Section 6(4)(a) provides that when calculating the 5 year prescriptive period applying to any obligation to make reparation under section 6(1) of the 1973 Act, any period "during which by reason of - (i) fraud on the part of the debtor…the creditor was induced to refrain from making a relevant claim" is ignored. That exception to the general rule is, in turn, subject to a proviso in that it does not take account of any period after which the creditor could "with reasonable diligence" have discovered the fraud. Accordingly, in order to avoid the normal consequences of prescription, the court has to find that the creditor did not know about the fraud and could not, by reasonable diligence, have found out about it.

The case before the Inner House arose out of anti-competitive practices in relation to the sale of trucks to Scottish local authorities. Claims by several authorities were brought between 22 July 1998 and 18 January 2012. In September 2010, the MAN group of companies reported themselves to the EU Commission as having engaged in anti-competitive practices, applied for and were granted conditional immunity in December 2010 under 2006 Commission Notice on Immunity from fines and reduction of fines in cartel cases (2006/C298/11) on the basis that they had brought the matter to light. In January 2011 the Commission announced that they had started investigations into suspected anti-competitive practices in different EU states and other manufacturers (Volvo, Daimler and Iveco) submitted applications for leniency. The Commission then informed the manufacturers on 20 November 2014 that they were initiating proceedings.

Settlement negotiations followed and on 19 July 2016 the Commission published a report on the outcome of its investigations finding that the manufacturers had breached article 101 of the Treaty on the Functioning of the EU by unlawfully colluding in respect of: (i) pricing of heavy and medium trucks; (ii) timing of the introduction of emission technologies; and (iii) the passing of associated costs to consumers. They were all heavily fined (with Daimler facing a fine of more than €1billion) for their involvement in the collusion, other than MAN.

Following the Commission's decision, 20 local authorities raised actions seeking reparations for overpayments in respect of trucks as a result of the collusive practices, including the two pursuers in this action - Glasgow City Council and West Dunbartonshire Council - which were selected as the lead cases. The actions were raised on 20 February 2019 and were challenged as being out of time. The pursuers, however, relied on section 6(4) saying that until the publication of the Commission's report in July 2016 they did not know and could not, with reasonable diligence, have discovered the unlawful activity which was said to constitute a fraud.

The commercial judge at first instance found in favour of the pursuers. In relation section 6(4) he held that "fraud" had a wide meaning, as a matter of public policy. It encompassed any concealment by the debtor and the important point was when that concealment came to an end and the creditor discovered the truth. He accepted the evidence of the pursuers' witnesses which was to the effect that they did not know about the cartel and that there was nothing to prompt further inquiries which, if conducted with reasonable diligence, could have led to the discovery of the fraud.

He also relied, however, on the approach taken in England and Wales with regard to section 32(1) of the Limitation Act 1980 and dicta in the cases of Arcadia Group Brands v Visa Inc [2014] EWHC 3561 (Comm) and Granville Technology Group v Infineon Technologies [2020] EWHC 415 (Comm) in which the judge had held that prescription could not run against a pursuer who was unable to plead a relevant case because critical facts, that had to be pled in order to establish a prima facie case, had been concealed by the defender. Those facts in the present case included the nature of the infringement and the identity of the wrongdoer. The pursuers, he held, would not have been able to plead a prima facie case at the relevant time. The manufacturers appealed.

The Inner House held that there were two issues which required resolution. First, did the pursuers know of the operation of the cartel (i.e. the fraud) prior to February 2014 (being the date 5 years before the raising of the action). Secondly, could the pursuers, using reasonable diligence, have discovered the operation of the cartel prior to that date.

These, of course, were matters of fact and as has been well-rehearsed by the Supreme Court in recent years, the court is not entitled to interfere with first instance findings of fact except on the basis of well-known and closely defined grounds of challenge. The Inner House helpfully sets out again these bases. The first of these is that the appeal court is entitled to interfere where the decision was "plainly wrong" in the sense that no reasonable judge could have reached the conclusion in question (Henderson v Foxworth Investments 2014 SC (UKSC) 203, Lord Reed at para 62). The second is that there may be some identifiable error including "the making of a critical finding of fact which has no basis in evidence, or a demonstrable misunderstanding of relevant evidence, or a demonstrable failure to consider relevant evidence" (Woodhouse v Lochs and Glens Transport 2020 SLT 1203, at para 32). The Inner House goes on to explain that "A material error of law is another ground for interfering with a first instance decision, but such an error may or may not require a review of the findings of fact. If such a review is required the court will more easily reverse a finding of inferential, as distinct from primary, fact (Woodhouse at para 33)". In relation to the present action, the court confirmed that a finding that the pursuers' employees were unaware of the published material was one of primary fact but whether reasonable diligence could have been discovered was a matter of inference based on primary fact.

The Inner House had little hesitation in accepting that it was not entitled to interfere with the commercial judge's conclusion on the basis that he was plainly wrong nor that he had made any error in making the findings of primary and inferential fact which he was perfectly entitled to make on the basis of the evidence provided to the court.

However, the commercial judge made an error of law which required the Inner House to examine the conclusion that he reached. The error was in applying the English case law relating to the 1980 Act. It was, according to the Inner House, an error for two reasons. First, that is an English statute which has no application in Scotland and a very different statutory basis and historical origin to the provisions in the 1973 Act. The Inner House held that "There is no rule in Scotland that the suspension of prescription under section 6(4)(a)(i) occurs up to the point at which the pursuer is able to plead a relevant prima facie case…It is sufficient that there has been a fraud…which induced the creditor to refrain from raising an action". Secondly, even if the English authorities relied upon had any relevance they were, in any event, superseded by FII Group Test Claimants v HMRC [2020] 3 WLR 1369 which departed from the rule relied upon in the other cases. According to that case, time begins to run in England when "the creditor knows, actually or constructively, the essential facts on which the cause of action is based with sufficient confidence to justify embarking on the preliminaries to the issue of a writ such as submitting a claim to the proposed defendant, taking advice and collecting evidence" (per Lord Reed and Lord Hodge at para 195).

However, even when applying the correct test the court held that the commercial judge was entitled to reach the conclusion that he had reached. The evidence was that the pursuers did not know about the cartel. Further, the commercial judge was entitled to infer that they could not, with reasonable diligence, have discovered its existence. The commercial judge was not plainly wrong and had analysed the evidence correctly. The conclusion reached was according to the court "readily explicable having regard to the testimony of the witnesses, the limited nature of the published material and the surrounding circumstances".

The Inner House's decision again reiterates the high bar that appellants have to clear in order to challenge facts established at first instance and provides interesting comment in relation to the operation of section 6(4). The Inner House also comments briefly on section 11(3) of the 1973 Act and the fact that the problems associated with that section still exist due to the fact that the Prescription (Scotland) Act 2018 has not yet been brought into force. While the court seems confident that the changes made by the 2018 Act will solve the problems identified in recent cases on section 11(3), it is not entirely clear that it will solve them all. Certainly, the 2018 Act will solve the problem that was identified in Morrison v ICL Plastics 2014 SC (UKSC) 222 and in Gordon's Trustees v Campbell Riddell Breeze Paterson 2017 SLT 1287; i.e. where the creditor knows that they have suffered a loss but does not know its cause. However, it is hard to see how the 2018 Act solves the problem of latent damage most recently identified in WPH Developments v Young & Gault 2021 SLT 905. In any event, it would be beneficial to see the 2018 Act come into force and perhaps the court's "surprise" at it not being progressed will be the push the legislative needs.