Scottish Sheriff Court Decisions

SHERIFFDOM OF LOTHIAN AND BORDERS   Case Number: A391/12

Judgment by   SHERIFF PRINCIPAL MHAIRI M STEPHEN   in appeal in the cause   ROSEMARY WINTER-SCOTT, THE ACCOUNTANT IN BANKRUPTCY Pursuer and Appellant   against   BALFOUR AND MANSON LLP, having its registered office at 54-66 Frederick Street, Edinburgh and the firm of Balfour & Manson formerly having a place of business at 54-66 Frederick Street, Edinburgh, and Andrew T F Gibb, David PH McLennan, Brenda L Rennie, James L J Craig, John M Hodge, Alfred J Tyler, A J Spencer Kennedy, Murray A A Burns, Margaret M Neilson, Kenneth S Robertson, Anne M Pacey, Pamela H Loudon, David S McIntosh, Elaine J Motion, Marjory C MacGregor, Christine A Stuart, Shona H Smith, Robin J Hill all as partners of the now dissolved firm of Balfour & Manson formerly having a place of business at 54-66 Frederick Street, Edinburgh Defenders and Respondents   ___________________________

 

Act: Hawkes

Alt: Richardson

 

 

 

EDINBURGH,  9 September 2013

The Sheriff Principal, having resumed consideration of the cause, refuses the appeal; adheres to the sheriff's interlocutor of 21 January 2013; certifies the appeal as suitable for the employment of junior counsel, thereafter finds the appellant liable to the respondents in the expenses of the appeal; allows an account thereof to be given in and once lodged remits the account of expenses to the Auditor of Court to tax and to report.

(signed) Mhairi M Stephen

 

NOTE:

1.              This appeal lies against the sheriff's interlocutor of 21 January 2013 which followed proof on the respondents' first plea in law. The sheriff's interlocutor sustained the respondents' first plea in law and assoilzied them from the craves of the initial writ; repelled all remaining pleas and found the appellant liable to the defenders in expenses of the action.

 

2.              The pursuer and appellant in the action is the Accountant in Bankruptcy qua permanent trustee on the sequestrated estates of Patricia Anne Phillip of Denmark Farm, Colliston, near Arbroath. The Accountant in Bankruptcy was appointed permanent trustee by Act and Warrant of 3 May 2002. She appointed David A S Gellatly as her agent all in terms of the Bankruptcy (Scotland) Act 1985.

 

3.              The respondents' and defenders are a firm of solicitors in Edinburgh and the individual partners of that firm at the relevant time.

 

4.              The present action is for damages as a result of the defenders' alleged negligence. The action is defended and liability is denied. Furthermore, the respondents' first or preliminary plea is to the effect that any obligation incumbent on the defenders to the pursuer has prescribed. In particular Answer 7 sets out the averments in support of that plea. The plea refers to the terms sections 6 and 11 of the Prescription and Limitation (Scotland) Act 1973 (As Amended). The sheriff's judgment under appeal follows a preliminary proof. It is clear that no evidence was required in view of the facts admitted or agreed in joint minutes.

 

5.              It appears to be beyond dispute that in the course of his enquiries as the agent for the appellant, Mr Gellatly, discovered that the debtor, Patricia Anne Phillip (the "debtor") had executed a disposition of Denmark Farm in favour of her husband Alexander Phillip. Mr Gellatly considered that the disposition fell within the terms of section 34 of the Bankruptcy (Scotland) Act 1985 as an alienation of the debtor's asset and was challengeable by the pursuer as being a gratuitous alienation. The appellant instructed that proceedings be raised in court to reduce the disposition. The appellant instructed Messrs Blackadders, solicitors and subsequently Messrs RSB Macdonald, solicitors. In turn the respondents were instructed as the Edinburgh agents or correspondents in relation to the proceedings in the Court of Session. An action of reduction was signetted at the Court of Session on 16 April 2003. The action was defended. Significantly, in the course of these proceedings in the Court of Session the debtor's husband, Mr Phillip, who was the defender in the action of reduction, granted a standard security over the subjects at Denmark Farm in favour of iGroup Mortgages. The standard security was registered in January 2004 and subsequent investigations ascertained that the sum secured over the property was approximately £212,500. According to the pleadings the value of the subjects at the time the security was registered was less than the standard security. Accordingly, there was no free equity in the property at that stage. As the appellant avers in Article 4 of Condescendence: "The effect of the security was that the value of the subjects was lost to the Debtor's estate. "

