Delegated Powers and Law Reform Committee

Meeting date: Tuesday, May 1, 2018

Official Report 575KB pdf

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Prescription (Scotland) Bill: Stage 1

Item 2 is evidence on the Prescription (Scotland) Bill at stage 1. This is the last of our planned evidence sessions on the bill. We have before us the minister in charge of the bill, Annabelle Ewing, who is the Minister for Community Safety and Legal Affairs. She is accompanied by three Scottish Government officials: Jill Clark, head of the civil law reform unit, Michael Paparakis, civil law policy manager, and Neel Mojee, who has been here before and who is a solicitor on constitution and civil law. Welcome to all of you.

I will start with a general question, which is directed at the minister. Why did the Government decide to implement the Scottish Law Commission’s report on prescription and what policy benefits will that bring?

Good morning. I refer members to my entry in the register of interests, wherein they will find that I am a member of the Law Society of Scotland and that I hold a current practising certificate, albeit that I am not currently practising.

The policy objectives behind the bill are to ensure that there is clarity, certainty and fairness in the approach to prescription and, in turn, to bring the issues of legal certainty very much to the fore. Of course, all such matters are balancing acts, but it is hoped that, through the hard work of the Scottish Law Commission, working in tandem with many stakeholders during its consultation process, people will consider that the bill has struck a balance between the respective interests of the creditor and the debtor while recognising that the overall objective to be secured is that of providing legal certainty, which is of benefit to wider society. In a nutshell, that is the objective of the bill.

What are the gaps in the current law that need to be addressed?

The Scottish Law Commission made various comments in that regard. In its work on the issue, it has made clear that it is not looking at the law of prescription as a whole; it is looking at the law of negative prescription, and it is doing so because issues have arisen that in its view need to be addressed sooner rather than later. Those include in particular the issues of discoverability and latent defects. I am sure that we will get on to those, so I will not belabour the point at this stage. Issues have arisen as a result of a Supreme Court ruling that has created some confusion in people’s understanding of the existing position under Scots law. The Scottish Law Commission has also anticipated other potential problems, and it feels that it would be helpful, as part of its contribution to keeping Scots law under review, to address those issues in legislation.

The Scottish Government carried out a limited consultation on the proposals in the bill. In a previous evidence session, Jill Clark gave a list of the organisations that were consulted. Given that the Scottish Government consultation might have attracted interest from other organisations and stakeholders, in particular welfare rights organisations, can you explain that decision?

We adopted the procedure that has been used thus far with Scottish Law Commission bills that come to the Delegated Powers and Law Reform Committee, which fall within your remit and jurisdiction because they are not regarded as particularly controversial. I think that this is the fourth such bill. Stuart McMillan, who was also a member of the committee in the previous session of Parliament, will be able to give me chapter and verse on the other three, but I was involved in one of them—the Contract (Third Party Rights) (Scotland) Bill—as part of my duties in my current ministerial portfolio. There was also the Succession (Scotland) Bill and the Legal Writings (Counterparts and Delivery) (Scotland) Bill.

The procedure that has been used with regard to three of the four bills is that the SLC produces a discussion paper, takes on board the views that are expressed and then proceeds to consultation on a draft bill, after which the Scottish Government proceeds with a targeted consultation. That is the process that happened for the Prescription (Scotland) Bill. The one exception to that has been the Succession (Scotland) Bill, and that was because there had been quite a gap between the SLC processes and the Parliament considering the bill, so it was felt that we were required to proceed with a fuller consultation. However, for the Prescription (Scotland) Bill, we adopted the same procedure that has been followed with other bills of the same type.

The Government consulted a fairly focused number of organisations but, when the committee put out a call for evidence, we were contacted by other stakeholders and organisations. Certainly, the evidence session that we had last week, particularly with Mike Dailly of the Govan Law Centre, was extremely interesting and opened up other avenues for discussion. Were the likes of the Govan Law Centre, welfare rights organisations and Citizens Advice Scotland considered before the Scottish Government undertook its consultation? I am keen to understand the rationale for not asking such organisations.

I would have to see the list of bodies that the Scottish Government wrote to in the targeted consultation and the list of bodies that responded to the SLC’s consultation processes—the initial discussion paper and the consultation on the draft bill. Obviously, anybody can respond to a consultation, and it is up to them to do so or not, as they wish. I have read the Official Report of all the committee’s evidence sessions on the bill, and I guess that we will get on to the substance of that shortly. However, on the number of people who have been engaged, there have been quite a few, and it is open at all times to Citizens Advice Scotland and others to make their views known.

I understand that Citizens Advice Scotland may have indicated a while back that, rather than commenting on everything, which I think had been its position, it would have to focus on particular issues that were of concern to it. At the end of the day, if individuals or organisations wish to respond to a consultation, their views are most welcome, but we cannot force people to respond; it is up to them to do so or not.

Thank you.

