Scottish Court of Session Decisions

LORD ALLANBRIDGE'S OPINION.—I heard a debate on procedure roll in this action on 27th, 28th and 29th September 1983. The pursuers were represented by Mr Murray and Mr Wylie, the first defenders by Mr Weir and Mr Pinkerton, the second defenders had not lodged defences and were not represented and the third defenders were represented by Mr J. T. Cameron and Mr Dalgety. In the action the pursuers are suing for damages arising out of an alleged defective golf course whose greens require to be reconstructed. According to the pursuers the first defenders contracted to provide them with a new golf course properly designed and constructed. The first defenders employed the third defenders to do the construction work as the main contractors.

Both the first and third defenders argued that the pursuers' present action was time-barred and should be dismissed at this stage. Alternatively, they argued separately that if the action was not time-barred certain of the cases of fault made against them respectively were irrelevant and should not be remitted to probation. [This alternative argument was rejected by Lord Allanbridge and the case is reported only on the question of prescription.] The pursuers, on the other hand, submitted that a proof before answer on the whole pleadings as they stand should be allowed.

In the first speech, Mr Pinkerton for the first defenders referred to sections 6 and 11 of the Prescription and Limitation (Scotland) Act 1973, Dunlop v. M'Gowans 1979 S.C. 22 and 1980 SC (HL) 73 and Avinou v. Scottish Insulation Company 1970 S.C. 128. On the basis of these authorities, Mr Pinkerton argued with reference to the pursuers' pleadings, that by 20th December 1971, when Professor John M. Halliday wrote the letter referred to at pp. 12 D–E, 16 B–D and 20 D–E, the pursuers knew they had had a loss and therefore they had an "enforceable obligation". As a result the five year period within which they required to raise an action commenced and thereafter finished on 20th December 1976. However, the action against the first defenders was not raised until 29th December 1980 and it was therefore time-barred. [His Lordship then referred to the alternative argument on relevancy with which this report is not concerned, and continued.] In the second speech, Mr Dalgety for the third defenders, adopted the first defenders' argument on time bar. He also argued that the third defenders were in an even stronger position than the first defenders on this matter as the third defenders had actually left the site before the remedial work was carried out by John R. Stutt Limited in 1972 and 1973 (see Record p. 20 E). He also said that by the date of Professor Halliday's letter in December 1971 the pursuers knew they had a cause of action and the five year period must have commenced not later than that date as far as the third defenders were concerned. He referred to a number of authorities on the question as to when a "cause of action" arose, namely, Dennis and Another v. Charnwood Borough Council [1982] 3 All E.R. 486 at pp. 490–493 and especially p. 493 e–g, Sparham-Souter and Others v. Town and Country Developments [Essex] Limited and Another [1976] 2 All E.R. 65 at pp. 71a and 75g and Pirelli General Cable Works Limited v. Oscar Faber and Partners [1983] 2 W.L.R. 6 at pp. 11, 12. Mr Dalgety also referred to the cases of Pegler v. Northern Agricultural Implement Company (1877) 4 R. 435 at p. 438 and Healey v. Massey & Son 1961 S.C. 198 at p. 200, as authority for the view that as the pursuers had not denied the terms of the extracts from Professor Halliday's letter as quoted on record (see Record p. 16 B–D) and these were facts within the pursuers' knowledge, they must be held to have admitted these extracts as being accurate.

[His Lordship again dealt with the alternative argument and continued.] In the third speech, Mr Wylie for the pursuers replied to the attacks upon their pleadings made by the first and third defenders' counsel. He said the vital, matter to be considered was when the injuriaand the damnum in the present case first concurred. He said that date was in late 1976 or in May 1977 when the greens first flooded and had to be closed after even moderate amounts of rain (see Record p. 25 C–E) because that was when actual damage to the course first occurred and the pursuers suffered loss. The mere existence of defects did not create damage and in any event, in December 1971 when Professor Halliday wrote his letter, the golf course was still in the course of construction and had not been handed over. It was first handed over in May 1973 when it was nearing completion with some remedial work still to be done which continued until the course was officially opened in September 1973 (see Record p. 24 D–E). At that time and for several years thereafter the course appeared to be satisfactory and the first sign of damage to it and the first damage itself occurred in late 1976 or early 1977 (see Record p. 24 E). The short answer by the pursuers was that there were no averments of any loss or damage to the course until at the earliest late 1976 or May 1977. He referred to Lord Fraser's observations at p. 12 F–G of Pirelli's case supra, where he indicated that a cause of action will not accrue until damage occurs, which (in buildings) will commonly consist of cracks coming into existence as a result of the defect, even though (in English law) the cracks or the defects may be undiscovered and undiscoverable.

