1. Introduction
This decision clarifies how Scottish prescription law applies to concealed construction defects and allegedly continuing product misrepresentations. Its central distinction is between merely asserting that contractual obligations have been performed and conduct specifically alleged to have concealed defects, induced an erroneous belief, and thereby prevented a claim.
The tenant of the Leonardo Inn Hotel in Aberdeen sought the cost of remedying allegedly defective cladding from the design-and-build contractor, Galliford Try Building 2014 Limited, and the architect, Building Design Partnership Limited. The architect, in turn, sought relief from Kingspan Insulation Limited, alleging fraudulent or negligent statements about Kooltherm K15 insulation.
Although the tenant failed on important arguments concerning collateral warranties, the occurrence of loss, and discoverability, its case survived under section 6(4) of the Prescription and Limitation (Scotland) Act 1973. The architect’s claim against Kingspan also survived, under both section 6(4) and the continuing-act provision in section 11(2).
The court decided only whether the pleaded cases justified an evidential hearing. It did not establish that the cladding was defective, that any defender was liable, that Kingspan committed fraud, or that prescription had ultimately been defeated.
5. Legal Reasoning and the Precedents Applied
5.1 Collateral Warranties: The Contractual Words Determine Equivalence
The court rejected any assumption that collateral warranties necessarily replicate every defence available under the underlying contract. The question is one of contractual construction: what did the parties’ actual words provide?
British Overseas Bank Nominees Limited v Stewart Milne Group Limited
In British Overseas Bank Nominees Limited v Stewart Milne Group Limited 2020 SC 24, the Inner House construed wording allowing equivalent defensive rights as placing the contractor in the same defensive position under the warranty as under the building contract.
The contractor’s warranty here contained essentially identical wording. Clause 1.4(i) permitted reliance on equivalent rights in defence of liability, excluding set-off, retention and counterclaim. Lord Richardson held that prescription defences fell naturally within that provision.
Legal & General Assurance (Pensions Management) Limited v Halliday Fraser Munro
Legal & General Assurance (Pensions Management) Limited v Halliday Fraser Munro 2025 SLT 1151 confirmed the importance of distinguishing between:
- clauses limiting the substantive duties owed under a warranty; and
- clauses importing defensive rights available under the original appointment.
That decision also rejected reliance on a free-standing “principle of equivalence” divorced from the contractual language. Lord Richardson followed this approach rather than treating equivalence as inherent in all collateral warranties.
The architect’s clause was differently drafted. It provided that the architect would have no greater duties or obligations in time or in nature
, and no greater liabilities, than under its appointment. Two features were decisive:
- The express exclusion of set-off, retention and counterclaim indicated that the clause addressed defensive rights, not merely the content of professional duties.
- The words
in time
supported importing the temporal protection afforded by prescription under the appointment.
The decision therefore shows that an express reference to “equivalent rights of defence” is not the only drafting capable of producing that result. Different language may do so when read as a whole.
Why the Twelve-Year Provisions Did Not Displace Prescription
The contractor’s warranty required professional indemnity insurance for twelve years and imposed a twelve-year contractual deadline for proceedings. The tenant argued that these provisions indicated a separate period of liability.
The court disagreed. A contractual long-stop can coexist with an earlier prescription defence. Claims do not invariably prescribe five years after practical completion, because statutory postponement or exclusion provisions may apply. A twelve-year outer deadline therefore remains commercially intelligible without guaranteeing that every claim survives for twelve years.
The insurance obligation likewise did not override the express defensive-rights clause. The court distinguished the different contractual and chronological circumstances considered in Legal & General Assurance (Pensions Management) Limited v Halliday Fraser Munro.
5.2 Loss Occurred When the Tenant Assumed the Repairing Liability
The tenant maintained that entering the lease was not itself a loss: no repair expenditure had then been incurred, and the latent defects were unknown. Lord Richardson rejected that argument, adhering to his earlier construction of the lease.