 

6.              Central to this action is the defenders' failure or alleged failure to lodge a notice of litigiosity timeously. The sheriff records these matters at findings in fact 10, 11 and 12. It is not disputed that no notice of litigiosity was in place prior to the grant of the standard security. The respondents' dispute whether such a notice should have been lodged by them.

 

7.              The preliminary proof related solely to the question of prescription, the action having been served on Balfour & Manson LLP on 25 May 2012. The sheriff records at Finding in Fact [23] "The present action was not served on any of the defenders before 25 May 2012 when it was served on Balfour and Manson LLP."

 

8.              The absence of a notice of litigiosity having been recorded in advance of the debtor's husband granting the standard security is crucial to the question of negligence and loss. It is not disputed that no notice was recorded by any of the solicitors instructed by the appellant. Failure to lodge and record the notice of litigiosity meant that the appellant was unable to reduce the standard security. By 15 February 2007 the respondents had intimated their withdrawal from acting as Edinburgh agents to RSB Macdonald and to the Deputy Principal Clerk of Session. By that stage the sheriff finds that the appellant was aware:

(1)        that the standard security had been granted over the subjects on 15 January 2004;

 

(2)        that as at 15 January 2004 no notice of litigiosity in respect of the action had been recorded at the instance of the pursuer (appellant);

 

(3)        that the sum secured over the subjects by the iGroup Security was in excess of £212,000;

 

(4)        that Messrs Bell Ingram, surveyors had valued the subjects Denmark Farm at approximately £170,000 in December 2000;

 

(5)        that as a result of the absence of the notice of litigiosity being recorded prior to the standard security being recorded it was not possible for the standard security to be reduced at the instance of the appellant; and

 

(6)     that the respondents had withdrawn from acting for the appellant on 7 February 2007 and Messrs RSB considered that the failure to lodge a notice of litigiosity was a difficulty which had been caused by the defenders.

 

 

9.              The respondents withdrew from acting as Edinburgh agents because of their concern as to the conflict of interest which might arise due to no notice of litigiosity having been recorded. Subsequently Messrs Harper Macleod were instructed by the appellant by which time RSB had been requested by the appellant to cease any further action in the litigation involving the debtor's husband.

 

10.           On 24 May 2007 the respondents' file of papers was transmitted to Messrs Harper Macleod, solicitors by DX. These facts constitute the essential background information which led the sheriff to conclude that any obligation which the respondents had towards the appellant to make reparation had prescribed.

 

11.           For the reasons given by the sheriff he considered that the appellant had actual knowledge of loss and that it was actionable in the sense described by Lord Emslie in AMN Group Limited v Gilcomston North Limited 2008 SLT 385. [Para 58]

 

12.           The Prescription and Limitation (Scotland) Act 1973 provides:

"Section 6 - Extinction of obligations by prescriptive periods of five years

(1)   If after the appropriate date, an obligation to which this section applies has subsisted for a continuous period of five years-

 

(a)        without any relevant claim having been made in relation to the obligation, and

(b)        without the subsistence of the obligation having been relevantly acknowledged,

 

then as from the expiration of that period the obligation shall be extinguished:

 

Provided that in its application to an obligation under a bill of exchange or a promissory note this subsection shall have effect as it paragraph (b) thereof were omitted.

 

(2)   Schedule 1 to this Act shall have effect for defining the obligations to which this section applies.

