Scottish Court of Session Decisions

 

FIRST DIVISION, INNER HOUSE, COURT OF SESSION

[2015] CSIH 30

[A532/11]

Lord President

Lord Menzies

Lord Drummond Young

 

OPINION OF THE LORD PRESIDENT

in the Reclaiming Motion

in the cause

HIGHLANDS AND ISLANDS AIRPORTS LIMITED

Pursuer and Respondent;

against

SHETLAND ISLANDS COUNCIL

Defender and Reclaimer:

Act:  Reid QC, Duthie;  Burness Paull LLP

Alt:  Keen, QC, MacColl;  Brodies LLP

21 April 2015

Introduction

[1]        This is a reclaiming motion from an interlocutor of the Lord Ordinary dated 4 February 2014.  It raises a question as to the interpretation of sections 6 and 9 of the Prescription and Limitation (Scotland) Act 1973 (the 1973 Act) and, in particular, a question as to the meaning of the expression “relevant claim” in section 6(1)(a). 

 

The Prescription and Limitation (Scotland) Act 1973

[2]        Sections 6 and 9 of the 1973 Act, so far as relevant, provide as follows:

 

“6        Extinction of obligations by prescriptive periods of five years

(1)        If, after the appropriate date, an obligation to which this section applies has subsisted for a continuous period of five years –

            (a)        without any relevant claim having been made in relation to the obligation, and

            (b)        without the subsistence of the obligation having been relevantly acknowledged,

then as from the expiration of that period the obligation shall be extinguished …

 

9          Definition of ‘relevant claim’ for purposes of sections 6, 7 and 8

 

(1)        In sections 6 [7 and 8A] of this Act the expression “relevant claim” in relation to an obligation, means a claim made by or on behalf of the creditor for implement or part-implement of the obligation, being a claim made-

            (a)        in appropriate proceedings; …”.

 

The action

[3]        The pursuer operates Sumburgh Airport, Shetland.  In 2005 it entered into a contract with the defender for professional services in relation to a runway extension.  On 1 November 2011 the pursuer raised this action.  It concluded inter alia as follows - 

(1)        for declarator that the defender is in breach of its contract with the pursuer
entered into in or about January 2005 for the provision by the former to the latter of professional services relative to the extension of runway 09/27 at Sumburgh Airport, Zetland, et separatim is in breach of its duty of care to the pursuer in relation to the provision of those services; and that it is accordingly liable to the pursuer in damages et separatim in reparation for the loss suffered by the pursuer as a result of those breaches or either of them;

 

(2)        for declarator that in the provision of services by the defender to the pursuer
 under the contract for the provision of professional services by the former to the latter in connection with the extension of runway 09/27 at Sumburgh Airport, Zetland, entered into between them in or about January 2005, “defects” within the meaning of clause 41 of that contract have arisen, and that the defender having failed to correct the same, it has become liable to pay the pursuer the cost of repairing the same pursuant to that clause.”

 

[4]        There was no conclusion for payment of damages because, according to the pursuer, the extent of the alleged loss could not then be properly quantified.  It is agreed that the action was raised within the prescriptive period. 

[5]        In May 2013 the pursuer lodged a proposed amendment to add a conclusion for payment by the defender of £14,210,000, with interest.  In October 2013 the closed record was opened up and amended accordingly.  It is agreed that by then the prescriptive period had expired.  In answer 34.1 the defender pled that when the action was raised, it had declaratory conclusions only.  Therefore the summons advanced no claim for implement of any obligation on the part of the defender to make reparation to the pursuer. 

[6]        The Lord Ordinary heard parties on the Procedure Roll on the defender’s fourth and fifth pleas in law; namely –

“4.        Esto the defender would otherwise be under any obligation to make payment to the pursuer by way of reparation or under the contract (which is denied), any such obligation having been extinguished by the operation of prescription, the defender should be assoilzied.

 

5.         The pursuer’s declaratory conclusion not being claims for implement of any obligation to make reparation arising under the parties’ contract or in delict, those conclusions have not interrupted the running of prescription and, accordingly, the pursuer’s averments in Article 34.1 are irrelevant and should be excluded from probation.”

