An action alleging professional negligence by a firm of solicitors has been held out of time because it was raised more than five years after the pursuers first knew they had a liability in legal costs in relation to the alleged right of action, whether or not they knew that these might be recoverable.
Lady Paton, Lord Bracadale and Lord Malcolm in the Inner House gave the ruling in refusing a reclaiming motion by Linda Gordon and others in their action against Campbell Riddell Breeze Paterson, solicitors, alleging that the defenders negligently served defective notices to quit in relation to agricultural tenancies over three fields.
The notices were intended to take effect on 10 November 2005. The tenant remained in possession and proceedings to evict him, raised in February 2006, were refused by the Land Court in July 2008. The action was raised in May 2012.
Also on 10 November 2005, the defenders had written to the pursuers advising that the tenant was refusing to quit and that because of a "potential conflict of interest" the pursuers should take immediate steps to take advice both in relation to the tenant and to the actings of the defenders. The pursuers had instructed other solicitors who had taken the proceedings aganst the tenant.
The judges agreed that prior to the UK Supreme Court decision in David T Morrison & Co Ltd v ICL Plastics (2014), the five year time bar period would have been calculated from the time when the pursuers knew that their liability in respect of legal fees amounted to "loss, injury or damage caused as aforesaid" in terms of s 11(3) of the Presciption and Limitation (Scotland) Act 1973.
However the reasoning of the majority in Morrison left no room for an argument that time did not run until the pursuers had that element of knowledge of breach of duty. Lord Malcolm, delivering the leading judgment, said that s 11(3) addressed only latent damage, and given the pursuers’ knowledge of the costs, it was not easy to categorise them as latent damage. "The emphasis is on knowledge, or lack of knowledge, of the occurrence of loss, injury or damage, which is viewed as a matter of objective fact", he commented. "In short, in respect of s 11(3), according to the majority, the test is objective. Has the creditor suffered an injury? If so, is he aware of the facts which constitute the injury? If yes, the prescriptive period has begun."
Adding that the court had to apply the ruling in Morrison rather than evaluate it, he concluded: "It was acknowledged that the benefit of the certainty achieved by the majority’s approach might come with the creation of 'hard cases'. This action suggests that, pending the current review of the law by the Scottish Law Commission, the hard cases may be more common than anticipated."