Scottish Court of Session Decisions

You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> AGRO INVEST OVERSEAS LIMITED AGAINST STEWART MILNE GROUP LIMITED AND AGRO INVEST OVERSEAS LIMITED AGAINST MORGAN ASSOCIATES AND AGRO INVEST OVERSEAS LIMITED AGAINST ROBERT TREMBATH T/A TREMBATH ASSOCIATES [2018] ScotCS CSOH_120 (18 December 2018)
URL: http://www.bailii.org/scot/cases/ScotCS/2018/[2018]_CSOH_120.html
Cite as: 2019 GWD 2-26, [2018] CSOH 120, [2019] BLR 187, [2018] ScotCS CSOH_120

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OUTER HOUSE, COURT OF SESSION

[2018] CSOH 120

CA85/16, CA132/16, CA131/16

OPINION OF LORD CLARK

In the causes

AGRO INVEST OVERSEAS LIMITED

against

Pursuer

STEWART MILNE GROUP LIMITED

And

Defender

AGRO INVEST OVERSEAS LIMITED

Pursuer

against

MORGAN ASSOCIATES

Defender

And

AGRO INVEST OVERSEAS LIMITED

Pursuer

against

ROBERT TREMBATH t/a TREMBATH ASSOCIATES

Agro Invest Overseas Limited v Stewart Milne Group Limited

Pursuer: McColl QC, McKenzie; Brodies LLP

Defender: Johnston QC, Walker QC; Anderson Strathern LLP

Defender

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Agro Invest Overseas Limited v Morgan Associates

Pursuer: McColl QC, McKenzie; Brodies LLP

Defender: Morton sol-adv, BTO

Agro Invest Overseas Limited v Robert Trembath t/a Trembath Associates

Pursuer: McColl QC, McKenzie; Brodies LLP

Defender: Marney; DWF LLP

18 December 2018

Introduction

[1] In 2007, the pursuer, Agro Invest Overseas Limited (“Agro”) entered into a series of

contracts for the design and construction of works at the Ben Alder Estate, Dalwhinnie,

Inverness-shire. For present purposes, four separate locations of the works are relevant: the

leisure centre, situated in the main lodge building at basement level; the breakfast room, also

situated in the main lodge building, at the level above the basement; the north tower

extension to the main lodge building; and a new private chapel and a beach turret,

constructed on the shore of the loch, away from and not physically linked to the main lodge

building.

[2] Stewart Milne Group “(SMG”) was appointed as the main contractor, with the

building contract providing for sectional completion of the works. Morgan Associates

(“Morgan”) was appointed as the civil and structural engineer for inter alia the leisure centre.

Robert Trembath (“Mr Trembath”), trading as Trembath Associates, was appointed as the

architect for the part of the works at the chapel and beach turret.

[3] In April 2015, Agro raised separate actions against SMG, Morgan and Mr Trembath.

In the case against SMG, the summons was served on 28 April 2015. The claims against

SMG concern losses allegedly sustained as a result of: (i) water ingress problems in the

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leisure centre, breakfast room, north wing extension, the chapel and the beach turret; and (ii)

structural issues affecting the chapel and the beach turret. The action against SMG proceeds

upon the basis of alleged breaches of contract. In the case against Mr Trembath, the

summons was served on 29 April 2015. That claim concerns alleged defects in the works at

the chapel. It is based upon breach of contract and fault. In the case against Morgan, the

summons was served on 30 April 2015. That claim concerns losses allegedly sustained by

reason of water ingress problems caused by design defects in the leisure centre. It is based

upon breach of contract and fault. Agro also sued another firm of architects which had been

involved in the design of part of the works, but that action has been resolved. In due course,

in the action against SMG, third party notices were served by SMG on Morgan and

Trembath and they were convened as third parties in that action.

[4] SMG and Morgan take issue with whether, if loss has been sustained in relation to

the alleged defects in the leisure centre, the breakfast room and the north wing extension,

Agro has suffered loss. Another entity, Compania Financiera Waterville SA, (“CFW”) a

Panamanian registered company, is the owner of the land on which the leisure centre,

breakfast room and north wing extension are situated. Agro claims that it had entered into

an oral agreement with CFW that Agro would meet the costs of repair of defective work.

SMG and Morgan argue that the basis for liability under the oral agreement has not been

made out and further that any obligation on the part of Agro, owed to CFW, to meet the

costs of repair must have been extinguished by prescription. SMG, Morgan and

Mr Trembath also contend that any obligation they each may have had to make reparation

to Agro has been extinguished by prescription. All three cases called together before me for

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a preliminary proof before answer on these matters. SMG also raise an additional point

concerning an alleged waiver by Agro of its right to sue SMG.

[5] I reached the view that the appropriate course was to issue a single Opinion, dealing

with all of the actions, rather than issuing three separate Opinions in each of which many

similar points would require to be rehearsed. The primary factors which influenced that

decision were that: (i) the background to each action was similar; (ii) the actions had been

heard together; (iii) it had been agreed between the parties that the evidence in one action

would be evidence in the other actions; (iv) the parties had, to some extent, relied in their

submissions on the evidence in the other actions; and (v) submissions by a defender in one

action were on occasion adopted by a defender in another action. One consequence of that

approach is that the resulting Opinion is longer than usual.

[6] I have adopted the following structure: firstly, to deal with the issue of whether Agro

has suffered loss in respect of alleged defects in the leisure centre, breakfast room and north

wing extension, including the question of whether any obligation owed by Agro to CFW has

been extinguished by prescription (“Issue 1”); secondly, to deal with the issue of whether

any obligation owed by each of the defenders to Agro has been extinguished by prescription

(“Issue 2”); and then lastly to deal with the issue of the alleged waiver by Agro of its right to

claim against SMG (“Issue 3”). Before turning to address these issues, I make the following

brief and general observations in relation to the evidence.

The evidence

[7] Evidence was led over a period of eight days. Factual evidence was given by the

following witnesses: Alexander McKay, who acted (until July 2014) as the client

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representative of Agro for the purposes of the building project; Brendan McKenna, a

chartered quantity surveyor formerly employed by Riddet Ltd, responsible for co-ordination

of aspects of the project and financial administration on behalf of Agro; William Lindsay, a

chartered building surveyor whose firm took over, in July 2014, the role formerly carried out

by Alexander McKay; Dr Ulrich Kohli, an attorney and author based in Switzerland, who is

a director and the president of Agro; Dr Guido Urbach, an attorney from Switzerland, who

is also a director of Agro; David Fyfe, a maintenance and quality manager for SMG;

Douglas McCusker, formerly the area construction manager of SMG; Alexander Burnett, a

chartered structural engineer and former partner in Morgan; James Welsh, the site

construction manager with SMG; and Robert Blair, a regional quantity surveyor for SMG.

There was also expert evidence led on behalf of each party. Neil Clarkson, a consultant civil

engineer, gave expert evidence on behalf of Agro. Morgan’s expert, William Reid, a

chartered civil, structural and highway engineer, gave expert evidence in relation to the role

of Morgan as consulting engineer. Donald Canavan then gave evidence, as an expert

architect, on behalf of Mr Trembath. Lastly, Hamish Clark, a chartered architect, gave expert

evidence on behalf of SMG.

[8] In view of the fact that the main aspects of the evidence relied upon by the parties are

set out later, in the summary of the parties’ respective submissions, and in the reasons I give

for my decision, I do not intend at this point to narrate the evidence in any real detail.

Instead, I will simply identify the main matters covered. The key strands of the factual

evidence included the entering into of an oral agreement between Agro and CFW, the roles

of each of the defenders in respect of the works, the building contract, the carrying out and

completion of the works, the occurrence of water ingress in various locations and at various

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points in time, discussions about remedial works and steps taken by the parties in that

regard. The evidence about the works covered matters relevant to practical completion,

including the absence of any certificate of practical completion, the dates when sections were

completed, the timing of when SMG left the site, and when the defects liability period ended

and retained monies were released. The evidence about water ingress included reference to

events in 2008 and 2009, including at the leisure centre, the breakfast room and the chapel,

the application of waterproof render in the basement, reference to email correspondence

(particularly on 25 November 2009) regarding incidents of water ingress in various

locations, and thereafter about further incidents of water ingress in March 2011, in January

to March 2012, and at various dates in 2014. There was also evidence about the installation

by SMG of pumps, in about July 2011, to remove water from the basement.

[9] Much of the expert evidence related to the incidents of water ingress and whether a

person in the position of the pursuer, exercising reasonable diligence, ought to have taken

steps to investigate these incidents, resulting in the nature and causes of the problems being

ascertained.

[10] On behalf of the pursuer, it was submitted that the court should treat the evidence of

Mr Canavan (the expert who gave evidence on behalf of Mr Trembath) with significant care.

It was contended that, in giving his evidence, Mr Canavan at times gave the clear impression

that he was present to act as an advocate for the position of his client, and, in particular, was

prepared to engage in speculation, in the interests of his client. Further, it was argued that

Mr Canavan had relied upon things he had been told about Mr Trembath’s position on

factual matters, but there had been no opportunity for the pursuer to explore those factual

matters with Mr Trembath, who had not given evidence. Similarly, the court was invited on

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behalf of the pursuer to treat the evidence of Mr Reid (Morgan’s expert) with significant

care. It was said that he had relied upon material which was of doubtful relevance and had

not attempted to assess the costs of the investigative testing he suggested as being

reasonable for the pursuer to have carried out. It was further argued that SMG’s expert

witness, Mr Clark, had acted as an advocate, his report being partial (omitting matters that

did not favour his client’s position) and putting points, in his evidence, somewhat

pejoratively when there was no need to do so. Reference was made to Kennedy v Cordia

(Services) LLP 2016 SC (UKSC) 59. In addition, Mr Welsh’s recollection of matters was said

to be particularly poor.

[11] Understandably, given the passage of time, there were certain areas of the factual

evidence which were somewhat vague, including aspects of the evidence of Mr Welsh. I

have taken that into account. Each one of the factual witnesses, however, appeared to me to

be doing his best to tell the truth. As to the expert witnesses, where an expert has neglected

to give proper consideration to a relevant matter which goes against the views he has

expressed, and which was sufficiently obvious that on a balanced approach it plainly

required consideration, that can be a cause of real concern. At one level, it can demonstrate

that an expert is being partisan and dogmatic and hence can materially undermine his

evidence. While both Mr Canavan and Mr Clark were forthright about the views that they

expressed, it seemed to me that they were doing no more than vigorously defending their

own opinions and reasoning, rather than being partisan. In relation to Mr Clark, he gave an

explanation as to why the matters raised by Senior Counsel for the pursuer were omitted.

While not entirely cogent, it satisfied me that he was not seeking in any way to present a

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biased view or to otherwise mislead the court. The issues raised about Mr Reid’s evidence

go to questions of weight and I have had regard to them in that respect.

Issue 1: Does Agro have a right to recover for the alleged losses in respect of the leisure

centre, breakfast room and north wing extension?

The averments on Issue 1

[12] In Article 2 of Condescendence in the SMG action, the pursuer averred:

“The pursuers are an owner of part of the Ben Alder Estate, Dalwhinnie. In about

2007, the pursuers and the other owners of the relevant parts of the Estate had

decided to undertake significant development work at and about that part of the

Estate known as “the Lodge”. This work included the construction of: (a) an

underground (or basement level) spa and leisure centre; (b) a north tower extension

to the main lodge; and (c) a breakfast room above the underground spa and leisure

centre. The underground spa and leisure centre and the north tower extension were

to be situated within an area owned by Compania Financiera Waterville SA, a

Panamanian registered company. In addition, a private chapel and beach turret

(linked to the chapel by underground transept) was also to be built as part of the

project. These were located in an area away from (and were not physically linked to)

the main Lodge. The chapel and turret were to be situated within areas owned by

the pursuers (in respect of a 75% pro indiviso share) and [eight named individuals]

(each to the extent of a 3.125% pro indiviso share). The pursuers were the party with

whom the defenders contracted in respect of the development works. The pursuer

acted as the development agents and principal developers in respect of this

construction project for the other owners. The pursuers are the party that were liable

to the defenders for their fees and have to bear the costs of the losses arising from the

defenders’ breaches of contract. Pursuant to a verbal agreement entered into

between Compania Financiera Waterville SA and the pursuer in 2006, the pursuer

acted as agents and principal developers for that company in respect of the

aforementioned construction project in so far as it concerned works on that part of

the Estate owned by that company. Pursuant to that agreement, the pursuer is liable

to meet the cost of repairing any defects in such works.”

[13] In response, both SMG and Morgan averred that any obligation on the part of the

pursuer to make reparation to CFW had prescribed. SMG averred that the pursuer had

suffered no loss. Morgan averred that the pursuer had no title or interest to sue for loss or

damage sustained by CFW.

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Submissions on Issue 1

Submissions for SMG

[14] The submissions for SMG on this issue can be summarised as follows. The pursuer

had advanced no pleaded basis as to why it should be entitled to claim for losses relating to

the 25% share of the chapel and beach turret that is owned by the eight named individuals

mentioned in Article 2 of Condescendence. There was no mention of any verbal or other

agreement with them or that there was a duty to account to them in respect of any damages

that might be recovered. All that remained was the argument concerning agency, which

was bound to fail. The pursuer’s argument only sought to explain why the pursuer

contended it could sue for the loss incurred in relation to those parts of the estate owned by

CFW.

[15] In that regard, the only evidence in relation to the verbal agreement with CFW was

to be found in the witness statements of Dr Urbach and Dr Kohli. The evidence of the

former was of little assistance: he became a director of Agro only long after the events in

question and evidently relied on what he was told by Dr Kohli. No evidence was led as to

why Swiss law was relevant. No evidence was led that CFW had raised proceedings against

Agro. The existence of any such proceedings was not averred in the pleadings. No evidence

was led that Agro had acknowledged the subsistence of the alleged liability to CFW.

[16] It was accepted in principle that the general basis for the claim advanced by the

pursuer could be relevant in law. If the pursuer had an extant liability to the true owners

which had arisen through breach of contract by the defender, in principle the pursuer may

be able to pass on that liability to the defender. On the evidence, however, the pursuer had

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not made a relevant case for liability of this kind. The available evidence was either of very

poor quality, or irrelevant, or incompetent, or indeed suffered from all of these deficiencies.

[17] In particular, there was no evidence about who made the agreement; where they did

so; the precise terms of the agreement; or the applicable law. Both witnesses stated in their

witness statements that the agreement was not documented in writing. In his evidence in

chief, however, Dr Kohli stated that clarifications of the oral agreement were recorded in a

written memorandum of understanding (“MOU”). He did not explain why, or when, this

was done. The discrepancy between his written and oral evidence raised serious doubts as

to the reliability of his evidence as a whole. It appeared that the best evidence of the terms

of the agreement between Agro and CFW would be the MOU. But that had not been

produced to the court.

[18] The question of whether Agro remained liable in contract to CFW was a question of

law for the court. The views of witnesses about this question of law were entirely irrelevant.

Furthermore, in view of the passage of time between the allegedly defective work being

done and the date of the preliminary proof, any liability as between the pursuer and CFW

no longer subsisted, it having been extinguished by prescription. There were no averments

that the period had been interrupted by a claim or an acknowledgement, and so there was

no loss in respect of which the pursuer ought to be indemnified. The suggestion made on

behalf of Agro in oral submissions that there was a relevant acknowledgement as a result of

the raising of the actions against SMG and Morgan by Agro stretched the concept of

reasonable acknowledgement beyond its proper scope. The submissions made on behalf of

Morgan were adopted by SMG. The pursuer had failed to make a case for any recoverable

loss.

