Continuing uncertainty on the law of prescription

It was understood that the Prescription (Scotland) 2018 Act (the 2018 Act) was brought into force to soften the harsh prescription regime under the Prescription and Limitation (Scotland) Act 1973 (the 1973 Act) as applied in more recent case-law. However, the effect of the judgment in Ogilvie Construction Limited v M1 Re Glasgow Limited and Ogilvie Construction Limited v Leach Rhodes Walker Ltd is that, following the 2018 Act, the prescriptive period can begin to run before the claimant is actually aware that loss, injury or damage has been caused by a legal wrong.

This outcome means that the 2018 Act did not change the old prescription regime in the way it was thought to.

Background

This case involved the construction of a hotel in Glasgow, for which Ogilvie Construction Ltd (Ogilvie) was appointed as design and build contractor by M1 Re Glasgow Limited (M1). Ogilvie appointed Leach Rhodes Walker Ltd (Leach) as architect for the project.

Following the Grenfell tragedy in 2017, a review of the hotel’s cladding design was carried out, resulting in a remedial re-design (the Remedial Design), which was procured in late 2017.

In 2020, Ogilvie raised an action against Leach, alleging that Leach was in breach of its duties since they prepared the original design. Investigations carried out by Ogilvie revealed that the Remedial Design was also defective and that cavity barriers were deficient.

Leach argued that the obligations it owed to Ogilvie in respect of the original design, Remedial Design and cavity barriers had prescribed. This prompted Ogilvie to raise an action against M1, seeking orders that its obligations to M1 for both designs and the cavity barriers had also prescribed.

Start of the prescriptive period

The start of the prescriptive period for latent defects claims in terms of the 2018 Act was examined by the Court and Lord Lake determined that, like the position prior to the 2018 Act, where the loss is purely economic (rather than physical damage) the five-year prescriptive period starts when the loss occurs, whether or not the claimant is actually aware of it.

This meant that in this case, Ogilvie suffered loss “at the point that they started work to implement the design in question and thereby incurred expenditure which would be wasted”. The Court held that the loss arose in April 2017, as the parties agreed that is when the construction of the defective cladding, cavity barriers and remedial works took place.

In respect that the 2018 Act requires knowledge that the actions of a known party caused the defects, the court concluded it was enough to know that the design in question was provided by a known party.

Relevant acknowledgement

The Court considered whether the remedial works performed amounted to a relevant acknowledgement of ‘liability’ that had interrupted the five-year prescriptive period.

Lord Lake noted that although remedial works can be seen to be an acceptance that something has “gone wrong”, it is not sufficient to meet the test under s10(1) of the 1973 Act (as amended by the 2018 Act).

Lord Lake considered that the carrying out of remedial works can refer to the underlying obligation to carry out works to the required standard rather than to an obligation to make reparation for loss. The remedial works carried out in this case were therefore not a relevant acknowledgement that had interrupted the five-year prescriptive period.

Key implications of the judgment

The judgment underscores the continuing uncertainty surrounding prescription in Scotland. It is important that parties contemplating defects claims promptly obtain legal advice regarding prescription.
For claims concerning economic loss, such as the cost of remedial works to correct design defects, the prescriptive clock will likely start ticking from the moment a party becomes aware (or should with reasonable diligence have become aware) that a building was constructed in accordance with a design prepared by a known party.
Parties contemplating construction defects claims should be aware that prescription may begin, and expire, before a party knows that a defect or associated costs are attributable to a breach of duty.

If you would like help with this topic, or have any questions, please contact a member of our Construction, Engineering and Infrastructure Disputes team.

This article was co-authored by Trainee Euan Rennie.

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