Factual and Procedural Background
The Plaintiff, Company A, was the principal contractor responsible for enabling works to prepare a former railway yard for development. Company B was subcontracted to provide civil and structural engineering services, including the design of the enabling works related to two historic railway tunnels beneath the site. The Plaintiff alleged that Company B produced a design that failed to accurately reflect the physical conditions of the site, rendering it incapable of implementation. This led to additional costs and delays due to the need for redesign and remedial works.
The Plaintiff claimed damages for losses sustained from these redesigns. Company B pleaded that the claim was prescribed under section 11(1) of the Prescription and Limitation (Scotland) Act 1973. The Plaintiff disputed this, relying on exceptions under sections 11(3) and 6(4) of the Act. After a preliminary proof limited to the question of prescription, the commercial judge rejected Company B's plea and allowed the claim to proceed to a full proof on the merits. Company B appealed that decision to the court.
Legal Issues Presented
- Whether the Plaintiff’s claim was prescribed under section 11(1) of the Prescription and Limitation (Scotland) Act 1973.
- Whether the exceptions to prescription under sections 11(3) and 6(4) of the Act applied to postpone or interrupt the prescriptive period.
- The proper legal approach to multiple alleged breaches within a single cause of action for prescription purposes.
- The evidential requirements for establishing induced error under section 6(4) to interrupt prescription.
Arguments of the Parties
Company B's Arguments
- The Plaintiff’s claim was prescribed since the five-year prescriptive period began no later than June 2014, but the summons was served in July 2019.
- The commercial judge erred by treating multiple breaches as separate causes of action, engaging in impermissible "salami slicing" of what was a single global loss claim.
- The exceptions under section 6(4) require specific proof of induced error attributable to the company’s guiding mind, which the Plaintiff failed to provide, notably by not calling a key witness.
- The commercial judge incorrectly applied the rule that averments of negligence and causation be taken pro veritate to the section 6(4) analysis.
- The Plaintiff’s reliance on assurances from Company B did not amount to the kind of induced error contemplated by section 6(4), but rather was a commercial choice.
Company A's Arguments
- The commercial judge correctly applied section 11(3), recognizing multiple distinct breaches each giving rise to separate obligations and prescriptive periods.
- The claim involves several separate breaches of duty, each requiring individual consideration for prescription purposes, consistent with statutory provisions.
- The judge’s application of section 6(4) was appropriate; the Plaintiff demonstrated they were under induced error due to Company B’s assurances, which caused them to refrain from making a claim until November 2014.
- There was direct evidence of reliance and induced error, supported by witness statements, justifying postponement of prescription.
- The Plaintiff did not artificially restrict their losses but claimed a global figure for damages flowing from the defective design.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| David T Morrison & Co Ltd v ICL Plastics Ltd [2014 SC (UKSC) 222] |
Prescriptive period commences when creditor is aware of objective facts constituting loss, not necessarily breach. |
Confirmed that awareness of loss triggers prescription even if cause of loss is unknown; applied to determine start of prescriptive period. |
| Gordon's Trustees v Campbell Riddell Breeze Paterson LLP [2017 SLT 1287] |
Clarifies when prescriptive period begins in cases of latent loss and the connection to cause of action. |
Used to interpret section 11(3) and the requirement that loss be connected to the cause of action. |
| Musselburgh and Fisherrow Co-operative Society Ltd v Mowlem Scotland Ltd [2004 SCLR 412] |
Multiple distinct defaults causing separate losses may have separate prescriptive periods. |
Discussed but ultimately rejected as applicable to the present case’s single global loss claim. |
| Pelagic Freezing (Scotland) Limited v Lovie Construction Group [2010] CSOH 145 |
Successive incidents of loss from separate defaults may be treated independently for prescription. |
Referenced to show that separate causes of action have separate prescriptive periods; court found inapplicable here. |
| BP Exploration Operating Company Ltd v Chevron Transport (Scotland) [2002 SC (HL) 19] |