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Submissions for Morgan

[19] The submissions for Morgan on this issue can be summarised as follows. Agro had

failed to prove on the balance of probabilities that it had title and interest (a sufficient legal

standing) to pursue a claim for the cost of repairing defects in the leisure centre. Put another

way, Agro had failed to prove loss. Agro had failed to establish the specific terms of the

alleged oral agreement. On the evidence, it was not open to the court to find that Agro

owed any liability to CFW. The evidence of the pursuer’s witnesses that Agro remained

liable was irrelevant. Their beliefs did not establish the terms of the oral agreement, and did

not provide a sufficient basis for a finding by the court that, pursuant to the agreement,

Agro remained liable. There was a lack of any proof of CFW making a relevant claim, or

Agro acknowledging that claim.

[20] While it was accepted that both witnesses were credible and reliable, Dr Kohli’s

evidence left open the possibility that he did not actually participate in the oral agreement or

was not present when the discussions took place, and so could not speak to what was

allegedly agreed. This significantly reduced the weight of his evidence. Dr Kohli’s evidence

as to the terms of the agreement clearly only reflected his stated belief. It was not an attempt

by him to recall the terms of the oral contract, but an attempt to explain his view of the effect

of the agreement. It seemed likely that this belief about the pursuer remaining liable had

been steered by unconscious bias (Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC

3560 (Comm)) which meant that less weight should be given to it. Further, many

ambiguities were left on key matters and this also substantially reduced the weight to be

given to this evidence.

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[21] In the circumstances of this case where the oral agreement is alleged to have

occurred approximately eleven years before the proof started, there was much to be said for

the approach that documentary material is the principal source of evidence (Gestmin, supra).

Agro had failed to lodge the MOU and this severely impacted upon the weight which

should be given to the witness evidence led about the oral agreement. The comments of

Arden LJ in Wetton (as Liquidator of Mumtaz Properties) v Ahmed and others [2011] EWCA Civ

610, to the effect that contemporaneous written documentation is of the very greatest

importance in assessing credibility, were of significance. Applying that principle to the

position in this case, it was appropriate to infer from the fact the MOU was missing from the

proof, having not been lodged, that it did not support Agro’s case and that there was no

clause in it making Agro liable to CFW for the cost of repair.

[22] It was clear from the witness statement of Dr Urbach that he relied on what Dr Kohli

told him. He was not an officer of the company in 2006. His evidence added nothing to

what Dr Kohli said. His evidence should carry no weight at all.

[23] Much, if not all, of the evidence as to the terms of the oral agreement was hearsay

evidence. Hearsay evidence is admissible, but the task facing the court is to decide how

much weight to give it in all the circumstances (Polanski v Conde Naste Publications Limited

2005 UKHL 10 at 74; Welsh v Stokes 2008 1 WLR 1224; TSB Scotland plc v James Mills Montrose

Limited (in receivership) 1992 SLT 519; Lynch v Lynch 1998 SLT 672). In any event, the

evidence was vague and also wholly unreliable, and should carry no weight.

[24] It was a surprising feature of this case that not only did Agro not lead evidence about

which of their own officers agreed things in 2006,but they also did not lead evidence from

any witness from the fellow subsidiary CFW to speak to the entering into of the oral

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agreement or its terms. This also affected the weight of the evidence. Agro had also failed

to prove what choice of law applied in respect of the oral agreement and the claim should

therefore simply be rejected.

[25] Turning to the question of whether Agro remained liable, as a matter of law, the

hurdle which Agro required to overcome in order to discharge the onus of proof, in respect

of prescription, was to demonstrate that its obligation to indemnify CFW, as at the date that

company sustained loss, injury and damage, had not been extinguished. To do that Agro

required to prove when CFW’s loss, injury and damage occurred, and be able to

demonstrate that either a relevant claim by CFW was made, or that the obligation was

relevantly acknowledged within the five year period or that the running of prescription was

postponed or interrupted. The issue of the starting date for prescription of CFW’s claim

against Agro turned on section 11(1) of the 1973 Act, and on when CFW suffered loss, injury

or damage.

[26] Reference was made to: David T Morrison & Co Ltd t/a Gael Home Interiors v ICL

Plastics Ltd 2014 SC (UKSC) 222; Strathclyde Regional Council v W A Fairhurst & Partners 1997

SLT 658; Pelagic Freezing (Scotland) Limited v Lovie Construction Limited [2010] CSOH 145;

Stewart Milne Westhill Limited v Halliday Fraser Munro [2016] CSOH 76; Johnston, Prescription

and Limitation (2nd ed, at 4.23 to 4.26); Scottish Law Commission, Discussion Paper on

Prescription (no 140, paragraph 5.8); and Homberg Houtimport BV v Agrosin Private Ltd

[2004] 1 AC 715.

[27] Against this background, the date of CFW’s loss, injury or damage could be either

the date when: (a) the building was practically completed and handed over to CFW; or (b)

physical damage first took place. Duke of Portland v Wood’s Trustees 1926 SLT 321

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demonstrated that, in this case, it was appropriate to treat loss, injury and damage as having

been sustained by CFW when it took possession of the property, as the value of CFW’s asset

at that point was not what it should have been but for the latent defects. It would not be a

sensible construction of the oral agreement (if it was found to exist and to be in the terms

stated in evidence) to conclude that Agro became liable to CFW at some earlier point in time.

CFW therefore suffered material loss, injury and damage on one of the following dates, and

the obligation owed by Agro to CFW would be extinguished by prescription after the five

year period following thereon: 31 July 2009, being the date of practical completion; which

failing, 25 November 2009, being the date of physical damage; which failing, 31 March 2010,

being the date of completion of the fit out works; which failing, 4 April 2010, being the date

of physical possession by the estate owners; which failing, 28 October 2010, being the date of

further physical damage; which failing, 2 December 2010, being the apparent date for the

commencement of the defects liability period; which failing, 31 July 2011, being the

estimated date of further water ingress and damage and the date of installation of the

pumps.

[28] If the court were to find that an oral agreement in the terms stated in the evidence

had indeed been entered into, the sensible interpretation of it would be that any loss

suffered by CFW and hence by Agro would arise on practical completion. Whatever date

was found to be the date of practical completion, none of the means of avoiding CFW’s

claim being extinguished by prescription had been established. Accordingly, any liability

Agro ever had to CFW had been extinguished by prescription and Agro therefore had

suffered no loss and had no interest in pursuing the present action.

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Submissions for Agro

[29] It was to be noted at the outset that the title to sue issue only arose in relation to the

leisure centre, breakfast room and the north tower extension. It did not extend to the chapel

and beach turret (in respect of which the pursuer has an interest as heritable proprietor). No

such issue was identified in the pleadings of any of the defenders relative to the chapel and

beach turret. It should also be noted that the pursuer, as a party to contracts with each of

SMG and Morgan, plainly had title to sue. On the unchallenged evidence of Dr Kohli and

Dr Urbach, the pursuer had title and interest to sue and had itself suffered loss as a result of

the breaches of contract by SMG and Morgan. For the avoidance of doubt, the pursuer did

not seek to rely on Swiss law; Scots law applied.

[30] The unchallenged evidence of Dr Kohli and Dr Urbach was that the pursuer entered

into a verbal agreement with CFW at some time in 2006, in terms of which it was agreed that

the pursuer would be the party liable to meet the costs of the repair of any defective work to

the leisure centre, breakfast room and north tower. Importantly, the unchallenged evidence

was also that the pursuer “remain[s] liable” to CFW for any and all damage in and defects to

the works, and that the pursuer is the party that has and will continue to suffer loss flowing

from any breach of contract on the part of the defenders. SMG and Morgan argued that any

obligation on the pursuer to make reparation to the true owner has prescribed. Curiously,

however, these defenders did not challenge the evidence that the pursuer remained liable to

CFW. Nor did these defenders even seek to establish in evidence that any cause of action

had arisen under the agreement between CFW and the pursuer as the result of some failure

on the part of the pursuer to abide by the terms of that contract. In these circumstances the

evidence of Dr Kohli and Dr Urbach should be accepted by the court in toto. There was no

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basis upon which their evidence should be rejected. Before the court could properly hold

that the pursuer did not remain liable to CFW as a matter of law, it would require a factual

basis upon which that conclusion could properly be reached. No such factual basis existed.

Separately, and in any event, the raising of the present proceedings by the pursuer against

the defenders constituted a relevant acknowledgement by the pursuer of its obligation to

CFW. On that basis, even if the court was not minded to accept the evidence of Dr Kohli

and Dr Urbach that the pursuer remains liable to CFW, the question of the pursuer’s title

and interest stood or fell along with its case on prescription in these proceedings. If these

proceedings have been brought timeously, it followed that the relevant acknowledgement to

CFW was made timeously. In relation to relevant acknowledgement, SMG’s point that there

was no evidence of CFW being aware of any such acknowledgment was irrelevant. In terms

of section 10(1)(a), if a party accepted an obligation and acted to get on with it, there was no

need to constantly apprise the creditor of this conduct. The only reason for raising the

action was the liability to CFW. The pleadings made reference to that liability.

[31] Both SMG and Morgan had mischaracterised the basis on which the pursuer claimed

it has suffered loss. Agro was not claiming on behalf of CFW, nor on the basis that Agro

was to indemnify CFW. Agro was the party which was, and remained, liable to meet the

costs of the repair to any defective works. The pursuer was suing for its own loss; the

pursuer was the party which had contracted with the defenders, was liable for their fees and

was the party that will have to carry out and bear the costs of the repairs arising from the

defenders’ breaches. That had always been the position of the pursuer. The obligation of

Agro to meet the cost of repair was plainly an ongoing obligation. No clear position was

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advanced by the defenders as to when the prescriptive period started in respect of that

obligation.

Issue 1: Decision and Reasons

[32] The thrust of the submissions made by SMG and Morgan was that the pursuer had

failed to establish that the liability it claimed to have under the oral agreement with CFW

continued to subsist. I accept that it is a matter for the pursuer to establish that the liability

continues to subsist, for the primary reason that the pursuer is claiming to have suffered a

loss, but also because the defenders raise in their pleadings the contention that any

obligation on the part of the pursuer to CFW has been extinguished by prescription. Before

turning to deal with this point, the pursuer avers, as noted, that eight other individuals

together own a 25% pro indiviso share of the chapel. The pursuer’s right to seek recovery of

all of the losses in respect of that part of the property was not the subject of specific

challenge in the averments of SMG or Morgan. On a fair reading of the defences, SMG

raises issues concerning CFW’s claim, as does Morgan. This is therefore not an issue which

falls within the title and interest to sue/no loss point that is within the ambit of matters

remitted for the preliminary proof and so I make no decision on it.

[33] It was not suggested that Agro acted as an agent for CFW in the sense of binding

CFW in a contract with SMG or with Morgan. In fact, Agro contracted directly with SMG

and Morgan and, on Agro’s averments, it was to Agro that these parties owed the

contractual (and, in the case of Morgan, delictual) duties founded upon by Agro in the

actions. No issues as to the law of agency therefore arise. I also reject Morgan’s contention

that the absence of any pleadings as to choice of law must mean that Agro’s liability to CFW

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has not been established. The general rule set out in Bonnor v Balfour Kilpatrick 1974 SC 223

falls to be applied, with the result that, in the absence of any pleadings as to foreign law, the

matter is governed by Scots law.

[34] I accept that certain criticisms can be advanced in relation to the quality of the

evidence as to the oral agreement, including the lack of written documentation such as the

MOU and the lack of detail as to how, when and by whom the terms are said to have been

agreed. However, at the end of the day, I have the wholly unchallenged evidence of two

witnesses whose evidence I found to be credible and reliable. I therefore accept that

evidence, including insofar as it articulates the terms of the oral agreement. However, I also

accept the submissions on behalf of SMG and Morgan to the effect that it is a matter for the

court as to whether Agro’s obligation to CFW subsisted at the date of the preliminary proof.

That is not something which can be dealt with merely by subjective factual evidence from

the two witnesses. It is a matter of law which requires an objective assessment, involving

construction of the terms of the contract, taking into account the relevant facts and

circumstances. Evidence consisting of, in effect, opinions or expressions of understanding

that Agro remains liable, is of no real assistance and indeed is irrelevant on that issue. Its

relevance is confined to establishing that Agro has not yet met the liability it may have to

CFW.

[35] The contractual obligation was expressed in the evidence as follows:

“The terms of that agreement are that Agro Invest Overseas Limited are the party

who were and are liable to meet the cost of the repair to any defective work to the

Works to the Underground Leisure centre, Breakfast Room and North Tower at the

Estate.”

Page 19 ⇓

Plainly, caution is required in seeking to construe contractual terms if the precise language

used is not absolutely clear. However, I am dealing with an oral agreement and it was not

suggested to the witnesses at any point that any other language from that spoken to in their

evidence was used in entering into that agreement, or that anything else was said. On the

undisputed evidence, I take the terms stated in the evidence as an accurate expression of the

relevant terms of the oral agreement. No arguments were however advanced by any of the

parties about the correct construction of the terms of the oral agreement and in particular

about when, on that correct construction, the obligation of Agro to CFW arose for

performance. It is clear that CFW’s loss, caused by a breach of contract on the part of Agro,

could not arise until the date of performance of that obligation and the resulting non-

performance. It is obvious that, in seeking to determine that date, there must in the first

place be defective work. In respect of the locations covered by the oral agreement, that must

mean defective work arising from a breach of contract by SMG or from a breach of contract

or fault on the part of Morgan.

[36] However, Agro does not say that it will suffer a loss only when the existence of the

defective work is admitted or established. On the contrary, Agro proceeds upon the basis

that it has already suffered such a loss, by incurring liability to CFW. As is discussed further

below, Agro contends that the loss arose at practical completion but also relies upon the

provisions of the 1973 Act which deal with postponement or interruption of the prescriptive

period in respect of the obligations of the present defenders. Agro has put forward various

starting dates for that prescriptive period, all within five years before the present actions

were raised. For example, it is suggested that Agro could not, with reasonable diligence,

have discovered the existence of the defects until March 2011, at the earliest. However, no

Page 20 ⇓

submission was made of there being any other date when Agro’s obligation to CFW arose

for performance, but which was less than five years before the commencement of the

preliminary proof. Moreover, there was no suggestion that CFW had made a relevant claim

or that there was any basis for postponing or interrupting the prescriptive period in respect

of Agro’s obligation to CFW, other than the contention that there was a relevant

acknowledgment on the part of Agro by raising the present proceedings.

[37] In relation to the question of relevant acknowledgement, in terms of section 10(1)(a)

of the 1973 Act, there requires to be

“…such performance by or on behalf of the debtor towards implement of the

obligation as clearly indicates that the obligation still subsists...”

Performance towards implement must be clearly referable to the particular obligation, the

subsistence of which is clearly indicated (Huntaven Properties Ltd v Hunter Construction

(Aberdeen) Limited & Ors [2017] CSOH 57 at [100]; Richardson v Quercus Ltd 1999 SC 278;

Gibson v Carson 1980 SC 356).

