Fair-Notice Pleadings Interrupt Quinquennium; Consequential-Loss Hold-Harmless Clauses Exclude Profit Claims Only Within the Contract’s Own Performance Sphere

Case: Pipeline Cleaning Solutions LTD against Coretrax Technology LTD (Court of Session)  |  Citation: [2025] CSOH 122  |  Court: Outer House, Court of Session (Lord Sandison)  |  Date: 23 December 2025

---

1. Introduction

This commercial action concerns a Scottish patentee and product developer, Pipeline Cleaning Solutions Limited (“PCS”, the pursuer), suing Coretrax Technology Limited (“Coretrax”, the defender) for approximately £10 million. PCS alleges (i) breaches of two contracts—an October 2016 confidentiality agreement and a later purchasing/distribution agreement—and (ii) infringement of its EU patent relating to its pipe/tank-cleaning fluid product “Uptake”.

The dispute arises from Coretrax’s alleged development and supply in 2018 of an equivalent product, “SwarfSweep”, said to have been reverse engineered using confidential information and to infringe PCS’s patent. Coretrax denies wrongdoing and raises three preliminary challenges:

• Prescription: whether PCS’s contractual claims (and aspects of its case introduced by later adjustments/amendment) prescribed under the five-year (quinquennial) regime in the Prescription and Limitation (Scotland) Act 1973.
• Contractual bar/exclusion: whether the purchasing agreement’s “hold harmless”/consequential loss regime (clause 11.3) excludes PCS’s damages claim for anticipated profits.
• Relevancy/specification: whether PCS’s pleadings on breach, causation and quantum are too speculative or lacking fair notice.

---

2. Summary of the Judgment

Lord Sandison declined at debate to uphold Coretrax’s prescription argument against PCS’s contractual claims, holding that the summons as served gave sufficiently fair notice and that subsequent specification did not amount to a fundamentally new basis of claim. The prescription plea was not sustained at this stage (though reserved to allow Coretrax to argue that prescription had already expired before service).

On the contractual exclusion/indemnity issue, the court held:

• Clause 11.3 of the purchasing agreement does exclude PCS’s damages claim for loss of anticipated profits insofar as based on breach of the purchasing agreement.
• Clause 11.3 does not exclude loss claims based on breach of the confidentiality agreement or on patent infringement, because the clause is confined to losses “arising from, relating to or in connection with the performance or non-performance of this AGREEMENT” (i.e., the purchasing agreement).

On relevancy/specification, the court held PCS’s causation and quantum case was not bound to fail; objections were better dealt with at proof and via case management.

Procedurally, the defender’s first plea was sustained only to the extent of excluding probation for averments based on breach of the purchasing agreement; otherwise the action proceeds to proof before answer on remaining grounds.