I am relatively new to the committee so I am not too au fait with the background to the consultations that take place in this regard, but I am concerned about consultations that focus on certain groups or sectors. I do not have the list in front of me, but it appears that the consultation was targeted very much at the business community and professional bodies. Given that the bill deals with people’s debts and benefits, I am quite surprised that we are not bringing in bodies that advocate for and work on behalf of people who are in that position. I am concerned that evidence is being taken too narrowly. The representatives who were here last week gave a different perspective on some of the issues.

As I say, the consultation approach that has been adopted for the Prescription (Scotland) Bill has been the same as those for three of the other four DPLR Committee and SLC bills. That is the first point to reiterate.

On the point about people with debt, solicitors act for both parties. That point was made in an evidence session with members of the legal profession. Maybe it was you, Mr Findlay, who asked directly, “Do you represent both sides?”, to which they responded, “Yes, we do.” It is important to bear that in mind as well.

We are keen to have as wide a consultation as possible. Individual stakeholders are absolutely free to make their views known, and I am pleased that you had your evidence-taking session last week. We cannot force people to submit evidence. That is the position. The various bodies that have been involved since the start of the SLC’s work include local authorities, so it is perhaps unfair to characterise the engagement as being just with business and people who do not represent debtors. You have already heard at earlier meetings evidence from people who represent different parties, and you have heard from academics. I think that it is fair to say that there has been a wide reach.

In order to submit to a consultation, people have to know that it exists—

Well, I think—

Just a moment.

Sorry.

Of course solicitors represent both sides, but the vast majority of people who are subject to, say, benefit overpayments or who have council tax debts will usually be represented through a welfare rights organisation, rather than by a solicitor.

I suppose that one would have to go and get the evidence to quantify that. In broad-brush terms, that may well be the case. As for the percentages that are involved, one would need to get the statistics to indicate that. However, it is clear that the process of engagement has been wide. As I said, local authorities have been involved and have made submissions to the SLC. I would need to go back and check to find out every single organisation that has been involved; I do not have that information off the top of my head, but I would be happy to supply it to the committee. The committee’s role in calling for evidence also has an important role to play in terms of scrutiny.

Taking all the approaches and looking at them overall, I think that it is fair to say that we will capture all the various views, and that is quite right and proper.

We will not labour that point any longer. I think that it arose because we all found last week’s evidence session very useful.

Section 3 extends the five-year prescription to all statutory obligations to pay money. The list of exceptions to the general rule lengthened as a result of the consultation process. We acknowledge the SLC’s point that the policy choice—which is between 5 years and 20 years—is, for several reasons, not as stark as it first seems. However, various stakeholders have suggested to us that the exceptions are essentially political choices for the Government and Parliament. Can you explain to the committee the policy rationale for each of the main exceptions listed in section 3?

10:15  

You said that the list lengthened, but that section simply restates the status quo of the 20-year negative prescription in Scotland with regard to taxes, social security benefits and maintenance payments. It is not right to characterise that as extending it, because that might be interpreted in a different way.

I understand that Her Majesty’s Revenue and Customs, and now Revenue Scotland, put clear policy objectives to the SLC that in their view justified the 20-year negative prescriptive period. The SLC accepted their position and that is one of its recommendations—and we have accepted all of the substantive recommendations in the SLC’s draft bill. It is to do with opportunity to collect and so forth.

On reserved social security benefits, the bill is again restating the present position, which is 20-year negative prescription in Scotland. That mirrors what happens in the rest of the United Kingdom. Although, on the face of it, there is a six-year short negative prescription in England and Wales, the Department for Work and Pensions made clear in its recent submission of 23 April that it is in a position to pursue well beyond the six-year period. The argument again relates to public policy objectives, but also to what the DWP reiterated in its recent submission about the way in which it seeks to recover overpayments, taking into account that it can deduct from benefits. The DWP said that it has a particular approach to looking at hardship and may extend repayment over a considerable period of time in order to facilitate individual circumstances. It also said that it may have to queue repayment arrangements, because a number of benefits may be involved, and that it therefore feels that public policy is best served by maintaining the status quo.

Maintenance agreements ensure that the moneys that are due from the person who is required to pay the maintenance obligation are secured and that people are made to take financial responsibility for their children.

Those were the first three exceptions. On council tax and non-domestic rates, representations were made by some local authorities to the SLC at the time of its consultation paper, which was published in February 2016. The authorities argued that the public policy considerations for them were essentially the same as those governing HMRC and Revenue Scotland, so the position again maintains the status quo, as they asked. Vis-à-vis what is happening down south, I understand that, while the six-year short negative prescription is apparently in operation, if a liability order is secured within that time it can be enforced by local authorities elsewhere in the UK without limit of time.

I think that what is being argued is that the position in the bill maintains the status quo, that there are public policy considerations for it and that it ensures that the arrangements are broadly in line with what happens elsewhere in the UK, as far as HMRC and the DWP are concerned.

You are presumably agreeing with the DWP.

What has to be borne in mind with regard to the DWP is that it still has jurisdiction over most benefits—sadly, in my view, although perhaps not in the view of the members around this table other than Mr Arthur and Mr McMillan. We do not believe that the UK Government should have jurisdiction over any benefits. However, sadly, that is still the case, so about 85 per cent of spend—

We are not really here to get in to that.

