Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2012] CSOH 44
A607/09	OPINION OF LORD WOOLMAN in the cause DAVID T MORRISON & CO LIMITED Pursuer; against (FIRST) ICL PLASTICS LIMITED; (SECOND) ICL TECH LIMITED; and (THIRD) STOCKLINE PLASTICS LIMITED Defenders: ­­­­­­­­­­­­­­­­­________________

Pursuer: Howie, Q.C.; O'Brian; Macroberts LLP

Defenders: Keen, Q.C.; Springham; HBM Sayers

9 March 2012

Background

[1] On 11 May 2004, a catastrophic explosion occurred at the Stockline factory in Glasgow. Nine people were killed and many others were injured. Extensive damage was caused to neighbouring properties.

[2] The factory was used for the manufacture and sale of plastic products. It was owned by ICL Plastics Limited. It is the parent company of a group that includes ICL Tech Limited and Stockline Plastics Limited. They also traded from the factory. All three companies are convened as defenders in this action. I shall refer to them collectively as "ICL".

[3] Criminal proceedings were instituted against the first and second defenders in respect of the explosion. They were charged with breaches of the Health and Safety at Work Act 1974. It was alleged that they had failed to carry out a proper risk assessment. In particular, they had failed to identify that the pipework conveying liquefied petroleum gas ('LPG') to the premises presented a potential hazard. The indictment stated that the defenders should have appointed competent persons to carry out risk assessments, to have a proper system of inspection and maintenance in respect of the pipework, and to ensure so far as reasonably practicable that the pipework was maintained in a condition that was safe and without risk to employees.

[4] The first and second defenders pleaded guilty to those charges at the High Court in Glasgow on 17 August 2007.

[5] A subsequent inquiry chaired by Lord Gill examined the whole circumstances relating to the incident: The ICL Inquiry, 16 July 2009. It concluded that the explosion was caused by a fault in a pipe in the basement. Corrosion of the pipe led to the leakage of LPG, which then ignited.

[6] David T Morrison & Co Limited own a shop which was damaged by the explosion. For many years prior to 2004, Gael Home Interiors traded from the shop. In this action, Morrison seeks compensation of approximately £1.5 million from ICL for the losses it sustained. The principal grounds of action are negligence and nuisance.

[7] The summons was signetted and served on 13 August 2009.

The Issue

[8] ICL admits liability on the merits. However, it maintains that the claim has prescribed. The argument is short and straightforward. Morrison had five years within which to raise any action. Accordingly, a summons had to be served on or before 11 May 2009. ICL's obligation to make reparation was extinguished on that date. The claim was therefore raised some three months too late.

[9] Morrison argues that the prescriptive clock did not start ticking on the day of the explosion. It contends that it only began ticking when Morrison had carried out reasonable inquiries into the cause of the accident.

[10] This case therefore concerns a deceptively simple question. When did the prescriptive period begin?

The Legal Framework

[11] The purpose of negative prescription is to cut off stale claims. In this area of the law, certainty is of central importance. So far as possible, everyone must know precisely when a claim exists and when it has prescribed.

[12] The Prescription and Limitation (Scotland) Act 1973 rationalised and restated the law. It swept away the existing rules and established a new framework. Obligations to make reparation are covered by section 6. They are extinguished "after the appropriate date", if certain conditions are satisfied. The first condition is that they have subsisted for a continuous period of five years. The second condition is that no relevant claim or acknowledgment has been made.

[13] The "appropriate date" is "the date when the obligation became enforceable". When does that occur? The 1973 Act states:

"11. - (1) Subject to subsections (2) and (3) below; any obligation ... to make reparation for loss, injury or damage caused by an act, neglect or default shall be regarded for the purposes of section 6 of this Act as having become enforceable on the date when the loss, injury or damage occurred."

[14] If that rule had stood unqualified, it could have operated harshly. Time would have run against persons with no knowledge that they had a cause of action. Accordingly, section 11(3) of the Act provides an exception:

"In relation to a case where on the date referred to in subsection (1) above ... the creditor was not aware, and could not with reasonable diligence have been aware, that loss, injury or damage caused as aforesaid had occurred, the said subsection (1) shall have effect as if for the reference therein to that date there were substituted a reference to the date when the creditor first became, or could with reasonable diligence have become, so aware."