---

3. Analysis

3.1 Precedents Cited

A. Prescription: “basis vs formulation”, fair notice, and interruption

• Pompa's Trs v The Magistrates of Edinburgh 1942 SC 119, 1942 SLT 118
  The foundational “change of basis” principle: the court will not permit a pursuer to change the basis of the case after expiry of the relevant time bar. Lord Sandison uses it as the starting point and frames the modern inquiry as whether later pleadings change the “foundation” rather than the “superstructure”.
• McPhail v Lanarkshire County Council (No 2) 1951 SC 301, 1951 SLT 167
  Elaborates the “foundation vs superstructure” analogy (Lord President Cooper), allowing altered averments of duty/breach while keeping the same essential negligence basis. Lord Sandison draws the continuing parameters from these older cases despite later statutory prescription.
• Hynd v West Fife Co-operative Ltd 1980 SLT 41
  Recognises the basis/formulation boundary is often “one of degree”. Lord Sandison notes that even where categories seem clear in principle, application can be impressionistic.
• Devos Gebroeder NV v Sunderland Sportswear Ltd (No 2) 1990 SC 291, 1990 SLT 473
  Central authority distinguishing (i) developing/restating the same claim vs (ii) asserting a different obligation. Lord President Hope emphasised a practical approach, but that a claim for one obligation does not preserve a different obligation. Lord Sandison uses Devos as the bridge from Pompa/McPhail to modern prescription analysis and as the origin of later “granular” building-contract reasoning.
• Link Housing Association Ltd v PBL Construction Ltd [2009] CSIH 54, 2009 SC 653
  Identifies fair notice to the defender as the underlying rationale when assessing whether the relevant claim timeously made covers the obligation later pressed. Lord Sandison treats this as the key practical criterion.
• Boyle v Glasgow Corporation 1975 SC 238, 1978 SLT (Notes) 77
  Referenced via Link Housing, as part of the development of fair-notice rationale in time-bar contexts.
• MacLeod v Sinclair 1981 SLT (Notes) 38 and Lawrence v JD McIntosh & Hamilton 1981 SLT (Sh Ct) 73
  Stand for the proposition that a claim under one contract is not a claim under another. Lord Sandison cites them to acknowledge the established boundary—important because this case involves two separate contracts.
• G & A Estates Ltd v Caviapen Trustees Ltd (No 2) 1993 SLT 1045; Cole v Lonie 2001 SC 610, 2001 SLT 608; Musselburgh and Fisherrow Co-operative Society Ltd v Mowlem Scotland Ltd 2004 SCLR 412; Huntaven Properties Limited v Hunter Construction (Aberdeen) Limited [2017] CSOH 57 and 2018 SCLR 257
  These “building contract” cases explore whether different defects/breaches constitute distinct obligations/injuriae for prescription purposes. Lord Sandison engages critically with this granular approach, cautioning that contracts often operate as unitary bundles of obligations, and refocuses on fair notice and “fundamental difference”.
• Assuranceforeningen Skuld International Oil Pollution Compensation Fund (No 2) 2000 SLT 1348
  Demonstrates that even significant narrative changes may not be time-barred where the claim remains essentially the same in nature and damage. Lord Sandison uses it to reinforce “fundamentally different basis” as the correct test.
• British Railways Board v Strathclyde Regional Council 1981 SC (and Inner House endorsement); Wilson v Lothian Regional Council [1995 SLT 991, 1995 SCLR 634]; Royal Insurance (UK) Limited v Amec Construction (Scotland) Ltd (No 2) [2008] CSOH 107, 2008 SLT 825; Tecjet Ltd v Kier Construction Ltd [2024] CSOH 60, 2024 SLT 1168
  These authorities support the proposition that even procedurally or substantively imperfect pleadings can interrupt prescription if they identify the obligation sufficiently; “relevance” in section 9(1) is about the obligation, not perfect legal pleading. Lord Sandison relies on this line to reject the defender’s attempt to treat the initial lack of clause-by-clause pleading as fatal to interruption.
• JG Martin Plant Hire Ltd v Bannatyne, Kirkwood, France & Co 1996 SC 105, 1996 SLT 1192
  Shows that delict cases too can undergo a “change of basis” (a new ground of fault) that is time-barred. Lord Sandison uses it to rebut any suggestion that only non-delict cases are vulnerable to fundamental change.

B. Prescription commencement (concurrence of damnum and injuria)

• Gordon's Trustees v Campbell Riddell Breeze Paterson LLP [2017] UKSC 75, 2017 SLT 1287
  Cited by the defender for the modern understanding of when the quinquennium starts—concurrence of loss and wrong—and for the objective approach to section 11(3) postponement arguments. Lord Sandison ultimately does not decide the start date at debate; he reserves the defender’s prescription plea to allow argument that the quinquennium had already expired before service.
• WPH Developments Limited v Young & Gault LLP (in liquidation) [2021] CSIH 39, 2022 SC 28, 2021 SLT 905
  Relied on by the defender as further authority on the objective character of knowledge for section 11(3) purposes.

