Undercover cladding: what does it mean for prescription?

On 20 October 2026, the Court of Session issued a decision on prescription in Leonardo Hotel Management (UK) Ltd v Galliford Try Building 2014 Ltd and Others. Leonardo, the tenant of a hotel in Aberdeen, had raised a claim for the cost of replacing cladding which it alleged was defective and that it was liable to replace due to a repairing obligation in its lease. It brought a claim against the design and build contractor (Galliford Try) and the architect (BDP) involved in the construction of the hotel, who had granted collateral warranties in its favour. BDP brought Kingspan Insulation Limited, the provider of materials used in the construction of the hotel, into the action as a third party.

Unusually, this decision is a second substantive decision by the first-instance judge based purely on legal arguments. This was prompted by recent appeal judgments which may have conflicted with parts of the original decision. Our blog on the earlier decision is available here.

Collateral warranties

Since the first Leonardo decision, the Inner House (the Scottish appeal Court) has released its decision in the case of Legal & General Assurance (Pensions Management) Limited v Halliday Fraser Munro. In that case, the Inner House held that there is no default position regarding the rights under a collateral warrant and that the beneficiary’s rights will depend on the wording in their specific warranty.

In the present case Lord Richardson decided that the wording of the collateral warranties put Leonardo in the shoes of the employer under the original construction contract. His view was that the wording of the provision which described the limitations of the rights conferred would be decisive unless they were unclear. That was not the case with these warranties.

Prescription & ignorance of loss: section 11(3)

Galliford Try and BDP argued that Leonardo’s claim had prescribed, meaning it could no longer make its claim due to the passage of time. Leonardo argued that it had not been aware of its loss until it knew of the cladding defects, relying on section 11(3) of the Prescription and Limitation (Scotland) Act 1973 (the “1973 Act”).

Lord Richardson had previously held that prescription began when Leonardo was aware of the loss it had suffered, and since the defective cladding was part of that loss, Leonardo had to be aware of that the cladding was defective. However, this second decision has reversed that outcome following the Inner House’s decision in Tilbury Douglas Construction Limited v Ove Arup and Partners Scotland Limited.

Lord Richardson now held that Leonardo’s loss arose at the start of the lease when it took on its repairing obligation. It made no difference that Leonardo was not aware of any defective cladding at that time, since it only had to be aware of the facts which gave rise to the loss, rather than the loss itself. Since Leonardo knew it entered the lease, and the lease gave rise to its loss (as it contained the repairing obligation), Leonardo was objectively aware of having suffered a loss, so the prescriptive clock started at the date of the lease.

Prescription and error: section 6(4)

Leonardo also relied on section 6(4) of the 1973 Act. The Legal & General case was again relevant to this issue. Lord Richardson highlighted three key points from that case for the purposes of section 6(4):

1. A pursuer must have an erroneous belief caused by fraud or a misrepresentation by a defender
2. That belief was the reason that a claim was not brought forward; and
3. Where this has happened, the period of time during which the pursuer was in error is discounted from any calculation.

Lord Richardson also noted that there is no requirement that the conduct would have induced error in a reasonable person.

Following Legal & General and Tilbury,Galliford Try and BDP argued that the events which Leonardo sought to rely on were merely “everyday conduct” which did not satisfy section 6(4). However, Lord Richardson disagreed, expressing the view that this exception was limited to generic conduct such as providing contractual services and accepting payment. The Court considered that the defenders continuing with the construction works, which included fitting materials over the defective cladding, was specific conduct which could be relevant for the purposes of section 6(4). The case was allowed to proceed to a factual hearing to determine whether the evidence would support Leonardo’s contentions

Third party claims

BDP’s position was that the reason they had specified the particular materials in question (Kingspan Kooltherm K15 Insulation) was because of certain statements Kingspan made in the product data sheet.

In this context, the Court was also asked consider section 11(2) of the 1973 Act in relation to BDP’s claims against Kingspan. Section 11(2) provides that where there is a continuing default over a period of time, the five-year clock starts running when that default ceases.

Kingspan argued that that any claim against it had prescribed, as any misrepresentation had ceased at the point when the data sheet was relied upon – which was more than five years before the claim was made. BDP’s response to this was that it had continued to rely on those materials, and that it was not aware of a claim until a later date.

Lord Richardson agreed with BDP, noting that a representation could reasonably be relied upon after the initial reliance. Again, this will proceed to a factual hearing to determine the position.

Conclusion

This case is a further example that the “state of flux” in the area of the law is unlikely to settle down any time soon. The specific facts and circumstances of each case will be key – including the terms of any document such as collateral warranties. It is also likely that further arguments will follow about where the line is to be drawn between generic and specific acts will be drawn for the purposes of s6(4).

If you have any questions, please get in touch with a member of our construction team or your usual Brodies contact.