[15] The purpose behind that provision is plain. It aims to strike a balance between the interests of the respective parties. Persons should not be deprived of raising a claim if they are unaware and could not reasonably be aware that they had such a right. But defenders and their insurers should not be at risk of a claim suddenly emerging many years after the event in question.

[16] The proper construction of s 11(3) has been considered in a number of cases. In GGHB v Baxter Clark and Paul 1990 SC 237, at 252 Lord Clyde made three key observations. First, he stated that the subsection requires an "awareness of loss caused by negligence having occurred." So the provision does not only cover latent damage. [17] It also covers the situation where the claimant is aware that he has sustained loss, but does not realise that it was caused by someone else's fault.

[18] Secondly, section 11(3) is not engaged simply because the particular obligant has not been identified:

"I am not persuaded that sec.11(3) is still available with a view to deferring the start of the prescriptive period when the creditor knows of the loss, knows that it was caused by negligence, but does not know the identity of the person on whom the obligation lies."

[19] Thirdly, in relation to onus:

"... it is for the pursuers to establish that they could not, with reasonable diligence, have become aware that loss, injury or damage 'caused as aforesaid' had occurred."

[20] Lord Clyde's approach was approved in Glasper v Rodger 1996 SLT 44. Delivering the opinion of the court, Lord President Hope stated:

"In our opinion the lack of awareness which requires to be established for the purposes of section 11(3) is a lack of awareness that a loss has occurred caused by an act, neglect or default which gives rise to an obligation to make reparation for it. We agree with Lord Clyde's observations in GGHB v Baxter Clark and Paul ... that the subsection looks for an awareness, not only of the fact of loss having occurred, but of the fact that it is a loss caused by negligence." (47F-H)

[21] He continued (47J-K):

"A party who is aware that he has sustained loss, injury and damage may reasonably be expected to take some steps to find out what has caused that loss. Failure to do this will call for an explanation, if the test of reasonable diligence to which section 11(3) refers is to be capable of being satisfied."

[22] Two recent cases have further considered the scope of section 11(3). Both were Outer House cases decided after proof. In AMN Group Ltd v Gilcomston North Ltd 2008 SLT 835, Lord Emslie framed the issue as follows:

"... the question is in my view whether the pursuers were by the critical dates aware, or could with reasonable diligence have become aware, that relevant loss and damage known to them was actionable, in the sense that a stateable prima facie claim in negligence could properly be advanced against someone. Certainty or even probability of success in any such claim would not, I think, be required." (para. 58)

[23] In Pelagic Freezing (S) Ltd v Lovie Construction Ltd 2010 CSOH 145, Lord Menzies adopted Lord Emslie's approach. He also stated (para. 110):

"It is not necessary, in order for time to begin running, for the pursuers to be aware of the precise detail of every aspect of damage, nor the precise extent of that damage. Once there is knowledge of material damage, this is sufficient."

[24] Accordingly, in determining whether section 11(3) is engaged, it is necessary to consider the state of Morrison's knowledge. When did it know that it had a stateable prima facie claim arising out of the explosion? Using reasonable diligence, when could it have found that out? A number of matters, however, are not relevant. They are (i) whether Morrison had ascertained the identity of the obligant; (ii) whether there were likely prospects of success in any action; and (iii) the precise extent of the damage.

The Pleadings

[25] This came before me for discussion on the Procedure Roll. The focus was therefore on Morrison's pleadings. They contain a detailed narrative of the facts, which I have summarised above. Morrison avers that it suffered loss and damage caused by the explosion at its neighbour's premises.

