24 September 2020

The law of prescription in Scotland has had a tumultuous journey over the past few years and a recent decision has indicated that, once again, change is coming.

That decision is from Sheriff Principal Turnbull in the case of WPH Developments Ltd v Young & Gault LLP (In Liquidation) [2020] SAC (Civ) 7. The original decision is one which has been explored in a previous edition of BTOverview. The most recent judgment concerns an appeal against the Sheriff’s decision that the claim had not prescribed and should be allowed to proceed to a hearing on the evidence, which has now been remitted to the Inner House of the Court of Session. 

The question which Sheriff Reid, in the original decision, had to consider was whether or not the obligations founded upon by the Pursuer had been extinguished by the operation of the five year short negative prescription period provided for in Prescription and Limitation (Scotland) Act 1973 section 6(1). Sheriff Reid concluded that loss had occurred as soon as the Pursuer, in reliance upon erroneous drawings, incurred expenditure to contractors who built upon land which the Pursuers did not own. On the facts alleged by the Pursuers, the relevant works commenced more than five years prior to the action being raised.

The appeal by the Defenders has been remitted to the Court of Session because it concerns complex points of law on the correct interpretation of the Prescription and Limitation (Scotland) Act 1973 section 11(3).

Whilst there are no material updates arising directly from this appeal judgment, the impact of this is likely to be significant. It now gives an opportunity for the case to go to the Supreme Court if necessary; to clarify the debate point and perceived injustices on the law of prescription. If so, it will be the latest in a string of three recent occasions where the Supreme Court has been asked to judge on this point.

The Law of Prescription

To recap, if a claim for damages is not made within 5 years of the obligation becoming enforceable, then the claim prescribes. The problem in some cases is establishing when exactly an obligation becomes enforceable. Enforceability occurs at the date loss or damage arises as a result of negligence or contractual breach. Problems materialise when a claimant is not aware, nor could reasonably be aware, that any loss had occurred at the time.

Section 11(3) postpones the beginning of the 5-year clock according to the date when that loss or wasted expenditure first ought to have been apparent. Decisions stemming from this, most notably Gordon’s Trustees v Campbell Riddell Breeze Patterson and Midlothian Council v Bracewell Stirling Architects are viewed by many as unfair as they have interpreted this rule to apply even if the claimant is unaware of the cause of the loss; or even unaware at the time that it is in fact a loss. For example, in spending money on a housing development which later turns out to have been wasted because the housing turns out to be defective and has to be demolished, ‘loss’ occurs at the point of incurring the wasted expenditure and therefore the clock starts to tick before the claimant is aware of any problem.

WPH – Case Developments

WPH involved allegedly faulty plans drawn up in 2012 by an architect (Y&G) on behalf of a property developer (WPH). The developer had contractors build a housing estate in reliance on those plans. In 2014, it emerged that the estate was built partially upon neighbouring land. In November 2018, the action was raised.

The architect used the Midlothian case to argue that the prescriptive period began as soon as the Pursuers spent (or, in a sense, wasted) money on the development. However, the Sheriff accepted that the Pursuers did not have knowledge of loss at the time they were incurring expenditure and therefore the date which the prescriptive period commenced must be postponed. This is on the basis that interpreting the law otherwise would be at odds with the purpose of section 11(3). This conclusion contradicts the first instance decision in Midlothian. The most recent decision in WPH, granting leave to appeal, offers further opportunity for the Inner House to curtail the impact of the prior cases, giving a clearer sign of what its views are on this matter.

Next Steps

The significance of this most recent decision is in the fact that the Inner House now have this case to consider. The potential exists, in due course, for the Supreme Court likely to be given a chance to clarify the position which Midlothian and Gordon’s Trustees, and now the conflicting first instance decision in WPH, have opened to doubt. The trend of a move away from the harsh position in Gordon’s Trustees and Midlothian Council has been further instilled: with the nature and extent of actual knowledge at the time becoming the focus of whether a claim is time barred.

There will be some much-awaited legislation coming in the form of the Prescription (Scotland) Act 2018. For those defending cases and seeking to run prescription arguments, it would therefore be wise to run that prescription argument sooner rather than later, before either the Act comes into force or the court reaches a decision the WPH case: in other words, whilst there remains some scope for debate on the matter.

For more information please contact Gillian Harman, Associate (gah@bto.co.uk) or Emily Campbell, Trainee Solicitor (eca@bto.co.uk) on 0141 221 8012.