Mr Wylie then made a further submission to the effect that, if his previous submission was not accepted, the pursuers could rely on section 6 (4) (a) (ii) of the 1973 Act. In this case the first defenders had assured the pursuers that matters would be put right and had commenced remedial work. The significance of that "error" induced by the first defenders, was that it remained until May 1977 when damage was discovered, so that in terms of the said sub-paragraph the limitation period did not begin to run until that date. Finally, on this matter Mr Wylie submitted that even if the defects discovered in 1971 could be treated as damnum, this was a case where there was separate injuria emerging later which created a sufficiently separate and distinct ground of action. He contrasted the defects referred to in Professor Halliday's letter (see Record p. 16 B–D) with the defects now averred (see Record pp. 29 A to 31 E). He also referred to the case in New Zealand of Mount Albert Borough Council v. Johnson [1979] 2 N.Z.L.R. 234.

[His Lordship again referred to the alternative argument on relevancy and continued.] In the fourth speech, Mr Weir for the first defenders, said he adopted Mr Pinkerton's argument in respect of condescendence 10 [on relevancy] and had nothing further to add on that matter. As regards the matter of prescription, he also adopted his junior's submissions and added it would be helpful to outline a timetable of events in this case and did so. He then stated the correct question was to determine when the pursuers' loss and damage first occurred. He said the golf course was handed over in May 1973 and therefore at the latest this was when the pursuers suffered loss and damage. Defects had appeared much earlier but had not then been put right. Thus in May 1973 the pursuers took over a golf course they knew to be defective and therefore they had then a claim for damages. That was the time their obligation to get a golf course became enforceable. As regards the suggestion that the pursuers were in "error" in terms of section 6 (4) (a) (ii), there were no averments at all to the effect that there was any such error by them and thus such an argument was not open to them. As regards the suggestion that a distinction could be drawn between an alleged 1971 injuria and a later injuria based on the pursuers' pleadings in condescendence 8, he said that rather than rely on the New Zealand case quoted by Mr Wylie, he was content to rely on Scottish authority, namely, Dunlop's case supra, where the Lord Justice-Clerk (Wheatley) quoted with approval at pp. 31, 32, the words of Lord President Inglis in the case of Stevenson v. Pontifex and Wood 15 R. 125. In conclusion, Mr Weir asked me to dismiss the present action in so far as it was directed against the first defenders on the ground that any contractual or delictual obligation on their part had prescribed, but he added that if I did not do so he accepted there should be a proof before answer rather than a preliminary proof restricted to the question of time bar.

[His Lordship again dealt with the alternative argument on relevancy and continued.] Turning to the question of prescription, Mr Cameron stressed that the third defenders were in a different and more favourable position than the first defenders on this matter. Their separate point was that they were not and never were concerned with any remedial work to the golf course. He said that any injuria caused by the third defenders had taken place by the end of 1971. At the time of the A.G.M. of the pursuers on 31st January 1972, the pursuers had received a report from the Bingley Turf Association that the greens were not properly constructed and there was no green drainage. The pursuers then agreed not to accept the course as it stood. The third defenders had completed their work on the course by about July 1971 (see Record pp. 48, 49). Mr Cameron argued that by January 1972 and certainly by May 1973 when the pursuers took over the golf course, the pursuers had suffered damnum because they had incurred the cost of obtaining the report and incurred legal expenses which they could then have recovered from the third defenders apart from also claiming for the defects themselves. Mr Cameron also argued that the present situation was similar to a building under construction sustaining damage due both to a design fault by the architect and workmanship fault by the builder. As soon as the client got the damaged building he had an enforceable claim against both the architect and the builder. If the builder then offered to put the matter right by carrying out remedial work that did not affect the claim against the architect. If the remedial work was eventually successful then no problem would arise but if it was not successful then the claim against the architect could have prescribed if action had not been taken against him immediately the cause of action had arisen. In the present case the pursuers had taken the golf course on the basis that the first defenders would remedy the defects. These defects had not been remedied and the claim against the third defenders had now prescribed. In this situation the action in so far as directed against the third defenders should be dismissed.

[His Lordship again dealt with the alternative argument on relevancy and continued.] On the main question of prescription, Mr Murray referred to the terms of sections 6 and 11 of the 1973 Act and paragraph 1 of the First Schedule to that Act. He said that before any action could be dismissed the Court would require to be satisfied that the provisions of the Act had been satisfied. There must have been an obligation to make reparation which had existed continuously for at least five years before the action had been raised. He said it was originally argued that the date when the injuria and damnum concurred was when Professor Halliday had written his letter in December 1971 but that it was now argued that the date was when the pursuers took over the course in May 1973. However, at May 1973 it was clear that at that date there was no damnum because some remedial work had been carried out and further remedial work still was being carried out. The first fallacy in both defenders' argument was to equiparate defect with damage. As Lord Fraser had said in the House of Lords at p. 12 F of Pirelli, supra, "the plaintiffs cause of action will not accrue until damage occurs". The second fallacy in the defenders' argument was to suppose that the defects or damage seen in December 1971 continued to exist in May 1973 after some remedial work had been done. It was also possible to have a defect which would never emerge into damage.