[38] In my opinion, Agro’s submission that the raising of proceedings against SMG and

Morgan constituted a relevant acknowledgement, under section 10(1)(a), of its obligation to

CFW is well-founded. At first blush, there is some force in the contention that simply

raising these proceedings is not itself actual performance of Agro’s obligation. But in fact

the proceedings are plainly for the purposes of seeking to establish that the works were

defective, and to show the nature and extent of the defects and the resulting costs which

Agro will require to meet. There was no other reason to raise the actions against SMG and

Morgan. The pleadings expressly refer to the liability of Agro to CFW under the oral

agreement. The averments include that “Pursuant to that agreement, the pursuer is liable to

Page 21 ⇓

meet the cost of repairing any defects in such works”. There was no suggestion that any of

the sums which may be recovered could be used for anything other than to meet that

liability. The references in the evidence to the pursuer remaining liable plainly indicate that

the pursuer has not yet met the cost of repair, as is also implicit in the pleadings. The sums

sued for are calculated as being the costs of repair. For these reasons, I conclude that the

raising by Agro of the proceedings for these purposes constitutes performance towards

implement of its obligation to CFW. The absence of any averment by Agro on the matter of

reasonable acknowledgement is not in my opinion of any significance. It is a legal issue, the

only relevant evidence being the fact that the actions had been raised and the purpose of so

doing. The parties were fully able to deal with the issue in their submissions. In all of the

circumstances, I accept Agro’s case on relevant acknowledgement and reject the contentions

of SMG and Morgan on that matter. For that reason, Agro’s obligation to CFW has not been

extinguished by the operation of prescription.

Issue 2: have the obligations to make reparation allegedly owed by the defenders been

extinguished by the operation of prescription?

[39] In a preliminary proof on prescription, it is plainly of crucial importance to

understand the basis of the claim made by the pursuer and in particular the nature and

cause of any alleged loss. Those matters are directly relevant to the issue of concurrence of

damnum and injuria and indeed to issues relating to actual or constructive knowledge under

section 11(3), induced error under section 6(4) and relevant acknowledgement under

section 10(1) of the 1973 Act. Among other things, the claim being made is the comparator

for the purposes of matters such as whether loss, injury or damage which arose earlier was

Page 22 ⇓

separate and distinct. This exercise of understanding the nature and basis of the pursuer’s

claim of course involves a consideration of the pleadings of the pursuer, which for this

purpose are taken pro veritate. It is also legitimate, having regard to issues of fair notice and

the importance of expert reports in commercial actions, to consider the views expressed by

the pursuer’s expert in his reports.

[40] In the present case, there was some evidence and some reference in submissions

about precisely how the water ingress which forms the basis of the claims is said to have

occurred. Conflicting views were expressed and some expert evidence was inconclusive. In

my view, it would be quite inappropriate for the court to seek to reach a finding on the

actual cause of water ingress which forms the current complaint. That is not an issue which

falls within the scope of the matters referred for preliminary proof and indeed it is one of the

main points to be dealt with should there be any further proof before answer in this case.

The question at the preliminary proof is whether, having regard to the nature and cause of

the loss claimed to have been suffered by Agro, and taking those pleadings pro veritate and

as amplified in any export report, the obligations said to be owed by the defenders had been

extinguished by the operation of prescription at the time when the present actions were

raised.

Agro’s claim against SMG

[41] Agro’s position is that it has suffered loss and damage as a direct and natural result

of SMG’s breaches of its obligations under the building contract. While there are, in the

pleadings, occasional references to a delictual case against SMG, the case is ultimately based

only upon breach of contract. In summary, Agro’s claim is as follows. After the carrying

Page 23 ⇓

out of the works by the defenders, a number of defects had emerged in the leisure centre

and breakfast room, the north tower, and the chapel and the turret (although, in respect of

prescription, the issues relating to the north tower and the turret were not directly relevant).

The underground leisure centre had suffered from significant water ingress because it had

not been adequately waterproofed. It had been subject to pools of standing water in various

areas. This water ingress had been continuous with numerous pools of standing water even

after SMG had installed two pumps, operating full time. Based upon leaks, staining and

damage observed in or around March 2015 water ingress had taken place in the wine cellar,

wine stores, the gym, stair area, changing rooms, shower rooms, WCs, sauna and massage

room. The water was entering predominantly through the floor but also through the walls.

The higher the water level of the adjacent loch, the greater was the severity of the water

ingress. While deficient design was a contributory cause in respect of the leaks suffered,

deficient workmanship (for which SMG was responsible and liable) was also a material

contributing factor.

[42] Mr Clarkson, the expert witness for Agro, made reference in his report dated 6

October 2015 to failures of the tanking/membrane system at the leisure centre, due to design

and workmanship failures. Some further detail is given, for example at paragraph 8.31 in

the report, where he states:

“I consider that the most likely mechanism for the water ingress is through the

membrane at the failed joints or details, then into the slab along weak paths, where it

can then move through the slab construction joints or micro-cracking to appear on

the inside surface”.

Page 24 ⇓

Accordingly, it can in my view be taken to be the pursuer’s position that the water ingress to

the leisure centre is a result of failings in the Rawmat tanking, arising from design and

workmanship failures.

[43] It is further averred that the chapel has suffered water penetration and water damage

to its masonry and the internal finishes of walls and floors. It had also suffered from calcite

leaching and mortar damage. Pointing was poor and weep holes had not been properly

used. There were also problems with the cavity walls. Further, stonework was insecure (for

example in respect of skew copes and finials).

[44] Next, it was said that the breakfast room had suffered water penetration and water

damage. Pointing was again poor. There were many areas of ashlar faced cavity wall which

had experienced large patches of damp on the internal face. There was an absence of wall

ties with dowel pins and an absence of dowel pins/fixings in the parapet stones. Perpend

joint weep holes had been constructed in a manner inconsistent with the design. Similar

issues to those which were referred to in respect of cavity walls at other locations existed.

[45] Agro go on to contend, in Article 6 of Condescendence, that in the foregoing

circumstances, the defenders are in breach of their obligations under the contract, by failing

to carry out the works in a proper and workmanlike manner. Agro then go on to explain

and aver certain further specific alleged failures on the part of SMG.

Submissions for Agro

General

[46] Practical completion was the key date for the purposes of prescription, in that time

could not begin to run until that date. The evidence disclosed that practical completion

Page 25 ⇓

occurred on 2 December 2010. That was the primary position. In that situation, none of the

issues which relate to postponement of the starting date or the interruption of the running of

the prescriptive period arose. If 2 December 2010 was not accepted as the date of practical

completion, Agro’s first alternative position was that practical completion occurred on

1 March 2010. On this analysis too, none of the postponement/interruption issues arose. No

leaks arose and no other defects became apparent after 1 March 2010 until March 2011.

Rather, the common position of the factual witnesses was that, as at March 2010, all parties

understood that any prior problems with water ingress had been resolved and were not

recurring. No water ingress was taking place. Thus, on this hypothesis, no loss, injury or

damage was suffered by the pursuer until well within the quinquennium, and none of the

defenders sought to establish otherwise (having periled their positions on the events

surrounding the emails of 25 November 2009).

[47] Agro’s second alternative position, if the court did not accept either of the first two

points, was that the date of practical completion should be taken as not earlier than mid-July

2009, when SMG left the site after producing the health and safety file. There was simply no

evidence, or, at the very least, no satisfactory evidence, that practical completion was

achieved any earlier than that date. On this hypothesis, the subsequent events required to

be considered. However, the events of 2008 and the first part of 2009 involving the carrying

out of waterproofing render works by Ian Anderson did not require to be considered in any

detail as those works were undertaken prior to practical completion and formed part of

SMG’s contract works (as varied). It was SMG’s obligation to carry out and complete the

works.

Page 26 ⇓

The claim against SMG: the leisure centre

[48] The November 2009 defects were separate and distinct from those which are the

subject of the present action. In any event, any loss, injury or damage in November 2009

was not material.

[49] In relation to section 11(3) of the 1973 Act, there was certainly no reason prior to

March 2011, even with the exercise of all reasonable diligence, for the pursuer to be aware of

any loss, injury or damage. The previous problems had been dealt with and raised no issues

for the pursuer to investigate. Separately and in any event, the requirements of section 6(4)

of the 1973 Act were met because SMG carried out remedial works and represented that the

defects had been remedied. The reasonable diligence part of the section 6(4) test was also

met. Esto any of the alleged defects referred to in November 2009 were the same as the

defects currently complained of, the evidence was that SMG had relevantly acknowledged

their obligations to make reparation by attending on site and carrying out remedial works in

respect of them.

The claim against SMG: the breakfast room

[50] Approaching matters on the same pragmatic basis as outlined above, the nature,

location and scale of the defect affecting the breakfast room (the failure of the window sill

extension pieces) in the November 2009 time period, as well as the nature of the defaults by

which such defect was caused, were such that this defect was separate and distinct from the

matters now complained of, which are that the breakfast room has suffered water

penetration and water damage as a result of defects within the building fabric. In November

2009, SMG attributed water ingress into the breakfast room to a failure of window sill

Page 27 ⇓

extension pieces (despite having identified earlier that the breakfast room windows had “no

weep vents as per design”). That was a quite different failure to those now complained of

by Agro.

[51] Furthermore, in terms of section 11(3), the pursuer had exercised reasonable

diligence in relation to the breakfast room in November 2009. The pursuer did what a

person of ordinary prudence would have done if placed in the particular circumstances in

which the pursuer found itself. That is to say, the pursuer obtained SMG’s views on the

cause of the problem, and on the appropriate remedial works; the remedial works were then

carried out, and the problem bore to disappear. Nothing occurred to suggest that the cause

of the problem had not been correctly identified and the remedial works had not been

correctly carried out. The pursuer reasonably relied upon specialist action rather than, as a

lay client, seeking to second-guess matters. Separately, and in any event, in carrying out the

remedial works and representing to the pursuer that the defect had been remedied, SMG

induced the pursuer erroneously to refrain from making any claim in relation to the

November 2009 defect, such that the test in section 6(4) was met. The period of error lasted

from at least the end of 2009 until March 2011 at the earliest, a period of at least 14 months.

That period fell to be ignored in calculating the prescriptive period, with the result that the

pursuer’s action against SMG was raised comfortably within the quinquennium in respect of

this defect.

The claim against SMG: the chapel

[52] The water ingress through the ambulatory windows and high level windows in the

chapel was, on the evidence, caused by obvious mastic failure. It was treated as an entirely

Page 28 ⇓

normal snagging issue and was remediated as such by SMG’s sub-contractors. There was no

evidence that this water ingress caused any damage, far less material or non-negligible

damage. Similarly, the water ingress at the belfry louvres had obvious causes. It was also

treated as an entirely normal snagging issue and was remediated as such by SMG’s sub-

contractors by the installation of a screen behind the louvres and the repair and re-sealing of

lead flashing at the belfry floor. There was again no evidence that this water ingress caused

any damage, far less material or non-negligible damage. While water ingress into a building

which is supposed to be watertight is of course capable of being a serious matter, that was

plainly not so where the cause is easily identified and easily fixed. Accordingly, in respect

of the water ingress through the chapel windows and the belfry louvres in November 2009,

the pursuer had not suffered material damage.

[53] In relation to section 11(3), there was no evidence that the pursuer had actual

knowledge of any physical manifestation of the defects in the chapel which the pursuer now

sues in respect of, outside the quinquennium. On the evidence, the pursuer exercised

reasonable diligence in relation to the two instances of water ingress into the chapel in

November 2009 and yet did not discover the defects complained of in the present action.

The pursuer did what a person of ordinary prudence would have done if placed in the

particular circumstances in which the pursuer found itself. That is to say, the pursuer

obtained SMG’s views on the causes of the problems, which were in each case obvious, and

on the appropriate remedial works; the remedial works were then carried out, and the

problems then bore to disappear, at least for a considerable period of time. Nothing

occurred to suggest that the cause of the problems had not been correctly identified and the

remedial works had not been correctly carried out.

Page 29 ⇓

[54] Furthermore, it was plain from the extensive and detailed documentation produced

by Mr Trembath himself in relation to snagging at the chapel that he did not see anything

that gave rise to any concern on his part as to water ingress at the windows and the belfry.

It was notable that Mr Trembath was not called as a witness to speak to what he saw and

what conclusions he drew from it at the time (in 2009 and 2010).

[55] In relation to relevant acknowledgement, the following evidence supported the

pursuer’s position: (i) the meeting at site on 23 July 2014 between William Lindsay and

David Fyfe during which the chapel and beach turret defects were discussed, being defects

which Mr Fyfe appeared to accept that SMG had a responsibility to remediate; (ii) Mr Fyfe’s

email of 4 September 2014 undertaking to look at the issues at the turret and chapel; (iii)

SMG’s attendance at the meeting on 21 October 2014 to discuss inter alia the defects at the

turret and chapel, during which SMG agreed to open up areas of the turret to investigate.

Submissions for SMG

General

[56] In relation to the appropriate date for the purposes of section 6(1) of the 1973 Act and

the enforceability of an obligation for the purposes of section 11(1), prima facie, an obligation

on a builder to pay damages to his employer in relation to defects in a building arising from

workmanship failings (such as those alleged by the pursuer against SMG) generally became

enforceable as soon as the defective work was installed. From that time, or very shortly

thereafter, if the defect was significant and was in permanent work but was not corrected

swiftly, the employer could sue to enforce an obligation requiring the builder to pay

damages for breach of the building contract.

Page 30 ⇓

[57] Here, viewed at the most general level, the pursuer sustained loss, injury or damage

for the purposes of section 11(1) when works which in terms of the contract were intended

to be watertight, but in fact were not, were installed. For the purposes of prescription, that

was a loss: David T Morrison v ICL Plastics Ltd [2014] UKSC 48.

[58] A number of judicial opinions suggested that the earliest date from which

prescription of such claims can begin to run is the date of practical completion of the works,

or even the end of the making good of defects period (which will only begin to run from

practical completion and will normally end on the issuing of a certificate of making good of

defects). These included ANM Group Ltd v Gilcomston North Ltd 2008 SLT 835 at [35], in

which Lord Emslie referred with apparent approval to what was said by Lord Diplock in a

dissenting speech in P & M Kaye Ltd v Hosier & Dickinson Ltd [1972] 1 WLR 146, at 165. It

had been thought, wrongly, by some that Lord Diplock had in mind a general rule

preventing an owner from suing in all circumstance for defects until practical completion.

In Keating on Construction Contracts (10th ed, para 11-035), that view was stated (see also

Strathclyde Regional Council v Border Engineering Contractors Ltd 1998 SLT 175).

[59] This approach had been the subject of judicial and academic criticism (see for

example: Hudson on Building and Engineering Contracts (13th ed, paras 7-074 – 7-075)).

According to Hudson, the so called temporary disconformity theory is not applied

“…where the Contractor has refused to put the work right at the proper time, is

covering up or building on unsatisfactory work, or where the defects are already

serious or numerous enough to cause substantial delay or loss.”

Support for that approach could be found in the cases cited by Hudson including: Lintest

Builders Ltd v Roberts (1980) 13 BLR 38, 44 (CA); W. Tomlinson v Parochial Church Council of St

Page 31 ⇓

Michael (1990) 6 Const LJ 319; and Guinness plc v CMD Property Developments Ltd (1995) 76

BLR 40.

[60] More recently, the temporary disconformity principle had been discredited in Pelagic

Freezing Ltd v Lovie Construction Ltd [2010] CSOH 145 (at para [106]). Lord Doherty appeared

to endorse the approach suggested by Hudson in Huntaven Properties Ltd v Hunter

Construction (Aberdeen) Ltd [2017] CSOH 57 (at para [54]). There had also been numerous

academic articles to the same effect.

[61] The prevailing view was that suggested by Hudson and most recently by Lord

Doherty. Accordingly, prima facie an obligation to pay damages for breaches of a building

contract which give rise to the incorporation into the permanent works of defects which are

not of a genuinely temporary nature, or which are covered up, or which are numerous and

serious, becomes enforceable when the work is carried out. If the defect is very quickly

admitted and corrected then it may well be the case that the employer would lose the right

to sue. However, that latter qualification did not arise in the present case.

