Gordon & Ors (Trustees of the Inter Vivos Trust) v Campbell Riddell Breeze Paterson LLP (Scotland)

Factual and Procedural Background

The Appellants act as trustees of The Trust, which owns three fields near The Village that were let to a farming partnership. In 2004 the Appellants’ solicitors (now the Respondents) served notices to quit with the aim of obtaining vacant possession to secure residential development value. The notices misstated both the identity of the tenant and the relevant leases. When the tenant refused to vacate on 10 November 2005, the Appellants incurred legal costs instructing new solicitors and, on 9 February 2006, applied to the Scottish Land Court for removal of the tenant. On 24 July 2008 the Land Court upheld only the notice relating to one grazing field and held the other two notices invalid, leaving those fields subject to agricultural tenancies and preventing development.

On 17 May 2012 the Appellants sued the Respondents for damages arising from alleged professional negligence. The Respondents pled that the claim was time-barred by the five-year “short negative prescription” under the Prescription and Limitation (Scotland) Act 1973. Judge Jones upheld the plea ([2015] CSOH 31). The Inner House affirmed that decision on 8 March 2016 ([2016] CSIH 16). The present appeal to the Supreme Court followed.

Legal Issues Presented

1. When does the five-year prescriptive period under section 11 of the Prescription and Limitation (Scotland) Act 1973 begin to run against a creditor who incurs expenditure in reliance on allegedly negligent professional advice?
2. Did the Appellants’ claim prescribe before the summons was served on 17 May 2012?

Arguments of the Parties

Appellants’ Arguments

• The prescriptive period did not begin until 24 July 2008, when the Scottish Land Court’s decision first demonstrated actual loss (continued tenancy and wasted expenditure).
• Until that date the Appellants could not know they had suffered “loss, injury or damage” within the meaning of section 11(3).

Respondents’ Arguments

• Time began at the latest on 10 November 2005 (when vacant possession was not obtained) or, in any event, by 17 February 2006 when the Appellants had incurred material legal expense.
• Under section 11(3) the creditor need only be aware of expenditure or failure to obtain a benefit, not of its legal cause or ineffectiveness.
• The action, raised on 17 May 2012, was therefore out-of-time.

Table of Precedents Cited

Court's Reasoning and Analysis

Statutory interpretation. Section 11(1) sets the general rule: prescription begins when loss occurs. Subsections (2) and (3) merely postpone that date; the phrase “loss, injury or damage” carries the same objective meaning throughout. Citing Morrison v ICL, the Court held that subsection (3) requires awareness only of the fact of loss, not its cause or legal implications.

Application to facts. The Appellants objectively suffered loss on 10 November 2005 when they failed to secure vacant possession, thereby losing development opportunity. They were certainly aware, by 17 February 2006, that they had incurred legal expenditure. As these facts provided the requisite knowledge under section 11(3), the five-year period expired before proceedings commenced on 17 May 2012.

Policy considerations. Although the rule may operate harshly where financial loss is not immediately recognisable, the Court emphasised the importance of certainty. The judgment noted ongoing proposals of the Scottish Law Commission to reform the discoverability test but held that any change is for the legislature.

Holding and Implications

HOLDING: The appeal is DISMISSED.

Direct effect: the Respondents are absolved from liability because the Appellants’ claim is prescribed. Broader implication: the decision confirms that, for financial loss cases, awareness of expenditure or failure to obtain a benefit is sufficient to start the five-year prescriptive period under the 1973 Act, reinforcing the strict approach adopted in Morrison v ICL. No new statutory precedent was set, but the judgment may prompt legislative reform currently under consideration.