C. Construction of exclusion/indemnity clauses and contractual interpretation

• Ashtead Plant Hire Co Ltd v Granton Central Developments Ltd [2020] CSIH 2, 2020 SC 244, 2020 SLT 575
  Provides the modern Scottish approach to interpretation: context, purpose, objective meaning, and commercial common sense. Lord Sandison explicitly adopts this methodology (with reference also to Glenfiddich Wind).
• Glenfiddich Wind Limited v Dorenell Windfarm Limited [2025] CSOH 62
  Cited by the pursuer for a comprehensive recent summary of construction principles. Lord Sandison uses it as part of the interpretive framework.
• Farstad Supply AS v Enviroco Ltd [2010] UKSC 18, 2010 SC (UKSC) 87, 2010 SLT 994
  Central to understanding “defend, indemnify and hold harmless” as potentially extending beyond reimbursement into exclusion/renunciation and avoidance of circuity of action. Lord Sandison accepts the clause is clearly wide-ranging (and “shading into” exclusion), but construes its scope by the clause’s own connecting words (“performance or non-performance of this AGREEMENT”).
• Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40, [2007] Bus LR 1719
  Relied on by the defender for the breadth of “arising from, relating to or in connection with”. Lord Sandison distinguishes the arbitration-clause context and refuses to treat Fiona Trust as creating a presumption of maximal breadth for exclusion/indemnity clauses.
• Commissioner for Railways v Avrom Investments Proprietary Ltd [1959] 1 WLR 389 and Chiswell Shipping and Liberian Jaguar Transports Inc v National Iranian Tankers Co (The World Symphony and The World Renown) [1992] 2 Lloyd's Rep 115
  Authorities on the function of “notwithstanding” clauses as priority/qualification devices; used in argument about internal contractual hierarchy.

D. Other authorities cited in submissions

• McClure Naismith LLP v Harley Haddow Partnership [2017] CSOH 125, 2018 SCLR 257 and Johnston, Prescription & Limitation, (2ndEdition)
  Cited by the defender for the proposition that new claims/bases introduced after the quinquennium are time-barred; and by the pursuer for the view that even an irrelevant claim may interrupt prescription provided the obligation is brought into issue.

---

3.2 Legal Reasoning

A. Prescription: what must be in the summons to interrupt the five-year period?

The defender’s core prescription thesis was narrow but potent: even if the action was served within five years of PCS’s pleaded awareness date (23 November 2018), the summons as served did not specify which contractual obligations were breached, and did not clearly plead loss caused by breach of the confidentiality agreement; therefore later adjustments/amendments were “new claims” raised outwith the quinquennium.

Lord Sandison’s reasoning proceeds in three steps:

1. The governing test remains “change of basis” (Pompa/McPhail), refined by practicality and fair notice (Devos; Link Housing).
   The inquiry is not about pleading perfection but whether later pleadings are fundamentally different such that they amount to a different obligation being pursued.
2. The “relevant claim” requirement is obligation-focused, not clause-pleading-focused.
   Drawing on British Railways Board v Strathclyde Regional Council, Royal Insurance (UK) Limited v Amec Construction (Scotland) Ltd (No 2), and Tecjet Ltd v Kier Construction Ltd, the court stresses that a claim can interrupt prescription even if it is broadly stated or even procedurally deficient, so long as the obligation is capable of identification and the defender has fair notice.
3. Application to the pleadings: the summons did enough.
   The served summons:
   • narrated both contracts and the patent;
   • averred that “In formulating and supplying SwarfSweep … to its customers the Defenders breached the Purchasing Agreement and the Confidentiality Agreement …”;
   • pleaded a damages entitlement for “breaches of contracts” (plural) (albeit the condescendence text emphasised the purchasing agreement).
   On that footing, later identification of clauses (e.g., confidentiality clauses; reverse engineering bar) and inclusion of additional loss averments were treated as specification and development, not a fundamentally new basis.

