Gordon and Others, as the Trustees of the Inter Vivos Trust of the late William Strathdee Gordon v Campbell Riddell Breeze Paterson LLP (Scotland)
| Jurisdiction | Scotland |
| Judge | Lord Hodge,Lord Neuberger,Lord Mance,Lord Sumption,Lord Reed |
| Judgment Date | 15 November 2017 |
| Neutral Citation | [2017] UKSC 75 |
| Court | Supreme Court (Scotland) |
| Date | 15 November 2017 |
[2017] UKSC 75
Lord Neuberger
Lord Mance
Lord Sumption
Lord Reed
Lord Hodge
Appellants
Robert Howie QC
Robert Sutherland
(Instructed by Drummond Miller LLP)
Respondent
David Johnston QC
Adam McKinlay
(Instructed by Brodies LLP)
Heard on 19 July 2017
( with whomLord Neuberger, Lord Mance, Lord SumptionandLord Reedagree)
When the law extinguishes obligations as a result of the effluxion of time it is important that there is certainty as to when the clock is started. Yet many within the legal profession in Scotland have been unsure about this important matter. This is another appeal about the meaning of the provisions of the Prescription and Limitation (Scotland) Act 1973 ("the 1973 Act") concerning the short negative prescription. Counsel for the appellants informed the court that several cases have been sisted in the Court of Session to await the outcome of this appeal.
This appeal proceeds on facts which the parties have agreed solely for the purpose of determining the question of prescription and which may be summarised briefly. The appellants ("the trustees") are the trustees of the inter vivos trust of the late William Strathdee Gordon ("the trust"). The trust owns farmland, comprising three fields near the village of Killearn, which the trustees acquired because of its long-term potential for residential development. The three fields are a grazing field, a field of about 40 acres and a field of about 50 acres.
The grazing field was originally let out by the trust by a series of seasonal grazing lets to a farming partnership of Messrs A & J C Craig ("the farming partnership") which had two partners. This lease continued by tacit relocation from about 1983. The 40-acre and 50-acre fields were let out to the farming partnership under separate leases in 1981 and 1983 respectively. After the expiry of the original terms of let of those fields the trust entered into various minutes of agreement, which were prepared by their solicitors, who were the predecessor firm to the respondents in this appeal. Those minutes of agreement purported to continue the original leases of those fields. In about August 1992 the solicitors became aware that Mr Andrew Craig, one of the two partners, had retired from the farming partnership. Notwithstanding that knowledge, the minutes of agreement in 1992 and 1998 described the tenant as the farming partnership and John Campbell Craig the sole proprietor and trustee for the firm. Under the 1998 agreements the ish (expiry date) of the lease of each of the two fields was 10 November 2003.
It is a matter of agreement that by 2003 the leases for all three fields were agricultural holdings for the purposes of the Agricultural Holdings (Scotland) Act 1991 ("the 1991 Act").
In 2003 the trustees instructed Mr McGill, who was both a trustee of the trust and a partner in the firm of solicitors, to serve on the tenant notices to quit the three fields at the term of 10 November 2003. The tenant served counter notices under the 1991 Act. After receiving advice from counsel that the notices to quit the 40-acre field and 50-acre field were ineffective as they did not give the period of notice which the 1991 Act required, the solicitors served further notices to quit in respect of the three fields dated 8 November 2004 requiring the tenant to remove on 10 November 2005. In each of those notices to quit the tenant was identified as "the firm of Messrs A & J C Craig and John C Craig, sole proprietor of and trustee for said firm". The notice to quit the 40-acre field described it as being subject to a lease dated 22 September and 7 and 8 October 1981 as amended by subsequent agreements. Similarly the notice to quit the 50-acre field described it as being subject to a lease dated 5 January and 14 February 1983 as so amended.
On 1 December 2004 Mr Richard Leggett, a partner of the solicitors, wrote a long letter to Mr William Gordon, one of the trustees, in which he explained that the solicitors had to withdraw from acting for the trust because of a conflict of interest caused by difficulties which might result from a failure to terminate the leases of the fields before their expiry dates which had allowed the tenant to continue to occupy the fields by tacit relocation. The solicitors suggested that those difficulties might require the payment of money to Mr John Craig to get him to cede possession of the fields. In response, the trustees did not require the solicitors to cease acting for them and continued to instruct them. But, after the tenant did not cede possession of the fields on 10 November 2005, the solicitors wrote to the trustees on the same day to withdraw from acting for the trust in relation to the leases at Killearn, again citing the difficulties which they foresaw would arise from their earlier failure to prevent tacit relocation. Thereafter Mr McGill resigned as a trustee.
The trustees then instructed Anderson Strathern LLP, who on 9 February 2006 applied to the Scottish Land Court seeking the removal of the tenant from each of the three fields. It is an agreed fact that by 17 February 2006, at the latest, the trustees had incurred material expense in instructing Anderson Strathern to pursue those applications. The tenant defended the applications. In a decision dated 24 July 2008 the Scottish Land Court gave effect to the notice to quit in relation to the grazing field but refused to give effect to the notices to quit relating to the other two fields, because the notices were inaccurate in their description of both the tenant and the relevant lease. As a result, the 40-acre field and the 50-acre field remain subject to leases that are agricultural holdings, thus preventing the trustees from developing them.
As is well known, section 6 of the 1973 Act, when read with sections 9 and 10 of that Act, creates the short negative prescription by providing that if an obligation has subsisted for a continuous period of five years after "the appropriate date" without the creditor or someone on his behalf having made a relevant claim or the debtor or someone on his behalf having relevantly acknowledged the subsistence of the obligation, the obligation is extinguished at the expiration of that period. Section 6(3) provides that the appropriate date in relation to an obligation arising from a breach of contract is a reference to the date when the obligation became enforceable.
This appeal is concerned with section 11 of the 1973 Act, which defines when an obligation to make reparation becomes enforceable. It provides:
"(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, 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."
(Emphasis added)
On 17 May 2012 the trustees commenced a legal action against the respondents by serving on them a summons seeking damages for breach of an implied term of the contract between the trustees and the solicitors, that the latter would exercise the degree of knowledge, skill and care expected of a reasonably competent solicitor. The breach which the trustees allege is that the solicitors failed to identify correctly both the tenant and the applicable lease in the notices to quit dated 8 November 2004 relating to the 40-acre field and the 50-acre field. Among the sums claimed by the trustees in this action are the fees and outlays paid to the solicitors and to Anderson Strathern relating to the attempt to obtain vacant possession of the two fields and damages for the enhanced value of the land and the opportunity for the trust to exploit the fields' potential for development both of which were lost through the failure to recover possession of them.
The respondents pleaded that any obligation on them to make reparation had prescribed because the trustees had not raised the action within five years...
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