 

(3)   In subsection (1) above the reference to the appropriate date, in relation to an obligation of any kind specified in Schedule 2 to this Act is a reference to the date specified in that Schedule in relation to obligations of that kind, and in relation to an obligation of any other kind is a reference to the date when the obligation became enforceable.

 

(4)   In the computation of a prescriptive period in relation to any obligation for the purposes of this section-

 

(a)        any period during which by reason of-

 

(i)    fraud on the part of the debtor or any person acting on his behalf or,

(ii)   error induced by words or conduct of the debtor or any person acting on his behalf,

 

the creditor was induced to refrain from making a relevant claim in relation to the obligation, and

 

(b)        any period during which the original creditor (while he is the creditor) was under legal disability,

 

shall not be reckoned as, or as part of, the prescriptive period:

 

Provided that any period such as is mentioned in paragraph (a) of this subsection shall not include any time occurring after the creditor could with reasonable diligence have discovered the fraud or error, as the case may be, referred to in that paragraph.

 

(5)   Any period such as is mentioned in paragraph (a) or (b) of subsection (4) of this section shall not be regarded as separating the time immediately before it from the time immediately after it."

 

"Section 11 - Obligations to make reparation

 

(1)   Subject to subsections (2) and (3) below; any obligation (whether arising from any enactment, or from any rule of law or from, or by reason of any breach of, a contract or promise) 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.

 

(2)   Where as a result of a continuing act, neglect or default loss, injury or damage has occurred before the cessation of the act, neglect or default the loss, injury or damage shall be deemed for the purposes of subsection (1) above to have occurred on the date when the act, neglect or default ceased.

 

(3)   In relation to a case where on the date referred to in subsection (1) above (or, as the case may be, that subsection as modified by subsection (2) 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."

 

"Schedule 1 - Obligations affected by prescriptive periods of five years under section 6

 

1(d) to any obligation arising from liability (whether arising from any enactment or from any rule of law) to make reparation;"

 

 

APPELLANT'S SUBMISSIONS

13.           Mr Hawkes, for the appellant, argued that the sheriff had erred in sustaining the respondents' plea in law. His motion was to allow the appeal; recall the sheriff's interlocutor; repel the first plea in law for the defenders and then remit to the sheriff to proceed as accords.

 

14.           The appellant's averments with regard to prescription and reasonable diligence can be found in Condescendence 7. The appellant avers "the pursuer did not know and could not reasonably have become aware that she had potentially suffered loss and that loss might be attributed to an alleged act or omission on the part of the defenders until the end of May 2007 and in any event after 27 May 2007." And more specifically the appellant avers "The first time that the pursuer knew, or ought reasonably have known that the defenders had failed to register a notice of litigiosity and that that failure had resulted in a loss being sustained was after the date on which the pursuers' new agents having received and had the opportunity to review the defenders' file of papers and report to the pursuer. That date wasn't until 28 May 2007 at the earliest".

 

15.           Mr Hawkes took issue with the sheriff's reasoning in paragraphs 13 and 14. The sheriff applied the wrong test and was wrong to conclude that the pursuer was aware of both damnum and iniuria as at 14 February 2007. He was wrong to conclude from the agreed facts that the appellant had a stateable prima facie claim which could be advanced against someone. Such awareness could not be imputed to the appellant until the defenders' files were available to the appellant. The sheriff was likewise wrong to reject the appellant's argument on reasonable diligence on the basis that until the defenders' file had been scrutinised by the appellant's new solicitors the issue of negligence was not a matter which the appellant could be aware of. The sheriff was wrong to draw the inferences he did from the correspondence of 14 February 2007 and the defenders' withdrawal from acting. He was wrong to impute to the appellant sufficient knowledge such as to meet the relevant test of awareness.