[26] Article 5 contains the negligence case. I shall set it out in full:

"The explosion was caused by the fault and negligence of the defenders. They knew or should have known of dangers associated with the escape of LPG. They knew or should have known that there was a risk of explosion if LPG was not handled safely. It was their duty to take reasonable care to avoid any harm to others arising from their use of LPG, and in particular to take reasonable care to prevent any explosion from occurring. It was their duty to familiarise with matters that might affect the safety of their LPG system. Accordingly, the defenders knew or should have known that the underground pipe was likely to corrode over time. They knew or should have known that even if steps had been taken to protect the pipe against corrosion, it would still have deteriorated over a longer period of time, and that a system of inspection was still necessary. They knew or should have known that if the underground pipe was allowed to become corroded, then there was a risk of LPG escaping. They knew or should have known that in that event there was a risk of loss, injury and damage to others in the vicinity, and in particular the risk of explosion. In the foregoing circumstances, it was the duty of the defenders to take reasonable care to ensure that the pipe was maintained in a safe condition. It was their duty to have in place a system of periodic inspections of the pipe with a view to identifying any corrosion at an early stage. It was their duty to take steps to prevent any such corrosion from developing to a point where it posed a danger of gas escaping. Such duties were incumbent upon all three defenders as the occupiers of the premises, on the first defender as the owner of the premises, and on the second defender as the person using the particular LPG pipe in its business. In each and all of the foregoing duties, the defenders failed, and thereby caused the loss and damage suffered by the pursuer."

[27] Article 6 of the Condescendence contains a claim based upon the Pressure Systems Safety Regulations 2000, which was not the subject of argument at the hearing.

[28] Article 7 states that "the escape of gas from the LPG pipe and the resulting explosion constituted a nuisance". There are then references to breaches of the Pressure Systems Safety Regulations 2000, to the Health and Safety at Work Act 1974, and to the Health and Safety Regulations 1999. The article then states that "the explosion occurred through culpa on the part of the defenders".

[29] With regard to the delay in raising the claim, Morrison's aver that:

"Immediately following the explosion the pursuer instructed its insurance brokers. Loss adjusters were instructed to deal with the claim."

[30] The pleadings go on to state that the area around the site of the explosion was sealed off by the police. Morrison only obtained entry to its premises in June 2004.

[31] In the same month, ICL had petitioned for judicial review of the procurator fiscal's decision denying it access to its premises. The petition stated that access was sought "to form a prima facie view on the cause or causes of the explosion" and on its responsibility, if any, for the explosion. In fact, the factory was not released from the control of Crown Office until 12 July 2004.

[32] Against that background, Morrison aver that

"It is unlikely that, ... such release having occurred [the factory] could be inspected by experts retained on the pursuer's behalf, such experts would have obtained permission to carry out the requisite examination of the premises, carried out that examination, formed a view satisfactory to them on the cause of the explosion and reported thereon to the pursuer and its advisers prior to 17 August 2004 had they exercised on more than a degree of diligence which would have been accorded reasonable."

[33] In my opinion, it is unnecessary to hold a proof before answer in this case. There is nothing that requires to be elucidated by way of evidence.

Negligence

[34] In considering whether or not Morison could have raised a claim based on negligence on the date of the explosion, it is necessary to consider first the question of res ipsa loquitur.

[35] The classic formulation of that principle was given by Erle CJ in Scott v London and St. Katherine's Docks (3 H & C at p 602):

"But where the thing is shewn to be under the management of the defendant or his servants, and the accident is such as in the ordinary course of things does not happen if those who have the management use proper care, it affords reasonable evidence, in the absence of explanation by the defendants, that the accident arose from want of care."

[36] In McDyer v Celtic FC 2000 SC 379, Lord President Rodger quoted that dictum and continued: (383H-384B)

"That approach has been applied repeatedly in Scots law and we doubt whether its essence has been stated more succinctly than in the words of Lord Maxwell in Murray v City of Edinburgh District Council at p 256:

'The principle only applies where the incident suggests negligence on someone's part and, because of exclusive management and control in the defenders at the time or times when the negligence occurred, it can be presumed that it was the defenders who were negligent.'"

[37] Do the circumstances of the present case yield a presumption of negligence? In my view they do. Buildings do not explode spontaneously. The principle of res ipsa loquitur does therefore apply. As Lord Normand explained the position in Barkway v South Wales Transport Co Ltd [1950 1 All ER 392, 399H

"The maxim is no more than a rule of evidence affecting onus. It is based on commonsense, and its purpose is to enable justice to be done when the facts bearing on causation and on the care exercised by the defendant are at the outset unknown to the plaintiff and are or ought to be within the knowledge of the defendant."

[38] Applying that approach in the present case, on the date of the explosion Morrison was in a position to say "someone is responsible for this". In other words, it was entitled to infer fault. Further, although it is not a necessary ingredient, Morrison could have convened ICL as the defender. It knew that ICL was in occupation and control of the premises. There was therefore no practical impediment to raising an action.

