation.

Table of Precedents Cited

Court's Reasoning and Analysis

By a majority (Judges Reed, Neuberger and Sumption), the Supreme Court held that the phrase “loss, injury or damage caused as aforesaid” in section 11(3) merely links the loss to the obligation but does not require the creditor to know, or be able with diligence to know, that the loss was caused by an actionable breach of duty. The majority reasoned as follows:

• The natural reading of the subsection focuses on awareness of the occurrence of loss; had Parliament intended knowledge of breach of duty, clearer language—of the kind used elsewhere in the Act—would have been deployed.
• Comparisons with section 17 (personal injury limitation) show that, when the legislature intends knowledge of causation or identity of a defender to postpone time, it states so expressly.
• Treating legal advice or awareness of actionability as the trigger would undermine certainty, make prescription depend on the quality of advice received, and create arbitrary differences among creditors.
• The legislative purpose of prescription is legal certainty; postponing time until the creditor merely discovers the fact of loss achieves a balanced compromise between certainty and fairness. Latent damage is adequately addressed by the subsection as thus interpreted.
• Because awareness of actionable negligence is not required, the evidential doctrine of res ipsa loquitur has no role in the section 11(3) analysis.

The dissenting opinion (Judges Hodge and Toulson) would have required knowledge of the factual cause (an act or omission) before prescription begins, though not knowledge of legal actionability. They considered it “strange” for time to run before the creditor knew what caused the loss. However, this view did not command the majority.

Holding and Implications

APPEAL ALLOWED. The court ruled that the five-year prescriptive period began on 11 May 2004, the date the damage occurred, because Company B was (or could reasonably have been) aware of the fact of loss on that date. Consequently, the obligation sued upon had prescribed before the action was raised on 13 August 2009.

Implications: The decision overrules nearly three decades of Scottish authority that had postponed prescription until the creditor knew the damage was caused by an actionable wrong. Going forward, creditors must raise proceedings within five years of discovering actual loss, regardless of whether they yet know its cause or legal actionability. The ruling enhances legal certainty but places a greater onus on potential pursuers to act promptly once damage is apparent; it does not establish new precedent on res ipsa loquitur.