I know, but you asked whether I agreed with the DWP, and I am trying to give you an answer.

Some 85 per cent of social security spend is still decided on the basis of rules that are set furth of here. There are the reserved benefits, and then there is the policy to do with how the benefits system operates, which is also reserved. It is important to note that, with our new social security agency, the legislation on which the Parliament passed last week, we propose to take a different approach from the one that the DWP takes to how repayment takes effect and the grounds on which it can be sought.

What the DWP said in paragraph 13 of its submission of 23 April was troubling. It said that reducing the prescription period to five years

“could also lead to a greater pressure to secure full repayments of debt within a five year period and thus undermine or at least blunt the long-established hardship procedures the Department has to balance recovery against welfare needs. This would place debtors in a worse position than they are now if there is an expectation to pay debts off quicker and hence at an increased rate of repayment.”

Sadly, the Scottish Government does not have any jurisdiction over policy decisions concerning the operation of reserved benefits. The fact that that is a matter for Westminster should be taken into account, as should what the DWP has said, which seems to be a shot across the bows. I do not want to put such vulnerable people in a worse position as far as reserved benefits are concerned, as that would be extremely unhelpful. Therefore, I must look at what the DWP has said, because it is in control of the matter.

Mike Dailly, who appeared before the committee last week, has written a blog on the subject. I will read out a paragraph from it.

“In relation to social security benefits, we believe there is no justification for not having all devolved and reserved benefits subject to the five year prescriptive period. It is inequitable that people have a month to appeal a benefit decision, while the DWP would have 20 years to pursue reserved benefit debts.”

What is your response to that?

As I have said, we do not—sadly—control the way in which the reserved benefits are operated. That is a matter for the DWP. I am sure that members of the committee will know of constituents whose experience of the reserved benefits system has not been positive. However, that is the situation that we face.

We hope to do things very differently here in Scotland; we want our social security system to be based on the key principles of dignity, fairness and respect. The grounds for recovery of overpayment will therefore be different in Scotland. It will not be possible for overpayment to be recovered if there has simply been an error on the part of the social security agency; there will have to have been a fault on the part of the recipient. However, if someone suddenly receives a vast sum of money into their account, they should be aware that it is likely that there has been a mistake and that it is not their lucky day. That will be a key difference in the approach to recovery that is taken by the new social security agency in Scotland.

That is not the position with the DWP. I am sure that members will know of cases in which the DWP has got back to recipients to retrieve sizeable sums of money, when it has made mistakes. We will adopt a different approach. Of course, we now have jurisdiction over all aspects of the matter, so we can do something different.

However, if Parliament were to seek to amend the prescription powers with regard to obligations to repay overpayments of reserved benefits, that would raise issues of legislative competence, which the Scottish Government would have to consider carefully.

I have asked a few questions, so I will allow Neil Findlay to come in with a question about council tax.

There appears to be some uncertainty about how councils deal with council tax and business rates. Some use the five-year period and some use the 20-year period. Do you accept that there are uncertainties, and will the bill resolve them?

I understand that thus far some of the larger councils, including Glasgow City Council, Fife Council and South Lanarkshire Council, made representations in February 2016 during proceedings by the SLC, indicating that they wanted to retain the status quo, which was 20-year negative prescription. They also indicated what public policy considerations they felt were applicable, which was basically reiterating HMRC’s and Revenue Scotland’s feeling that there are public policy considerations.

I note that technical questions have arisen in the committee about what the current practice is in each of the 32 local authorities; we will certainly be seeking further information from the Convention of Scottish Local Authorities. Of course, it would be entirely appropriate for the committee itself to write to COSLA seeking such clarification.

Do you think that there is uncertainty, or not?

Having read the evidence to the committee, and from my understanding of the submissions that were made to the SLC, I am saying that the status quo is the position that local authorities are seeking. I note that Mr Findlay has suggested that that is not the position of every one of the 32 local authorities, so we will seek clarification. I imagine that the committee might also wish to seek clarification from COSLA on that issue and on the general public policy considerations that have been raised, but that is up to the committee.

The Law Society of Scotland and others say that the exception for council tax is unfair and might discourage councils from collecting debts promptly, and that debts should not be pursued over decades. We know that a shorter period exists in England, so it really is a political choice not to use that. Could you explain the reason for that?

I will pick up on a few points. First, the status quo has for some time now been that there is a 20-year negative prescription vis-à-vis council tax and non-domestic rates. Secondly, it is not quite correct to say that the position in England is a flat six years; that is not the case. Councils in England can proceed with liability orders that can then be enforced without limit of time. That is important to note.

Do you know how often those are enforced?

I do not have chapter and verse about English court proceedings in front of me, but we can try to obtain that information. However, the fact is that liability orders can be pursued. In terms of the political position, the request came from some of the largest local authorities in Scotland, including Glasgow City Council and Fife Council. It was their request that the SLC reflect on the situation and make the recommendation that currently appears in the bill. That is where we are today, Mr Findlay. If you are suggesting that local authorities do not want that to happen, the need to seek clarification from COSLA becomes more imminent.