[62] Applying that to the facts of this case, on the pursuer’s own pleaded case, the defects

now complained of are serious, numerous, permanent and, in some cases exist in covered up

work. Accordingly, prima facie, any obligation to pay damages for the alleged defects

became enforceable prior to handover.

[63] The main waterproofing solution designed for the waterproof box, that the basement

was supposed to become, was Rawmat. It was Mr Clarkson’s opinion that the Rawmat had

deteriorated over time, and water had penetrated it. This view was rejected by both

Mr Clark and Mr Reid. On the balance of probabilities, the water ingress was occurring not

through the Rawmat but at places (not exhaustively identified in the evidence) where the

Page 32 ⇓

Rawmat adjoined other buildings or other waterproofing solutions. This was consistent

with the evidence as to the lack of a complete waterproof design and the evidence that

Rawmat, if it failed, would fail immediately. Accordingly, the defects in the waterproofing

in relation to which the pursuer’s claim proceeds were present by the time of the handover

of the works. As the evidence demonstrated, the works were handed over some

considerable time before the critical date, for prescription purposes, of April 2010. There

was substantial evidence from numerous witnesses to indicate that SMG left the site in June

or July 2009, if not earlier, and so the quinquennium ended in June or July 2014, with the

result that the pursuer’s claim had prescribed.

The leisure centre, breakfast room and chapel - knowledge and section 11(3)

[64] On the authorities it was clear that the onus rested on the pursuer to bring itself

within section 11(3) by demonstrating that until a date within five years of raising

proceedings it neither knew nor could with reasonable diligence have known that it had

sustained loss, injury or damage. The pleadings did not attempt to identify the date on

which the pursuer had actual knowledge of loss, or to address the issue of constructive

knowledge.

[65] However, if the pursuer sought to argue that it did not know, and could not with

reasonable diligence have known, that the buildings in issue were not waterproof, that

argument must fail. On the evidence, the pursuer knew of the loss, injury or damage during

2008 or in any event 2009, since remedial works were instructed at that time. That was

enough to satisfy the ‘discoverability’ provisions of section 11(3). The question arose as to

whether there was any reason why prescription should run from a later date. Mr Clark’s

Page 33 ⇓

report set out the basis for his opinion that any reasonably prudent building owner faced

with the number and frequency of leaks (including leaks that required the application, at the

pursuer’s cost, of waterproof render to try to stem water ingress) would have instructed

further detailed investigations and consideration of the design of the works. He explained

that, had that been done, the pursuer would have identified the design defects which the

pursuer itself avers have contributed to the problems it now faces.

[66] In relation to the pursuer’s actual or constructive knowledge, an important part of

the context was that the employer’s representative, Mr McKay, was an experienced

construction professional. There were repeated episodes of water ingress into the leisure

centre during 2008 and 2009. These episodes were such, on the evidence, as to put the

pursuer on notice that the basement was not a waterproof box and to put it on inquiry as to

what was causing the water ingress. The pursuer, however, approached the episodes as

matters of snagging with which it requested the defender to deal. Any remediation carried

out was of a superficial nature. There was a substantial body of expert evidence to the effect

that the pursuer ought in 2008 and 2009 to have taken steps to involve members of the

professional team in order to investigate why the water ingress was occurring. In relation to

the leisure centre the evidence established that problems of water ingress were not, as

Mr Clarkson maintained, confined to one specific area of underpinning to which waterproof

render required to be applied. Mr Clark had set out the steps which Agro could have

followed: contacting the design team to identify potential reasons for water ingress, leading

to identification of shortcomings in the waterproofing design, itself leading to identification

of specific locations for disruptive investigation. A similar analysis applied to the breakfast

room and to the defects in the chapel.

Page 34 ⇓

[67] Accordingly, in the exercise of reasonable diligence the pursuer could have become

aware during the course of 2008 or at latest 2009 that problems of water ingress went

beyond mere snagging issues. That being so, the pursuer could not bring itself within

section 11(3).

[68] Mr Clarkson, in seeking to address the issues that arose under section 11(3), had

applied the wrong test. The section 11(3) question was not concerned with what the pursuer

reasonably believed but with what the pursuer could have known had it acted with

reasonable diligence.

[69] As regards the breakfast room windows, the documentary evidence showed that in

November 2009 it had already been identified that there were no weep holes at these

windows, and that this was because of the design. At that time the pursuer’s agent

(Mr McKenna) noted that the architect’s window sill designs were being partly blamed for

the water ingress. Mr Welsh had noted that ‘there must be either no cavity tray in the walls

or the sealing of cavity tray ends/joints has not been done’. Accordingly, the pursuer was

actually aware of the issues relating to the breakfast room windows well over five years

before raising the present proceedings. If that submission was not accepted, in any event in

the exercise of reasonable diligence the pursuer could have become aware of these issues

well outwith the five year period.

[70] Turning to the chapel, the first defect of which the pursuer complained was water

ingress through the ambulatory windows. According to Mr Clarkson, in 2009 the failure

was simply of mastic seals and was localised. By contrast, the defects complained of in the

present proceedings relate to the masonry and the proper waterproof detailing within the

cavity walls. On the evidence, the only remedial steps taken in 2009 related to the mastic.

Page 35 ⇓

The pursuer took no steps to involve the architect of the chapel in considering any

investigation or discussion of remediation. Nor did the evidence suggest that any

consideration was given to the drawings, which did not show installation of cavity drains

and trays at the windows. The defects now complained of were present from the time the

chapel was constructed. If the pursuer was unaware of them, nonetheless in the exercise of

reasonable diligence it could have become aware of them well over five years before raising

the present proceedings.

[71] The second defect complained of in relation to the chapel was water ingress through

the walls and belfry. According to Mr Clarkson, prior to April 2010 water ingress occurred

through a defect in leadwork, which was repaired. Mr Clarkson stated that the leaks then

repaired were not associated with the current complaint. Again, the pursuer took no steps

to involve the architect of the chapel in considering any investigation or discussion of

remediation. The evidence indicated that the precise source of the water ingress in 2009 and

in 2016 had not been identified. Indeed, Mr Clarkson observed that ‘the exact nature of the

defect in the belfry is unrecorded’. That being so, it was not open to him at the same time to

maintain that the previous leaks are not associated with the current complaint. The defects

now complained of were present from the time the chapel was constructed. If the pursuer

was unaware of them, nonetheless in the exercise of reasonable diligence it could have

become aware of them well over five years before raising the present proceedings.

Agro’s reliance on section 6(4)

[72] In relation to section 6(4)(a)(ii), the test for what amounts to a relevant error for the

purposes of that provision had been stated in BP Exploration Operating Company Limited v

Page 36 ⇓

Chevron Transport (Scotland) 2002 SC (HL) 19 and in Heather Capital & Duffy v Burness Paull

[2017] SLT 376. The pursuer in the present case relied on a number of acts and statements

allegedly made by SMG as having induced error on the pursuer’s part which, in turn,

induced it not to sue. These appeared to relate only to the leisure centre; error did not seem

to be relied on in relation to any of the other building elements. A statement that a specific

defect had been remedied could not be equiparated with a representation that the contract

works were free from all defects or watertight in all respects. Far less could it be construed

as a representation inducing the pursuer not to make a claim against SMG. There were no

relevant averments of, or evidence as to, error on the part of the pursuer; or that any error

was induced by SMG; or that any error induced by SMG led the pursuer to refrain from

making a claim against SMG.

[73] In any event, the proviso to section 6(4) has the effect that no time is deducted from

the prescriptive period after the creditor could with reasonable diligence have discovered

the error. If the pursuer was (contrary to these submissions) labouring under any error

induced by SMG, by 2008 or 2009 in the exercise of reasonable diligence the pursuer could

have disabused itself of that error. Engagement with the professional team or an

investigation going beyond the superficial could have dispelled any such error.

Agro’s reliance on section 10(1)

[74] On the question of relevant acknowledgement under section 10(1), as a preliminary

observation, even if a relevant acknowledgment to attend to a breach of one obligation had

occurred, that would not prevent prescription of any obligation to make reparation for

breach of another obligation. So, for example, performance towards implement of an

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obligation to construct a window sill in a good and workmanlike manner could not be

“clearly referable” to the subsistence of an obligation to install a wall tie. It did not matter

that not installing the wall tie was a breach of the broad obligation to execute works in a

good and workmanlike manner. In relation to the first class of conduct, attending to the

minor snagging defects noted in the 25 November 2009 email, there was no dispute between

parties that these were indeed minor workmanship defects which are not linked to the

ongoing water ingress. All parties understood that these were minor snagging defects and

that they were being corrected in accordance with the defender’s contractual obligation to

attend to defects. The remedial work had dealt with them and they had not recurred. That

being so, carrying out these works could not amount to a relevant acknowledgment of any

subsisting obligation to carry out work to correct whatever is causing the ongoing problems

of water ingress.

[75] As to the installation of pumps, whether installed as a temporary or permanent

solution, this could not amount to a relevant acknowledgment of a subsisting obligation to

prevent water ingress. On the contrary, installing pumps recognised that water will

continue to enter the building.

[76] Turning to the evidence of visits by the defender to site, the carrying out of

investigations and the carrying out of further remedial work (beyond the work discussed in

the 25 November 2009 email), the evidence was sparse and there was no compelling

evidence that SMG’s conduct in this regard amounted to a relevant acknowledgment of any

ongoing obligation to attend to anything that was now the subject of complaint (namely a

fundamental problem with the waterproofing of the basement). Where a contractor was

contacted about a job he had completed and where the employer had some concern, merely

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returning to site, investigating the issue causing concern and proposing work that might be

carried out could not sensibly be seen as relevantly acknowledging an obligation to pay for

work that is required to deal with a problem, the cause of which is not even known. Even if

one were to figure the same example where, unknown to all parties, the leaks were actually

caused by defective workmanship (for which the contractor was contractually liable) the

conduct described would still not amount to a relevant acknowledgment by the contractor of

a subsisting obligation to pay for the cost of remedial work. In other words, without

something more, the prescriptive period would still run despite the contractor returning to

site, investigating and proposing solutions. Furthermore, in the present case, the evidence

indicated that SMG was paid for remedial work, in particular, the application of waterproof

render which was applied as a remedial measure to try to stop water ingress in the

basement. In circumstances where the employer pays for the remedial work, he cannot

contend that the contractor has made a relevant acknowledgement of an extant obligation to

pay for that remedial work.

Agro’s claim against Morgan

[77] The services to be provided by Morgan included engineering design advice in

relation to the waterproofing of the underground spa and leisure centre. It was a provision

of the contract that Morgan was to exercise the skill and care reasonably to be expected of

structural engineers of ordinary competence. Following upon the carrying out of the

development work, a number of defects had emerged. The leisure centre had suffered from

significant water ingress and had not been adequately waterproofed. These defects had

arisen as a result of, inter alia, defects in the design. The details of the occurrence of water

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ingress were as set out in the action directed against SMG. Morgan’s design for the leisure

centre was not robust. The reinforced concrete walls and floor were not designed to the

appropriate standard. An engineer exercising the skill and care reasonably to be expected of

structural engineers of ordinary competence would not have used such a design. The

particular failures in design were as averred. Loss and damage had also been suffered as a

result of Morgan’s fault. It was Morgan’s delictual duty, in providing services to Agro, to

exercise the skill and care reasonably to be expected of structural engineers of ordinary

competence in providing services under the appointment. For the same reasons as given in

relation to the contract, Morgan had failed to act to such a standard.

Submissions for Agro

[78] Again applying the pragmatic approach called for in Musselburgh & Fisherrow

Co-operative Society Limited v Mowlem Scotland Limited 2004 SCLR 412, the nature, location

and scale of each of the defects affecting the leisure centre in the November 2009 time

period, as well as the nature of the defaults by which such defects were caused, was such

that those defects were all separate and distinct from the matters now complained of (that

the basement had not been adequately waterproofed as a result of failures of the Rawmat

tanking).

[79] Esto any of the defects noted in November 2009 were the same as the defects

currently complained of, these were not material and also, in terms of section 11(3),

reasonable diligence was exercised. The building was not passed to the pursuer until 2010

and there was no manifestation of problems prior to March 2011. Moreover, Morgan

relevantly acknowledged their obligations in July 2011 by attending on site to consider the

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water ingress in the leisure centre, checking their design and subsequently emailing

Mr McKenna to say that they were convinced the design was robust and that any issues

must be due to workmanship. They thereby interrupted the prescriptive period relative to

the November 2009 defects and commenced a new quinquennium in relation thereto. The

same facts were relied upon for the purposes of induced error under section 6(4). Morgan’s

conduct and representations in July 2011 induced a period of error between July 2011 and

November 2014 (40 months). In relation to the question of “reasonable diligence”, for the

purposes of section 6(4), the pursuer did what a person of ordinary prudence would have

done if placed in the particular circumstances in which the pursuer found itself. It asked the

designer (Morgan) to check its design and received the answer that the design was robust.

Thereafter the pursuer concentrated on having the defects rectified by SMG. Morgan did

not say to the pursuer that further or other investigations should be carried out in relation to

the design. Morgan also relevantly acknowledged its obligations through its actions in

attending the meeting on 21 October 2014 and subsequently checking the design and

confirming (again) that the tanking details and specifications were robust.

Submissions for Morgan

[80] Much of Morgan’s submissions related to the question of whether Agro had suffered

any loss which allowed it to sue in the present action. These are detailed above.

[81] Reference was made to provisions in the building contract between Agro and SMG,

including those dealing with practical completion of the sections of the works. Based on the

evidence, the court should make the following findings. Practical completion took place in

July 2009 when the works were practically complete with the exception of the filling in of a

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hole which needed to be left open for the fit out works to be done. If that was incorrect, then

it took place on 31 March 2010 when the fit out works were complete. Failing that, the date

of practical completion was 4 April 2010, when family members of those involved in

ownership of the site attended. If that was not accepted, then 2 December 2010, when the

defects liability period for the whole of the works started, was the date of practical

completion. Morgan did not agree with the submissions on behalf of SMG about the date of

the occurrence of loss, injury and damage.

[82] The court had heard evidence from a number of factual witnesses as regards water

ingress and physical damage after completion of the development works, including the

matters arising in November 2009. Such defects represented immediately apparent material

loss, injury and damage (for the building owners), in the form of water ingress to

supposedly wind and watertight structures, and that while it was possible that isolated leaks

in particular locations could have been resolved over the years, the underlying problem

causing the ingress remained to this day.

[83] Agro appeared to argue in this case that they were not aware, and could not with

reasonable diligence have been aware, that the issues highlighted in the email of

25 November 2009 represented loss, injury or damage caused by an act, neglect or default.

The evidence contradicted any such claim, including evidence that the water ingress noted

in November 2009 was “severe” and “serious”. The evidence supported the contention that

the water ingress in and before November 2009 was caused by the same cause as that which

is the subject of the present claim and was not properly investigated.

