Prescription after the 2018 Act: “Awareness” still does not require knowledge of a defect, and remedial works are not an acknowledgement of a damages obligation

Court: Outer House, Court of Session  |  Judge: Lord Lake  |  Citation: [2026] CSOH 44  |  Date: 5 May 2026
Cases: Ogilvie Construction LTD against M1 Re Glasgow LTD and Ogilvie Construction Ltd against Leach Rhodes Walker Ltd

1. Introduction

These linked actions arose from the design and construction of a 15-storey hotel in Glasgow (Motel One brand). The design-and-build contractor (the pursuer in both actions) sued its architect (the first defender) in one action (“the LRW action”), and separately sought declarators against the employer/owner-operator (the second defender) (“the M1 action”).

The dispute concerned external wall cladding insulation and cavity barriers following the Grenfell Tower fire:

• Original cladding insulation design: 70mm Kingspan Kooltherm K15 (“the 70mm Design”).
• Post-Grenfell redesign: an additional 30mm K15 (“the 70+30mm Remedial Design”).
• Alleged deficiencies also in the cavity barrier design (“the Cavity Barrier Design”).

The preliminary proofs before answer were confined to prescription under the 1973 Act (as amended). The court proceeded on the assumption that the averred breaches were proved/true; the only question was whether the relevant obligations to make reparation had been extinguished.

Issues framed by the court

• Whether the contractor’s claims against the architect in respect of (i) the 70+30mm Remedial Design and (ii) the Cavity Barrier Design had prescribed.
• Whether the employer’s potential claims against the contractor in respect of (i) the 70mm Design, (ii) the 70+30mm Remedial Design, and (iii) the Cavity Barrier Design had prescribed.
• In particular: (a) when the five-year prescriptive period began under sections 6 and 11; (b) whether start was postponed by section 11(3); (c) whether time fell to be excluded under section 6(4); and (d) whether remedial works amounted to a “relevant acknowledgment” under section 10(1).

2. Summary of the Judgment

Lord Lake held that all five obligations identified had been extinguished by the running of negative prescription.

• Commencement: For economic loss in building/design cases, loss occurs (objectively) when the defective work is carried out / expenditure is incurred, not when the defect is discovered.
• Section 11(3) (as amended in 2018): The amended “awareness” test does not require awareness that something has gone wrong or that the asset is defective; knowledge of the works/expenditure and the identity of the actor can be enough.
• Section 10(1): Carrying out remedial works in performance of the contract’s primary obligations does not “clearly indicate” acknowledgment of a secondary obligation to pay damages.
• Section 6(4): A bare assertion of contractual compliance is generally insufficient to amount to “error induced by words or conduct” excluding time; in any event, the court rejected the factual contention that the employer was induced into relevant error by the contractor’s assurance letter.

The case was put out “by order” for parties’ submissions on disposal consistent with those conclusions.

3. Analysis

3.1 Statutory framework: sections 6, 10, 11 and 6(4) of the 1973 Act (as amended)

The obligations in issue were obligations to pay damages, not Schedule 2 obligations, so the “appropriate date” for section 6 purposes was governed by enforceability and, specifically, by section 11 for damages claims. The court set out section 11(1), (3), (3A) and (3B) as amended by the 2018 Act. The amendments were central:

• Section 11(1): enforceability is fixed at the date the loss occurs.
• Section 11(3) postpones commencement where, at that date, the creditor was not aware (and could not with reasonable diligence have been aware) of the facts in section 11(3A): (a) loss occurred; (b) it was caused by a person’s act/omission; (c) identity of that person.
• Section 11(3B): it does not matter if the creditor was unaware that the act/omission was actionable.

3.2 “Loss, injury or damage” remains an objective fact: continued force of Gordon’s Trustee and its progeny

Lord Lake emphasised that, despite traditional “damnum and injuria” language (not used in the Act), the question is statutory: under section 11(1), when did loss occur?