 

The decision of the Lord Ordinary

[7]        The Lord Ordinary accepted the pursuer’s submission that she should adopt a purposive approach to the statutory interpretation of sections 6 and 9.  She accepted that account could be taken of authorities that preceded the Act.  She also took account of the recommendations and approach of the Scottish Law Commission, on whose Report, Reform of the Law Relating to Prescription and Limitation of Actions (Scot Law Com No 15 (1970)), the 1973 Act was based; and in particular, its proposal to “clarify, co-ordinate and modernise” the law of prescription rather than to introduce new law or signify a change from the underlying principles of the common law.  In essence the Lord Ordinary concluded that since prescription involved curtailment of rights, the legislation fell to be construed in a way that minimised that effect.  She considered that the action specified the nature of the alleged liabilities in detail.  Only the quantification of loss was absent.  In this respect the case was to be distinguished from Wylie v Avon Insurance Ltd (1988 SCLR 570), to which I shall refer, since the obligation in question in that case was not addressed in the declaratory conclusion.  This case did not seek declarator of the mere existence of obligations, it specified the nature of the loss and damage that followed from the breach of them.  In the view of the Lord Ordinary the action constituted a claim in part-implement of the obligations alleged.  It gave fair notice of the claim.  She could see no basis for any prejudice or disadvantage to the defender.  The action served justice in the protection of rights.  It was in accordance with good practice that pleadings should be made only where there was a proper evidential basis for them. 

[8]        The Lord Ordinary therefore excluded the averments in answer 34.1 from probation, sustained the pursuer’s fifth plea in law, repelled the defender’s fourth and fifth pleas in law and allowed a proof before answer.   That is the interlocutor that is reclaimed against.

 

The grounds of appeal

[9]        The defender’s grounds of appeal are that the Lord Ordinary erred (1) in holding that the declaratory conclusions seek “part-implement” of the contractual and delictual obligations in respect of which the pursuer now seeks payment; (2) in holding that the action gives fair notice of the claim; (3) that the action serves justice in the protection of rights and is consistent with the underlying purposes of the 1973 Act; and (4) in placing weight on the pursuer’s argument that it felt that it was unable properly to quantify its claim.

 

 

Conclusions
The approach to the interpretation of sections 6 and 9
[10]      I agree with the decision of the Lord Ordinary.  A “relevant claim”, so far as is material to this action, is a claim made in implement or part-implement of the obligations, contractual and delictual, on which the action is founded and is a claim made in appropriate proceedings (s 9(1)(a)).

[11]      Section 4(2)(a) implies that the requirement that the proceedings should be “appropriate” refers to the forum in which the proceedings are brought rather than to the form that the proceedings take (MRS Hamilton v Baxter 1998 SLT 1076).  The present proceedings are therefore appropriate.

[12]      It is not disputed that if the claim can be said to have been made only when the amendment was allowed, the claim has prescribed.  The short question therefore is whether the declaratory conclusions in this action constituted the making of a relevant claim. 

[13]      The defenders insist that the pre-1973 law is of no relevance to that question since the purpose of the 1973 Act was to put the law of prescription on a new footing.  I do not agree.  In my view, the 1973 Act altered the rules of prescription, for example in relation to the period of the short negative prescription and the cases to which it applied; but it did not alter the principles on which prescription is held to occur.  In Central SMT Co Ltd v Lanarkshire CC (1949 SC 450) this court held that a conclusion for declarator of liability was sufficient to prevent the operation of a time bar (cf also Lancashire Textiles (Jersey) Ltd v Thomson Shepherd & Co Ltd 1985 SC 135, Lord Davidson at p 140).  That view was consistent with the principle that a declarator of liability is the first stage in every petitory action, whether or not such a declarator is expressly concluded for (Union Electric Co v Holman & Co 1913 SC 954, Lord President Dunedin at pp 957-958).  In my view, the 1973 Act does not abridge these principles.  

[14]      But even if one interprets sections 6 and 9 in isolation from any prior case law, the answer, in my opinion, is the same.  It is to be found by reference to the apparent purpose of section 6, namely that an informal intimation of a claim, for example by a solicitor’s letter, will not suffice to interrupt the running of prescription.  The claim must be made formally by way of litigation. 

[15]      At first sight it would seem obvious that in this case the sole purpose of the summons, as originally framed, was to establish a liability that would entitle the pursuer to damages the claim for which would be formulated in due course.     Against that, counsel for the defender asserted that, as a general rule, a declaratory conclusion cannot constitute the making of a relevant claim.  In the court below and in this court counsel relied for that proposition on Wylie v Avon Insurance Co Ltd (supra).  In my view, that proposition is unsound.  In Wylie v Avon Insurance Co Ltd the pursuer sought merely a declarator of the existence of a contract.  That conclusion gave the defender no notice of any remedy that the pursuer sought, nor notice of the provisions of the contract on which the pursuer founded.   In the words of the court, it raised only an abstract, academic question. 

