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Leonardo Hotel Management (UK) LTD against Galliford Try Building 2014 LTD and others (Court of Session)
Factual and Procedural Background
Company A, tenant of The Hotel, brought proceedings concerning alleged defects in the hotel’s cladding. Company B was the design-and-build contractor, Company C was the landlord’s architect, and Company D manufactured cladding panels used in the development. Company A seeks the cost of repairs allegedly required under its lease. [1][2][3]
The proceedings were raised in February 2021. The defenders and Company D argued that the claims had prescribed. Company C also claimed that its claim against Company D had prescribed. The opinion followed a second debate, permitted after developments in the pleadings and subsequent appellate decisions concerning section 6(4) of the Prescription and Limitation (Scotland) Act 1973. [4][5][6]
The court refused the applications for absolvitor or dismissal and allowed a proof before answer, excluding only specified averments from probation. [7][8][9]
Legal Issues Presented
- Whether the collateral warranties allowed Company B and Company C to rely on prescription defences applicable to the original building contract and appointment. [10][11][12]
- When loss occurred for the purposes of section 11(1) of the 1973 Act, and whether Company A could rely on section 11(3). [13][14][15]
- Whether Company A had relevantly averred fraud or induced error under section 6(4). [16][17]
- Whether Company C’s claim against Company D could rely on sections 11(2) or 6(4). [18][19]
Arguments of the Parties
Company B’s Arguments
- The collateral warranty gave Company B equivalent rights of defence to those available under the building contract. [20][21]
- Loss arose when Company A entered into the lease and assumed the repairing obligation; the prescriptive period therefore began at that point. [22][23]
- Company A’s section 11(3) averments were insufficient and its section 6(4) case relied only on ordinary contractual conduct, such as providing services, seeking payment and granting a warranty. [24][25][26]
Company C’s Arguments
- Its collateral warranty also provided equivalent rights of defence, particularly through the words “in time”. [27][28]
- It adopted Company B’s arguments on sections 11(1), 11(3) and 6(4). [29]
- Company A’s pleadings failed to give fair notice of how Company C had allegedly permitted concealment of the defects. [30][31]
Company D’s Arguments
- It adopted Company C’s submissions regarding Company A’s claim. [32]
- It argued that Company C’s claim was prescribed because the alleged misrepresentation was not a continuing act under section 11(2). [33][34][35]
- It argued that receipt of the Wintech report gave Company C actual knowledge, or at least sufficient information to discover with reasonable diligence, the alleged misrepresentation. [36][37]
Company A’s Arguments
- The collateral warranties did not import the prescription periods applicable to the original contracts. [38][39]
- Entering the lease did not itself constitute loss because the need for repair was not then known or inevitable. [40][41]
- Section 6(4) should be interpreted broadly and could apply to physical concealment, omissions and other conduct that induced error. [42][43][44]
- Its averments identified an error, the relevant periods, and courses of conduct by Companies B and C that allegedly caused or contributed to the concealment of the defects. [17][45][46]
Company C’s Response Regarding Company D
- The alleged misrepresentation could continue to have causative effect after it had first been acted upon. [47][48]
- The Wintech report did not establish actual knowledge of the alleged misrepresentation, and reasonable diligence was a factual value judgment unsuitable for determination without evidence. [49][50]
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| British Overseas Bank Nominees Limited v Stewart Milne Group Limited 2020 SC 24 | Equivalent rights of defence under a collateral warranty. | Supported the conclusion that Company B could rely on prescription defences under the original building contract. [20][51][11] |
| Legal & General Assurance (Pensions Management) Limited v Halliday Fraser Munro 2025 SLT 1151 | Construction of collateral warranties and section 6(4). | Provided the principal framework for construing the warranties and identifying circular or insufficient section 6(4) pleadings. [10][52][53] |
| Huntaven Properties Limited v Hunter Construction (Aberdeen) Limited and others [2017] CSOH 57 | Construction claims are normally enforceable by practical completion. | Formed part of the analysis of when the claims became enforceable. [22] |
| David T Morrison & Co Limited (t/a Gael Home Interiors) v ICL Plastics Limited 2014 SC (UKSC) 222 | Section 11(3) does not generally postpone prescription until the creditor knows that something went wrong. | Used with later authorities to reject Company A’s section 11(3) case. [54][55][56] |
| Gordon's Trustees v Campbell Riddell Breeze Paterson LLP 2017 SLT 1287 | Awareness of loss for section 11(3). | Applied to conclude that Company A had sufficient awareness when it entered the lease. [54][56][57] |
| Tilbury Douglas Construction Limited v Ove Arup and Partners Scotland Limited 2024 SC 383 | Loss may be “locked in” when a contract creates an unavoidable liability; section 6(4) requires error, causation and a defined period. | Required reconsideration of the earlier decision and led to rejection of Company A’s section 11(3) case, while supporting the sufficiency of its section 6(4) pleadings. [58][59][17] |
| Greater Glasgow Health Board v Multiplex Construction Europe Limited and others [2025] CSOH 56 | Application of the section 11(3) and section 6(4) authorities. | Referred to in the parties’ submissions concerning the proper approach. [60][25] |
| BP Exploration Operating Company Limited v Chevron Transport (Scotland) 2002 SC (HL) 19 | Fraud or induced error may prevent time running where conduct causes the creditor to refrain from claiming. | Supported the court’s treatment of physical concealment as potentially relevant conduct under section 6(4). [61][62][63][64] |
| Batchelor v Opel Automobile GmbH [2025] CSOH 93 | No legal restriction limits the type of conduct capable of inducing error under section 6(4). | The court adopted this analysis and rejected a narrow “everyday conduct” limitation. [65][66][67] |