[84] The court’s findings in fact in relation to when water ingress at the leisure centre took

place after completion of the building, and hence when loss, injury and damage occurred to

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the property, should be as follows. In August 2009 damp patches became evident in the

leisure centre at high level after a period of heavy rain. In November 2009, again when the

rainfall was heavy, severe water ingress was experienced in a number of locations, including

the leisure centre, the breakfast room and the chapel, causing damage to buildings and

finishes. In November 2009, representatives of Agro indicated that there may be other areas

where water ingress problems existed, and the extent of the flooding in November 2009

suggested that it is perfectly possible water was ingressing into the area below the stair in

the leisure centre from somewhere else. Physical damage had occurred or is likely to have

occurred by November 2009. In October 2010, further workmanship and snagging defects,

including outstanding water ingress events, were identified, and further remedial works

were instructed in relation to the leisure centre and chapel in accordance with snagging lists

which had been prepared. Further water ingress occurred in the spring of 2011 and in July

2011, leading to the installation of a pump system. Further damage was caused as a result of

a defect identified in January 2012, affecting the leisure centre gym, and steps were taken to

install sump pumps at the leisure centre to control the ingress being experienced. Further

significant ingress of water affected various areas of the leisure centre in January 2014.

[85] Accordingly, material loss, injury and damage had been suffered by CFW on the

dates as noted above (at paragraph [27]).

[86] Turning to section 11(3), in connection with Agro’s obligation to CFW, a lot of the

expert evidence at the preliminary proof had involved views on what the experts thought a

reasonable person in the position of the building owner should have done, with particular

reference to events noted in November 2009. There was a sharp dispute about the extent to

which a person in the shoes of a building owner could, with reasonable diligence, have

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known there was a material problem at that time. Mr Reid believed a reasonable building

owner should have carried out tests after repair works were completed. Whilst it might be

thought that was a counsel of perfection at the relevant point in time (25 November 2009), it

was in fact a view borne from practical experience. Mr Reid was the most experienced of the

experts, and experience had taught him not to assume the problem is the obvious one, and

that fixing it will address the underlying issue. What Mr Canavan said in his evidence in

relation to the water ingress in the chapel resonated with Mr Reid’s views. If the evidence of

Mr Reid was not accepted, Mr Clark had given an alternative approach. That approach was

adopted. Given all the instances of water ingress it was necessary to investigate what was

going on.

[87] Agro had failed to establish that the causes of the problems in 2008/2009 were

separate and distinct from the current complaint. Agro was not successful in establishing

that all elements of the defective work were transitory. The waterproof box was not

watertight. The court should focus on whether that problem was remedied. It was not

remedied.

[88] It was accepted that Morgan was asked to check the design and stated that it was

robust. However, an act of a person agreeing to check the design and confirming this to be

robust was not performance towards implement of an obligation to pay damages and so

could not be a relevant acknowledgement.

Agro’s claim against Mr Trembath

[89] Mr Trembath was appointed as architect in relation to the design and construction of,

inter alia, the chapel and turret. The terms of the appointment were formalised in a

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Memorandum of Agreement dated 2 March 2007, incorporating the RIBA Conditions of

Engagement CE/95 (including the associated Schedule of Services and Conditions of

Appointment). Mr Trembath was lead consultant. He was to coordinate and integrate the

services of all Specialists (as defined in the Conditions of Appointment) into the overall

design. Mr Trembath was obliged, in providing the Services, to make such visits to the

works as he reasonably expected to be necessary. The Services which Mr Trembath was to

provide included: developing the design; preparing production drawings and a

specification; coordinating production information; at intervals appropriate to the stage of

construction, visiting the site to observe and comment on the contractor’s site supervision

and examples of his work relevant to the provisions of the building contract; and, as

appropriate, instructing the opening up of completed work to determine that it was

generally in accordance with the documents forming the building contract. It was a term of

Mr Trembath’s appointment that he would exercise reasonable skill and care in conformity

with the normal standards of the architect’s profession in providing his Services.

[90] Following upon the carrying out of the development work, a number of defects had

emerged with the chapel and turret. They suffer from water penetration and water damage

to their masonry (and, for the avoidance of any doubt, the internal finishes of walls and

floors), with calcite leaching and mortar damage, poor pointing, absence of dowel

pins/fixings in the parapet stones in the beach turret and the incorrect use of weep holes.

These defects had arisen as a result of, inter alia, defects in the design of the chapel and

turret.

[91] In the foregoing circumstances, Mr Trembath had failed to exercise reasonable skill

and care in conformity with the normal standards of the architect’s profession in providing

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his services under his appointment and, in particular, in carrying out his design of the

chapel and turret. This failure has given rise to the defects condescended upon. None of

these defects would have been present had Mr Trembath met his obligations under the

appointment. Without prejudice to that generality, various specific breaches were

identified.

Submissions for Agro

[92] Breaches of contract by Mr Trembath had led to: (i) water penetration and damage to

the masonry of the chapel and turret; (ii) calcite leaching and mortar damage; (iii) poor

pointing; (iv) the absence of dowel pins and fixings in the parapet stones; and (v) the

incorrect use of weep holes. On Mr Trembath’s pleadings, and on the evidence before the

court, it was not suggested that Mr Trembath’s obligation to make reparation to the pursuer

in respect of the calcite leaching and the absence of dowel pins and fixings in the parapet

stones had prescribed. Therefore, on any view Mr Trembath’s prescription plea should be

repelled to that extent, and a proof before answer should be allowed in respect of these

matters. In respect of the remaining defects in the chapel and beach turret, the pursuer

made the same submissions, mutatis mutandis, as those made in respect of the claim against

SMG, noted above, on materiality of the issues identified in November 2009 and on

constructive awareness under section 11(3).

[93] Furthermore, the evidence of Donald Canavan (the expert witness on behalf of

Mr Trembath) in relation to reasonable diligence came to little more than saying that if

further investigations had been carried out in November 2009, as they might have been had

Mr Trembath been informed of the water ingress, evidence of the other defects now

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complained about might have been discovered at that time. He was unable to say positively

that another source of water ingress would have been discovered at the time, and accepted

that he did not know what the true cause of the water ingress in November 2009 actually

was, far less that the cause of that ingress was any of the defects now complained of by the

pursuer. He accepted that the matters now complained of were separate and distinct.

[94] His evidence was simply beside the point, for the reasons articulated by Lord Eassie

in Musselburgh & Fisherrow Co-operative Society Limited v Mowlem Scotland Limited 2004 SCLR

412, at [53]: in the absence of a physical manifestation giving actual knowledge of defect B or

making its existence ascertainable with reasonable diligence, failure to diligently investigate

defect A does not amount to a failure to diligently investigate defect B.

[95] In any event, Mr Trembath’s actions in responding to Mr Lindsay’s email of

30 September 2013 (in which Mr Lindsay explained the current issues at the turret and

chapel and sought Mr Trembath’s comments), attending a meeting on site on 21 October

2014 (at which he made it clear that he was willing to co-operate in relation to the problems

at the chapel and beach turret) and thereafter providing a detailed report on 3 November

2014 (in which he inter alia confirmed that the dressed stone elements and the antique stones

and detailing were suitable for construction) amounted to a relevant acknowledgement for

the purposes of section 10(1) of the 1973 Act.

Submissions for Mr Trembath

[96] Certain aspects of the submissions made on behalf of SMG were adopted. These

were: firstly, that an approach based upon practical completion being the starting point for

the enforceability of an obligation in a building contract was incorrect and placed an

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unwarranted gloss on the provisions of the 1973 Act; secondly, that the onus was on the

pursuer in relation to whether the defects now complained of were the same or different

from those which arose in November 2009 and the onus also lay with the pursuer in relation

to section 11(3), and in each case that onus had not been discharged; thirdly, that Lord

Eassie’s position in Musselburgh & Fisherrow Co-operative Society Limited v Mowlem Scotland

Limited was incorrect. If these submissions were accepted the preliminary plea on

prescription fell to be sustained. If not, the following submissions were made.

[97] The terms of the contract with Mr Trembath were varied in certain respects,

including that Mr Trembath ceased to operate as contract administrator. In relation to the

date of breach of contract, on the pursuer’s averments any breach would have occurred and

been complete prior to the date of practical completion. The evidence indicated that the date

of practical completion was May 2009. Mr Trembath did have continuing involvement in

the project after May 2009 but he was not then performing the contractual obligations of

which he is said to be in breach. After May 2009 it was the fitting out works that were being

undertaken.

[98] The email of 25 November 2009 referred to severe water ingress in a number of

locations including in the chapel, through the ambulatory windows and through the belfry

louvres. This was referred to in the email as a serious matter. The loss, injury or damage

was water ingress within the chapel. The damage was material. The pursuer was well

aware that there was water penetration. The pursuer maintained that the water penetration

which occurred in November 2009 was caused by a different cause to that which the pursuer

now relies upon. However, on the opinion evidence from Mr Canavan, that was not the

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case. He gave detailed reasons for that view. There was therefore actual awareness for the

purposes of section 11(3).

[99] Alternatively the pursuer could with reasonable diligence have discovered in

November 2009 the defects which are now founded upon. In November 2009 the concern

for the pursuer was that it may have suffered a loss. This was a multi-million pound

construction project and hence was different from, for example, a one-off domestic house

construction. There should have been no question of water penetration in a newly

constructed chapel. More should have been done than simply going back to the contractor.

In a project of this size and complexity, a person able to fund such a project would not

simply allow the contractor to investigate but would refer the matter to the architect for

robust and complete investigation. Mr Canavan suggested this would be the normal course

of investigation. On behalf of Agro it had been submitted that none of the construction

professionals involved in the works suggested undertaking any of the investigations which

the experts now refer to, but the whole point of Mr Trembath’s position was that the

architect ought to have been told of water ingress in 2009 and this would then have led to

those investigations. Mr Canavan’s evidence was that such investigation would have taken

a short period, of a few weeks. Had thorough investigation taken place in November 2009

any defects of the kind now complained of would have been discovered. In particular, the

condition of the mortar, the condition of cavity trays, the condition of weep holes, and the

condition of cavity closers would have been ascertained, as Mr Clark suggested.

Mr Canavan agreed with that view and also said that adequate investigation would have

established the water ingress tracking route and any missing cavity trays or damp proof

courses. The weakness or friability of uncarbonated mortar should have resulted in testing

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of representative samples of the mortar materials by a laboratory. The fact that water was

present on the floor of a building which was supposed to be wind and watertight would

result in the expectation that the designer would be involved in any investigation. The same

point applied in respect of the windows in the belfry. Water inside the chapel at the chancel

must have passed through multiple layers of construction and one would need to know the

course of the water in order to understand how it got there.

[100] In relation to relevant acknowledgement, properly and sensibly understood it was

plain that neither the events at the site meeting of 21 October 2014 nor the email of

3 November 2014 could constitute performance towards implement of an obligation to make

reparation. In relation to section 6(4), should the point arise, there was no evidential basis at

all for the proposition that Mr Trembath induced the pursuer at any time to refrain from

making a claim for reparation.

Issue 2: Decision and reasons

The relevance or otherwise of Practical Completion

[101] It is plainly correct, as was submitted on behalf of SMG, that the concept of practical

completion cannot be used to place a gloss on the language of the statutory provisions; that

language expresses the law and must be applied. However, it is equally obvious that for the

purposes of the statute an act, neglect or default, in a case such as the present, takes place

when the breach of duty founded upon occurs. In relation to SMG, the case is based on

breach of contract. The contract between Agro and SMG states, as is common in many

construction contracts, that SMG were to “carry out and complete” the works in accordance

with the contractual conditions. Accordingly, if the works were not completed in

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accordance with the conditions there was at that point a breach of duty. The obligation may

be viewed as dual, in the sense that it creates a duty both to carry out, and separately, to

complete, the works in conformity with the contract: see Guinness plc v CMD Property

Developments Ltd 76 BLR 40; Hunt v Optima (Cambridge) Ltd EWHC 681 (TCC); 148 Con. L.R.

27. Whether this means that there was also an earlier breach in failing to carry out the works

in accordance with the conditions is for present purposes neither here nor there; a duty to

complete the works in accordance with the contract conditions means that, in the contract

with SMG, completion is a point in time at which breach can occur (see The Oxford

Partnership v The Cheltenham Ladies College [2007] BLR 293). Thus, I reject SMG’s contention

that the date of practical completion is not relevant. On the contrary, it is directly relevant to

the date of the alleged breach of contract by SMG.

[102] I also disagree with the submission on behalf of SMG to the effect that in Hunthaven

(at para [54]) Lord Doherty appeared to endorse the approach suggested in Hudson, on

which SMG relies. In that case, the issue being addressed at that point was whether the

pursuer had suffered loss, injury or damage prior to the end of the defects liability period

(rather than prior to practical completion). In paragraph [55], Lord Doherty explained that

“By practical completion…” there was a breach, and that:

“At practical completion the first defender was obliged to hand over to the pursuer

the relevant Phase of the slab, which phase was to be in conformity with the contract

requirements. If it was not, the first defender would be in breach of contract at that

time” [emphasis added].

Read in context, Lord Doherty’s observations at paragraph [54] concerned the factual issue

of whether the defects complained of were transitory or temporary in nature, which was the

starting point for the pursuer’s reliance upon the “temporary disconformity” approach. In

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concluding that they were not, he was rejecting the pursuer’s submission to that effect. But

the discussion thereafter is entirely consistent with practical completion being a point in

time at which there will be a breach of contract if the works are not in conformity with the

contractual requirements.

[103] As to the date of practical completion, in the present case it is of course correct that

no certificate of practical completion was ever issued. But it is beyond argument that the

stage of practical completion must have been reached. Completion is a recognised stage of

building contracts. The works were handed over and on any view must have been

completed. SMG and in due course its sub-contractors left the site. The remaining tranche

of the retention monies was released. The issue is therefore not if, but when, practical

completion occurred. There is significant force in the pursuer’s contention that it should be

taken as 2 December 2010. The letter from SMG to Ridett Ltd dated 5 December 2011

confirmed that the end of the defects liability period (relative to “Works at Ben Alder Estate,

Chapel, North Wing Tower, Leisure Centre, Breakfast Room and Study”) was 2 December

2011. In a construction contract, the contractor is likely to be keen to be paid for the work at

the earliest possible point in time. Where the contract provides for a retention, as here, it is

in the contractor’s interests to have that released. Once practical completion has been

reached and thereafter the defects liability period has run its course, with defects attended to

and with no known outstanding issues, remaining retention monies can be released. There

is no good reason as to why a contractor would be interested in delaying the commencement

of the defects liability period, so that it started at some point well after practical completion.

On the contrary, the contractor would ordinarily want the defects liability period to

commence straight after practical completion. There was no evidence suggesting in any way

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that the 12 month defects liability period in the present case was extended or that it

commenced at a date later than practical completion. Taking that into account as part of the

context, but more importantly having regard to the evidence relied upon by the pursuer

(including the terms of the letter to Ridett Ltd dated 5 December 2011, and the evidence of

Brendan McKenna), I conclude that practical completion took place on 2 December 2010.

While it is correct that the chapel and beach turret formed a different section of the works,

the letter of 5 December 2011 confirmed that the end of the defects liability period in respect

of the chapel and the other areas was also 2 December 2011.