Practical doctrinal point: Lord Sandison treats the defender’s argument as effectively requiring the court to hold that the original summons was so unspecific that it could not interrupt prescription at all. The court rejects that as inconsistent with the “obligation identifiable / fair notice” line of authority.

B. Clause 11.3 (consequential loss “hold harmless”): meaning and scope

The purchasing agreement defined “Consequential Loss” expansively to include (among other things) “loss of revenue, profit or anticipated profit”. Clause 11.3 then provided, “Notwithstanding any provision to the contrary elsewhere”, each party would “save, indemnify, defend and hold harmless” the other from that party’s “own Consequential Loss” arising from, relating to or in connection with the performance or non-performance of the agreement.

The court’s analysis is notably layered:

1. Nature of the words (“save, indemnify, defend and hold harmless”):
   The court accepts (consistent with Farstad Supply AS v Enviroco Ltd) that this is a wide-ranging risk-allocation mechanism, shading towards exclusion of liability.
2. “Own Consequential Loss” — suffered vs caused:
   The parties disputed whether “own” meant (i) loss suffered by the indemnifying party (defender’s preferred reading) or (ii) loss caused by the indemnifying party (pursuer’s reading). Lord Sandison prefers the defender’s construction as the more natural linguistic meaning (“X’s own loss” ordinarily denotes loss suffered by X). He finds no contextual/purposive reason to distort the natural meaning.
3. The critical limiter: connection to “performance or non-performance of this AGREEMENT”.
   Even if the head of loss is within “Consequential Loss”, the clause only bites where the loss has the specified connection with the purchasing agreement’s performance/non-performance. This becomes decisive on scope:
   • No extension to patent infringement: the court rejects the defender’s attempt to use broad connecting words to swallow patent claims. The presence of clauses requiring respect for PCS’s patent (clauses 6.1, 6.4, 6.5) and ethical dealing (clause 11.4) makes it difficult to accept that clause 11.3 was meant to neutralise patent rights between the parties.
   • No extension to the separate confidentiality agreement: the confidentiality agreement contained its own indemnity for breach and was not treated as practically nullified by clause 11.3, which is textually tied to the purchasing agreement’s performance/non-performance.
4. Does “non-performance” encompass positive breach?
   For breaches of the purchasing agreement itself (including the confidentiality and reverse engineering provisions within it), the court holds—“with some hesitation”—that the clause’s broad connection language encompasses breaches, treating “non-performance” as wide enough to include positive breach. A narrower construction would require fine distinctions not likely intended by reasonable commercial parties.

Net result: clause 11.3 excludes damages for loss of anticipated profits insofar as the claim is founded on breach of the purchasing agreement; it does not exclude such damages insofar as founded on patent infringement and/or breach of the separate confidentiality agreement.

C. Relevancy and specification: causation and quantum

The defender argued PCS’s loss case was speculative and lacked a causal bridge (no pleaded obligation on Coretrax to sell Uptake; no pleaded substitution by customers; insufficient quantum workings).

Following a late pleading improvement, the court views PCS’s “essential case” as: breaches of confidentiality and patent infringement enabled Coretrax to produce and market SwarfSweep, which displaced Uptake in the market and delayed Uptake’s establishment, causing lost profits.

The court holds this is not bound to fail in law and that the defender’s criticisms are largely merits-based. On specification/fair notice, the court considers the business-plan-based quantification intelligible enough at this stage; further concerns can be managed through case management and expert evidence procedures rather than dismissal.

---

3.3 Impact

A. Litigation practice: prescription pleading strategy in commercial cases

• Lower premium on clause-by-clause pleading at the interruption stage: This decision reinforces that a summons can interrupt prescription if it identifies the obligation(s) sufficiently and gives fair notice, even if later specification is required. Defenders cannot assume that broad contractual breach averments are inherently incapable of interrupting prescription.
• But the “basis” boundary remains real: The judgment reaffirms that introducing a fundamentally different obligation (e.g., shifting contract-to-recompense, or adding a distinct contract not previously in issue) remains vulnerable—consistent with Devos Gebroeder NV v Sunderland Sportswear Ltd (No 2) and the “one contract is not another” rule.
• Fair notice is the practical lodestar: By emphasising Link Housing Association Ltd v PBL Construction Ltd, the decision signals a defender-focused assessment: was the defender sufficiently alerted to the nature of the claim being made?