Interpretation of "refrain" under section 6(4) and requirements for induced error to interrupt prescription. |
Applied to assess induced error and burden of proof under section 6(4); distinguished factual context from present case. |
| WPH Developments Ltd v Young and Gault LLP (in liquidation) [2022 SC 28] |
Clarification on the timing of awareness of loss for prescription purposes. |
Used to differentiate latent contractual issues from immediate knowledge of loss. |
| Rowan Timber Supplies (Scotland) Ltd v Scottish Water Business Stream Ltd [2011] CSIH 26 |
Invoices for services not received do not necessarily engage section 6(4) exceptions. |
Distinguished from the present case where services were rendered but allegedly defective. |
| Legal and General Assurance (Pensions Management) Limited v Halliday Fraser Munro and Others [2023] CSOH 81 |
Attribution of knowledge or state of mind to a company for prescription purposes. |
Applied to assess whether error could be attributed to the Plaintiff company. |
| Meridian Global Funds Management Asia Limited v Securities Commission [1995] 2 AC 500 |
Principles on attributing acts or knowledge to a company’s guiding mind. |
Referenced to analyze attribution of error to the Plaintiff. |
| Glasgow City Council v VFS Financial Services Ltd [2022 SC 133] |
Reasonable diligence test for discovery of error or loss. |
Used to evaluate the diligence expected of the Plaintiff in discovering the alleged design errors. |
| Adams v Thorntons WS [2015 1 SC 30] |
Importance of timely raising of claims and evidential burden in prescription cases. |
Quoted in the postscript to emphasize the necessity for claimants to demonstrate statutory conditions to avoid prescription. |
| Dunlop v McGowans [1980 SC (HL) 73] |
Single indivisible obligation cannot be split for multiple prescriptions. |
Invoked to argue against artificial separation of the Plaintiff’s global claim. |
Court's Reasoning and Analysis
The court analyzed the start of the prescriptive period under section 11(1) of the 1973 Act, concluding that the Plaintiff’s loss occurred as soon as they entered into the fixed price enabling works contract in November 2013, relying on Company B’s defective design. This was the earliest date at which the obligation to make reparation became enforceable.
Regarding section 11(3), which postpones the start of prescription until the creditor is or could with reasonable diligence be aware of the loss, the court found that the commercial judge erred by treating the multiple breaches in the pleadings as separate and distinct causes of action with separate prescriptive periods. Instead, the breaches collectively form a single cause of action leading to a single global loss. Therefore, the prescriptive period can only start once, at the date the Plaintiff became aware of the loss connected to that cause of action, here November 2013.
The court rejected the "salami slicing" approach and held that knowledge of subsequent events such as delays or additional costs in 2014 did not reset or postpone the prescriptive period for the entire claim.
On the issue of section 6(4), which allows interruption of prescription due to induced error, the court found that the commercial judge lacked sufficient evidential basis to conclude that the Plaintiff was under an error induced by Company B’s words or conduct that caused them to refrain from making a claim. The Plaintiff failed to prove the necessary erroneous state of mind attributable to the company’s guiding mind, particularly due to the absence of key witness evidence. The court held that reliance on assurances was a commercial choice rather than an induced error within the meaning of section 6(4).
Consequently, the exceptions under sections 11(3) and 6(4) did not apply to extend or interrupt the prescriptive period. The court emphasized that the burden lies on the Plaintiff to demonstrate statutory conditions to avoid prescription and that the court cannot rely on speculation about motives or omissions.
Holding and Implications
The court granted the reclaiming motion, recalled the commercial judge’s interlocutor, sustained Company B’s plea of prescription, and granted a decree of absolvitor, thereby dismissing the Plaintiff’s claim.
This decision directly absolves Company B of liability on the basis of prescription. No new legal precedent was established beyond the application and clarification of existing prescription principles. The ruling underscores the importance of timely litigation and the evidential burden on claimants seeking to rely on exceptions to prescription under the 1973 Act.