Much has been written on the developing, and increasingly refined, state of prescription under the 'old regime', governed by the Prescription and Limitation (Scotland) Act 1973. That 'old regime' applies to claims prescribing before 1 June 2022, which do not benefit from the new 'knowledge test' introduced by the Prescription (Scotland) Act 2018. That distinction is particularly relevant in the construction sphere, where a considerable number of claims continue to fall foul of the 'old regime's rules.
That said, the development of a relatively settled position can be seen (at least up until the Inner House) and this recent case provides a helpful consideration, summary and restatement of current law.
The matter itself concerned a discrete, £16m, claim arising from the cladding to the atrium of the Queen Elizabeth University Hospital in Glasgow. It was alleged (and assumed as true for the purposes of the hearing) that the cladding should have, but did not, meet the contractually required fire resistance (Euroclass B). Practical completion was achieved in 2015 and the majority of claims arising from the hospital's construction were raised in 2020; however, the issues with the atrium cladding were not known at that time and the relevant proceedings were not raised until 2022, outwith the standard, five year, prescriptive period.
The pursuer sought to maintain its claim under the two standard saving provisions of the 1973 Act (sections 11(3) and 6(4)): such arguments were rejected by the Inner House (and the Commercial Judge), notwithstanding the fact that the pursuer may not have had actual knowledge of the issue prior to the claim prescribing.
Takeaways
In practical terms, the 'takeaways' are that:
- Although Section 11(3) allows the commencement of the prescriptive period to be postponed where the pursuer could not reasonably have been aware that "loss, injury or damage" had occurred, that is to be objectively assessed and the key criteria is the pursuer's knowledge that it had incurred expenditure, not that it knew (at that point) that it had suffered any detriment. In a construction setting, knowledge of such expenditure could arise when the pursuer acquires or funds the construction of a property; on that basis, the prescriptive clock commonly starts to run at practical completion.
- Section 6(4) allows the running of the prescriptive period to be interrupted and suspended for a period where the defender's conduct has caused or induced an error in the pursuer's assessment of its rights or remedies that, in turn, has contributed to the pursuer not making a claim. However, the court reiterated that any such conduct must be more than just routine activities that could imply there is no issue (such as rendering fees), that the conduct (which could be silence in certain circumstances) must have been relied on to induce error and that clear evidence must be available to show the effect of the inducement on the an individual's state of mind (/how long that lasts). Further, as was relevant in this instance, the prescriptive period will only be suspended while the pursuer could not, with reasonable diligence, have discovered the issue itself.
More academically, the Inner-House also provided a helpful discussion on the requirements for establishing reasonable notice in commercial pleadings and the burden of proof for establishing the various limbs of the saving provisions discussed above.
In the construction sphere we still, regularly, deal with substantial cases that fall to be determined under the 'old regime'. The practical distinction between the two regimes can be significant and remains difficult to reconcile in the abstract. However, a clear set of rules has emerged which is regularly, and now consistently, applied by the Inner-House. Parliament did not apply the new regime retrospectively and unless the issue is brought before the Supreme Court, the clear guidelines in this case appear unlikely to be challenged.