On the pleaded case, the broad repairing obligation exposed the tenant to the cost of remedying defects already present. Its financial disadvantage was therefore established when it entered the lease, rather than only when it discovered the defects or paid for repairs.
Huntaven Properties Limited v Hunter Construction (Aberdeen) Limited and others [2017] CSOH 57 was cited for the proposition that construction-defect claims against a contractor will normally be enforceable by practical completion at the latest. The tenant’s own position nevertheless required separate consideration: its relevant loss arose when it subsequently assumed the lease obligations.
The Supreme Court Authorities
David T Morrison & Co Limited (t/a Gael Home Interiors) v ICL Plastics Limited 2014 SC (UKSC) 222 and Gordon's Trustees v Campbell Riddell Breeze Paterson LLP 2017 SLT 1287 supplied the governing framework. Under the applicable law, the occurrence of loss and the creditor’s appreciation that something has gone wrong are distinct questions.
The tenant also relied on observations in BDW Trading Limited v URS Corporation Limited [2025] 2 WLR 1095 concerning pure economic loss and discoverability. Its counsel accepted that those observations did not represent the governing law of Scotland. The relevant averments were excluded, while the tenant preserved its position for any further challenge.
5.3 Section 11(3): Knowledge of the Transaction Could Be Sufficient
The difficult question was not simply when loss occurred, but what the tenant had to know about it. Under the applicable version of section 11(3), the authorities did not require awareness that the loss was wrongful, avoidable or detrimental.
Tilbury Douglas Construction Limited v Ove Arup and Partners Scotland Limited
In Tilbury Douglas Construction Limited v Ove Arup and Partners Scotland Limited 2024 SC 383, a contractor entered a fixed-price contract in circumstances where allegedly negligent design would later require redesign and cause delay. The Inner House held that the losses were already “locked in” when the contract was concluded.
The contractor knew that it had entered the agreement. That knowledge was sufficient even though redesign expenditure and delay had not yet materialised and their necessity was unknown. The decision applied the objective-awareness approach from the Supreme Court authorities, alongside the line of authority including WPH Developments Ltd v Young and Gault LLP.
Lord Richardson regarded this as a significant development requiring reconsideration of his earlier ruling. He also noted the Inner House’s express difficulty in reconciling that ruling with the established authorities when refusing permission to appeal in the earlier case.
Applying the same reasoning, the tenant’s repair losses were “locked in” when it knowingly entered the lease on 8 December 2009. Its ignorance of the defects did not postpone prescription under section 11(3).
The court nevertheless rejected the contractor’s suggestion that importing the landlord’s prescription defences made separate consideration of the tenant’s section 11(3) case unnecessary. The two contractual relationships remained distinct. Ultimately, however, the tenant’s own discoverability argument failed on its merits, and no section 11(3) case was advanced for the landlord.
5.4 Section 6(4): “Everyday” Conduct Is Not Categorically Excluded
This is the judgment’s principal clarification. The defenders argued that ordinary contractual conduct—performing work, seeking payment, and granting warranties—could not support induced error under section 6(4). Lord Richardson rejected that as an overbroad reading of the recent authorities.
BP Exploration Operating Company Limited v Chevron Transport (Scotland)
BP Exploration Operating Company Limited v Chevron Transport (Scotland) 2002 SC (HL) 19 established the importance of a causal connection between the debtor’s conduct, the creditor’s error, and the failure to claim.
It also explained that a creditor need not consciously decide against enforcing a known claim. Concealment may leave the creditor wholly unaware that an obligation exists. Such a creditor can still have been induced to refrain from claiming within the statutory meaning.
The tenant’s allegations of physical concealment were directly relevant to that explanation: the case was that covering the defects prevented their existence, and consequently the potential claims, from becoming apparent.
Reconciling the Recent Inner House Decisions
The court accepted the binding conclusion in Legal & General Assurance (Pensions Management) Limited v Halliday Fraser Munro that reliance solely on the grant of the very warranty being sued upon was circular and insufficient. A promise of due performance does not, without more, establish an induced error preventing enforcement of that promise.
