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Prescriptive time limits 'fatal blow' to litigation, court warns

Parties to civil litigation in Scotland must not underestimate the importance of bringing claims in good time, an expert has warned, after the Court of Session dismissed a claim against the former partner of a now-dissolved law firm.21 Jun 2018

The Outer House of the Court of Session ruled that the legal doctrine of 'long negative prescription' applied in the case, meaning that Hamid Khosrowpour had 20 years in which to bring a claim against solicitor James Stewart Taylor. Khosrowpour had contacted Taylor in 1989, asking him to give legal effect to an agreement between him and his then mother-in-law that he would inherit her house upon her death. However, the arrangements that Taylor put in place meant that Khosrowpour did not ultimately inherit the house.

In his judgment (20-page / 477KB PDF), Lord Doherty referred to a 2014 case in which the Supreme Court ruled that the time period began running from the date on which the action giving rise to the injury occurred. In this case, Khosrowpour sustained an immediate actual loss when Taylor put the wrong documentation in place in 1989, he said.

Commercial litigation expert Craig Connal QC of Pinsent Masons, the law firm behind Out-Law.com, said that the case was a reminder to parties that they should not "underestimate the importance of prescription".

"The date on which damage or injury occurs can be crucial, and might not always be obvious - but getting it wrong can have fatal, and often expensive, consequences for an action," he said. "Specialist legal advice should be sought as soon as there is any thought at all that proceedings against a responsible party could be a possibility, since it might be necessary to look back in time to when cost or other loss was incurred."

Khosrowpour had provided his then mother-in-law with £8,000 in 1989 so that she could purchase her house from the council at a discounted price. He claimed that he had made an oral agreement with her that, in return, he would inherit the house on her death. Taylor, then a partner with the law firm of Coutts & Palfrey, prepared a will for the mother-in-law, under which Khosrowpour would inherit the house. Khosrowpour was also granted a standard security over the house for the monies advanced.

In 2003, a second will was executed, revoking the first and making other arrangements for the house. When the mother-in-law died in 2012, Khosrowpour, who is now divorced from her daughter, was offered £22,000 to reflect the money advanced for the purchase of the house plus interest. In 2013, he sued Taylor for breach of contract and in delict (or breach of duty of care), which is the Scottish civil law equivalent of tort.

The Outer House first dismissed the breach of contract action based on the law of partnerships. Khosrowpour's contract was not with Taylor, but with the law firm of Coutts & Palfrey. Although the law firm has since been dissolved, Khosrowpour did not have the right to pursue one of the former partners individually. Instead, the law requires him to establish liability against all of the relevant former partners, who in this case are Taylor and another individual.

Having dismissed Khosrowpour's claim for breach of contract, Lord Doherty then turned to the delict claim. He agreed that Taylor personally owed delictual duties of care to Khosrowpour, which he had breached when he had been negligent in 1989. However, he also had to establish when Khosrowpour suffered an actionable loss.

Khosrowpour argued that he did not suffer an actionable loss until the death of his former mother-in-law in 2012. Lord Doherty disagreed. He ruled that the loss occurred "immediately [Khosrowpour] parted with the £8,000" in exchange for rights which were "less valuable than those he would have obtained had [Taylor] duly performed his contractual and delictual duties".

"In my view it is self-evident that what [Khosrowpour] got in return for that payment was less than he ought to have got had [Taylor] duly performed his duties," the judge said. "Instead of M being bound to leave the house to [Khosrowpour] when she died, she was free to transfer it to anyone she chose during her lifetime or to make any testamentary provision she wished in respect of it. At worst for [Khosrowpour] he would have been entitled to damages if M died without making the agreed testamentary provision. Instead, all that he had was a precarious expectancy which could be defeated at any time."

"I am not persuaded otherwise by the fact that the informal agreement was reached between mother-in-law and son-in-law rather than between commercial actors. [Khosrowpour] instructed [Taylor's] firm to put the agreement on a proper legal footing so that M would be bound by it and he would not be merely reliant on her honouring an otherwise unenforceable obligation," he said.

The 20-year period in which Khosrowpour was entitled to bring a claim against Taylor therefore began running in 1989, and had expired by the time he did so in 2013, the judge ruled.