 

16.           In the course of submissions Mr Hawkes referred to David Johnston's book on Prescription and Limitation (2^nd Edition), Greater Glasgow Health Board v Baxter Clarke and Paul 1990 SC 237; AMN Group Limited v Gilcomston North Limited 2008 SLT 835 and the recent Inner House decision in David T Morrison and Company v ICL Plastics Limited [2013] CSIH 19. He drew similarities with AMN and the ICL case. Mr Hawkes suggested that the relevant or critical date for the appellant was not before 28 May 2007. Until that date the appellant could not have been aware that she had suffered loss and that the loss was actionable. That was the date when her new solicitors obtained the respondents' file of papers. The agreed facts relating to February 2007 were insufficient to constitute her awareness of damnum and iniuria. These arguments had been advanced before the sheriff.

 

17.           Mr Hawkes derived several propositions from the decision of Lord Emslie in AMN. In common with the present case the pursuers in AMN were aware of a problem but not the cause. There were competing suggestions as to the cause of the difficulty leaving the pursuers to speculate. The four general propositions which the appellant sought to draw from that decision are as follows firstly, the absence of legal advice; secondly, where a party considers it might have a claim reasonable diligence may require no more than that party instructing an independent expert appraisal from a suitably qualified person. Thirdly, a pursuer should not be placed at a disadvantage by taking into account the possibility of loss not having been caused by negligence or breach of contract and finally, surmising that the problem (causing the loss) might be attributable to a culpable third party is not to be equiperated with having a prima facie cause of action. This should not count against a pursuer.

 

18.           Mr Hawkes also sought to derive assistance from the recent Inner House decision in the ICL case (cit sup). The arguments advanced by the pursuers and appellants in that case are similar to the submissions made on behalf of the Accountant in Bankruptcy in the present case. Just because something had evidently gone wrong it does not necessarily follow that actionable loss has been sustained. In the ICL case there had been a catastrophic explosion and in this case no notice of litigiosity had been lodged. Assumption or speculation of the pursuer's part should not be sufficient to start the prescriptive clock. I was reminded that the Inner House in ICL paragraph [31] had the following to say:-

"In our view it is necessary in the present debate to keep the possibility of non-negligent causes in mind, and the fact that it may not be possible confidently to exclude non-negligent causes in every case without some investigation."

 

Accordingly, prima facie negligence could not be inferred from the appellant's knowledge and awareness as at February 2007. She may have been aware of loss and that something had gone wrong however she could not take the assumption on the part of her principal but local agents at face value that the cause of the difficulty was an omission on the part of Edinburgh agents. She was entitled to conduct an investigative process in order to inform herself on the question of negligence.

 

RESPONDENTS' SUBMISSIONS

19.           Mr Richardson, for the respondents, reminded me that the findings in fact are based on agreed facts in the form of joint minutes of agreement. No oral evidence was led before the sheriff by either party and certainly not by the appellant on whom the onus lies in satisfying the court that a later date should be the critical date for the purpose of prescription. Nor does the appellant address the issue of reasonable diligence either in her pleadings nor in evidence. The averments in Condescendence 7 of the record do not advance that argument. The sheriff's function is to apply the appropriate legal test derived from the authorities to which he has been referred to the facts and circumstances of the case. The appellant's case is deficient as regards the significance of the respondents' files and introduces speculation as to the possibilities that may arise from review of these files. It introduces speculation also as to what was in the pursuer's mind and therefore her state of awareness or knowledge. It is for the pursuer to satisfy the court on these matters.

 

20.           The Sheriff was entitled to reach the conclusion he did on the question of awareness of loss and that the loss is actionable due to negligence. The appellant has awareness of the cause of her loss and that is due to the failure to lodge the notice of litigiosity timeously. She is aware that the difficulty has been caused by one or other of her agents. The crucial question relates to the cause of the loss and did it arise from fault, in other words, was it actionable? In this regard the sheriff correctly inferred actual awareness from the agreed facts. The respondents' withdrawal from acting is a critical factor. The appellant knew that the defenders had withdrawn from acting for a reason associated with the cause of loss. The sheriff's reasoning in paragraph 13 could not be faulted when he states: "I agree with Mr Richardson that the only reasonable inference from the defenders' perfectly proper decision to withdraw from acting was their conflict of interest and that conflict arose because of the issues surrounding the notice of litigiosity. Put more bluntly, if it was the defenders' responsibility to lodge the notice of litigiosity and they had not done so, causing the pursuer loss, the pursuer's interests and those of the defenders would be in conflict. No other explanation is offered nor is any other explanation obvious".