Relying on the Supreme Court’s approach in Gordon's Trustee v Campbell Riddell Breeze Paterson LLP and subsequent Court of Session decisions (Midlothian Council v Raeburn Drilling and Geotechnical Ltd; WPH Developments v Young and Gault; Tilbury Douglas Construction Limited v Ove Arup), the court held:

• In construction/design contexts involving pure economic loss, loss occurs when expenditure is incurred on the defective work (or when a defective asset is created/received), not when the defect is discovered.
• For the contractor’s claims against the architect: loss occurred when works began implementing each design (70mm Design in April 2017; 70+30mm Remedial Design around October 2017; cavity barriers no later than February 2017).
• For the employer’s claims against the contractor: loss occurred as soon as the building was constructed with non-compliant elements; the court treated commencement similarly as beginning with installation, without submissions inviting a “temporary disconformity” analysis delaying loss to practical completion (cf. Huntaven Properties Ltd v Hunter Construction (Aberdeen) Ltd and Agro Invest Overseas Limited v Stewart Milne Group Limited).

Lord Lake acknowledged the “harshness” of this approach (that obligations may prescribe before the creditor even knows they exist), but held that the Inner House in WPH Developments (following Kennedy v Royal Bank of Scotland plc) foreclosed any attempt to confine Gordon’s Trustee to cases where the creditor subjectively knows something has gone wrong.

3.3 The key point on the 2018 amendments: section 11(3A) does not require knowledge of a defect

A major practical question was whether the amended “awareness” test in section 11(3A) changed the pre-2018 position. Lord Lake held it did not, for two linked reasons:

• The 2018 Act continued to use “loss, injury or damage” language; there was no express change to its established meaning (objective occurrence, not subjective discovery of a defect).
• Once “loss” in section 11(3A)(a) is satisfied by knowing the works/expenditure occurred, section 11(3A)(b)–(c) are satisfied if the creditor knows that those works/expenditure were caused by identified actors (e.g., a building was constructed under a design prepared by a known designer/contractor).

In a passage of wider significance, Lord Lake reasoned by analogy with negligent overvaluation cases: if the “loss” is overpayment (objectively occurring when committed to the transaction), then for section 11(3A)(b)–(c) it is enough to know the payment/price was fixed by reference to the advice of an identified valuer—without knowing the valuation was wrong.

The employer relied on a Scottish Law Commission statement (Report on Prescription, July 2017, para 3.20) suggesting that paying an invoice “for services rendered” would not amount to awareness of causation. Lord Lake declined to adopt that as altering the statutory interpretation, noting the Commission’s report pre-dated Gordon’s Trustee and that the Commission’s phrasing did not sit with the judicial meaning of “loss, injury or damage” applied in binding Inner House authority.

3.4 Fire safety compliance evidence: important to facts, but not ultimately decisive on “awareness”

Much evidence concerned whether (and when) parties appreciated that the 70+30mm Remedial Design did not comply with Mandatory Standard 2.7 of the Building (Scotland) Regulations 2004 and the Non-Domestic Technical Handbook routes to compliance:

• The “Linear Route to Compliance” (requiring non-combustible insulation).
• The “BR135 route”, involving either BS 8414 testing with a BR135 classification report or a desktop assessment, in each case requiring agreement/approval by the local authority in practice.

The court reviewed three Atelier Ten (A10) reports commissioned post-Grenfell (August 2017 x2, and October 2017), and additional advice from fire consultants. Lord Lake accepted that:

• The contractor did not receive the third A10 report contemporaneously; it could not be treated as within the contractor’s knowledge merely because it had been sent to some individuals connected with other roles.
• The contractor would likely have treated the Stage 2 building warrant as confirming the “path to compliance” (as the fire experts agreed).
• The employer had materials putting it on notice of likely non-compliance and the absence of documentation/certification it had been seeking.

However, the judge then stated the critical point: even if the contractor did not know of non-compliance, that did not matter for section 11(3), because “awareness” does not require knowledge that the design was defective; it is enough that the creditor knew the works/expenditure happened and who caused them.