[16]      In a case such as this the question whether a declaratory conclusion constitutes the making of a relevant claim falls to be determined by reference to the terms in which declarator is sought and to the condescendence and pleas in law that support it.  That, I think, reflects the view that there should be a practical rather than a technical approach to the interpretation of the 1973 Act (Thomas Menzies (Builders) Ltd v Anderson 1998 SLT 794).  In this case, the declarators sought directly impute contractual and delictual liabilities to the defender.  The condescendence then specifies in detail the contract on which the action is founded, the duties on the part of the defender to which the contract gave rise, and the respects in which the defender is said to have been in breach of the contract and of certain duties of care.  It then expressly avers that these breaches have caused the pursuer to sustain financial loss for which the pursuer seeks damages; and that by reason of the complexity of the claim, the damages cannot yet be precisely quantified.  The basis of the claim is then epitomised in the pleas-in-law. 

[17]      Counsel for the defender submitted that in its original form the summons at most indicated the likelihood that the pursuer would make a claim; but did not make the claim itself.  I do not agree.  On a fair reading, the summons left the defender in no doubt that a claim was being made, that it was a claim for payment and that precise quantification of it would follow in due course.  That, in my view, was sufficient to constitute the making of a relevant claim.  It was plainly a claim in part-implement of the defender’s alleged obligations, being a definitive step in the process of enforcing them. 

[18]      I find support for this view in the decision of the House of Lords in Esso Petroleum Co Ltd v Hall Russell & Co Ltd (1988 SLT 874).  In that case the owner of a tanker that collided with a jetty at which it was being berthed sought recovery of certain losses from the builder of the berthing tug that had cast off its line and put the tanker out of control.  It also sought declarator that if any body or person should recover from it the costs of repairing and reinstating the jetty, it would be entitled to be reimbursed by the builder of the tug and certain other third parties.  The Court of Session held inter alia that the claim for declarator was irrelevant.  The House of Lords held that the apparent statutory liability of the pursuer to the owners of the jetty was sufficient to entitle it to the declaratory conclusion on the view that it had a plain interest to protect itself against a possibility of prejudice that was by no means fanciful or unreal (Lord Jauncey at p 886G-H).  That was plainly a reference to prescription.  In that case the declarator sought was a declarator of a liability that might not in the event arise.  In this case, the declarator sought is of an existing liability.

[19]      My conclusions are in line with those of Howie J in the Cape Provincial Division in Cape Town Municipality v Allianz Ins Co Ltd (1990 (1) SA 311(C)), where, although in the context of differently worded provisions, he rejected an argument similar to that advanced for the defender in this case. 

[20]      If the pursuer when raising this action had simply made its best estimate of its loss on the information then available and had made a formal averment that the sum sued for was a reasonable estimate of the loss and damage sustained by it, the question of time bar would not have arisen.  The pursuer would then have been free to adjust or amend the claim, even after the expiry of the prescriptive period, in the light of further and better information (Devos Gebroeder NV v Sunderland Sportswear Ltd 1990 SLT 473, at 477H).  That, I think, indicates how contrived the case for the defender is. 

 

Disposal

[21]      I propose to your Lordships that we should refuse the reclaiming motion. 

 

 

FIRST DIVISION, INNER HOUSE, COURT OF SESSION

[2015] CSIH 30

[A532/11]

Lord President

Lord Menzies

Lord Drummond Young

 

OPINION OF LORD MENZIES

in the Reclaiming Motion

in the cause

HIGHLANDS AND ISLANDS AIRPORTS LIMITED

Pursuer and Respondent;

against

SHETLAND ISLANDS COUNCIL

Defender and Reclaimer:

Act:  Reid QC, Duthie;  Burness Paull LLP

Alt:  Keen, QC, MacColl;  Brodies LLP

21 April 2015

[22]      I am in complete agreement with your Lordship in the chair, in respect of both reasoning and disposal of this reclaiming motion.  I have nothing further to add.

 

FIRST DIVISION, INNER HOUSE, COURT OF SESSION

[2015] CSIH 30

[A532/11]

Lord President

Lord Menzies

Lord Drummond Young

 

OPINION OF LORD DRUMMOND YOUNG

in the Reclaiming Motion

in the cause

HIGHLANDS AND ISLANDS AIRPORTS LIMITED

Pursuer and Respondent;

against

SHETLAND ISLANDS COUNCIL

Defender and Reclaimer:

Act:  Reid QC, Duthie;  Burness Paull LLP

Alt:  Keen, QC, MacColl;  Brodies LLP

21 April 2015

[23]      I agree with the Opinion of your Lordship in the chair that the reclaiming motion should be refused for the reasons stated, and I have nothing to add.