| Rowan Timber Supplies (Scotland) Limited v Scottish Water Business Stream Limited [2011] CSIH 26 | Conduct relied upon under section 6(4) need not be separate from or subsequent to the conduct creating the obligation. | Considered in the competing submissions on the scope of section 6(4). [68][69] |
| Baker v The Queen [1975] AC 774 | Limits on challenging binding appellate authority in a lower court. | Relevant to the argument that the Outer House could not treat Inner House decisions as per incuriam. [70][71] |
| BDW Trading Limited v URS Corporation Limited [2025] 2 WLR 1095 | Observations concerning discovery of pure economic loss. | The court held that the cited observations did not represent the law of Scotland. [72][14] |
| Highlands & Islands Airports Limited v Shetland Islands Council 2015 SC 588 | The 1973 Act and underlying common-law prescription principles. | Relied upon in Company A’s broad construction argument, which the court did not need to adopt. [73] |
| Caledonian Railway Co v Chisholm 1886 13R 773 | Prescription should not penalise a creditor whose failure to sue was caused by the defender’s concealment or conduct. | Used to explain the purpose of section 6(4) and to support the relevance of Company A’s concealment case. [73][63][64] |
| Inglis v Smith 1916 SC 581 | Historical principles concerning prescription and conduct causing delay. | Referred to in Company A’s submissions. [74] |
| Dryburgh v Scotts Media Tax 2014 SC 651 | Prescription principles. | Referred to in Company A’s submissions on section 6(4). [75] |
| Heather Capital Limited (in liquidation) v Levy & McRae 2017 SLT 376 | “Conduct” under section 6(4) may be active or passive and need not be deliberate or blameworthy. | Supported the conclusion that Company C’s alleged omissions could qualify and that reasonable diligence generally requires evidence. [76][77][78] |
| AMN Group Limited v Gilcomston North Limited 2008 SLT 835 | Meaning of “act, neglect or default” in section 11. | Referred to in the analysis of section 11(2). [79] |
| Warren James (Jewellers) Limited v Overgate GP Limited [2010] CSOH 57 | Distinction between a continuing act and a completed act with continuing effects. | Used in rejecting Company D’s narrow construction of section 11(2). [80][81] |
| John G Sibbald & Son Limited v Douglas Johnston & Anr [2014] CSOH 94 | Identification of the act, neglect or default giving rise to the obligation. | Applied to identify the alleged misrepresentation as the relevant act. [80][82] |
| Cramaso LLP v Viscount Reidhaven's Trustees 2014 SC (UKSC) 121 | Continuing potency of a representation. | The court held that the decision did not prevent a misrepresentation from remaining continuing under section 11(2). [34][83] |
| Mackie v Mercedes-Benz Group AG & others [2025] CSOH 94 | Application of continuing misrepresentation principles under section 11(2). | The court adopted its analysis in concluding that Company C had pled a relevant section 11(2) case. [84][83] |
| Glasgow City Council v VFS Financial Services Limited 2022 SC 133 | Actual knowledge and reasonable diligence under section 6(4). | The court held that the Wintech report did not conclusively establish actual knowledge and that reasonable diligence required evidence. [85][86] |
| Greater Glasgow Health Board v Multiplex Construction Europe 2026 SLT 433 | Subsequent approval of the approach to conduct and reasonable-person error under section 6(4). | Noted as confirming the court’s interpretation. [77][87] |
Court's Reasoning and Analysis
The court treated construction of the collateral warranties as an ordinary contractual-construction exercise, without relying on any general principle of equivalence. Company B’s clause expressly granted equivalent rights of defence, including prescription defences. Company C’s clause referred to obligations “in time” and excluded specified defensive rights, indicating that other defences under the original appointment were preserved. [10][11][88][12]
Entering the lease constituted loss because Company A thereby assumed the repairing obligation. The court rejected the argument that loss arose only when the defects were discovered. The court also rejected the section 11(3) case: applying Tilbury Douglas, the repair-related losses were “locked in” when the lease was entered into, even though no repair expenditure had yet occurred. [89][14][59][57]
Section 6(4) requires an error, a period during which the creditor refrained from claiming, and words or conduct of the debtor causing the error. The court held that the provision does not restrict the relevant conduct to conduct beyond ordinary contractual performance. [90][66][17]
Company A’s case against Company B was relevant because it alleged physical concealment of the defects, together with omissions, payment claims and the warranty, and identified the relevant periods and resulting error. Company A’s case against Company C was also relevant because the alleged failure to identify and report the defects allegedly allowed their physical concealment. Passive conduct could qualify. [45][64][46][91][92]
Regarding Company C’s claim against Company D, the court held that a misrepresentation may remain a continuing act under section 11(2) after it has been acted upon, because actionability does not necessarily end its causative potency. Company C therefore pled a relevant section 11(2) case. [81][93][94][83]
The court also rejected Company D’s section 6(4) challenge. The Wintech report was not sufficiently clear to establish actual knowledge, and whether Company C could have discovered the alleged fraud with reasonable diligence was a value judgment generally requiring evidence. [95][86][78][96]
Holding and Implications
MOTIONS REFUSED; PROOF BEFORE ANSWER ALLOWED. The court refused the applications by Companies B, C and D for absolvitor or dismissal. [7]
The averments concerning equivalent contractual limitation periods, section 11(1), and section 11(3) were excluded from probation. Company A’s section 6(4) case was sufficiently relevant to proceed to evidence. Company C’s claims against Company D were also sufficiently relevant under sections 11(2) and 6(4). [97][98][99][100][83][96]
The direct consequence is that the substantive claims proceed to a proof before answer, subject to the excluded averments. The opinion sets out and applies existing authorities rather than stating that a new precedent was created. [8][9]
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