By Louise Walker, Trainee Solicitor

 

WPH Developments Limited v Young & Gault LLP (in Liquidation) [2021] CSIH 39

In Scotland, prescription is regulated by the Prescription and Limitation (Scotland) Act 1973, The 1973 Act provides that the obligation to make reparation is subject to the five year prescriptive period. After this period, any obligation to make reparation is extinguished. When the prescription period commences has been examined in the recent Inner House case, WPH Developments Limited v Young & Gault LLP (in Liquidation) [2021] CSIH 39

In October 2012, WPH instructed Y&G to provide the plans for a housing development. In 2013, Y&G provided WPH with the drawings of the individual plots. Thereafter, WPH built on the land according to the boundaries outlined in the plans provided by Y&G and the purchasers were granted absolute warrandice. In May 2014, the Keeper of the Registers of Scotland rejected the dispositions due to boundary discrepancies. The plans produced by Y&G were allegedly incorrect in terms of WPH’s boundary. On 21 November 2018, WPH raised a court action against Y&G for the losses incurred as a result of the boundary discrepancies. 

Section 11(3) of the 1973 Act provides that where ‘the creditor was not aware, and could not with reasonable diligence have been aware, that loss, injury or damage caused as aforesaid had occurred’ then the prescriptive period commences on, ‘that date there were substituted a reference to the date when the creditor first became, or could with reasonable diligence have become, so aware. 

In 2020, Sheriff Reid considered whether the prescriptive period had started in 2012 or in 2014. If the prescriptive period started in 2012, when WPH commenced construction on the plots, the action would have been raised outwith the five year prescriptive period. However, if the prescriptive period started in 2014, at the time when WPH became aware of the discrepancy, the action would have been raised within the five year period. Sheriff Reid held that the prescriptive period only commenced after WPH became aware of their loss. In other words, the prescriptive period commenced when WPH were informed of the boundary discrepancies. 

Y&G appealed this decision and, in July 2021, the Inner House held that Sheriff Reid had erred in his decision. Instead, the Inner House held that the prescriptive period commenced when the Construction work began. Lord Malcolm held that, irrespective of WPH not being aware of the boundary discrepancies, Section 11(3) requires knowledge if expenditure or other loss in that, ‘there is no scope for a postponement of the start of the five year prescriptive period until the pursuers were told of the problem.’ In applying this, it was held that the prescriptive period started when, ‘it was known that walls had been built and that houses had been sold.’ 

Whilst this appears a harsh application of Section 11(3) for the Appellants, Lord Malcolm acknowledged that the Prescription (Scotland) Act 2018 will ‘supersede the 1973 Act and that part which leads to the result in this case.  Accordingly, the 2018 Act will require it to be demonstrated that the pursuer was aware of the loss and that the loss was as a result of an identified potential defender’s breach of duty. 

It is not yet known whether WPH will appeal to the Supreme Court or when the 2018 Act will come into force. However, the Inner House’s decision clearly indicates that an objective approach ought to be used in determining when the prescriptive period commenced in terms of Section 11(3) of the 1973 Act in line with the earlier Supreme Court authorities on this point.