 

21.           Finally, I was referred to Lord Menzies' decision in Pelagic Freezing (Scotland) Limited v Lovie Construction Limited; Greater Glasgow Health Board; AMN; and ICL. AMN fell to be distinguished firstly as the pursuers in that case had no knowledge of the cause of the loss, that is no knowledge of what was wrong with the roof; secondly the significance of the information derived from a third party who became a defender which may well have clouded the issue for the pursuer; thirdly, due to the role of that third defender reasonable diligence was treated in a different fashion. (The pursuer had obtained advice from an architect who eventually became a defender). In AMN issues arose with regard to induced error and how that impacted on the issue of whether the pursuers had been in error within the meaning of section 6(4) of the 1973 Act. That issue is not present here. Finally, in AMN there had been very extensive evidence led by all parties.

 

22.           The ICL case also fell to be distinguished as the pursuers in that case had no knowledge of the cause of their loss. There was a possibility that no one might be responsible. The issue of prescription was dealt with in ICL by way of debate on significant pleadings. In conclusion Mr Richardson urged that the appeal be refused. The ground of appeal articulated in paragraph 5 of the note of appeal fails to take into account on whom the onus of proof lies. As there is no evidential basis for the significance of the respondents' files and the delivery of these files this ground is without merit. The findings in fact are not and cannot be challenged. The sheriff's decision correctly proceeds on these findings in fact. There was no evidence whatsoever as to what was in the files and whether the contents had any significance to the question of actionability. Furthermore, the final part of that paragraph ignores the findings in fact which deal with the actual awareness of the appellant as to her loss and the cause of that loss.

 

23.           The criticism of the sheriff in paragraph 6 of the note of appeal ignores again the onus of proof. There is no evidence or explanation as to what it is the appellant could not have found out before the end of May. The inference with the sheriff draws from the respondents' withdrawal from acting points to the appellant having sufficient knowledge to meet the relevant test. It underlines the difficulties which have arisen and that the difficulties place the parties in a position of conflict or potential conflict.

 

24.           The criticisms of the sheriff's reasoning are without merit and the appeal ought to be refused with expenses in favour of the respondents.

 

DECISION

25.           This appeal is concerned with the operation of sections 6 and 11 of the Prescription and Limitation (Scotland) Act 1973 (the "1973 Act"). Section 6 operates to extinguish obligations arising from liability to make reparation (Schedule I 1(d)) after a continuous period of five years without a claim having been made. Section 11 - dealing with obligations to make reparation - moderates the effect of section 6 to guard against a claim being extinguished before the pursuer knows he has suffered loss. Section 11(3) postpones the start of the prescriptive period running to a later date in circumstances where the pursuer was not aware or could not with reasonable diligence have been aware that loss, injury and damage, caused as aforesaid, had occurred. The key words are "aware" or "awareness" and "caused as aforesaid". The latter phrase has been judicially interpreted as referring to the "act, neglect or default". (Lord Clyde in Greater Glasgow Health Board v Baxter Clarke & Paul 1990 SC 237 at 251).

 

26.           The question then arises as to the awareness or lack of awareness of what? It now appears to be reasonably well settled that the pursuer must demonstrate a lack of awareness "not only of the fact of loss having occurred but of the fact that it is a loss caused by negligence" Lord President Hope in Glasper v Rodger 1996 SLT 44 approving Lord Clyde in Greater Glasgow Health Board (supra). Recently the operation of section 11(3) has been considered by an Extra Division in what is known as the ICL case. (David T Morrison & Co v ICL Plastics Limited [2013] CS IH 19). Lady Paton giving the Opinion of the Court sets out the test to be applied by the court in a proof, preliminary proof or PBA. Specifically approving the dicta of Lord Emslie in AMN Group v Gilcomston North Limited 2008 SLT 835 para [58] at para 39 of the ICL case her Ladyship sets out the court's task as follows:

"It would be for the Lord Ordinary to assess:

'....whether the pursuers were by the critical [date] 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 on negligence could probably be advanced against someone. Certainty or even probability of success in any such claim would not, I think, be required...'"