3.5 “Relevant acknowledgment” (section 10(1)): remedial works under a primary obligation are not performance towards a damages obligation

The employer argued that the contractor’s remedial works amounted to a relevant acknowledgment of an obligation to make reparation. Lord Lake rejected this, grounding the analysis in the statutory language (“the obligation”) and authority including Gibson v Carson.

The court drew a sharp distinction:

• Primary obligations: to deliver contract performance to the required standard (including statutory compliance).
• Secondary obligations: to make reparation in damages for breach.

Even if remedial works “acknowledge” something has gone wrong in a colloquial sense, they are not necessarily (or even usually) referable only to a damages obligation. They can be explained by the continuing primary obligation to complete/rectify contract works. Accordingly, they did not “clearly indicate” that a damages obligation “still subsists” (section 10(1)).

3.6 Excluding time for “error induced” (section 6(4)): bare assurances of compliance are insufficient, and no relevant inducement was proved

Both the employer and contractor sought to invoke section 6(4). Lord Lake applied recent Inner House authority, particularly:

• Tilbury Douglas Construction Limited v Ove Arup and Partners Scotland Limited (assurances about adequacy of design did not, without more, constitute inducement into relevant error; commercial reliance is not the same as statutory “error induced”).
• Legal and General Assurance (Pensions Management) Limited v Halliday Fraser Munro (it is “circular and illogical” to treat the contractual/warranty promise breached as the very representation inducing error; section 6(4) is not engaged merely because a party asserts it has complied or was not negligent).
• Policy background: Caledonian Railway Co v Chisholm and BP Exploration Co Ltd v Chevron (section 6(4) addresses unfairness where a debtor’s conduct makes it unjust to rely on the time bar).

On the employer’s reliance on an assurance letter from the contractor (February 2018), the court held:

• Such a statement was essentially an assertion of compliance and did not meet the “words or conduct” threshold in the Inner House cases.
• Factually, the employer was not shown to have been induced into relevant error about remedies: it already had information raising non-compliance concerns; it knew the contractor lacked some of that information; it sought the assurance in a contractual-strategy context; and the assurance did not answer the specific concerns (e.g., documentation/approval under the BR135 route).

On the contractor’s reliance on the architect’s failure to disclose the third A10 report, the court held the contractor did not establish inducement: it was not aware of the report at the time, and its belief in compliance arose from the ordinary contract process and pre-existing circumstances, not from being actively led into error by the architect’s words or conduct. Lord Lake also rejected framing section 6(4) as a general “duty to speak”; the statutory test is inducement by words or conduct causing failure to make a claim.

3.7 Expert evidence and “reasonable diligence”: the court’s gatekeeping approach

Although not determinative of outcome, Lord Lake made a useful practice point on expert evidence in prescription disputes:

• Experts may supply technical knowledge enabling the court’s decision; they should not usurp the court’s role by opining on ultimate questions of reasonableness or legal conclusions.
• Non-expert factual witnesses should not evaluate or critique specialist expert reports outside their expertise.

