Since Gordon's Trustee's v Campbell Riddell Breeze Paterson LLP [2017] UKSC 75, pursuers in Scotland have faced what is sometimes perceived as a harsh application of the Prescription and Limitation (Scotland) Act 1973. On 1 July 2022, Lord Braid's decision in The Firm of C&L Mair v Mike Dewis Farm Systems Limited [2022] CSOH 47 was published and addresses the extent to which a pursuer can seek to navigate around Gordon's Trustees on the basis that the loss is in fact a contingent one.

It has long been the case in Scots law that prescription begins to run when there is a concurrence of injuria (eg a breach of duty or contract) and damnum (the loss occurring from that act). By way of reminder, in Gordon's Trustees the Court held that (for the purpose of interpreting s.11(3) of the 1973 Act), loss is a reference to the "existence of physical damage or financial loss as an objective fact" (para 19). Furthermore, the start of the prescriptive period (under section 11(3)), is not postponed until a pursuer is aware actually or constructively that they have suffered a detriment in the sense that something has gone wrong. It is sufficient (for the prescriptive period to commence), that a pursuer is simply aware that they have not obtained something they sought, or that they have incurred expenditure where loss has occurred.

The strict application of Gordon's Trustees was demonstrated in Midlothian Council v Raeburn Drilling and Geotechnical Ltd [2019] CSOH 29 in which Lord Docherty held that loss occurred as soon as the pursuer had incurred expenditure in reliance on the defenders' advice. In that case, the pursuer was unable to recover losses from the defender where the defender had allegedly given negligent advice that ultimately led to the construction of a housing development on land that was unsuitable for it. From the moment the pursuer incurred costs associated with construction, it had incurred expenditure (and so loss), even though it was unaware that it was building houses that would eventually need demolished as a result of that advice. That application was recently demonstrated in WPH Developments Limited v Young & Gault LLP 2022 SC 28 in which the pursuer (a property developer) relied on allegedly negligent site drawings and suffered loss from the moment they constructed walls on land they did not own, even when at that point they did not know they were not the owner of that land at that point.

In The Firm of C&L Mair, the pursuer employed the defender to supply and install a slurry tank on the pursuer's farm. The work was completed in February 2012 and payment under the contract made. The tank was installed on a large flat area of ground with a large embankment immediately behind it. In 2016, a landslip of the embankment occurred, causing damage to the slurry tank to the extent that it had to be demolished and built elsewhere. While the reported decision does not confirm exactly when the action was raised, we can infer it was more than 5 years after the date of completion of the works on the basis that contingent losses were being relied on.

The pursuer argued that there was no loss until the landslip occurred and that it was not in fact inevitable that the landslip would have ever occurred. A loss which may or may not be suffered depending on a future contingency (in this case the landslip), was not damnum for the purpose of the prescriptive period commencing. The defender appears not to have challenged that this was a contingent loss, but rather argued that on a strict application of Gordon's Trustees to contingent losses, damnum could still be considered as having occurred when the pursuer wasted expenditure on the construction of the slurry tank, on the basis that the slurry tank eventually failed to achieve its purpose.

Lord Braid held that the ratio of Gordon's Trustees still permits a distinction between " loss which has occurred (even though not appreciated as such at the time) and loss which has not yet occurred (but may do so in the future), the latter being purely contingent and not amounting to damnum". Where the creditor suffers only the risk of a future loss, then loss has not yet actually occurred. Furthermore, Gordon's Trustees is not authority for the proposition that in every case where expenditure has been incurred, loss must necessarily have occurred. Therefore, in this case, simply making payment for the supply and construction of a slurry tank does not necessarily amount to loss, where the loss was purely contingent on some other factor (such as a landslip occurring).

Of course, a contingent loss must still be distinguished from a quantifiable future loss. In Kennedy v Royal Bank of Scotland plc [2018] CSIH (at para 20), Lord Carloway pointed out that where a loss is inevitable, in almost all cases that loss will have already occurred. As such where a loss is simply a quantifiable future loss, prescription will begin to run from the event giving rise to that loss (even where the loss will still occur). In C&L Mair, had the defender adopted the position that the land slip from the embankment was inevitable, it would of course have been possible to argue that the loss claimed was actually just a quantifiable future loss and the damage occurred upon completed installation of the slurry tank.

Therefore, simply because a creditor has incurred expenditure does not automatically lead to the occurrence of damnum. While The Firm of C&L Mair case does not create any new exceptions to the law of prescription, but it is a reminder that Gordon's Trustees has no impact on contingent losses and that where a loss can be truly described as a contingent loss, damnum has not occurred until the contingent event does.

Contributor

Lucy Duff

Senior Solicitor