Introduction

The legal landscape surrounding construction contracts often grapples with issues of duty of care, contractual obligations, and the statutes governing the timing of claims. A recent case, Tilbury Douglas Construction Ltd v Ove Arup & Partners Scotland Ltd ([2024] CSIH 15), adjudicated in the Scottish Court of Session on June 12, 2024, elucidates critical aspects of prescription and limitation as stipulated in the Prescription and Limitation (Scotland) Act 1973. This case centers on Tilbury Douglas, the principal contractor, alleging that Ove Arup & Partners, the subcontracted engineer, provided a flawed design that necessitated costly and time-consuming redesigns. The crux of the dispute lies in whether the claim by Tilbury Douglas is barred by prescription, invoking sections 11(1), 11(3), and 6(4) of the aforementioned Act.

Summary of the Judgment

Tilbury Douglas Construction Limited initiated a reclaiming motion against Ove Arup & Partners Scotland Limited, asserting that Arup's design was deficient, leading to significant project delays and additional costs totaling nearly £6 million. Arup countered by invoking prescription under the Prescription and Limitation (Scotland) Act 1973, arguing that the five-year period for such claims had expired. The commercial judge initially rejected Arup's plea, allowing Tilbury's claims to proceed. However, upon appeal, the Inner House of the Court of Session overturned this decision, siding with Arup and holding that the claim was indeed time-barred under the Act.

Analysis

Precedents Cited

The judgment extensively referenced pivotal cases that shape the interpretation of prescription and limitation in Scotland:

• David T Morrison & Co Ltd v ICL Plastics Ltd (2014 SC (UKSC) 222) - Established that knowledge of loss does not need to be connected to a breach of duty for section 11(3) to commence.
• Musselburgh and Fisherrow Co-operative Society Ltd v Mowlem Scotland Ltd (2004 SCLR 412) - Addressed the treatment of multiple breaches and their impact on prescription periods.
• Pelagic Freezing (Scotland) Limited v Lovie Construction Group [2010] CSOH 145 - Discussed the implications of multiple defects and their relation to separate causes of action.
• BP Exploration Operating Company Ltd v Chevron Transport (Scotland) 2002 SC (HL) 19 - Explored the interpretation of "refrain" in the context of induced error under section 6(4).
• Dunlop v McGowans (1980 SC (HL) 73) - Highlighted the illegitimacy of "salami slicing" claims.
• Rowan Timber Supplies (Scotland) Ltd v Scottish Water Business Stream Ltd [2011] CSIH 26 - Examined the requirements for proving error under section 6(4).
• Glasgow City Council v VFS Financial Services Ltd (2022 SC 133) - Reinforced principles around the connection of loss to the cause of action.

These precedents collectively informed the court's approach to interpreting the prescription and limitation provisions, particularly emphasizing the interconnectedness of breaches and the commencement of prescriptive periods.

Legal Reasoning

The appellate court identified significant errors in the commercial judge's interpretation and application of section 11(3) and 6(4). Key points in the legal reasoning include:

• Multiplicity of Breaches: The commercial judge incorrectly treated multiple breaches as separate causes of action, thereby individually restarting prescriptive periods. The appellate court clarified that the breaches, in this case, converged to a single cause of action—a deficient design necessitating redesign.
• Commencement of Prescription: The judge failed to recognize that the primary loss occurred at the inception of reliance on the flawed design, typically marked by the contract's execution in November 2013. The appellate court emphasized that the five-year period should commence from the date the obligation became enforceable, not from subsequent discoveries of defects.
• Application of Section 6(4): The commercial judge erred in his application, particularly regarding the requirement for proving induced error. The appellate court underscored that Tilbury failed to provide concrete evidence demonstrating that Arup's conduct directly induced their error, making reliance on section 6(4) untenable.
• Reasonable Diligence: The appellate court criticized the commercial judge for not adequately assessing whether Tilbury had exercised reasonable diligence in uncovering the design deficiencies earlier, thus negating the extension of the prescriptive period.

The court's reasoning reinforced a stringent interpretation of the prescription statutes, discouraging fragmented claims and emphasizing timely litigation upon the discovery of defects.

Impact

This judgment serves as a critical reference point for future construction contract disputes in Scotland, particularly regarding:

• Unified Causes of Action: Parties must present their claims as a cohesive cause of action rather than fragmented breaches to prevent undue extensions of prescription periods.
• Timely Litigation: It underscores the imperative for contractors and subcontractors to promptly address and litigate defects upon discovery to avoid prescription bars.
• Burden of Proof: The decision reaffirms that the onus lies heavily on claimants to substantiate claims under exceptions like section 6(4), necessitating clear evidence of induced error.

Moreover, the case reinforces the judiciary's stance against "salami slicing" claims, promoting more efficient and consolidated litigation processes.

Complex Concepts Simplified

Prescription and Limitation

In Scottish law, "prescription" refers to the time limits within which legal actions must be initiated. The Prescription and Limitation (Scotland) Act 1973 outlines these periods, beyond which claims are typically barred.

Section 11(1)

This section states that an obligation to compensate for loss becomes enforceable on the date the loss occurs. After five years from this date, without any claim being made or acknowledgment of the obligation, the claim expires.

Section 11(3)

An exception to the five-year rule, this provision delays the start of the prescription period until the claimant becomes aware, or could have reasonably discovered, that they suffered a loss due to the defendant's breach.

Section 6(4)

This section provides another exception where the claimant was induced by the defendant's fraud or error to refrain from making a claim. It effectively pauses the prescription period during which the error or deceit occurred.

Duty of Care

In this context, a duty of care refers to the responsibility of Arup to provide a competent design, ensuring that it accurately reflects the site conditions to prevent foreseeable losses to Tilbury.

Conclusion

The Tilbury Douglas Construction Ltd v Ove Arup & Partners Scotland Ltd case underscores the critical importance of timely legal actions within prescribed periods in construction contracts. It emphasizes that:

• Cohesive Claims: Parties must consolidate their grievances into a singular cause of action to avoid fragmented claims that can unjustly prolong litigation timelines.
• Prompt Action: Immediate response to discovered defects is essential to preserve the right to claim damages before prescription bars are triggered.
• Evidence of Induced Error: Claimants seeking exceptions under sections like 6(4) must present clear and convincing evidence of how the defendant's conduct led to their inability to timely pursue claims.

This judgment serves as a cautionary tale for contractors and subcontractors alike, highlighting the necessity of diligent oversight and swift legal recourse in the face of contractual breaches. It also reinforces the judiciary's commitment to upholding the integrity of prescriptive periods, ensuring that claims are both timely and substantiated.