4. Precedents Cited (and how they influenced the decision)

• McClure Naismith LLP v Harley Haddow Partnership & Others: supported the analytical approach of identifying distinct obligations to make reparation per breach, with a single prescriptive period per obligation.
• Dunlop v McGowans: historical framing of prescription and “obligation to make reparation”, though Lord Lake emphasised the modern statutory analysis.
• David T Morrison v ICL Plastics: part of the modern line interpreting “loss, injury or damage”; reinforced objective, fact-based commencement.
• Gordon's Trustee v Campbell Riddell Breeze Paterson LLP: decisive authority; “loss” is objective and “awareness” does not require knowledge of detriment/defect.
• Midlothian Council v Raeburn Drilling and Geotechnical Ltd; WPH Developments v Young and Gault; Tilbury Douglas Construction Limited v Ove Arup: applied Gordon’s Trustee in economic loss and construction contexts; demonstrated and entrenched the “harsh” effect.
• Kennedy v Royal Bank of Scotland plc: supported rejection of attempts to require knowledge that something had gone wrong.
• Huntaven Properties Ltd v Hunter Construction (Aberdeen) Ltd; Agro Invest Overseas Limited v Stewart Milne Group Limited: referenced on potential “temporary disconformity” arguments (not advanced here).
• Gibson v Carson: critical to section 10(1); acknowledgment requires conduct only reasonably explained by reference to the specific obligation.
• Legal and General Assurance (Pensions Management) Limited v Halliday Fraser Munro and Tilbury Douglas Construction Limited v Ove Arup and Partners Scotland Limited: decisive for rejecting section 6(4) arguments based on ordinary contractual assurances/representations.
• Caledonian Railway Co v Chisholm and BP Exploration Co Ltd v Chevron: policy foundation for section 6(4) as an anti-unfairness provision, not a general escape route.

5. Impact

5.1 Prescription in construction, cladding and latent-defect disputes

The most significant impact is the confirmation that the 2018 “awareness” amendments do not, in practice, reverse the post-Gordon’s Trustee position in latent-defect construction claims:

• Time can run from installation/incurred expenditure even where parties reasonably believe the works are compliant (including where regulatory steps are thought to have been satisfied).
• Section 11(3A)(b)–(c) will often be satisfied in construction projects simply because the employer knows the contractor performed the work and the design team produced the design—without needing knowledge of defect.

This intensifies the need for early, structured investigation and protective claims where any compliance concern arises, particularly on fire safety/cladding where regulatory and guidance positions can shift and documentary routes to compliance (tests, desktop studies, approvals) can be contested years later.

5.2 Limits of “fixing it” as a prescription strategy

The section 10(1) holding reduces the scope for arguments that remedial action “keeps claims alive”. Parties undertaking remediation should not assume this will reset or interrupt prescription for damages claims; acknowledgments must be referable to the damages obligation, not merely contract completion/rectification.

5.3 Narrow scope of section 6(4) in commercial construction relationships

The decision aligns Outer House practice with recent Inner House authority: section 6(4) will not readily exclude time merely because one party reassures another that everything is compliant. The provision targets unfairness from induced error, not ordinary reliance on contractual performance statements.

6. Complex Concepts Simplified

• Negative prescription (five years): after five years without a “relevant claim”, many obligations (including damages obligations) are extinguished.
• Obligation to make reparation: a damages obligation arising from breach (a “secondary” obligation), distinct from the contract duty to perform (a “primary” obligation).
• Section 11(1) “loss”: an objective event (e.g., money spent on defective work; receipt of a defective asset), not necessarily the moment a defect is discovered.
• Section 11(3) postponement: time starts later only if the creditor lacked (and could not reasonably obtain) awareness of the facts in 11(3A) at the loss date.
• Section 10(1) relevant acknowledgment: conduct by the debtor must clearly indicate the specific obligation still exists; conduct equally explained by other obligations will not do.
• Section 6(4) “error induced”: excludes time only where the debtor’s words/conduct induce an error causing the creditor not to claim; ordinary assertions of compliance generally do not qualify.
• “Proof before answer”: an evidential hearing on selected issues while keeping the merits “in reserve” (here, breach was assumed; only prescription was tried).

7. Conclusion

Lord Lake’s opinion in [2026] CSOH 44 confirms that, notwithstanding the 2018 amendments, the Scottish courts’ modern prescription jurisprudence remains firmly anchored in the objective occurrence of loss and a low threshold for “awareness”. In construction disputes, knowledge of the defect or of non-compliance is not required for time to start running; awareness that the work was done and by whom may be enough. Remedial works will not, without clear linkage, acknowledge a damages obligation; and section 6(4) will not readily rescue claims based on routine assurances of compliance. The combined effect is to place a premium on early forensic review, document preservation, and protective litigation strategy in projects where latent compliance risks exist.