The Inner House of the Court of Session (the Scottish Court of Appeal) has given recent guidance on s11(3) and 6(4) of the Prescription and Limitation (Scotland) Act 1973 in Tilbury Douglas Construction Ltd v Ove Arup and Partners Scotland Ltd CSIH 15. In reversing the court at first instance's decision, it reaffirmed the restricted nature of the sections' application in professional negligence cases. A decision likely to be favourable to those defending claims.
Negative Prescription
In broad terms, s6 of the 1973 Act provides that a claim in contract or delict (tort) needs to be raised in a court action or arbitration within 5 years of the date "loss, injury or damage" occurred as a result of a breach of an obligation. This has led to a significant amount of litigation over recent years.
However, there are some provisions which allow that period to be extended. These include s11(3) which states that the prescriptive period will be lengthened if the claimant was not aware or could not with "reasonable diligence" have been aware that loss, injury, and damage had occurred.
Further, s6(4) provides that the prescriptive period will be extended if fraud or the words or conduct of the party in breach had induced the claimant to hold off raising an action.
The Case
The claim related to railway tunnels at Haymarket, Edinburgh, which will be familiar to anyone taking a train to or from the west of Edinburgh. A commercial development was planned above them which meant various works had to be carried out in advance to ensure the tunnels, which date back to the mid-19th century, could take the load.
Arup was appointed to provide engineering services including the design of the enabling work. Based on their package, Tilbury entered a fixed price contract with their employer in November 2013 to carry out the work. However, there had to be substantial re-design of the works causing additional spend and delay that Tilbury could not reclaim. Tilbury raised an action against Arup on 30 July 2019 and Arup pled the claim had prescribed.
At first instance after a preliminary proof on prescription, the judge allowed the pursuer's claim to proceed to a wider proof before answer (a trial) and Arup appealed.
When could Tilbury have become aware of their loss? – s11(3)
The judge had found that only loss flowing from the grounds of the claim made in the action would start the computation of the prescriptive period. Therefore, as that loss flowed from November 2014, when Arup had advised that full grouting of one of the tunnels would be required, the action was raised in time.
The Inner House first noted that in this case the loss required to be analysed as global rather than parts being attached to specific breaches. Accordingly, once Tilbury entered the contract with their employer at a fixed price in November 2013, that constituted loss and the prescriptive clock started to tick even if they were unaware they had incurred such a loss.
While the Prescription (Scotland) Act 2018 makes some changes to s11(3) for obligations which had not prescribed before 1 June 2022, the court's reasoning here is still useful for considering the now current test.
Had Tilbury been induced to think there was no problem? – s6(4)
Noting assurances Arup had given Tilbury during the contract works, the judge at first instance decided that s6(4) applied and the prescriptive period did not start until November 2014.
On appeal the Inner House first noted that there was no evidence for the first instance court to hold that Tilbury were in fact in error induced by Arup or the duration of that error, matters which will no doubt be addressed by future claimants being aware of this case.
It then noted a stricter application of the section than had been followed by the Outer House. While Arup had maintained that there was no deficiency in the design, the Court considered there was more than enough information to persuade Tilbury that a claim against Arup could have been made and, importantly, a professional merely providing services and invoicing for them would not satisfy the test under s6(4).
Conclusions
The Inner House decision tightens the availability of exceptions to the 5-year prescriptive period. Firstly, it reaffirmed that loss can be incurred in respect of s11(3) before a party is aware it is truly a loss rather than simply an expenditure, contract or some other event which fixes a future "loss".
Secondly, and although not binding, the Inner House's comments on s6(4) has the potential to limit its application in claims against professionals, in particular where the professional is providing continuing services and invoicing for them.
Time will tell whether section 11(3)A, applicable to cases which did not prescribe before 1 June 2022, will change the landscape.
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