B. Contract drafting and risk allocation: consequential loss and “hold harmless” clauses

• Scope depends on the connector: Even very strong words (“save, indemnify, defend and hold harmless”) will not automatically extend beyond the agreement if the operative connector is limited to losses connected to “performance or non-performance of this AGREEMENT”.
• Do not rely on arbitration-clause breadth logic: The court’s refusal to treat Fiona Trust & Holding Corporation v Privalov as a general “maximal breadth” presumption for exclusion clauses is practically important; parties wanting cross-cutting exclusions should draft them expressly.
• IP-sensitive contracting: Where a contract elsewhere contains IP-protection obligations and ethics clauses, courts may be slow to construe a consequential loss exclusion as implicitly neutralising statutory IP remedies between the parties.
• “Non-performance” may include breach: Parties using “performance/non-performance” language should assume it may capture positive breaches unless the contract distinguishes categories more precisely.

C. Substantive dispute dynamics: claims structure after this decision

• PCS’s purchasing-agreement damages route for loss of anticipated profits is cut off by clause 11.3 (at least at pleading relevance stage).
• PCS’s case proceeds on patent infringement and confidentiality-agreement breach, which can still underpin a lost-profits measure (subject to proof and any later arguments).

---

4. Complex Concepts Simplified

• Quinquennial prescription (five-year prescription): Under section 6 of the Prescription and Limitation (Scotland) Act 1973, many obligations to pay damages extinguish if no “relevant claim” is made within five years.
• “Relevant claim” (section 9): Typically means raising court proceedings seeking implement or part-implement of the obligation. The key question in this case was whether the summons, as served, identified the obligation sufficiently to count.
• “Basis” vs “formulation”: You may refine how you plead the same essential claim after time has run, but you cannot introduce a fundamentally new legal obligation after the time bar. The metaphor is “foundation” (basis) vs “superstructure” (details).
• “Hold harmless” / indemnity: Not merely reimbursement after the event; depending on wording (as discussed in Farstad Supply AS v Enviroco Ltd), it can operate as an exclusion of liability as between the parties.
• “Consequential Loss” clauses: Parties often define this term contractually to include profits and anticipated profits. If so, profit-based damages claims may be contractually excluded even if they might otherwise be recoverable.
• “Arising from, relating to or in connection with”: Broad connecting words, but their reach depends on context and the kind of clause. The court distinguished arbitration clauses (where breadth is presumed) from exclusion/indemnity clauses (where giving up rights is not presumed absent clearer wording).

---

5. Conclusion

Lord Sandison’s opinion delivers two practically important messages for Scottish commercial litigation. First, on prescription, the court endorses a fair-notice, obligation-identification approach: an imperfectly specified summons may still interrupt quinquennial prescription if it clearly puts the defender on notice of the obligation being enforced, and later clause-level specification may remain within the same “basis”. Second, on contractual risk allocation, a powerful consequential-loss “hold harmless” clause can exclude loss-of-profit damages for breaches of the agreement in which it sits, but it will not be stretched to extinguish liabilities arising under a separate contract or under patent law when the clause is textually confined to losses connected with performance or non-performance of “this AGREEMENT”.

The immediate procedural significance is that PCS’s damages case survives to proof on patent infringement and confidentiality breach, while its purchasing-agreement-based profit claim is excluded at relevancy stage by clause 11.3. The broader significance is the court’s careful calibration between (i) not allowing technical pleading points to defeat timely claims and (ii) respecting clear commercial exclusion language—while still insisting that the exclusion’s reach must be anchored in the words the parties actually used.