I am not here to express the views of local authorities. There are many things that local authorities want that the Government ignores. They want more money to run the services that are currently being cut. It is as though you are saying that whatever local authorities ask the Scottish Government for will be delivered, but that is self-evidently not the case. I am asking about the fact that there will be a six-year period in England and Wales and a 20-year period in Scotland.

I have explained that the six-year period is a bit of a misnomer, because a liability order can be secured and there is no limit on the time for enforcing it.

Are you saying that there will be no difference between Scotland and the rest of the UK?

I am not saying that. I am saying that the position is analogous, and that to suggest that the period is simply six years and then it all stops is not quite correct in describing what happens in practice in England and Wales.

On the point about local authorities, the SLC proceeded with a consultation, local authorities responded, including some of the largest local authorities. Their view was that, in terms of the public policy considerations that had been set out by HMRC and Revenue Scotland, they required the same approach in order to ensure that they had the opportunity to maintain good order with regard to obligations that are owed to them.

10:30  

Obviously, local authorities are very important stakeholders, along with many others. We listen to all views. In terms of local authorities’ budget, we proceeded with a fair settlement of £10.7 billion in the budget, which Mr Findlay did not support. That represented an increase in income and capital, notwithstanding the cuts to the Scottish Government budget from Westminster.

We are digressing, convener. The position is as I have said, so it is important that there be further engagement with COSLA to tease out those issues.

We will not get into the budget, Mr Findlay.

It was the minister who raised it.

No. Actually, it was the member who raised the budget.

We have received no evidence that I am aware of in relation to the situation in England and Wales, other than that they have a six-year period and that what is being proposed here would be worse. That is the only evidence that I have heard from people who have come before the committee.

If the minister is using the situation in England and Wales to rebut that point, we need evidence from the Government that sets out the situation in England, how debt is recovered after the six-year period, how many cases there are and how what is being proposed is a better system. We have had no evidence of that.

If there is such evidence, I am more than willing to look at it and consider it fairly. We want the fairest possible system. What is being proposed appears not to be the fairest system.

Perhaps the minister could write to the committee on that point.

I will ask officials to do that. We will obtain as much information as we can.

Mr Findlay is right: this is the first we have heard of it. All the evidence that we have had is that there is a six-year limit in England and Wales. The business about liability orders is new to us. If you could give us more information, that would be helpful.

We will obtain as much information as we can and write to the committee.

In relation to payments and penalties on reserved social security benefits, can the minister confirm that the exception is within the devolved competency of the Scottish Parliament?

When you refer to “the exception”, Mr Findlay, what specifically do you mean?

I mean in relation to the prescription period relating to overpayments of reserved benefits.

I think I said this a moment ago, but I will reiterate it. As regards prescriptive periods for obligations concerning overpayment of reserved benefits, any amendment to the status quo would raise issues of legislative competence that the Scottish Government would require to look at very carefully.

The advice that we have is that it is within devolved competence.

As I said—

Have you not looked at that already?

With respect, the bill is presented as it is and for the reasons stated. In particular, there is the practical issue that the DWP has clearly indicated that, if the bill does not take that approach, a different approach might not be so beneficial to individual applicants. One has to weigh up all issues, including the practical impacts of any course of action.

The issue that Neil Findlay raises, as I have already said, raises issues of legislative competence that would require to be considered carefully by the Scottish Government.

I will put the question to Mr Mojee, as he is a solicitor. Have you undertaken that consideration? Has your department weighed up potential differences that could emerge on competence?

I would reiterate what the minister has said.

You are allowed to say yes or no.

If we were to amend the current exception, that would raise issues of legislative competence that we would need to consider carefully.

Several stakeholders have suggested that it would be fairer to debtors and would encourage the DWP to be more prompt in its debt recovery if the exception for reserved benefits and tax credits were to be removed. What do you say to that?

I have to say that my experience with the DWP is that nothing happens terribly quickly. What I can go on is what the department said publicly in its memo to the committee of 23 April, which I read out. It seems to be saying that given that it has different technical methods of recovery, five-year prescription could mean that some approaches that mitigate the effect on the recipient might no longer be available, which could have a detrimental effect on the recipient. I am sure that none of us wants to do anything that would put vulnerable people in a worse position.

Let us move on to forfeiture.

An earlier version of the proposals had a specific exception to five-year prescription for forfeiture, which mirrored the legislation that applies to England and Wales. Why was the provision removed?

My understanding is that once an obligation is established and is subject to the normal prescriptive period, it can be enforced through forfeiture in certain ways. Customs and excise officers, for example, can seize ships. Forfeiture is an ancillary element; basically, as long as there is the overarching obligation, whatever the due date is, there are ancillary powers of forfeiture.

The removal of the provision was therefore a technical drafting issue. It was deemed unnecessary to repeat the exception, given that if the obligation persists and is subject to the normal prescription rules, the ancillary powers of forfeiture also persist. That is axiomatic.

