Scottish Court of Session Decisions

[1] This action was raised in the Sheriff Court by means of an initial writ served on 24 April 1997. For the purposes of the procedure which followed thereon the facts were not in dispute. In essence, by missives dated 12, 13 and 17 August, 29 September, 26 and 30 November and 1 December all 1982 between the pursuer and the defender, the parties agreed to enter into a lease of the basement property at 5-7 Old Fishmarket Close/190 High Street, Edinburgh. The purpose of the transaction was to allow the proper development of restaurant premises in the lower part of the building while protecting the integrity of residential premises above. The said missives provided, inter alia, by virtue of paragraph 4 of the letter dated 12 August 1982,

These terms were not repeated in the lease subsequently entered into between the parties.

[2] On 11 June 1990 the pursuer's law agents, Messrs Tods Murray, W.S. wrote to the defender's then law agents in the following terms:

[3] Nearly two years later certain further investigations were carried out at the premises occupied by the pursuer. On 27 April 1992 his architect wrote to him to say that those investigations had revealed that in two respects the basement premises were not adequately separated from the flat above in terms of fire resistance and that in one respect it was not adequately separated in terms of sound deadening. The foregoing defects are founded on by the pursuer in the present action in which it is claimed that they constitute a breach of contract and in particular a breach of paragraph 4 of the letter of 12 August 1982 above quoted. The present proceedings were commenced on 24 April 1997, that is to say, just a few days short of five years after the date of the architect's report in April 1992.

[4] In his defences to the action the defender set out three preliminary pleas. The first of these is a general plea to the competency; the second is a plea to competency on the ground of prescription; and the third is a general plea to relevancy and specification. In due course those pleas came to debate before Sheriff Stoddart. At that debate the sheriff was invited to sustain the first plea in law on behalf of the defender on the ground that the provision in the missives founded on by the pursuer had not been incorporated into the actual lease. The sheriff rejected that submission and repelled the defender's first plea in law. In relation to the second plea in law it seems to have been agreed in the course of the debate that the question of prescription could not be resolved without proof. Consequently the sheriff allowed a proof before answer restricted in the first instance to the question of prescription. Thereafter that preliminary proof was heard by Sheriff Poole and on 1 December 1998 she issued a judgment which was the subject of an appeal to the sheriff principal.

[5] In her judgment the sheriff found in fact that the pursuer was aware in June 1990 that the defender was in breach of contract in respect of the ventilator system in the ceiling space. She also found that at that date the pursuer was aware that the floor of the premises above could be seen; that despite the pursuer's knowledge at that date he made no further investigation until April 1992; and that had the pursuer investigated further in June 1990 he would have discovered that the defender had failed to separate the tenement in accordance with the building warrant and regulations and would have been able to quantify his loss at that date. In the foregoing circumstances the sheriff concluded that the prescriptive period in terms of section 6 of the 1973 Act had begun to run in June 1990 with a consequence that any obligation owed by the defender had prescribed nearly two years before the commencement of the present proceedings.

[6] That decision was appealed to the sheriff principal. As he records, the relevant statutory provisions are to be found in section 6 and section 11 of the Prescription and Limitation (Scotland) Act 1973. Section 6(1) of that Act, so far as relevant, provides:

It was not disputed in the present case that any obligation owed by the defender to the pursuer in terms of the missives of lease was an obligation to which section 6(1) applied.

[7] Section 11(1) of the Act provides:

[8] Before the sheriff principal it was accepted by counsel for the pursuer that injuria and damnum had both occurred in 1982 with the consequence that any obligation owed by the defender had been enforceable from that time. Before us that concession was not departed from on the basis that what was alleged by the pursuer here was not defective workmanship leading to subsequent damage but rather a failure at the outset to do certain things which were required in terms of the contract between the parties. However, the pursuer placed reliance on section 11(3) of the Act which provides as follows:

[9] In the present case the pursuer's position is that he did not become aware of the breaches of contract giving rise to his claim and could not, with reasonable diligence have become so aware, until he received the report from his architect on 27 April 1992. As the sheriff principal notes, if that proposition is well founded in fact and in law, the consequence is that the present proceedings were commenced before the expiry of the prescriptive period. On the other hand, the defender's position, which was accepted by the sheriff after proof, is that the pursuer had the required awareness in June 1990 with the consequence that the present proceedings have been commenced long after the expiry of the quinquennium.