Mr Murray also argued in reply to Mr Cameron's suggestion that he could have sued the third defenders in May 1973, that by October 1973 the remedial work had been completed and everything appeared satisfactory and there was then no damage. Thus as at October 1973 there could be no damnum and therefore no obligation so that there was no continuity of the obligation which was essential in terms of section 6 (1) of the Act. As regards Mr Cameron's suggestion that as at May 1973 the pursuers would have a claim for the expenses of the report obtained by them in January 1972 and the legal expenses, Mr Murray said these expenses were obtained in mid-contract and before the course was handed over, and whilst the pursuers may have been satisfying their curiosity on these matters, these were not expenses for which they had any legal claim against the third defenders.

Mr Murray also submitted that the saving clause contained in section 11 (3), which is absent in English legislation, also protected the pursuers. They had no reason to know in May 1973 that after the remedial work had been done, that such remedial work had been unsuccessful. He also argued, as submitted by his junior, that the pleadings of the pursuers were apt to include a case of "error" in terms of section 6 (4) (a) (ii). Finally he repeated his junior's argument, founded on the New Zealand case of Mount Albert Borough Council, supra, that by 1973 matters had completely changed because advice had been given to the first defenders (see Record pp. 26 27) and remedial work had been done. Thus different injuria giving rise to different damnum had eventually arisen in May 1977 (see Record p. 25 C–D). On the whole matter Mr Murray asked me to allow a proof before answer on all the pursuers' averments and with all pleas standing.

Having heard the argument of counsel, the main question for me to answer at this stage of the action is when did the injuria and damnum concur so as to give the pursuers a right of action. The sections of the Prescription and Limitation (Scotland) Act 1973 which have primarily to be considered in determining this issue are section 6 (1) and section 11 (1). As was stated by Lord Justice-Clerk Wheatley at p. 31 of the case of Dunlop, supra:—

"The crucial subsection is 11 (1), which provides that for the purposes of section 6 the obligation shall be regarded as having become enforceable on the date when the loss, injury or damage occurred. This determines the point from which the prescriptive period starts to run. ‘Enforceable’ means that there has been created a legal right which can be enforced through the processes of the law. That means that a point has to be reached when there is a concurrence of injuria and damnum. The key question thereby becomes ‘what is damnum?’"

Now, whilst the case of Dunlop was concerned with whether separate items of loss which continued to arise after the initial loss, could be held to constitute separate and distinct causes of action and the Second Division answered that question in the negative, the key question in the present case is also "what is damnum?". On that matter, and in the context of this case, I find the very recent observations of Lord Fraser in the English case of Pirelli, supra, to be of great assistance. At p. 12 F–G, Lord Fraser said:—

"I think, with all respect to Geoffrey Lane L.J., that there is an element of confusion between damage to the plaintiffs body and latent defect in the foundations of a building. Unless the defect is very gross, it may never lead to any damage at all to the building. It would be analogous to a predisposition or natural weakness in the human body which may never develop into disease or injury. The plaintiffs cause of action will not accrue until damage occurs, which will commonly consist of cracks coming into existence as a result of the defect even though the cracks or the defect may be undiscovered and undiscoverable."

It is to be noted that Lord Fraser went on to explain that he did not find the distinction between personal injuries and damage to property drawn in the case of Sparham-Souter, supra (referred to by counsel for the third defenders in this case), convincing and observed that in the later case of Dennis, supra (also referred to by counsel for the third defenders), the Appeal Court had found the distinction surprising. Be that as it may, it is quite clear that Lord Fraser's clear distinction between defect and damage arising in cases of damage to property, is of high authority. It was concurred in by all the other judges in the House of Lords. Whilst the result in Pirelli's case was primarily concerned with the question of when the damage was discovered or was discoverable, a problem which does not arise in Scotland due to the terms of section 11 (3), the distinction between defect and actual damage to a building or other property is of vital importance and must be applied by me in this case. Thus in the case of a golf course any defect in design or workmanship will not give rise to damnum until actual damage is caused to the course. Such damage could be manifested in many ways but water lying on the greens and not draining away is a clear indication of underlying defects which are causing damage and interference on the playing surface.