I am sure that I am not explaining this in the best way—I am getting into legalese—but that was the feeling. Let me put it this way: there was no attempt to change the outcome. It was just a matter of technical drafting, and it was deemed unnecessary to include the specific exception, from a legal perspective.

You mentioned seizure of ships, which is about the seizure of goods. The committee has considered the issue in the context of unpaid taxes. We are concerned that the general exception relating to taxes will not cover all situations in which forfeiture is used in practice, and that removal of the specific exception takes away the opportunity to clarify how prescription applies to forfeiture more generally.

It is my understanding that everything that had to be captured had been captured, but I undertake to reflect further on that point and report back to the committee.

Thank you.

I have some questions about discoverability. Section 5 sets out the new test associated with the start date for five-year prescription, in relation to the obligation to pay damages. The third part of the new test requires the pursuer to know the identity of the defender or defenders before five-year prescription starts to run.

How will the approach work where there is joint and several liability? We are particularly interested in situations in which potential defenders were not involved in the neglect and were linked to the case only financially.

I have seen references to joint and several liability in the context of tenants and council tax, for example. Joint and several liability is a general principle of Scots law. The bill sits alongside Scots law and does not change the rules of joint and several liability. It looks at the narrow focus of the rules on negative prescription in Scotland and it operates in the context of the current position for joint and several liability. Therefore, one has to look at the facts and circumstances of each case to determine what the legal position would be in that regard.

The bill looks at the position from the point of view of negative prescription to determine the start date from which prescription runs, when the relevant prescriptive period comes to an end and so forth. The bill does not attempt to deal with all aspects of Scots law, including joint and several liability; it just deals with negative prescription. In the instance that you gave, one would need to look at the relevant facts and circumstances of the case to determine the joint and several liability.

When there are unknown parties, what determines when the period starts to run?

They might be unknown, but if you are jointly and severally liable, you are liable for the actions of the others. If one debtor is identified, your prescriptive period in that instance will start to run, assuming that there has been loss as a result of an act or an omission of that person, even if that person is the only party to be identified. In circumstances in which you are able to identify other parties who were involved in the act or omission, there would be different start dates from which the prescriptive periods would start to run. That is clear in the bill.

If you discover someone else who is jointly and severally liable—

If you discover someone else, it is not necessarily a joint and several liability situation; that is subject to the rules on joint and several liability. However, if there are various actors involved in the loss through their acts or omissions, there can be different start dates for the run of the prescriptive period. I am sorry—I did not mean to conflate the two.

So you will be able to go after those who are jointly and severally liable.

As I said, the joint and several liability element is governed by the rules under Scots law. You would need to look at those rules to determine in the instant case that you raised what the position would be. The normal approach is that if you agree or are deemed to be jointly and severally liable, you are jointly and severally liable—that is that. One should always get legal advice about the obligations that one takes on in life.

So I would not be disadvantaged by the proposed change if I had to pursue the jointly and severally liable individuals to get payment.

I am sorry—who is jointly and severally liable? I am getting a bit confused. I thought that I understood your example, but you have veered off. Which perspective are you talking about?

Under the bill, the prescriptive period will start to run for the benefit of the creditor when three things are known: that there has been loss, injury or damage; that the loss, injury or damage has resulted from an act or omission by a particular person or people; and the identity of that person or those people.

Let us say that I am making a claim against the person whom I think has done the damage. For some reason, that person does not or cannot pay, so I want to pursue the jointly and severally liable partners. Is there anything in the provisions on the five-year prescription to prevent me claiming against those individuals because I have not gone after them within the five-year period?

I see what you are getting at. In that hypothetical situation, why would you not know their identity? However, taking the example to its extremes, if you do not know the identity of the other parties, for whatever reason, you could adopt a belt-and-braces approach, but the point of the bill is to provide as much legal certainty as possible. We cannot legislate for every single case.

Given that you are thinking about it, do we need further clarity on that?

10:45  

I am certainly happy to look into the specific example that you have just raised. Let us say that there are two debtors. If you only identify one of them but, for whatever reason, you decide that it is not worth proceeding with legal action against them, you would then be trying to find out about the other debtor, and you might feel that you were running up against the end of the prescriptive period. In an extreme case, the joint and several liability would be such that you could not possibly identify the second party at that time. I think that that would be a less common circumstance, but we shall look into that.

The committee heard some oral evidence to the effect that the third part of the new test in section 5 might increase the complexity of the law in some situations, including where there are multiple potential defenders as a result of complex contractual or corporate structures. Do you accept that criticism of the new test? Is that risk offset by other benefits?

To go back to first principles, the reasoning behind this reformulation of the discoverability test is to seek to facilitate fairness for—in this case—the creditor. That is balanced by other aspects of the bill, which look at the position of the debtor and take into account the wider public benefit of greater legal certainty.

In the instance that you have just outlined, you could sue the different debtors at different times, so there should not be any particular problem.

At present, you would put out a number of protective writs to preserve your prescriptive period if you are not entirely sure whom you should be suing. In doing that, you would stop the prescriptive period from running. That is not really the best use of resources for anybody on either side of a legal dispute or indeed for the courts and society at large. It is not a very sensible way to do it—there must be better ways.