However, the remarks about “everyday” conduct in Tilbury Douglas Construction Limited v Ove Arup and Partners Scotland Limited were not treated as creating a separate legal prohibition. The central failure in that case was the absence of evidence establishing a relevant error which prevented a claim. Its observations about ordinary services and payment were secondary to that evidential deficiency.
Similarly, the later observations about ordinary contractual conduct in the collateral-warranty decision were obiter. Lord Richardson read both decisions as requiring a properly identified and causally effective error, rather than excluding entire categories of conduct from section 6(4).
Heather Capital Limited (in liquidation) v Levy & McRae
Heather Capital Limited (in liquidation) v Levy & McRae 2017 SLT 376 supported a broad understanding of “conduct”. It may include positive acts, silence or inaction. It need not be deliberate, independently wrongful, or motivated by concealment, and it need not be the sole cause of the error.
Lord Richardson considered that a categorical exclusion of ordinary contractual conduct would conflict with that analysis without support in the statutory wording.
Batchelor v Opel Automobile GmbH and the Later Multiplex Decision
The court expressly agreed with Batchelor v Opel Automobile GmbH [2025] CSOH 93: at debate, the creditor must plead induced error, consequent failure to claim, and sufficient supporting detail to give fair notice. The statute does not prescribe a closed list of qualifying conduct.
Nor must the conduct have been capable of misleading a hypothetical reasonable person. The relevant question concerns the actual creditor’s error. This does not remove the separate reasonable-diligence restriction on how long the excluded period can last.
The defenders had relied on Greater Glasgow Health Board v Multiplex Construction Europe Limited and others [2025] CSOH 56. Lord Richardson also noted the subsequent Inner House decision, Greater Glasgow Health Board v Multiplex Construction Europe 2026 SLT 433, issued after the debate. It expressly approved the earlier analysis of conduct and confirmed the absence of a reasonable-person requirement for inducement.
5.5 Why the Tenant’s Concealment Allegations Were Sufficient
The tenant identified the necessary elements:
- The error: the belief that the hotel contained no relevant cladding defects.
- The consequence: the tenant and landlord did not pursue claims because of that belief.
- The periods: December 2009 to December 2020 for the tenant, and February 2009 to September 2017 for the landlord.
- The inducing conduct: a specified course of conduct involving physical concealment, failures to identify and report defects, payment applications, and warranties.
For the contractor, the critical allegation was that defective elements were covered with other materials as construction progressed. The remaining allegations were assessed as parts of that course of conduct, not as independently sufficient generic assurances.
For the architect, the case concerned omission rather than direct physical covering. The tenant alleged duties to inspect, verify and report, followed by failure to identify defects before further work concealed them. Those pleaded duties supplied the context in which the architect allegedly “permitted” concealment.
The court rejected the architect’s fair-notice objection. Read together, the pleadings sufficiently explained what should have happened: the defects should have been identified and reported before the works concealed them.
The tenant did not allege fraud against these defenders. Its case relied on induced error. The ruling therefore does not depend on proving deliberate concealment, but it still requires proof of the alleged conduct, actual error, causation, relevant periods and applicable diligence.
Historical and Supporting Authorities
Caledonian Railway Co v Chisholm 1886 13R 773 illustrated the longstanding objection to allowing a debtor to benefit from delay caused by its own concealment or false pretences, whether fraudulent or not.
The tenant also cited Highlands & Islands Airports Limited v Shetland Islands Council 2015 SC 588, Inglis v Smith 1916 SC 581, and Dryburgh v Scotts Media Tax 2014 SC 651 as part of its broader argument concerning the provision’s history and treatment of induced error.
Rowan Timber Supplies (Scotland) Limited v Scottish Water Business Stream Limited [2011] CSIH 26 was relevant to the argument that inducing conduct need not necessarily be separate from, or later than, the events creating the obligation. The defenders distinguished its unusual facts, involving charges for services not received.
Lord Richardson found it unnecessary to resolve the tenant’s wider historical propositions. His construction reconciled the recent appellate decisions with the established statutory analysis.