 

 

27.           It is important to observe that the Opinion of the Extra Division in the ICL case was delivered after the sheriff's decision following the preliminary proof in this case. No evidence was led before the sheriff. The sheriff made findings in fact based on two joint minutes (Nos 16 and 17 of process) and facts admitted on record.

 

28.           It can readily be observed that the pursuer and appellant is the Accountant in Bankruptcy. She is a public official with special responsibility to the court in matters of insolvency. She administers the process of personal insolvency and records corporate insolvencies in Scotland. She acts as trustee and administers debtors' petitions for sequestration. Her functions are guided by the provisions of the Bankruptcy (Scotland) Act 1985 (as amended). She requires to interpret the provisions of the legislation and provide guidance to those involved in bankruptcy. Accordingly, given her responsibilities and knowledge of insolvency and the Bankruptcy (Scotland) Act 1985 the appellant cannot be regarded as a lay person.

 

29.           The defenders are a firm of solicitors and the individual partners of that firm.

 

30.           The claim or action which the appellant wishes to pursue against the respondents relates to loss to the debtors estate due to the grant of security over the debtor's heritable property on or about 15 January 2004. The failure on the part of the respondents to notice of litigiosity timeously is the negligent act or omission upon which the action proceeds. The lack of such a notice undermined the purpose and prospects of the appellant reducing the security which in turn resulted in there being little or no point in the pursuer proceeding with the action of reduction of the disposition by the debtor in favour of her husband. As the sheriff succinctly expresses it in his note "It is important to bear in mind that the recording of the standard security in the absence of the notice of the litigiosity rendered the entire action at the instance of the pursuer precarious in the sense of being commercially pointless". The notice of litigiosity or rather its absence is the de quo of the action and therefore central also to the question of prescription.

 

31.           The letter from the appellant's Dundee's solicitors to her agent on 14 February 2007 summarises the difficulty. A straightforward reading of that letter, in my view, flags up for the appellant an issue of negligence or damnum. This letter plainly construed marks the confluence of awareness of damnum and iniuria. The author provides information and advice on the prospects of continuing with the action of reduction in the Court of Session and states:

"Consequently, there seems little point in continuing with this action - even if the court reduced the disposition, that would not affect Mr Phillip as a subsequent purchase in good faith. My understanding is that it is possible the re-mortgage might have been prevented had my Edinburgh agents recorded a notice of litigiosity. Frankly, I do not know whether they considered that step or whether it was possible for them to have taken it."

 

And further on:

 

"As local correspondent in the case, it is difficult for me to make any further comment, for the reasons detailed above. I fully appreciate you will need to take instructions from the Accountant in Bankruptcy, and it may be that the matter will require further investigation in due course. I am happy to co-operate with that. While I very much regret any inconvenience this difficulty may cause, I would like to emphasise that any difficulty has been caused in Edinburgh, not here."

 

32.           Accordingly, I agree with the sheriff's observation that the letter goes a long way towards raising an issue of negligence. It occurs at the same time as the respondents withdraw from acting. It is accepted that by 15 February 2007 the defenders and now respondents inform RSB of the amount secured by the standard security and that they are now in a position of potential conflict. The sheriff finds that that conflict arose because no notice of litigiosity had been recorded prior to the recording of the standard security. (Finding in Fact [20]).

 

33.           The sheriff was entitled to hold that the respondents had successfully discharged the onus of establishing prima facie that the action against them by the appellants had prescribed in terms of section 11(1) of the 1973 Act given the concurrence of damnum and iniuria. The action was served on the respondents on 25 May 2012.