The SLC put forward a number of options in the consultation. The feeling is that, on balance, the option that has been decided upon by the SLC and which is represented in this bill is a reasonable one.

Of course, there is a countervailing issue around the need to pursue reasonable diligence, so there is already a balance written into the new rules. The balance of the evidence suggests that this solution is certainly an improvement on the current position. Of course, the current position was put into doubt as a result of the 2014 Supreme Court ruling in the Morrison case, because people thought that they knew what the rules were but found out that the rules might be something entirely different.

The new test introduces appropriate fairness into the process and I think that it is balanced by the reasonable diligence obligation.

I have a question on the start date for 20-year prescription, which is in section 8. Like five-year prescription, 20-year prescription starts from the date that the obligation becomes enforceable. For obligations to pay damages, that is currently when the loss, injury or damage occurs. Section 8 changes the start date of 20-year prescription for the obligation to pay damages: it says that the 20-year period should run from the date on which the defender’s act or omission occurred. This proposed change would be a shift in the law in favour of the defender, clearly, because the new start point would be much earlier than the old one in some cases and would never be later.

In evidence to the committee last week, Mike Dailly of the Govan Law Centre suggested that section 8 was unnecessary. He said that each proposal in the bill should be examined on its own policy merits and that it is unhelpful to regard the bill as something that has to offer benefits to both pursuers and defenders.

How would you respond to that viewpoint?

I noted Mike Dailly’s view when I read the Official Report of last week’s evidence session. Obviously, other people have other views. If you read the part of the SLC’s report where it narrates the nature of its consultation and how the work progressed, I think that you will find that, thus far, the balance of the evidence that the committee has had before it absolutely supports the provision.

There is, indeed, a recognition of the balancing act that must be engaged in as we strive to reach a fair balance between the interests of both sides to a claim, and also of the importance of looking at the overall picture in terms of legal certainty, which we discussed as a key objective in response to your very first question, convener. That enhances legal certainty and allows fidelity.

In terms of the earlier start date that is likely to be the case in practice, by looking at the last act or omission, it was felt that, in many cases, the loss can arise many years down the line and for the 20-year prescriptive period—the long-stop prescription—to start running from then would elongate the process quite considerably.

You must also take into account the fact that, some years ago, Scotland decided to remove the 40-year negative prescription from our legal system. The proposal reflects the feeling that we cannot go on indefinitely with having obligations extant, and it improves legal certainty.

Of course, changing that start date runs the risk of increasing the number of the harsh cases that we have heard about. As you will be aware, those are the cases where an obligation to pay damages is extinguished without the right holder ever having been aware that obligation existed at all. If that is the case, should that risk affect the policy that underpins section 8?

I note the reference to hard cases, and I know that the committee has an interest in a particular case—the Paterson case—that is before the Public Petitions Committee. It has been widely accepted that, if there is any potential remedy for the Patersons, it is not to be found under the law of prescription. Ultimately, when trying to come up with a situation that improves legal certainty, we cannot rely on the knowledge of any individual creditor, as that would not allow us to have a system at all—a point that was well made by the Subordinate Legislation Committee in its report. That means that we have to decide what our system is, and that—inevitably, as with any system in which there is a hard cut-off date—there will be some hard cases at the margins. However, the point has been made by a number of people who have given oral evidence to you that hard cases do not make the best law.

On the Paterson case, issues have been raised around the Land Registration etc (Scotland) Act 2012. I think that the Public Audit and Post-legislative Scrutiny Committee is examining that act, and it might be that there are some areas where improvements can be made. I regularly meet the Law Society of Scotland. When I had a meeting with it the other week, I asked it to consider what practice rules could be put in place in relation to the particular issue of the keeper of the Registers of Scotland and the need to ensure that the client is aware of that.

Other issues are in train as a result of the case being raised, but the solution will not be found in relation to the law of prescription.

That is clear enough.

Some concern has been expressed by stakeholders, including the Law Society and the Faculty of Advocates, about how section 8 would work in relation to omissions to act and on-going breaches. Can you offer any reassurance to the committee in that regard?

If you are asking about the language of acts or omissions—in particular the word “omissions”—I can say that those are terms of art of Scots law, and this bill operates within the general context of Scots law. These are matters that the courts look at extremely frequently, and I think that other people who gave evidence and made written submissions expressed the view that those were terms of art and that the courts deal with such matters very practically, which means that including that particular phraseology did not introduce anything new.

My question concerns section 6 of the bill and the provision that, although 20-year prescription can no longer be interrupted, it can be extended only to allow for on-going litigation or other proceedings to finish. The SLC suggested in oral evidence that in practice any extension would be fairly short, because courts tend to manage cases actively and do not let them drag on. With the challenges to public sector finances, could there be an impact on the court system in the future if there were longer delays as a result of the 20-year period being extended? Also, does the possibility of an extension to allow litigation to finish undermine the overall effectiveness of section 6?

First, I do not think that any particular impact is likely to fall on the operation of the Scottish Courts and Tribunals Service as a result of the provision.