With that reference to the law, as I understand it, applicable to this case I turn to the facts of this case and the arguments of counsel. The facts can briefly be summarised as far as the question of prescription is concerned. In 1969 and 1970 the first defenders as a development company wished to acquire the pursuers' original golf course and offered to construct a new golf course for them (see Record pp. 7, 8). The first defenders and the third defenders agreed in April 1971 that the third defenders would be the main contractors (see Record p. 9 A–B). It is noteworthy that nothing is said in the pleadings on record as to any finishing date for the construction of the new course or any specific date of entry being given to the pursuers. Whilst the golf course was in the course of construction and before it was handed over to them, the pursuers became aware the greens were flooding and considered that considerable work would be required to remedy this situation and wrote to the first defenders in December 1971 to this effect (see Record p. 16 B–C). The first defenders obtained a report in early 1972 from John R. Stutt Limited and between 1972 and 1973 further works were carried out on the course by John R. Stutt Limited (see Record p. 20 E). During the period from 1973 until 1977 there were no further complaints regarding the greens as there was no cause for complaint (see Record p. 24 E). In May 1973, before the remedial work was completed, the golf course was handed over to the pursuers and that remedial work was completed by September 1973 when the course was officially opened (see Record p. 24 D–E). In late 1976 the greens had for the first time to be closed after even moderate amounts of rain and in May 1977 the Sports Turf Research Institute referred for the first time to drainage problems first emerging (see Record p. 25 C–D). On 29th December 1980 the pursuers raised the present action against the first defenders and brought in the third defenders as defenders on 26th February 1981.

Turning to the arguments of all six counsel which were clearly put forward and which I have already outlined, it was interesting that as the debate continued the first date founded on as the terminus a quo by the first and third defenders, namely, the date of Professor Halliday's letter in December 1971, became more difficult to argue. This was because there was no apparent date agreed for the handing over of the new golf course and as at December 1971 the course was still in the course of construction. That being so it was difficult, if not impossible, to argue that the pursuers had then suffered any loss because they were not then the owners of the golf course. They had a contract to receive a new golf course from the first defenders but it had not then been given to them. For that reason I am of the opinion that the pursuers had suffered no damnum and had no cause of action in December 1971. Mr Cameron, in the fifth speech, tried to argue that the pursuers had incurred expense in obtaining a technical report and legal advice and therefore had a claim against the third defenders as at December 1971. On this matter I agree with Mr Murray that as the pursuers had merely sought advice in mid-contract, which they had no legal right to do as they could have awaited the handing over of a completed golf course, they could not have sued anyone for such expenses incurred before the contract was completed and the golf course handed over. By the time the course was handed over it appeared that the damage to the golf course in respect of flooded greens had been corrected by the remedial work.

The next terminus a quo argued for by both defenders was May 1973 when the golf course was handed over to the pursuers, albeit remedial work was not then finished. The problem regarding this date for both defenders is that by this time there was no damnum, as the matter was explained by Lord Fraser in Pirelli's case. By May 1973 some remedial work had been carried out and as at that date there was then no damage, according to the pursuers' averments, to the playing surface of the golf course. Whether or not there were then underlying defects in the golf course which had not been corrected or eradicated by the remedial work is not conclusive when considering whether or not there was damnum as at that date. What is conclusive and what matters is whether there was actual damage to the playing surface of the golf course or, in any event, in terms of section 11 (3) of the Act, actual damage of which the pursuers were aware or ought with reasonable diligence to have been aware. On the present pleadings in this case I am clearly of the opinion that I cannot at this stage of the case on procedure roll, be satisfied that as at May 1973, injuria and damnum had then concurred so as to give the pursuers an "enforceable obligation" in terms of section 11 (1) of the Act against either the first or third defenders. In fact on the pleadings it would appear that the earliest date they could have had such an obligation would have been in late 1976 when the playing surface of the course was such that the greens had to be closed after even moderate amounts of rain (see Record p. 25 C). Thus the five year period would not have expired earlier than late 1981, and the present action against both defenders was raised before that date and it is therefore not time-barred.

In this situation I am not prepared to dismiss the action at this stage on the grounds of prescription. As it was accepted by all parties at the debate that in that event there should be a proof before answer inter alia on any further questions relating to prescription, I do not consider it necessary or even advisable to comment on the further arguments on prescription submitted to me, namely, the question of "error" in terms of section 6 (4) (a) (ii) and the matter of whether or not it could be argued that there were separate and distinct injuriaand damnum along the lines of the argument founded on the New Zealand case of Mount Albert Borough Council, supra. These arguments are best decided, if necessary, after the facts in this case have been established at a proof.

[His Lordship again dealt with the alternative argument on relevancy and continued.] On the whole matter I therefore allow parties a proof before answer on their pleadings in the amended closed record, as further amended at the bar during the procedure roll debate at p. 46 E of the Closed Record. I should only add, as a matter of interest and not because it has influenced in any way my allowance of such a proof, that this may remove the problem created by the curious feature of the first defenders' second plea-in-law and the third defenders' fourth plea-in-law which were concerned with prescription but which both asked for absolvitor. Thus both defenders had required to ask me to sustain their respective general first pleas-in-law on the ground of prescription and so dismiss the action.