[10] We come now to deal with the arguments advanced in front of the sheriff principal. The sheriff principal recorded these arguments as follows:

[11] The sheriff principal dealt with that argument in the following way:

We would only add at this stage that we agree with the sheriff principal in what he says about the sufficiency of the material before the sheriff and would, looking to this matter of sufficiency of evidence alone, conclude that there was in fact insufficient material to substantiate findings in fact 8, 9 and 10 from which the sheriff deduced her finding in fact and law that the pursuer's claim had prescribed by reason of the 1973 Act.

[12] The sheriff principal then went on to deal with the argument for the defender in the following way.

[13] The sheriff principal then went on to deal with a number of cases which had been quoted to him to which we will return in due course. However, in the whole circumstances he concluded that, whatever else may have been included, the obligation undertaken by the defender in 1982 was a single obligation in respect of the kitchen ventilation system and the provision of fireproofing and soundproofing between the basement and the upper flats which comprised the "separation" obligation referred to in the missives. That being so, it must follow from this opinion that when the pursuer discovered a failure in respect of part of that obligation in June 1990, the prescriptive period in respect of the whole obligation began to run as from that date with the consequence that the defender's obligation to make reparation prescribed in June 1995, that is to say, nearly two years before the commencement of the present proceedings. It followed, according to the sheriff principal, that the appeal must be refused.

[14] Counsel for the pursuer and appellant suggested that the matter involved a short point regarding the nature of a breach of obligation for the purposes of prescription. He referred us to the written grounds of appeal which he had provided and also to a written note of submissions which he said contained a summary of the appellant's argument. In essence he criticised the approach of the sheriff principal which, he said, had been to accept the argument presented before him by the defender's counsel to the extent that there had only been one alleged breach of contract. On the contrary, he said, it was plain from a proper reading of the missives and the subsequent events that there were in fact two obligations, namely, an obligation to provide a proper ventilation system and, secondly, an obligation to provide a proper sound and fireproofing system and thus "separate" the two parts of the building. In his argument any observations or matters brought to the attention of the pursuer in 1990 related only to the first obligation and gave rise to nothing at all that would put the pursuer on notice that the second obligation had itself been breached. Such notice was only given to the pursuer in 1992 when his architect reported on the defects which he had found after intense investigations. If the sheriff principal's approach was correct, namely that there was only one single obligation, a breach of which the pursuer was or ought to have been aware of in 1990, then the legislation concerning prescription would have the effect that the pursuer's claim was out of time. However, he contended that the sheriff principal's approach had been incorrect and that there were in fact two separate obligations and that only the first had been apparent to the pursuer in 1990 and that the second had only become apparent to the pursuer in 1992. That was the question which the sheriff principal ought to have directed his mind to and if he had done so appropriately and properly he would have come to the conclusion that there were two separate and distinct obligations. Counsel for the pursuer pointed out that by June of 1990 all that the pursuer was aware of was that there had been a failure to provide a proper ventilation system. There was nothing in any of the information given to him at that time which indicated that there was any breach of any obligation to provide proper fire and soundproofing. That original failure related to the kitchen part of the premises alone. After the inspection in April 1992 which related to a different part of the premises, namely the store and the bar, he became aware that the fire and sound protection had not been provided as contracted for. In these circumstances there was no obligation on the pursuer in light of the information which he was given in 1990, to investigate the other parts of the premises and to find out whether or not the other obligations in the missives had been complied with. There were no findings in fact in the sheriff's judgment to indicate anything to the contrary. The true question in terms of section 11(3) of the 1973 Act, submitted counsel for the pursuer, was whether there had been an "act, neglect or default" on the part of the defender. In the present case he submitted that there had been separate defaults, namely, a default in respect of the ventilation system and a further default in respect of the provision of proper fire and soundproofing arrangements. In this context counsel for the pursuer referred us to the judgment of Lord MacLean in Sinclair v. McDougall Estates Limited 1994 S.L.T. 76 at page 82.