[104] If for any reason that conclusion is wrong, then in my view the only other possible

date is the pursuer’s alternative contention of 1 March 2010, for the reasons advanced in the

pursuer’s submissions. These included that this date is consistent with Mr McKenna’s letter

to Wellwood Leslie of 11 February 2010 in which he advised that the breakfast room and

north wing were complete, but that the leisure centre was not, and the Form 5 completion

certificate submission made by Wellwood Leslie on 10 March 2010 indicating that the work

was completed on 1 March, and the electrical installation certificates signed on 18 and

19 March 2010.

[105] In relation to Morgan, there were limited submissions as to whether any obligation it

owed to Agro had been extinguished by prescription; as is noted above, much of Morgan’s

submissions concentrated on Issue 1. Morgan accepted that the starting point for

prescription was the date of practical completion and that this was ascertainable by

inference. No real attempt was made to explain how practical completion could be relevant

to the issue of prescription in respect of the claim by Agro against Morgan, other than that

CFW (and by implication Agro) suffered no loss, injury or damage as a result of any breach

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of contract or fault on the part of Morgan until the works were handed over, at practical

completion. Plainly, Agro’s claim against Morgan must depend on the contractual and

delictual duties owed by Morgan, none of which related to or referred to practical

completion. I conclude that Morgan’s reliance upon practical completion is unfounded. In

assessing the issue of concurrence of damnum and injuria in a question with Morgan, the

terms of SMG’s contract with Agro is of no relevance. This conclusion may be favourable to

Morgan because it may be the case that damnum and injuria concurred much earlier than any

date of practical completion of SMG’s works. But Morgan made no argument for a date any

earlier than the handover date as being the point at which loss was suffered by Agro. In

relation to Mr Trembath, again, it was not suggested that there was any reference to

practical completion in the contract. I therefore conclude that practical completion is

irrelevant also in relation to the alleged breach of duty by Mr Trembath. On behalf of

Mr Trembath, breach of duty was said to have occurred prior to practical completion, which

is asserted to have taken place in May 2009.

Agro’s claim against SMG: the leisure centre

[106] In terms of section 11(1) of the 1973 Act, an obligation to make reparation for loss,

injury or damage caused by an act, neglect or default shall be regarded for the purposes of

section 6 of the Act as having become enforceable on the date when the loss, injury or

damage occurred. I have accepted the pursuer’s position in relation to 2 December 2010

being the date of practical completion. That is the date when the contract was breached and

therefore is the date of injuria. Thus, there could have been no concurrence of damnum and

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injuria prior to that date. On that basis, given that the action was served on SMG on 28 April

2015, SMG’s plea of prescription falls to be repelled.

Concurrence of damnum and injuria

[107] In identifying the actual date of concurrence of damnum and injuria, the issue is

whether damnum was present on the date of the breach (at practical completion) or arose at

some later date. The pursuer makes general averments about failures in the Rawmat

tanking but does not say when or (at least in any real detail) how these failures are alleged to

have occurred. The evidence of the pursuer’s expert, Mr Clarkson, did not shed any

substantial light on the matter although he did indicate that the Rawmat tanking may have

deteriorated over time, for example because adequate compression was not applied when it

was installed. If there were, as he contends, localised workmanship failures these must have

related to the installation of the Rawmat tanking. At the point of installation, it could

therefore be argued that there was a defect, albeit one which might take some time for the

full consequences of the defect to be manifest. So, on that approach, the water ingress relied

upon by the pursuer was merely a manifestation of that existing defect. On the other hand,

it seems fair to conclude that if the workmanship failures had led to immediate failures in

the tanking these would have resulted in water ingress, which one would have expected to

be fairly serious and very evident, at a much earlier point, if not indeed straight after

installation. On the basis that widespread water ingress was not noted to have occurred at

that time, taken along with what appears, after March 2011, to be a progressively increasing

volume of water ingress, it could be argued on the balance of probabilities that the loss,

injury or damage occurred and was manifest only from, at the earliest, March 2011.

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[108] I consider that I am unable to conclude, taking pro veritate the pursuer’s position as to

the nature and cause of the defects currently complained of, that damnum did not occur until

some point in time after practical completion. I do of course appreciate that the current

defects might be said to have been latent, with damnum arising only when there was physical

manifestation of material damage. But I was simply presented with no evidence to the effect

that the defects currently complained of did not give rise to physical manifestation of

material damage (for example, damage within the structure, such as lack of adhesion or

compression of the Rawmat tanking) until some point after practical completion. It would

be unfair to SMG to give Agro the benefit of the doubt, when Agro has not made the

position sufficiently clear. I therefore conclude that the date of concurrence of damnum and

injuria was the date of practical completion.

[109] If I am wrong about practical completion having taken place on 2 December 2010,

then as noted above I accept, for the reasons given and the evidence relied upon by the

pursuer, the alternative date of 1 March 2010. That would then be the date for the

concurrence of damnum and injuria and in that situation the issues of postponement and/or

interruption of the prescriptive period fall to be considered, which I deal with below. If

practical completion did not occur on 1 March 2010, the only other candidate as the date for

practical completion is July 2009 with concurrence of damnum and injuria at that date, and

the questions relating to postponement/interruption would again arise.

[110] If, against the view that I have reached, SMG are correct that there was a concurrence

of damnum and injuria at an earlier point than practical completion, it is again only if Agro

can rely upon one or other of the grounds for postponement or interruption that the

obligation of SMG will not have been extinguished by prescription. No precise date for that

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concurrence was given on behalf of SMG, but there is a reference in SMG’s submissions to

June or July 2009.

[111] In his reply to the oral submissions of the other parties, Senior Counsel for Agro

contended that, separately and in any event, in terms of paragraph 4 of Schedule 2 of the

1973 Act, when work was executed by instalments, the key date is when the last instalment

is paid. In the present case, that was when the building was handed over at practical

completion. This point was made only at that stage in the submissions; as it was not

mentioned in the pleadings or in the written submissions advanced by Agro, SMG had no

opportunity to deal with it. Significantly, I was not referred to any evidence of precisely

when and on what basis instalment payments were made under the contract. Further, there

was no submission to the effect that, on a proper construction of the contract, it did not

mean that the obligation was to carry out and complete a particular instalment of the works,

in return for payment for that instalment. If that had been the position, that could result in

prescription starting to run separately at that point on each instalment of works. In short, I

was not given any sound basis upon which to reach the conclusion that the statutory

provision relied upon by Agro in this alternative submission had any relevance. I therefore

do not accept that submission.

Materiality

[112] If I am wrong about practical completion being the starting point for the running of

the prescriptive period, then the issue of materiality in relation to the incidents in 2008 and

2009 falls to be considered. In order for, as it were, the clock to start ticking on prescription

in relation to a right to sue on any particular defect, the defect in question must represent

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material, as opposed to negligible or insignificant or trivial, damage (Huntaven Properties Ltd

v Hunter Construction (Aberdeen) Limited & Ors [2017] CSOH 57 at [45]; Strathclyde Regional

Council v WA Fairhurst & Partners 1997 SLT 658 at 662B; Pelagic Freezing (Scotland) Ltd v Lovie

Construction Limited [2010] CSOH 145 at [102], [105] and [110]; Stewart Milne Westhill Limited

v Halliday Fraser Munro [2016] CSOH 76 at [67]; Homberg Houtimport BV v Agrosin Private Ltd

[2004] 1 AC 715 at [39]-[40], [64], [90] and [139]).

[113] SMG contends that, according to the evidence, there were various incidences of

water ingress into the leisure centre in 2008 and through to August 2009, including leaks

that required, at the pursuer’s own cost, the application of waterproof render. SMG founds

upon these as being occasions of loss, injury or damage which were material and which

occurred more than five years prior to the action being raised. On this issue, Agro submits

that Ian Anderson, the waterproofing contractor, was employed by SMG to apply

waterproof render at the leisure centre during that period and the works were carried out in

August, September and December 2008 and then into 2009. Agro contends that the evidence

indicates that the waterproof rendering works were carried out to provide waterproofing

where there was no Rawmat tanking in use. Agro contends that the best interpretation of

the evidence is that the material render work was all done in the same area, that being the

area of underpinning below the stairs. There were no water ingress problems to the

rendered area by mid-2009, so these were said to have been transitory problems.

[114] SMG’s expert, Mr Clark, stated in his report dated 30 June 2017:

“5.6.2.14

I do not know the circumstances that led to the application of

waterproof render to the inside of the waterproof box on five occasions including

one to the underpinning below the stair. In my experience, waterproof render is

normally associated with remediating a known problem of water ingress. I consider

it to provide a lower standard of waterproofing than would be provided by the

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Rawmat bentonite membrane. I have not seen evidence of a design of waterproof

render on the drawings or any instruction for this work.”

SMG further contends that the evidence in the case did not support the view that the render

was applied only to the area of underpinning, because the method statements provided by

Mr Anderson refer to rendering work being carried out at “various locations” and there was

also oral evidence about render being applied at the wall and junction, where a jacuzzi was

located.

[115] Agro’s expert, Mr Clarkson, in his report dated 2 August 2017, concludes (at

para 2.9):

“I have reviewed these emails and consider that they refer to only five instances of

render being applied, as opposed to eight, indeed this appears to be accepted by

Mr Clark later at para 5.6.2.1 of his report. Further they refer to one specific known

area adjacent to the underpinning under the stair. My opinions provided in my

original report remain. This area of underpinning beneath the stairs does not use

Rawmat. Indeed render would have been applied to deal with the absence of

Rawmat in this area where the old and new buildings meet. As such it would not

have been indicative of a wider problem with the Rawmat waterproof membrane,

such that a reasonably prudent building owner should have investigated further.”

[116] The locations of the applications of the waterproof render are not absolutely clear.

To a large extent the experts were seeking to construe the terms of emails in order to reach a

view. However, in reaching his conclusion Mr Clarkson set out what I consider to be

convincing reasons as to why the “various locations” should be understood as being at the

area of the underpinning. He had regard to what the contemporaneous documents

indicated about the separate stages of application of the render to the area of underpinning,

and he also considered the volumes of materials which were used. On balance, I am

persuaded that his position is correct and I accept his evidence on the matter. I therefore

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conclude that the incidents in 2008 and in the first part of 2009 relied upon by SMG do not

amount to material damage.

[117] In relation to the events in November 2009, SMG does not rely upon these as

constituting damnum for the purposes of its arguments on prescription. For that reason, I

need not consider the question of materiality of these matters in relation to Agro’s claim

against SMG.

Were the incidents in 2008 and 2009 separate and distinct from the currently pled

complaints?

[118] If my conclusions on the relevance of practical completion are incorrect, it becomes

necessary to consider in this context SMG’s arguments relating to the events of water ingress

in 2008 and 2009. It is only loss, injury or damage and the correlative act, neglect or default

that can properly be relied upon in support of a plea of prescription; prior losses and

defaults which are distinct, discrete and unrelated will fall to be left out of account (ANM

Group Limited v Gilcomston North Limited 2008 SLT 835 at [29]). In reaching a view as to

whether loss, injury or damage, and the correlative act, neglect or default, are truly separate

and distinct (as opposed to being a development or a further emerging example of an

existing known loss, injury or damage and its correlative default) I accept (and this was not

disputed by parties) that a pragmatic approach is appropriate (Musselburgh & Fisherrow Co-

operative Society Limited v Mowlem Scotland Limited 2004 SCLR 412, at [50]-[51]; Johnston,

Prescription and Limitation (2nd ed), at 2.26). In taking that pragmatic approach, it is relevant

to have regard to the nature, location and scale of the loss, injury or damage, as well as to the

nature of the default or breach of duty by which such loss, injury or damage was caused

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(Musselburgh & Fisherrow Co-operative Society Limited v Mowlem Scotland Limited 2004 SCLR

412, at [51]; ANM Group Limited v Gilcomston North Limited 2008 SLT 835 at [25]-[27]).

[119] SMG contended that there was a single defect: the intended “waterproof box” was

not waterproof. In light of the statutory provisions and the authorities, this is a

generalisation and over-simplification of the issues. SMG further contended that the

evidence as to the cause of the current problems upon which the pursuer founds was

inconclusive and therefore that the pursuer had not made out its case on the earlier incidents

in 2008 and the first part of 2009 being separate and distinct. However, as I have noted

above, at this stage in this preliminary proof the pursuer’s averments as to the cause of the

current problems must be taken pro veritate. In short, these are said to be failures in the

Rawmat tanking. For the purposes of considering whether the earlier incidents were

separate and distinct, that is the comparator. On the basis of the evidence of Mr Clarkson,

noted above, which I have accepted, these earlier incidents related to the waterproof render

at the area of underpinning and in any event did not recur and appeared to have been

remedied and resolved. Accordingly, these do not relate at all to failures in the Rawmat

tanking.

[120] In relation to the matters raised concerning the leisure centre in the email of

25 November 2009, SMG accept that these were minor workmanship failures, resulting in

snagging issues and are unrelated to the matter currently complained of in the action against

them.

[121] I therefore conclude that any issues of water ingress in 2008 and 2009 at the leisure

centre were separate and distinct from the currently pled problems.

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Actual or constructive awareness: section 11 (3)

[122] Section 11(3) of the 1973 Act provides that where a creditor in an obligation was, on

the date that obligation became enforceable, not aware (and could not with reasonable

diligence have been aware) that it had suffered loss, injury or damage, prescription will start

to run when the creditor first became aware (or could with reasonable diligence have

become aware) of the loss, injury or damage. For the purposes of section 11(3), the creditor

need only be actually or constructively aware of the occurrence of loss, injury or damage

which had, as a matter of fact, been caused by the breach of contract or breach of delictual

duty complained of (David T Morrison & Co. Limited (t/a/ Gael Home Interiors) v ICL Plastics

Limited 2014 SC (UKSC) 222, per the decision of the majority and in particular Lord Reed at

[16] -[19] and [25] and Lord Neuberger at [47] ; Gordon v Campbell Riddell Breeze Paterson LLP

2017 SLT 1287 at [17]). The creditor’s lack of actual or constructive awareness of the factual

cause of the loss, injury or damage is not sufficient to postpone the commencement of the

prescriptive period under section 11(3) (Gordon v Campbell Riddell Breeze Paterson LLP 2017

SLT 1287 at [20] and [21].) ‘Reasonable diligence’, for the purposes of section 11(3) and

section 6(4) of the 1973 Act, means the taking of those steps that a person of ordinary

prudence would have taken if placed in the circumstances in which the pursuer found itself

(Huntaven Properties Ltd v Hunter Construction (Aberdeen) Limited & Ors [2017] CSOH 57 at

[79] ; Glasper v Rodger 1996 SLT 44 at 48, applying Peco Arts Inc v Hazlitt [1983] 1 WLR 1315

(at 1323); Adams v Thorntons 2005 1 SC 30 at [23]-[24]; Heather Capital Limited (In Liquidation)

and Duffy v Levy & McRae; Heather Capital Limited (In Liquidation) and Duffy v Burness Paull

LLP 2017 SLT 376 (at [72]); Johnston, Prescription and Limitation (2nd ed) at 6.100-6.103 and

6.127).

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[123] If necessary, Agro seek to rely upon the terms of section 11(3). SMG relies, in

contesting Agro’s submissions on this point, not only on the events in 2008 and the first part

of 2009, but also upon the events of November 2009. SMG contends that even although

these November 2009 matters were not linked to the ongoing water ingress which is the

subject of the present action, nonetheless they should, when taken along with the other

problems, have prompted investigation. As is noted above, SMG relies upon Mr Clark’s

evidence to the effect that because of the number and frequency of the leaks (including leaks

which apparently required the application of waterproof render at the pursuer’s cost) a

reasonably prudent employer would have instructed further detailed investigations and

consideration of the design. SMG also relies upon the evidence of other witnesses, including

the expert witnesses of the other defenders, to say that in the exercise of reasonable diligence

such investigations ought to have been commenced.

[124] In my view, in relation to the matters which pre-date November 2009, the factual

basis for this contention as to the reasonably prudent person commencing further

investigations is not well founded, as I have accepted the evidence of Mr Clarkson about

these events. On the evidence, I do not accept that the events involved any material issues

of water ingress that merited further investigation. The incidents of water ingress did not

result in remedial repair works being carried out to areas which should have been

waterproof because of the use of Rawmat tanking. In fact, they arose at another area. There

was therefore no basis in the evidence for any suggestion that these incidents of water

ingress resulted from failures in the Rawmat tanking caused by workmanship failures.