5.6 Continuing Misrepresentation: Actionability Does Not Necessarily Mean Cessation
The architect and Kingspan agreed that, under section 11(1), the architect’s claim had become enforceable by practical completion at the latest. The insulation had by then been incorporated into the works. The architect therefore required a relevant basis for invoking section 11(2) or section 6(4).
Kingspan argued that the alleged misrepresentation was complete once the architect acted upon it. Any subsequent consequences were merely the effects of a completed act.
The Continuing-Act Authorities
AMN Group Limited v Gilcomston North Limited 2008 SLT 835 was cited in support of Kingspan’s construction linking “act, neglect or default” with the cause of action. Warren James (Jewellers) Limited v Overgate GP Limited [2010] CSOH 57 and John G Sibbald & Son Limited v Douglas Johnston & Anr [2014] CSOH 94 supported the necessary distinction between continuing wrongdoing and continuing consequences.
Lord Richardson retained that distinction but rejected the proposition that a completed cause of action necessarily proves that the underlying act has ceased. Section 11(2) expressly contemplates loss occurring while the causative conduct continues.
Cramaso LLP v Viscount Reidhaven's Trustees
Cramaso LLP v Viscount Reidhaven's Trustees 2014 SC (UKSC) 121 concerned continuing responsibility for a representation in circumstances involving reliance by a party not originally in existence. Kingspan argued that its reasoning confined the representation’s potency to the point when it was acted upon.
Lord Richardson rejected that inference. The Supreme Court had not been deciding section 11(2), and its reasoning did not establish that an initial act of reliance necessarily exhausts a representation’s further causative potency.
Mackie v Mercedes-Benz Group AG & others
The court agreed with the analysis in Mackie v Mercedes-Benz Group AG & others [2025] CSOH 94. A representation may retain continuing significance; whether it has ceased depends on its context, including matters such as withdrawal, lapse, discovery of the truth and the reasonableness of continued reliance.
Lord Richardson illustrated the point by considering a subsequent specification of the same product on another project. The fact that an earlier specification had already caused loss would not, by itself, prevent later reliance on the same statement.
This was not a ruling that every product statement continues indefinitely. A representation may be confined to a particular transaction. The architect had, however, pleaded enough to justify inquiry into whether the alleged representations here remained continuing.
5.7 The Wintech Report Did Not Conclusively Establish Knowledge
Kingspan also argued that the architect’s receipt of the Wintech report in 2017 established actual knowledge of the relevant error or, alternatively, that reasonable diligence would then have uncovered it.
The court rejected determination of either point without evidence. The report recommended obtaining clarification from a fire consultant; it did not state the position sufficiently clearly to establish conclusively that the architect knew the alleged product representations were false.
The architect also relied on the subsequent Atelier Ten report, which concluded that K15 was compliant. That report mattered to the factual assessment of the investigation and continued belief, even though it was not itself a representation by Kingspan.
Glasgow City Council v VFS Financial Services Limited 2022 SC 133 was cited concerning actual knowledge and information sufficient to prompt preliminary steps towards litigation. Its principles did not eliminate the need to examine the particular reports and circumstances.
Following the reasonable-diligence discussion in Heather Capital Limited (in liquidation) v Levy & McRae, Lord Richardson treated that assessment as a value judgment normally requiring evidence except in obvious cases. This was not such a case.
The court did not decide that publication of the Grenfell Tower Inquiry reports automatically determined when prescription began or resumed. The architect’s alternative dates remained matters for proof.
5.8 Precedent, Binding Reasoning and Obiter Observations
Baker v The Queen [1975] AC 774 was invoked in the parties’ competing submissions about precedent. The dispute concerned whether the Outer House could depart from, or distinguish, the recent Inner House decisions.
Lord Richardson did not treat either appellate decision as wrongly decided. Instead, he distinguished their binding reasoning from broader observations and interpreted the authorities consistently. This avoided any need to decide the parties’ arguments about disregarding an appellate precedent.