[39] In arriving at the view that the start of the prescriptive period was not deferred under section 11(3), I have carefully considered Mr Howie's lucid submissions on behalf of Morrison. He contended that there might not have been negligence, as buildings can explode without fault. For example, the LPG might have leaked into the atmosphere by reason of a design flaw in a pipe, which was not itself negligent. In those circumstances, there was no actionable claim.

[40] Mr Howie also referred to the rules of proper pleading. Each averment requires a basis, particularly one of negligence. It therefore followed, that Morrison first had to investigate the position. Until it received an expert report stating that there had been negligence, there was no proper basis for making a claim.

[41] But Mr Howie fairly conceded that Morrison could have raised an action based on res ipsa loquitur on the penultimate date of the prescriptive period. He stated that it could do so, but only if after proper investigation, no cause had been discovered.

[42] I do not accept that argument. As a matter of principle, if a case based on res ipsa loquitur can be pled without an expert report, then in my view that can be done at any stage. It is also my opinion that the rules of proper pleading do not alter matters. It is common for actions to be raised and then immediately sisted to enable an expert report to be obtained. That is particularly true when a time-bar looms. Once the report is received, the pursuer can decide whether to abandon, or to insist in the action.

Nuisance

[43] In the leading Scottish authority on nuisance, it was held that there must be an averment of fault: RHM Bakeries (S) Ltd v Strathclyde RC 1985 SC (HL) 17, 45 per Lord Fraser of Tullybelton. His lordship stated, however, that it was unnecessary for a pursuer to aver:

"...the precise nature of the fault committed by the defender which caused the accident. It would be quite unreasonable to place such a burden on a pursuer, who in many cases will have no knowledge, and no means of obtaining knowledge, of the defender's fault. As a general rule it would, in my opinion, be relevant for a pursuer to make averments to the effect that his property has been damaged by a flood caused by an event on the defender's land, such as the collapse of sewer which it was the defender's duty to maintain, that properly maintained sewers do not collapse, and that the collapse is evidence that the defender had failed in his duty to maintain the sewer. The onus will then be on the defender to explain the event in some way consistent with absence of fault on his part. As a general rule the defences available will be limited to proving that the event was caused either by the action of a third party for whom he was not responsible, ... or by a damnum fatale."

[44] Following that dictum, I conclude that it would also have been open to Morrison to plead a case on nuisance on 11 May 2004. In the absence of any explanation for the explosion, Morrison was entitled to infer that prima facie, the owner and occupier was responsible for the explosion. I note that the essential elements of Morrison's current case on nuisance as set out in Article 7 appear to follow Lord Fraser's approach.

Concluding Observations

[45] The test contained in section 4(3) has been called "the discoverability formula": Report on Prescription and Limitation of Actions (Latent Damage and other Related Issues) Scot Law Com. Report No 122 para. 2.6. The classic scenario for its operation is a case of latent damage. An explosion is far removed from such a case. In this case, it was instantly discoverable.

[46] The requirements for pleading a res ipsa case and a case based on nuisance are remarkably similar. Neither requires detailed averments of fault. And the case as now pled reflects that approach. Although I hold that Morrison could have raised an action on either or both grounds, that did not mean that it would necessarily succeed. It would have been a matter for ICL to rebut the case made against it. But in my view, prescription was not deferred until the prospects of success were ascertained.

[47] There is one final matter. I agree with the Dean of Faculty that Morrison's argument would have far reaching consequences. In future cases, the court would be called upon to adjudicate upon whether a pursuer's investigations were reasonable. That would relate not only as to their nature, but as to the time taken for them. It would lead to some nice questions. Should an indigent pursuer be given more time than a wealthy one? Morrison's argument would therefore tend to promote uncertainty and undermine the policy intent of the 1973 Act. The prescriptive period could be extended for a lengthy period. Defenders could only be certain that a claim had expired at the end of the long negative prescription. Insurance reserves would have to be maintained for twenty years.

Summary

[48] In light of the discussion above, I shall sustain the third plea-in-law for the defenders, repel the pursuer's pleas and dismiss the action.