On the second issue, the SLC was keen to recognise the practical situation in which there may be an on-going court case towards the end of a 20-year negative prescription period. It would not be appropriate to say, “Sorry, but your case didn’t reach the next stage by X date, so that’s it.” All the work that had gone into that court case, which could have taken years, would suddenly, on very arbitrary grounds, no longer be heard. The SLC desperately wanted to reflect that as a matter of practice but to keep it very tight, so what it said, and what has been reproduced in the bill, is that the period should be extended only until such time as the claim is disposed of or the proceedings are brought to an end, because proceedings could be brought to an end without the claim being disposed of. That will ensure that extensions will be limited, and it reflects the circumstances that would pertain in such situations, so I think that the SLC has got it absolutely right.

I have another question, and I may be stretching things a wee bit. You have said that an extension would be a very short time in addition to the 20-year period. Given your previous experience outwith Parliament, can you say for what length of time such extensions would normally be? Would it be a few months, or a year? I accept that every case is different, but what would the average be?

Every case is different. It is not really possible to say anything definitive, because I could say something now and further down the line there could be a different set of circumstances, and then you would say that I had not given you the correct information. It is fair to say that such circumstances will not be common, as has been said. We need to reflect, as a matter of practicality, that a question arises about what to do if a case is brought 19 years and 2 months in. Would we just say, “That’s it” when we reach the 20-year mark, even if the case has a wee bit of time to go? It was felt that that was not the most appropriate way forward.

My question is still on prescription; it is about property rights aspects. Section 7 of the bill states that the 20-year prescription that applies to certain property rights will no longer be able to be interrupted, but can be extended only to allow on-going litigation to finish. Although that mirrors the approach in section 6 for personal rights, the Faculty of Advocates, supported by other stakeholders, has suggested that the approach in section 7 would not work well for property rights such as servitudes. In light of that evidence, are you minded to reconsider the Government’s approach to section 7?

We have carefully reflected on that. We acknowledge the concerns that have been raised and are reflecting on whether we need to look at the language to make the position clear. If, having looked at all the concerns, we feel that the language is okay, that will be one thing, but we are going to reflect carefully on that point, so it was useful to tease that out in the evidence sessions.

It is work in progress.

It is.

In its written evidence, Brodies LLP has raised concerns about section 12, which defines what a final disposal is in court proceedings. In particular, Brodies says that

“Section 12 ... does not account for the possibility that a court or other body will grant leave or permission to appeal late or will allow an appeal to be lodged late.”

Do you accept that interpretation? Are you minded to propose amendments to section 12?

11:00  

That is another work in progress. We recognise the concern that Brodies has raised and will reflect on the matter carefully.

So, there are a couple of areas that you are considering.

Yes. We are not against amending the bill, but we need to see whether the language is adequate. If it is not, we will consider amending it, in light of those concerns.

Do you have a timescale for that?

That will be done in time for the stage 1 debate. I suppose that it depends when the stage 1 debate is.

It is sometime in June, apparently.

That is a long lead-in time. Sometimes, it is much shorter. That should allow us to progress work expeditiously.

Good.

Good morning, minister. Before I turn to my main line of questioning, I seek clarification regarding council tax. Am I correct in understanding that liability orders in England are roughly analogous to summary warrants in Scotland?

They may be. I refer to my entry in the register of members’ interests: I am a member of the Law Society of Scotland and I do not profess any particular qualification on English law.

I appreciate that.

As we have indicated, we wish to obtain more information on the issue, but the fact is that England has the liability order process.

I would appreciate that information. From my limited understanding as a lay person, liability orders and summary warrants seem to have the same objectives. I was struck by the fact that one website—counciltaxadvisors.co.uk, which is accredited by Advice UK—says that

“Magistrates Courts in England and Wales granted over 3.5 million Council Tax Liability Orders”

in one year.

That is quite a few.

It would be interesting to have a better understanding of that method of recovering debt.

Indeed.

Section 13 of the bill seeks to replace section 13—a nice coincidence—of the Prescription and Limitation (Scotland) Act 1973. It pertains to so-called standstill agreements and would allow for a single extension of the five-year prescription period.

The committee has received a range of views on that. There is a suggestion that allowing a standstill agreement would risk abuse by the economically stronger party in a dispute. On the other hand, some stakeholders say that the measures do not go far enough. Indeed, we have taken evidence that suggests that the bill is fine as it stands, but additional safeguards could be introduced, including that any standstill agreement must be in writing and that the debtor in an obligation must have taken legal or money advice.

I appreciate that if one party says that the bill does not go far enough and another says that it goes too far, that might suggest that you have found the perfect balance, in the middle. However, I am keen to hear the minister’s views on the policy arguments about section 13.

Section 13 recognises the need to balance the interest of legal certainty with the creditor’s interest in getting a result. It was felt that, instead of having some generally applicable wide provision that would allow for extinctions of the prescriptive period, which would defeat the purpose of seeking greater legal certainty, the standstill provision, as it is called, would help to facilitate resolution.