[15] Counsel for the defender accepted that the test in terms of the 1973 Act was whether or not there had been more than one default on the part of the defender. He accepted that the issue was whether, in proper terms, one was speaking of the same or a different default and he asked the question "How does one determine that in terms of a contract?" In this context he referred us to the cases of G.A. Estates Limited v. Caviapen Trustees Limited (No. 2) 1993 S.L.T. 1045 and Ductform Ventilation (Fife) Ltd. v. Andrews Weathertrim Ltd. 1995 S.L.T. 88 which we did not find particularly helpful in relation to the present issues. Counsel for the defender referred us to the case of Sinclair which he sought to distinguish on the basis that it was not possible to argue that that case provided a principle of general application which could be applied to the present case. That was because in the present case the failures on the part of the defender as alleged by the pursuer all occurred at the same time and therefore constituted one single default. He concluded by saying that the sheriff and sheriff principal were entitled to find as they did.

[16] In our opinion, it is quite plain that the matter falls to be considered as a very short point indeed involving a question of contractual construction. The question is whether or not the missives can properly be said to have imposed one or more obligations upon the defender. We need not rehearse the terms of the missives as we have already explicitly referred to them above. It is clear to us that there was an obligation imposed by that contract upon the defender to do certain operations to the ventilation system in order that odours should not be offensive either to persons using the restaurant premises below or to persons who were residing above those premises in terms of the reconstruction envisaged in that contract. That was the purpose of that particular obligation. Secondly, and separately in our view, there were obligations imposed for reasons of safety and privacy, namely that the division between the lower and upper premises should be separate in terms of fire safety and in terms of soundproofing. That constituted a quite separate obligation from the first. It is clear from the events which were not disputed in terms of the pleadings, that in 1990 all that came to the notice of the pursuer was a failure on the part of the defender to provide the appropriate and proper ventilation system. There was nothing, in our view, in what was disclosed at that time to indicate to him or his advisers that anything was wrong with the safety provisions provided for in respect of fire or soundproofing. In our view what came to the light of the pursuer in 1990 was a "default" in respect of the ventilation provisions in the contract. The defects in respect of the safety provisions regarding sound and fireproofing only became apparent to the pursuer after the investigations conducted on his behalf in 1992. Thus the defects derived from failure to perform separate and distinct obligations. As a matter of law it is quite clear to us that however contractual obligations may be expressed, they can indeed give rise to more than one default giving rise to an obligation to make reparation for loss, injury and damage in terms of the 1973 Act and so, for the purposes of the Act, injuria occurring at different times. That was clearly recognised in the passage in Sinclair v. McDougall Estates Limited above referred to, with which we agree, where Lord MacLean said this:

[17] For those reasons we are satisfied that the sheriff principal erred in the approach which he took to the whole matter and, in particular, in his acceptance of the erroneous submissions made to him on behalf of counsel for the defender to the effect that there was only one obligation and, therefore, could only be one default. We note that had it not been for that submission, he would have taken the view that the sheriff had erred. In all the circumstances, therefore, we allow the appeal to the extent of reversing the decision of the sheriff principal. It follows, in our view, that an appeal having been taken against the decision of the sheriff and, the sheriff principal having expressed the view we above refer to, with which we agree, that we should also reverse the decision of the sheriff. In those circumstances the appropriate course for us is to recall the interlocutors of 1 December 1998 and 20 April 1991, repel the defender's first and second pleas-in-law and quoad ultra remit the cause to the sheriff to allow a proof before answer on the parties' whole remaining pleas.