Summary of Opinion — First Division, Inner House, Court of Session

Factual and Procedural Background

On 18 December 2009 the Plaintiff contracted with the Defendant for the design and construction of The Hospital in The City. The Plaintiff alleges defects in the design and construction of the atrium cladding and seeks damages of £16,325,000. The Defendant denies breach and counterclaims for sums paid following adjudications. The Defendant raised contribution claims against Third Party A and Third Party B under collateral warranties.

The Defendant pleaded prescription under section 6 of the Prescription and Limitation (Scotland) Act 1973. The Plaintiff relied on section 6(4)(a)(ii) (error induced by words or conduct) and section 11(3) (postponement where creditor unaware). A commercial judge heard preliminary proof on prescription and found that the Plaintiff had not proved induced error and, alternatively, that with reasonable diligence the Plaintiff could have discovered the position by May 2016. The commercial judge accordingly dismissed the claims (assoilzied) against the Defendant, Third Party A and Third Party B. The Plaintiff sought to reclaim (appeal) that interlocutor. Judge Pentland delivered the opinion of the court.

Legal Issues Presented

1. Did the commercial judge err in law or fact in holding that the Plaintiff had not proved error induced by the Defendant's words or conduct so as to interrupt prescription under section 6(4)(a)(ii) of the Prescription and Limitation (Scotland) Act 1973?
2. If induced error were established, when did the period of induced error begin and end for the purposes of the "reasonable diligence" proviso to section 6(4)?
3. Was the commercial judge wrong to hold that section 11(3) did not postpone the commencement of prescription (i.e. was the Plaintiff unaware, and could not with reasonable diligence have been aware, of its loss before 9 February 2021)?
4. Should the appellate court disturb the commercial judge's factual findings given the applicable standards of appellate review?

Arguments of the Parties

Plaintiff's Arguments

• The Plaintiff contended it held a positive mistaken belief that the atrium cladding complied with the contract and that the Defendant's words, conduct and omissions (including payment applications, building warrant/completion certificate material, an inaccurate O&M Manual, internal communications and silence after March 2018) either made representations or prolonged the Plaintiff's error so as to invoke section 6(4).
• The Plaintiff argued silence could amount to conduct and relied on authorities (including AMN Group and, to a more limited extent, Stag Line) to submit that prolonged inaction in the face of a reasonable expectation of disclosure or advice can qualify as inducing error.
• On reasonable diligence the Plaintiff submitted the Defendant had the relevant knowledge and that it was not reasonable to assume the Plaintiff could have discovered the true position within the short period the commercial judge imposed; the Plaintiff relied alternatively upon section 11(3) (latent damage/unawareness) to fix the start of prescription at 9 February 2021.

Defendant's and Third Parties' Arguments

• The Defendant and Third Parties argued the commercial judge's factual findings were entitled to deference and that the Plaintiff had failed to lead evidence that any individual was induced into error or that any error was attributable to the corporation's directing mind; accordingly section 6(4) did not apply.
• They submitted silence was irrelevant where the Plaintiff was unaware of the Defendant's investigations and where the Plaintiff had obligations under CEL 11 to verify the O&M Manual; had the Plaintiff exercised reasonable diligence the issue would have been discovered much earlier.
• They argued section 11(3) was inapplicable because, applying Gordon's Trustees and Morrison, the Plaintiff incurred expenditure at practical completion (26 January 2015) and thus became objectively aware of the loss then.

Table of Precedents Cited

Court's Reasoning and Analysis

The court approached the reclaiming motion on the basis of the commercial judge's factual findings, explaining that appellate interference with first-instance findings is permissible only in exceptional cases where the trial judge was plainly wrong or made a material legal error. The court identified the statutory tests in sections 6 and 11 of the Prescription and Limitation (Scotland) Act 1973 and summarised the elements the creditor must prove under section 6(4): existence of an error as to rights/remedies, causation by the debtor's words or conduct, that error contributed to refraining from a claim, and the dates when the error began and ended (Tilbury Douglas).

Applying those principles to the commercial judge's findings, the court concluded:

• The commercial judge made detailed credibility findings and found no witness evidence that any individual was induced into error or that the Board's directing mind was shown to have been misled. The Plaintiff accepted those factual findings and did not identify alternative findings to be substituted.
• Routine acts by the Defendant (payment applications, submission of building-warrant documentation, completion certificates) were not shown to have induced corporate error; the O&M Manual was inaccurate but the Plaintiff did not consult it until 2021, so it could not have induced error earlier.
• Silence by the Defendant after March 2018 did not influence the Plaintiff's state of mind because the Plaintiff was unaware the Defendant was investigating the atrium; therefore silence could not have induced error (Stag Line distinguished; Heather Capital acknowledged as principle but inapplicable on facts).
• On reasonable diligence, the court accepted the commercial judge's analysis that CEL 11 imposed on the Plaintiff an obligation to verify the O&M Manual at handover; had the Plaintiff complied, it would have discovered the true position shortly after practical completion and any period of induced error would have ended by May 2016, leaving prescription to extinguish the obligation by May 2021.
• Section 11(3) was unavailable because, following Gordon's Trustees and Morrison, expenditure at or shortly after practical completion (26 January 2015) meant the Plaintiff was objectively aware of loss and could not postpone commencement until 2021.
• The appellate court found no demonstrable legal error in the commercial judge's reasoning and no basis to overturn his factual findings given the applicable standard of review (Henderson and related authorities).

Holding and Implications

DISPOSED OF

The reclaiming motion is refused. The court adhered to the commercial judge's interlocutor of 27 June 2025 which had assoilzied the Defendant, Third Party A and Third Party B (i.e. dismissed the Plaintiff's claims against them on prescription grounds). The court reserved questions of expenses.

Implications: The direct effect is that the Plaintiff's claims as pleaded were held to have prescribed and were dismissed; no broader change to prescription law was established and the court emphasised the application of existing authorities and the strict evidential burden on a creditor seeking to invoke section 6(4) or section 11(3).