The standstill agreement will be available under specified circumstances, as Tom Arthur rightly said. It will be only of a year’s duration and that period cannot be extended. Importantly, it is also not to be a general contractual provision; it is to be invoked only after the dispute has occurred. Therefore, it is focused on dispute resolution. That is a good thing and I think that we would all welcome it as such.

In other areas we are seeking to facilitate mediation and dispute resolution, rather than all actions going straight to court. That is the motivation behind the provision. There is, again, a balance to be struck in terms of the circumstances under which a standstill agreement can be invoked.

On inequality of arms, it is interesting to note from the SLC’s discussions in the report that some people called for consideration to be given to restricting the prescriptive period. Some stakeholders felt that there might be circumstances in which a creditor was less powerful than the debtor, which would involve a real inequality-of-arms situation. That was a road that the SLC chose not to go down. It feels that the standstill provisions for the short negative prescription meet the overall desire to strike a balance between respective interests.

On the final point about additional safeguards, I note that the matter came up in last week’s evidence. As far as lawyers and solicitors are concerned, it may be that the Law Society of Scotland should be asked to look at the matter in relation to its practice rules, because I have some questions about how that would work. If we say that people must take legal advice, there may be a case in which one large organisation is in touch with another and there is no inequality of arms, but they might use in-house solicitors, which raises the question whether that counts. Would the organisation still be required to take legal advice?

I understand that it is not the intention to get into that kind of scenario, but when we are drafting legislation we have to contemplate as many possible scenarios as we can. I am happy to go away and reflect on the issue, but I feel instinctively that including that in the bill might cause issues.

Okay. Staying on section 13, Brodies has argued that rather than just allowing for extensions, suspensions of the prescriptive period should also be permitted. I understand that to be a pause, in effect. There have been various arguments made about that. Is there policy merit in the proposal?

Having read the genesis of the SLC’s work—the entire report and all the subsequent submissions—I feel that the objective has been to find that balance. Taking into account the overarching objective of legal certainty, I agree with the SLC that the standstill, with the safeguards to be employed as set out expressly in the bill, is a better way of meeting the objective than the suspension that is proposed by Brodies. In fact, the standstill provisions have a good bit of support.

Various legal practitioners have suggested that, in its current form, section 13 might raise an issue in relation to contractual limitation clauses. The fear is that although such clauses are common and important in practice, they might be outlawed due to the current wording of section 13. How do you respond to the practitioners’ points?

I have noted that point, but I do not feel that it is well founded. It is clear to me that contractual limitation clauses would not be affected. The bill is to do with negative prescription, so it is important to bear in mind the very important difference between the definitions of “prescription” and “limitation”. Prescription concerns the existence of the obligation itself, while limitation is a procedural issue concerning the point at which someone must pursue the claimant through court action and so forth. The two issues are entirely separate. There is no intention to impact on contractual limitation clauses. I feel that that is clear in the bill.

My final question concerns something that is omitted from the bill. We took evidence that one potential further reform to the 1973 act could be with regard to the definition of “legal disability”. It is currently defined in section 15(1) of the 1973 act as including “unsoundness of mind”. I think that we would probably all agree that that term is somewhat archaic and, indeed, offensive. In the course of our evidence taking, it has been suggested to us that that definition could be replaced with a definition that is used in the Adults with Incapacity (Scotland) Act 2000. What are your thoughts on that suggestion?

I noted that comment, which I think was made by one of the academics from whom the committee took evidence.

Yes—it was made by Dr Eleanor Russell.

I understand that the same point has been made with regard to other legislation. I go back to the fact that the bill deals with negative prescription and sits in the context of general Scots law principles. If one wants to amend general Scots law principles that apply in many other areas, it would be best to seek to do so through a different vehicle. The danger of seeking to change basic Scots law principles and definitions that apply in other areas in a bill that deals with a particular area of the law is that we end up with a bit of a hotchpotch and unintended consequences.

With regard to the drafting suggestion that the definition in the Adults with Incapacity (Scotland) Act 2000 should be used in the bill, one would need to consider from what point the prescriptive period would run. Should the rules in the bill be used, or should a different set of rules be used, whereby the prescriptive period would run from when the guardian was appointed? A series of other issues would be raised. The bill deals with the negative prescription rules as they apply to the general principles of Scots law. If one wants to amend those other principles, it seems to me that the bill is not the best way to do that, especially if we take into account the unintended consequences to which that could give rise.

Dr Russell mentioned the 1973 act. In her evidence, she said that “legal disability” is defined in that act as including “unsoundness of mind”.

But “unsoundness of mind” is the general concept that I am talking about.

Is it defined in the 1973 act?

It is not defined in the 1973 act, which gives the courts some flexibility in how they interpret it.

Thank you for that.

Members have no further questions. Would you like to make any closing remarks, minister?

No—other than to say that I have found it to be a very helpful session. I note the power of work that the committee has done thus far, and I look forward to further engagement with the committee as we go through the next stages. We will get back to you with the information that we offered to provide.

It would be helpful if you could get back to us by 11 May. Thank you very much.

I suspend the meeting to allow the witnesses to leave.

11:13 Meeting suspended.  

11:19 On resuming—