[125] In relation to the matters that arose in November 2009, the contention of SMG is that

even though these were minor snagging issues caused by workmanship defects unrelated to

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the things now complained of by Agro, an ordinarily prudent person should have

conducted investigation, including into the underlying design, which would have led to

discovery of the issues which are currently the subject of complaint. There was, it was said,

a single defect: the intended “waterproof box” was not waterproof. SMG also contended

that, if there were separate defects, the point made by Lord Eassie in Musselburgh &

Fisherrow Co-operative Society Limited v Mowlem Scotland Limited, to the effect that not

diligently investigating matter A, where that would have revealed the presence of matter B,

does not mean that the pursuer has failed diligently to investigate matter B, is incorrect.

SMG argued that if the pursuer should have investigated defect A, which would revealed

defect B, then that is a single exercise of reasonable diligence which ought to have been

carried out.

[126] As Lord Eassie explained in the examples he gave, he was referring to distinct

matters or defects. Where there are such distinct defects, Lord Eassie concluded that “the

necessary physical manifestation must be relevant to the particular defect in question”

before investigation is required. On this point, I agree with Lord Eassie’s reasoning.

However, I do not consider that in the present case the question arises in the first place.

SMG’s proposition founds upon the investigation of the November 2009 problems, said by

Mr Clark to be appropriate, as being a step which a person of ordinary prudence would

have taken if placed in the circumstances in which the pursuer found itself. I reject that

contention. The problems in November 2009 were not things that the pursuer decided to do

nothing about; on the contrary, the issues were discussed with SMG and the causes were

then identified and the problems rectified. They were minor snagging defects. The

contention for SMG that further investigations into design ought to have been made is

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unsound. There is no doubt that the basement was intended to be waterproof but that

cannot mean that any ingress of water, even if caused by an issue that had been identified as

a minor workmanship failure, and then addressed and apparently resolved, required further

investigations into the design.

[127] There were a number of construction professionals engaged in the project and

nobody suggested at the time that further investigation into the design should take place.

On the contrary, the impression plainly given was that any problems had been resolved. I

have weighed up the various strands of the expert evidence and it seems to me that the

actings said to be required in the exercise of reasonable diligence by the expert witnesses for

the defenders in fact goes beyond what is reasonable in all the circumstances.

[128] I conclude that Agro was not aware in 2008 or 2009 that loss, injury or damage

caused by the act, neglect or default now relied upon had occurred and could not, with

reasonable diligence, have become so aware, at least until March 2011.

Induced error: section 6(4)

[129] Agro also relies, if it is necessary to do so, upon section 6(4) of the 1973 Act. A

creditor seeking to rely on section 6(4) in order to interrupt prescription on the basis of

induced error must prove three matters: (a) an error induced by the words or conduct of the

debtor (or someone acting on the debtor’s behalf); (b) that the error induced the creditor to

refrain from making a relevant claim in relation to the obligation in question; and (c) the

period during which the creditor was so induced (BP Exploration Operating Co. Ltd v Chevron

2002 SC (HL) 19 at [29]-[33] and [65]-[67]; Adams v Thorntons 2005 1 SC 30 at [66].) The onus

is on the debtor to prove the proviso in section 6(4) i.e. the point at which the creditor could

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with reasonable diligence have discovered the error (after which point, time will not be

excluded from the prescriptive period) (Heather Capital Limited (In Liquidation) and Duffy v

Levy & McRae; Heather Capital Limited (In Liquidation) and Duffy v Burness Paull LLP 2017 SLT

376 at [77]; Heather Capital Limited (In Liquidation) and Duffy v Levy & McRae 2017 SCLR 317 at

[47] -[56]; BP Exploration Operating Co. Ltd v Chevron 2002 SC (HL) 19 at [110] and [33]; United

Central Bakeries Ltd v Spooner Industries Ltd [2013] CSOH 150 at [117]). In relation to the word

‘induced’, the debtor may have been acting entirely innocently and in good faith: his

conduct may not have been deliberate, blameworthy or careless or carried out with any

particular motive such as deception or concealment, but nevertheless it may have led the

creditor to believe something different from the truth (BP Exploration Operating Co. Ltd v

Chevron 2002 SC (HL) 19 at [65]; Heather Capital Limited (In Liquidation) and Duffy v Levy &

McRae; Heather Capital Limited (In Liquidation) and Duffy v Burness Paull LLP 2017 SLT 376 (at

[63] ); ANM Group Limited v Gilcomston North Limited 2008 SLT 835 at [75]).

[130] Agro contends that in carrying out the remedial works (related to the matters raised

in November 2009) and representing that the defects had been remedied, SMG induced

Agro erroneously to refrain from making “any claim in relation to the November 2009

defects”. Later instances of SMG carrying out remedial works are also founded upon. In

view of the fact that the November 2009 defects are accepted by SMG to be minor snagging

issues that were resolved (and hence were separate and distinct matters) the actings of SMG

in respect of these issues is of no relevance: these actings cannot be founded upon as

inducing an error on the part of Agro not to sue in respect of the matters which are the

subject of the current complaint.

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[131] There was evidence of SMG carrying out remedial works in 2011 and 2012. The leaks

which appeared in 2011 were generally in areas other than the leisure centre, with one

apparent exception: the void under the staircase accessed from the gym plant room in the

leisure centre. From the email correspondence, it is clear that SMG attended the site to view

the defects and to take the necessary measures to rectify them. By August 2011 the remedial

works were completed and there were no outstanding issues as at December 2011, when

release of the remaining tranche of the retention monies to SMG was authorised. In early

January 2012 there was further water ingress. By 20 March 2012, SMG had undertaken

remedial works by the installation of a sump and pump arrangement.

[132] I am satisfied that the remedial works completed in August 2011 led Agro to the

erroneous belief that the cause of the water ingress identified earlier in 2011 had been

addressed, with the result that Agro refrained from making any claim against SMG. That

error lasted until December 2011, further problems becoming evident in January 2012. I am

satisfied that having regard to the whole circumstances, in the exercise of reasonable

diligence Agro could not have discovered that error prior to the end of December 2011. The

implicit representation was that the issue had been addressed and resolved and I am not

persuaded that an ordinarily prudent person in the position of Agro would have taken any

further steps to investigate the matter during the period from August to December 2011.

The result is that the period of error in this regard is four months.

[133] However, I am not satisfied that the events of early 2012 induced Agro into any

erroneous belief. There was nothing in SMG’s words or conduct which could be taken as

SMG investigating the cause of the problems and proposing to carry out, or actually

carrying out, remedial works. On the contrary, the principal work done was the installation

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of the sump and pump mechanism, which plainly dealt with the symptoms and not the

cause. In any event, standing the more serious nature of the water ingress in early 2012, I

am satisfied that an ordinarily prudent person would have carried out further investigations

into the cause of the water ingress, given that no cause had properly been identified.

Accordingly, I do not accept that Agro was induced by the words or conduct of SMG to

refrain from making a relevant claim for any period after December 2011.

[134] As a result, the period of four months from August to December 2011 should not be

reckoned as part of the prescriptive period in the claim against SMG in respect of the leisure

centre.

Relevant acknowledgement: section 10(1)

[135] In the context of building contract cases, the carrying out of remedial work is capable

of constituting performance towards implement of an obligation to make reparation for

failures which have caused defects in the contract works, for the purposes of section 10(1)(a)

of the 1973 Act. The question is whether in doing what it did with regard to the remedial

work there was such performance by the debtor towards implement of an obligation to

make reparation as clearly indicated that the obligation still subsisted (Huntaven Properties

Ltd v Hunter Construction (Aberdeen) Limited & Ors [2017] CSOH 57 at [102]-[103]). As I have

noted above, performance towards implementation must be clearly referable to the

particular obligation.

[136] On this matter, I accept the submissions of SMG. The minor snagging problems in

November 2009 were not linked to the ongoing water ingress which forms the basis of the

present claim. Remedial works as to these minor snagging problems cannot amount to a

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relevant acknowledgement of a subsisting obligation to correct whatever is the cause of the

ongoing water ingress problems. The installation of pumps was, as I have noted, addressing

the symptoms rather than the cause. While SMG attended on site, carried out investigations

and proposed solutions, in my opinion this was dealing with issues on an ad hoc basis rather

than acknowledging an actual liability. What is required is such performance towards

implement of the obligation (in this case, to make reparation for defective workmanship

relative to the Rawmat tanking) as clearly indicates that the obligation still subsists. No such

performance occurred.

Agro’s claim against SMG: the breakfast room

The incidents in November 2009 – separate and distinct?

[137] As is noted above, Agro contended that the matter noted in November 2009 in

respect of the breakfast room (the failure of the window sill extension pieces) was separate

and distinct from the matters now complained of in the present action. SMG says that is

incorrect and points to the fact that in November 2009 it had already been identified that

there were no weep holes at the windows and that there must be problems with the absence

or the sealing of cavity trays, matters which are raised in the present action. In my opinion,

there is plainly a sufficient degree of overlap between the matters now complained of and

the matter raised in November 2009. For that reason, I do not consider that the issues are

separate and distinct.

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Actual or constructive awareness: section 11(3)

[138] The parties are also at issue as to whether there was actual and/or constructive

awareness of the issues now complained of by Agro. While the possible existence of these

issues was at least partly the subject of comment at the time, the fact is that SMG’s views on

the cause of the problem and on the appropriate remedial works were obtained. SMG then

carried out remedial works and the problem then bore to disappear. Given that Mr Welsh of

SMG stated in his emails that the cause of the problem was the window sill extension pieces

and that remedial works to the extended window sill would eliminate the problem, it cannot

be concluded that Agro was actually aware of the problems now relied upon. Moreover, I

am not satisfied that, having been advised by the contractor of the cause and means of

remedying the problem, in the exercise of reasonable diligence the pursuer should have

carried out any further investigations or enquiries. For these reasons, Agro could not, in the

exercise of reasonable diligence, have become aware of the issues which are now

complained about prior to at least March 2011.

Induced error: section 6(4)

[139] On the facts as outlined above, SMG’s attention to the window sill extension in the

breakfast room and its clear representation that the problem had been remedied constitute

words and conduct which induced Agro not to make a relevant claim in respect of the

obligation. No persuasive reason was offered as to why an ordinarily prudent person

would have taken any further steps to investigate matters. I accept Agro’s contention that

the period of error lasted from at least the end of 2009 until March 2011, which is a period of

at least 14 months.

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Agro’s claim against SMG: the chapel

[140] As I have noted above, my conclusions as to practical completion apply also to the

chapel. It is appropriate that, in any event, I also address the other issues raised by the

parties in this regard.

The events of November 2009 – materiality

[141] Agro contends that the issues identified in November 2009 about the ambulatory

windows were caused by obvious mastic failures, treated as an entirely normal snagging

issue and remedied by SMG. No damage is said to have been caused. Similar points are

made regarding water ingress at the walls and the belfry louvres. As such, it is argued that

these matters were not material. Applying the test in the authorities, and having regard to

the nature and scope of the defects (the mastic failures at the ambulatory windows and high

level windows, and the absence of a screen behind the belfry louvres and the need for repair

and resealing of the lead flashing on the belfry floor) it cannot, in my opinion, be concluded

that the loss was negligible, insignificant or trivial. I therefore conclude that it was material.

The events of November 2009 - separate and distinct?

[142] The evidence of Mr Clarkson was to the effect that the matter that arose in November

2009 about the ambulatory windows was a localised issue relating to mastic sealant, in

contrast with the current claim, in which the defects complained of relate to masonry and

proper waterproof detailing within the cavity walls. While it is correct that Mr Clarkson did

not identify the exact nature of the defect in the belfry, his evidence was that the previous

water ingress is not associated with the current complaint. Having regard to the fact that

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there was not, in my opinion, any cogent evidence to the effect that the defects were the

same, I am satisfied that Agro’s position, that the issues that arose in November 2009

relating to the chapel were separate and distinct, is correct. Accordingly, these are irrelevant

to the question of prescription.

Actual or constructive awareness: section 11(3)

[143] In relation to section 11(3), SMG says that with the exercise of reasonable diligence

Agro could have become aware of the currently pled defects. The gist of SMG’s position is

again that steps should have been taken to involve the architect in considering any

investigation or discussion of remediation. Weighing up the expert evidence, this again

seems to me plainly to exceed what a person of ordinary prudence would have done if

placed in the circumstances in which the pursuer found itself. At the time, Agro again

sought and relied upon SMG’s advice on the causes of the problems, and on the appropriate

remedial works. Once these were carried out the problems seemed to disappear. Once

again, no experienced construction professional on site suggested the involvement of the

architect. In my opinion, a person of ordinary prudence would not have made enquiries of

the architect but would simply have acted in the same manner as Agro acted. Standing that

conclusion, Lord Eassie’s approach in Musselburgh & Fisherrow Co-operative Society Limited v

Mowlem Scotland Limited does not arise, but had it been necessary to consider the point I

would have agreed with that approach and would find that any failure to diligently

investigate the problems then manifest (which I have concluded were indeed separate and

distinct) does not amount to a failure to diligently investigate the defect which is the subject

of the current complaint.

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Relevant acknowledgement: section 10(1)

[144] Agro contends that there was discussion at a site meeting on 23 July 2014 involving

SMG’s representative, Mr Fyfe, during which Mr Fyfe appeared to accept that SMG had a

responsibility to remediate. There was also an email from Mr Fyfe on 4 September 2014 in

which he undertook to look at issues relating to the chapel. There was then a meeting on

21 October 2014 at which these issues were discussed and SMG agreed to carry out certain

investigations. This conduct stops well short of actually doing any remedial works. The

evidence about the meeting on 23 July 2014 is not clear and in any event a general

acceptance of a responsibility to remediate not directly linked to the issues in question

cannot amount to a relevant acknowledgement. The facts identified do not involve any

performance towards implement of an obligation to make reparation in respect of the

breaches now alleged. Accordingly, I conclude that there was no relevant acknowledgement

on the part of SMG in respect of the obligations currently founded upon.

Agro’s claim against SMG: summary of decision

[145] In view of the number and complexity of the various issues which arise in respect of

Agro’s claim against SMG, it may assist if I briefly summarise my conclusions. The date of

practical completion is when the concurrence of damnum and injuria occurred. Practical

completion took place on 2 December 2010. If that is incorrect, the running of prescription

was in any event postponed or interrupted in relation to the particular work areas in the

following manner. In relation to the leisure centre, the incidences of water ingress in 2008

and prior to November 2009 were not material and in any event were separate and distinct

from the current complaints. The events of November 2009 were material, but again were

Page 73 ⇓

separate and distinct. There was therefore no concurrence of damnum and injuria based on

these events. Moreover, in relation to the events in 2008 and 2009, Agro could not with the

exercise of reasonable diligence have discovered that loss, injury or damage caused by the

act, neglect or default currently complained of had arisen, until March 2011 at the earliest.

Agro’s contentions in relation to section 6(4) are rejected (except in relation to the four

month period noted above), as are its contentions about relevant acknowledgement. In

relation to the breakfast room, the matters which arose in November 2009 were not separate

and distinct, but in the exercise of reasonable diligence Agro could not have become aware

that loss, injury or damage caused by the act, neglect or default currently complained of had

arisen, until March 2011 at the earliest. Moreover, in terms of section 6(4), SMG’s conduct

results in a 14 month interruption in the running of prescription. In relation to the chapel,

the events of November 2009 caused material loss but were also separate and distinct from

those which are the subject of the current complaint. In any event, Agro could not with the

exercise of reasonable diligence have discovered that loss, injury or damage caused by the

act, neglect or default currently complained of had arisen, until March 2011 at the earliest.

