The 5-year time limit for bringing claims before the courts, known as the prescriptive period, applies generally to certain claims where an obligation exists to, for example, pay certain monies or compensation for breaches of contract.
In the recent Sheriff Court case of WPH Developments Ltd v Young & Gault LLP, we are given a timely reminder of the importance of bringing your claim to the courts, before the time limits allowed for doing so have lapsed. It is not always straightforward to identify the relevant date on which the clock starts ticking in respect of a claim and thus, the date it will be extinguished.
Facts of the case
In this case, the defender (Young & Gault LLP – architect firm) provided the pursuer (WPH – property development company) with construction drawings which incorrectly identified the legal boundaries of a plot for development. The pursuer company subsequently developed the plot on the basis of those drawings and brought an action for damages against the defender architect firm on 21 November 2018.
Case background
The pursuer argued that no loss was suffered prior to 21 November 2013 on the basis that two of the plots concerned were sold for full consideration and the remaining two plots remained within its ownership. It claimed that loss only occurred during 2014 when it was engaged in protracted negotiations with the neighbouring landowner and ultimately was required to purchase additional land and relocate parts of the boundary walls. Their position was that they were not aware of any loss during this period and that the loss itself concerned the cost of remedial works and not those incurred in the original development of the plot.
In defending its position, the architect firm argued that the pursuer was barred from bringing its claim owing to the expiry of the prescriptive time limit for doing so. They argued that the loss suffered by the pursuer occurred before 21 November 2013 when it began to develop the plot and thus incurred costs.
The decision
It was decided in this case that the prescriptive time limit had not lapsed.
The Sheriff held that the loss suffered by the pursuer occurred more than 5 years prior to the action brought against the defender, owing to:
- wasted expenditure in developing certain boundary walls and gardens which encroached onto a neighbouring landowner’s land;
- the liability incurred to remove the encroachment; and
- liability in damages to third party purchasers for breach of contract.
Despite that, the Sheriff ultimately decided that the pursuer could not have been aware of the occurrence of that loss until around 20 February 2014 when the neighbouring landowner brought the boundary issues to their attention. It was therefore ultimately decided that the property developer’s claim had not expired.
Whilst at first glance this most recent decision is likely perceived as a fair determination, it is openly at odds with previous decisions on the matter. As a result, the decision is being appealed.
In particular, the decision is at variance with the Supreme Court’s judgement in Gordon’s Trustees v Campbell Riddell Breeze Paterson. In this case, it was held that the pursuer (Gordon’s Trustees) doesn’t need to know that there has been a breach of duty for the clock to start ticking, they also don’t need to know that anything has gone wrong. If the party is aware of an expenditure which later turns out to be a loss, then being aware of that expenditure is sufficient for the clock to start ticking on the prescriptive period.
This decision was latterly followed by the Court of Session case of Midlothian Council v Bracewell Stirling Architects and others.
In light of those cases, it is difficult to imagine a situation where the most recent Sheriff Court decision is upheld at appeal.
It is largely acknowledged that the decisions to date in these matters are considered harsh.
A legal resolution
New legislation is to be introduced to remedy some of the perceived injustices, in the form of the Prescription (Scotland) Act 2018, seeking to amend the current legislation, the Prescription (Scotland) Act 1973. Amongst other matters, the new act sets out that the clock will not start ticking on the prescriptive period until the pursuer is aware:
- of loss, injury or damage having occurred;
- that such loss etc was caused by a person’s act or omission; and
- of the identity of that person.
It is important to note that not only can the commencement of the 5-year prescriptive period be postponed (where there is a continuing wrong or the loss is concealed), such as in this case (as the current decision stands), it can also be interrupted or suspended in certain circumstances.
In identifying the relevant period, we need to consider not only the date of occurrence of the loss but also the date on which the party who has suffered such loss, becomes aware of that loss.
This case highlights the importance of understanding the period when the clock starts ticking on a claim. Given the complexities that can arise in identifying such a period and the changing legislation, it is strongly recommended that legal advice is sought on the matter. Failure to identify the relevant date could result in a permanent bar against making a claim for the loss concerned.
If you need advice on any such claims, please get in touch with a member of our Dispute Resolution and Litigation team who can provide advice and support you through any dispute.