 

34.           However, section 11(3) postpones the start of the prescriptive period to a later date in circumstances where the pursuer "was not aware or could not with reasonable diligence have been aware that loss, injury and damage, caused as foresaid, had occurred".

 

35.           The critical issue therefore for the sheriff is to determine or assess the appellant's awareness that loss had been suffered and that it was actionable in the sense that a stateable prima facie claim in negligence could be advanced against someone. (Lord Emslie in AMN para [58]).

 

36.           It is clear from the authorities that the pursuer does not require to be aware of the party by whom the obligation to make reparation is owed nor to have refined the prospects of succeeding with a claim or action in negligence.

 

37.           The onus lies with the party seeking to contend for a date later than the date of the concurrence of awareness of damnum and iniuria. In other words, the party wishing to avail themselves of the exception or postponement provided by section 11(3) bears the onus. This is clear not only from AMN and the ICL case but also Britannia Building Society v Clarke 2001 SLT 1355 and Pelagic Freezing (Scotland) Limited v Lovie Construction Ltd [2010] CSOH 145. Quite apart from these authorities the maxim ei qui affirmat, non ei qui negat, in cumbit probatio supports this proposition.

 

38.           In the present action the basis for the findings in fact is agreed facts in the form of joint minutes or admissions on record. The sheriff heard the preliminary proof. It was open to either party to lead evidence of the pursuer's knowledge, and relevant circumstances with a view to establishing awareness or lack of. The pursuer and appellant chose not to lead evidence in support of her third plea in law.

 

39.           An analysis of the authorities reveals that section 11(3) is used frequently in complicated building cases involving defects which emerge over time and also cases involving latent damage. In these cases the loss or damage may not be ascertainable for some years and once there is an awareness of loss the issue of negligence is complex. Greater Glasgow Health Board v Baxter Clark and Paul 1990 SC 237 and AMN deal with the issue of prescription in the context of building defects. The circumstances of the present action are far removed from AMN and the Greater Glasgow Health Board case. The ICL case (David T Morrison and Company Limited v ICL Plastics Limited [2013] SCIH 19) is a recent decision of the Inner House on the issue of prescription and limitation and in particular the operation of section 11(3). In that case the pursuer's loss was immediately apparent following the explosion in the defenders' plastics factory nevertheless the issue in that case related to the complex issue of negligence which as noted in Johnston on Prescription and Limitation (2^nd Ed) at Chapter 6.94 "...commenting on the Lord Ordinary's decision that the pursuer could not rely on section 11(3) due to the operation of the res ipsa loquitur the author states "But it seems hard on the pursuers, not least when it took a lengthy public inquiry to establish the cause of the explosion. It reported only in July 2009. By contrast the pursuers were found to have the necessary awareness at the very date of the explosion;". Of course the Lord Ordinary's decision was successfully appealed and the Inner House devoted much time to the issue of the res ipsa loquitur. The Inner House allowed the appeal on the basis that the pursuers undoubtedly knew on the date of the accident on 11 May 2004 that they had suffered loss and damage due to the explosion but they did not, at that stage, know that the explosion had been caused by negligence. In my view, the ICL case is clearly distinguishable from the present situation. Facts were not established at a preliminary proof. The Lord Ordinary dealt with debate on the pursuers' section 11(3) argument. In the ICL case the pursuers had no knowledge whatsoever of the cause of loss whereas in the present case there is a clear indication by a solicitor acting for the pursuer that the recording of a notice of litigiosity or failure to do so is central to the loss. Furthermore, the reference to "difficulty" taken with the respondent's withdrawal for acting due to conflict points back to the difficulty caused by the absence of the notice of the litigiosity. The letter from RSC to the appellant's agent on 14 February 2004 in effect further narrows the cause of the difficulty to Dundee or Edinburgh with the author distancing Dundee and therefore the Dundee solicitors from culpability. That, in my view, discloses a situation far removed from the ICL case where the issue of negligence was technical, complex and entirely at large for the pursuers.