Agro’s argument as to relevant acknowledgement in relation to the matters at the chapel is

not accepted.

Agro’s claim against Morgan

The sub-issues

Concurrence of damnum and injuria

[146] The question of the date of concurrence of damnum and injuria in relation to any

obligation on the part of Morgan to make reparation to Agro was not addressed in any real

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detail in the parties’ submissions. Agro founded upon the date of practical completion, but

gave no cogent reasons as to why this is relevant in a question with Morgan. For its part,

Morgan also proceeded on the basis that practical completion was the appropriate starting

point. No submissions were made as to whether, in the context of a design defect, damnum

and/or injuria would arise at an earlier stage, let alone as to when that point in time

occurred. In that situation, having not been provided with the necessary material in

evidence or submissions, I am unable to reach a firm conclusion on the date of concurrence

of damnum and injuria in respect of any obligation owed by Morgan.

The events of November 2009 – separate and distinct?

[147] As I have noted above, Agro and SMG both submit that the workmanship issues

identified in the email of 25 November 2009 were minor snagging defects that were not

linked to the ongoing water ingress. These workmanship issues were dealt with and have

not reappeared. However, Morgan continues to rely upon 25 November 2009 as being the

date when physical damage first occurred at the leisure centre. In light of the evidence, and

applying the test from the case law referred to above, I accept that Agro and SMG are correct

in their articulation of the position. Accordingly, the issues identified in the email of

25 November 2009 were separate and distinct from the matters now complained of in

respect of ongoing water ingress. In particular, they are not related to failures of the

Rawmat tanking.

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The events of November 2009 - materiality

[148] While I have accepted that it is correct that the defects identified in the email of

25 November 2009 were separate and distinct, I also require to consider whether or not they

resulted in material loss, injury or damage. Again applying the test in the case law, and

albeit recognising that these were snagging issues, I do not consider that I can regard them

as negligible, insignificant or trivial. As is noted above the email of 25 November 2009

described them as “serious”.

Actual or constructive awareness: section 11(3)

[149] Morgan correctly submits that a lot of the expert evidence at the preliminary proof

involved views on what the experts thought that a reasonable person in the position of the

building owner should have done, with particular reference to the matters raised on

25 November 2009. One issue raised is of course whether material loss and damage, which

was caused by defects that are separate and distinct from those now complained of, required

further investigation. In my opinion, given that SMG now accept that these were

workmanship issues that were resolved, I do not consider that the evidence supporting the

need for further investigations relied upon by Morgan can bear any weight. The contention

being made is effectively that further investigations were required even though the only

actual defects were minor snagging matters arising from workmanship failures, which were

considered to be, and in due course demonstrated to be, remedied without any damage

recurring. For that reason, and the reasons given above about the evidence I have accepted

in relation to this issue, I accept Agro’s position in relation to section 11(3). The consequence

is that, in the exercise of reasonable diligence, the defects which are the cause of the current

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problems could not have been identified until March 2011, at the earliest. On that basis, any

obligation owed by Morgan to make reparation has not been extinguished by the operation

of prescription.

Induced error: section 6(4)

[150] I accept the position of Agro that the attendance on site by Morgan in July 2011 to

consider the water ingress in the leisure centre, coupled with the fact that they checked their

design and stated by email that they were convinced that their design was robust, and that

any issues must be due to workmanship, constitutes words and conduct which induced

Agro not to make a relevant claim in respect of the obligation owed by Morgan. On behalf

of Morgan, it was accepted that it had stated that its design was robust. Morgan did not

make any submissions on the section 6(4) issues in the claim by Agro against them,

preferring to focus on that provision in the context of Agro’s obligation to CFW. I further

accept that the period of error that was induced commenced in July 2011 but I conclude that

it ended on 21 October 2014, the evidence (from William Lindsay) being that at that point it

was realised that it was becoming apparent that there may be underlying design issues.

[151] Morgan also made no submission that the exercise of reasonable diligence for the

purposes of section 6(4) would have resulted in discovery of the error. In particular, Morgan

did not engage with Agro’s contention that it had taken the steps which a person of ordinary

prudence would have taken (that is, to ask the designer to check its design). In light of the

answer from Morgan that its design was robust, and that any issues must be attributable to

workmanship, I do not consider that a person of ordinary prudence placed in the

circumstances in which the pursuer found itself would nevertheless have undertaken

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further investigations in relation to the design. At the time, Morgan did not suggest any

such further investigations, nor did any other party. The evidence of Mr Reid regarding

steps which ought to have been taken involved significant investigative works, the costs of

which were not explained. In my view, he applied too high a standard. I am accordingly

persuaded that Agro exercised reasonable diligence for the purposes of section 6(4).

[152] On that separate basis, Morgan’s alleged obligation founded upon by the pursuer

has not been extinguished by the operation of prescription.

Relevant acknowledgement: section 10(1)

[153] In my view, Morgan’s conduct in attending the meeting on 21 October 2014 and

subsequently checking its design and confirming (again) that the tanking details and

specifications were robust does not constitute such performance by Morgan towards

implement of an obligation to make reparation as clearly indicating that the obligation still

subsisted. Rather, this conduct stopped short of any form of performance towards

implement and there was nothing in the conduct of Morgan which indicated that any

obligation still subsisted.

Agro’s case against Morgan: summary of decision

[154] Again, it may help if I summarise my conclusions. While it is not possible to identify

the date of the concurrence of damnum and injuria, the defects identified in November 2009

were material but were separate and distinct from those founded upon in the current action.

Agro’s position in relation to section 11(3) is accepted, with the consequence that, in the

exercise of reasonable diligence, the defects which are the cause of the current problems

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could not have been identified until March 2011, at the earliest. Agro’s contentions in

relation to section 6(4) are also accepted resulting in an interruption of the period of the

running of prescription by some 39 months. However, I reject Agro’s position in relation to

relevant acknowledgement.

Agro’s claim against Mr Trembath

The sub-issues

Scope of the dispute

[155] I accept Agro’s position that, in light of the pleadings on behalf of Mr Trembath, and

the evidence before the court, there is no suggestion that his obligation to make reparation to

the pursuer in respect of the calcite leaching and the absence of dowel pins and fixings in the

parapet stones has prescribed.

Concurrence of damnum and injuria

[156] In relation to the other complaints founded upon in the action against Mr Trembath,

again Agro founded upon practical completion as the starting point, but gave no reasoned

basis for that approach. On behalf of Mr Trembath, given that part of the submissions for

Agro were adopted, the point being taken was that the concurrence of damnum and injuria

must have been at an earlier date. Once again, I am not able on the evidence and

submissions made to reach a clear conclusion on this point. However, given that

Mr Trembath relies upon the events of November 2009, the issues between the parties can

still be resolved when one considers questions of materiality and the law on postponement

or interruption of the prescriptive period.

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The events of November 2009 - materiality

[157] Agro make submissions on the basis that the water ingress in November 2009 did not

cause any material damage. Again applying the test in the authorities, and having regard to

the nature and scope of the defects (the mastic failures at the ambulatory windows and high

level windows, and the absence of a screen behind the belfry louvres and the need for repair

and resealing of the lead flashing on the belfry floor) it cannot be concluded that the loss,

injury or damage was negligible, insignificant or trivial. It was therefore material. In that

regard, I accept the submission on behalf of Mr Trembath that the water ingress was

described in the email of 25 November 2009 as “severe” and that it was “a serious matter”.

The events of November 2009 - separate and distinct?

[158] I have already concluded that the matters currently complained of are separate and

distinct from those which arose in November 2009 at the chapel. I do not consider that the

evidence of Mr Canavan on this issue was persuasive. It related largely to the contention

that further investigations in 2009 would have shown that the water ingress then was of the

same origin as that seen subsequently. It did not adequately address the points raised by

Mr Clarkson about the differences between the causes of ingress in November 2009 and the

subsequent incidences. Accordingly, I remain of the view that the matters which arose in

November 2009 were separate and distinct.

Actual or constructive awareness: section 11(3)

[159] I have identified above the alleged defects which form the basis of Agro’s case

against Mr Trembath. Agro contends that it did not, on the evidence, have any actual

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awareness of loss, injury or damage of the type now complained of in the action. Agro also

says that there is no suggestion on behalf of Mr Trembath that the matters now complained

of are not separate and distinct from a design perspective. I do not accept the submission on

behalf of Mr Trembath to the effect there was actual awareness of the water ingress being

caused by the same defects. The evidence does not support that contention. Accordingly,

the issue is one of whether a person of ordinary prudence, if placed in the circumstances in

which the pursuer found itself, would have taken steps which would have resulted in the

discovery of the defects now complained of in the action.

[160] Agro obtained SMG’s views on the causes of the problems and on the appropriate

remedial works. These were then carried out and nothing occurred for a substantial period

to suggest that the remedial works had not been successful. Mr Trembath did not identify

anything of concern in his own thorough and careful review of snagging issues. Moreover,

Mr Trembath’s expert, Mr Canavan, was in fact unable positively to conclude that the

defects now complained of would have been ascertained had the investigations he

suggested been undertaken. Mr Canavan’s position was that more should have been done

than merely referring matters back to the contractor. He refers to various steps which he

says would be normal practice when water ingress of the type noted in November 2009 had

occurred. When faced with defects which appear to be of workmanship and which are

apparently resolved, with no-one among the construction professionals engaged in the

works suggesting anything further at the time, including Mr Trembath, I conclude that the

pursuer’s position is correct. Thus, Agro could not have become aware, in the exercise of

reasonable diligence, of the existence of the defects which form the current complaint, until

March 2011 at the earliest.

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[161] Again, standing that conclusion, the application of Lord Eassie’s approach in

Musselburgh & Fisherrow Co-operative Society Limited v Mowlem Scotland Limited does not arise,

but had it been necessary to consider the point I would again have agreed with that

approach and would find that any failure to diligently investigate the problems then

manifest (which I have concluded were indeed separate and distinct) does not amount to a

failure to diligently investigate the defect which is the subject of the current complaint.

Relevant acknowledgement: section 10(1)

[162] Agro relies upon various acts and comments by Mr Trembath in September 2013,

October 2014 and November 2014. Viewed individually or collectively, these do not in my

view satisfy the statutory test. Agro says that by Mr Trembath responding to an email of

30 September 2013, in which his comments were sought on the current issues at the turret

and chapel, attending at a meeting on site (and making clear at the meeting that he was

willing to cooperate with the problems at the chapel and beach turret) and then providing a

detailed report (in which he confirmed that the dressed stone elements and the antique

stones and detailing were suitable for construction) amounted to a relevant

acknowledgement. This evidence stops short of doing any remedial works and it does not

involve any form of performance towards implement of an obligation to make reparation in

respect of the breaches now alleged. It was little more than agreeing to look into matters;

indeed it seems to involve a conclusion being reached that there was nothing wrong. I

therefore do not accept Agro’s submission on relevant acknowledgement.

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Agro’s case against Mr Trembath: summary of decision

[163] By way of summary, I am not able to reach a firm conclusion on the date of

concurrence of damnum and injuria, but I conclude that the events of November 2009, while

material, were separate and distinct from the current complaints and that, in any event,

Agro could not in the exercise of reasonable diligence have identified the defects which are

the cause of the current problems until March 2011 at the earliest. Agro’s position on

relevant acknowledgement is again rejected.

Issue 3: waiver

Submissions for SMG

[164] There is a dispute between parties as to whether or not the installation of pumps was

intended to be a permanent or temporary solution to water ingress in the basement. The

pumps were installed, at cost to SMG, with the agreement of the pursuer’s authorised agent

and representative. The pumps were intended, and reasonably understood by SMG, to be a

permanent solution to water ingress there. SMG had reasonably acted on that

understanding to its cost and the pursuer was now barred from contending otherwise.

Reference was made to Armia Limited v Daejan Developments Limited 1979 SC (HL) 56 and

McBryde, The Law of Contract in Scotland (para 25-15).

[165] The evidence on this issue was that the rationale for installing the pumps was as a

permanent solution and that SMG was not asked to do any further opening-up work after

the pumps went in. There were simply no instructions to carry out any further

investigations. The parties clearly agreed that pumps would be installed to control water

ingress into the basement and that this was to be a permanent solution. The pursuer had

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thus waived any right that it had to insist on the basement being a fully waterproof box. The

pursuer had waived the right to complain about water ingress from precisely the same

source as was intended to be dealt with by the pumps. The pursuer had waived the right to

demand that SMG paid for yet further work to make the basement watertight. SMG

conducted itself on the basis of the agreement and incurred expense in purchasing the

pumps and installing them.

Submissions for Agro

[166] The interlocutor allowing the proof before answer was limited to allowing parties a

preliminary proof before answer on the question of prescription, title and interest to sue,

and “any other matter hereafter approved by the court”. No other matters were approved

by the court. SMG’s contentions on waiver therefore did not fall within the matters remitted

for the preliminary proof before answer. Such evidence as was led in relation to the

installation of the pumps was unobjectionable in the context of the issues of prescription

which were live before the court and it was not objected to on that basis. The court should

not entertain SMG’s case of waiver at the present time.

[167] However, if the court was prepared to entertain SMG’s submission, SMG’s case of

waiver failed on the evidence. Mr McKay was quite clear that he understood the pumps to

be only a temporary measure, not a permanent measure. Furthermore, the pumps were

installed because of a particular concern about water percolating up the wall and causing

damage to the specialist plaster finish in order to “control any water ingress to void areas

around the gym and to minimise any future damage to plaster in the gym”. The pumps

were in no sense a solution which would prevent water from getting into the leisure centre

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in the first place. It was inherently unlikely that Mr McKay would have accepted a situation

in which water could continue to ingress, subject to control by the pumps, for all time

coming. It would be going too far to hold that installation of the pumps, in the

circumstances in which they were installed, connoted the abandonment of the pursuer’s

right to sue for damages in respect of a breach of contract by SMG.

Issue 3: Decision and reasons

[168] I agree with the pursuer’s submission that this issue does not fall within the remit of

the preliminary proof before answer. Given, however, that evidence has been led, and it has

not been suggested that further evidence material to the issue could have been led, and that

both parties have made submissions on the matter, I consider that I can determine it at this

stage.

[169] On the submissions made, it was simply not established in the evidence that the

installation of the pumps was understood by both parties, let alone agreed, to be a

permanent solution to the issues of water ingress at the leisure centre. That is not surprising

given that the pursuer was faced with multiple and developing issues of water ingress, the

causes of which had not been resolved. There is in any event a clear leap of logic involved in

taking the installation of pumps on a permanent basis to be a solution to all of the water

ingress issues in the leisure centre and, further, not merely to be a means of getting rid of

water that is penetrating the structure but also to result in the abandonment by Agro of its

right to sue SMG in respect of the alleged causes of that water ingress. I do not find it

possible on the evidence before me to conclude that Agro had, whether expressly or

impliedly, as a result of the installation of the pumps, abandoned its right to sue SMG.

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Conclusion

[170] For these reasons, the various pleas-in-law on title and interest to sue, the absence of

loss, and prescription advanced by the defenders in the three actions will fall to be repelled.

I shall put the cases out by-order, to deal with that matter and to determine further

procedure. In the meantime, all questions of expenses are reserved.