 

40.           The significance of the ICL case is that the Inner House specifically endorses the approach taken by Lord Emslie in AMN in setting out the test to be applied by the Lord Ordinary (or sheriff) who hears the evidence in submissions. Otherwise, these cases depend on their facts and circumstances in the ICL case could not be further removed from this case. In this case the appellant has legal advice and is dealing with a discreet and specific area related to her special field of competence. The issue is not simply about solicitors' negligence per se but awareness of loss and prima facie negligence.

 

41.           It is evident that the sheriff applied the correct test. I refer to paragraphs 11 and 13 of the sheriff's judgment. The appellant takes issue with the sheriff's reasoning in paragraph 13 in which the sheriff applies the legal test to the facts of the case. The appellant in effects attacks the inferences which the sheriff draws from the agreed facts. In the absence of evidence from the appellants on the important issue of knowledge or awareness it is for the sheriff to decide whether he can make inferential findings on these agreed facts and what they should be. For the reasons I have referred to and I borrow a phrase from Mr Johnston's textbook the sheriff's reasoning is impeccable. The sheriff carefully follows the ratio in Greater Glasgow Health Board, AMN and ICL to the effect that the "awareness" required by statute which will start the prescriptive clock ticking is a general or prima facie awareness of loss and that the loss is caused by some form of negligence on someone's part. Section 11(3) does not require either the identity of the negligent party or the grounds on which any action may proceed far less assessment of the strength and weaknesses of the pursuer's prospects of succeeding. The pursuer has five years to decide who to sue and on what grounds. That is precisely the purpose of the quinquennium.

 

42.           The appellant also takes issue with the manner in which the sheriff deals with the question of "reasonable diligence". Mr Hawkes derived assistance from AMN in support of the proposition that reasonable diligence required the appellant to obtain independent advice before a prima facie claim in negligence could be advanced against any party. Accordingly, until the appellant's new solicitors had an opportunity of examining the files of the respondents neither, the appellant, nor her solicitors could form any view as to whether the respondents might be negligent in respect of the absence of the notice of litigiosity.

 

43.           In my view that argument is misconceived and misunderstands the purpose of sections 6 and 11 of the 1973 Act. Section 6 is concerned with extinction of obligations after five years. Its purpose is certainty and finality. The outcome contended for on behalf of the appellant seeks to postpone the beginning of the prescriptive period in an open ended fashion to allow for investigation and advice. That appears to me to conflate the test for the start of the prescriptive period with the purpose of the prescriptive period of five years which is designed to allow for investigation, advice and preparation. As the sheriff observed "the commencement of the prescriptive period gives to a pursuer a period of five years within which to gather the information necessary to raise proceedings." At paragraph [11]. The appellant's argument would result in uncertainty.

 

44.           The sheriff correctly states that Finding in Fact 19 sets out the accepted state of awareness on the part of the appellant as at 14 February 2007. Other than the fact of files being transmitted to the appellant's new agents there is no evidence whatsoever as to the significance of the files or what may have happened in the period between 14 February 2007 and the 25 May 2007 and whether that might have any bearing on the issue of reasonable diligence. More important, reasonable diligence has no place where there is actual awareness of loss and that it was prima facie actionable. If, as Mr Hawkes suggested, the delivery of the files was both significant and necessary in order that the appellant may receive independent advice or opinion on the question of negligence, the appellant fails to assert the outcome of obtaining and presumably reading the files. In the absence of any evidence to that effect the sheriff was correct to reject the suggestion that the period between February and May 2007 added much if anything to the pursuer's actual awareness or state of knowledge as set out in Finding in Fact 19.

 

45.           It follows that the appeal will be refused. I will make a finding of expenses in favour of the respondents and certify the cause as suitable for the employment of junior counsel for the appeal.

(signed) Mhairi M Stephen