Scottish Sheriff Court Decisions

A1498/97

The Sheriff Principal, having resumed consideration of the cause, refuses the appeal and adheres to the interlocutor of 1 December 1998 complained of; certifies the appeal as suitable for the employment of junior counsel; quoad ultra reserves meantime all questions of expenses.

This is an appeal against an interlocutor of 1 December 1998 in which, after a preliminary proof, the sheriff dismissed the pursuer's claim against the defender on the basis that it had prescribed by virtue of section 6 of the Prescription and Limitation (Scotland) Act 1973. The factual and procedural background to that decision are as follows.

On various dates in 1982 the parties entered into missives whereby the pursuer became tenant of a basement property at 5-7 Old Fish Market Close, 190 High Street, Edinburgh. The pursuer trades there as Le Sept Restaurant. It appears that in 1982 several other persons were also parties to the missives and to the lease, but it seems to be agreed that they have now dropped out of the picture, and that for present purposes the pursuer is the tenant and the defender is the landlord under the lease.

The original offer on behalf of the pursuer, which was sent to the defender's then solicitors, is a letter dated 12 August 1982. Paragraph 4 of that letter states:

The foregoing provision was accepted on behalf of the defender, and formed part of the missives as finally concluded.

Thereafter the pursuer entered into occupation of the basement premises, and operated his restaurant there. In the early summer of 1990, however, there were complaints from the occupier of the flat above the restaurant regarding kitchen smells, and arrangements were made by the pursuer to have the extractor fan serviced. On 11 June 1990 the pursuer's then solicitors wrote to the defender's then solicitors in the following terms:

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

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

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

The relevant statutory provisions are to be found in section 6 and section 11 of the 1973 Act. Section 6(1), so far as relevant, provides:

It was a matter of agreement in the present case that any obligation owed by the defender to the pursuer in terms of the missives of lease is an obligation to which section 6(1) applies.

Section 11(1) of the Act provides:

In the present case it was accepted by counsel for the pursuer that injuria and damnum had both occurred in 1982 with the consequence that any obligation owed by the defender had been enforceable from that time. In the circumstances of the present case I tend to think that that concession was probably correct given that what is alleged here is not defective workmanship leading to subsequent damage but rather a failure at the outset to do certain things which were required in terms of the contract between the parties. However, the pursuer placed reliance on section 11(3) of the Act which provides:

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

In presenting the appeal counsel for the pursuer proceeded initially on the basis that there were three separate failures on the part of the defender, namely a failure to provide satisfactory ventilation, a failure to provide satisfactory fire-proofing, and a failure to provide satisfactory sound-deadening. On that approach his submissions were mainly directed to challenging the adequacy of the sheriff's reasons for having concluded that, at the time when the extractor fan was serviced in June 1990, the pursuer, by looking up through the opening in the ceiling where the fan had been, ought to have been put on notice that there were, or might be, defects in relation to fire-proofing and sound-deadening. In that connection counsel made much of the fact that in his evidence Mr McLay, the architect who had submitted the report to the pursuer on 27 April 1992, expressed some support for the view that a lay person, looking through that opening, might not recognise the significance of what he could see. In the light of that evidence counsel submitted that, while the sheriff was entitled to hold that the defects in question could have been discovered in 1992, she had not been entitled to hold that an ordinarily prudent tenant ought to have been alerted to the possibility of their existence at that time. Moreover, it was submitted, the sheriff had not given any explanation for coming to that conclusion. By reference to Glasper v. Rodger 1996 SLT 44 counsel submitted that what is required under section 11(3) of the 1973 Act is an awareness both of the fact that loss has occurred and also of the fact that that loss was caused by negligence or breach of contract. In the present case it could not be said that the pursuer had, or reasonably should have had, that awareness in June 1990.

I have to say that the somewhat narrow approach to the appeal adopted by counsel for the pursuer did not, at first, strike me as surprising since, upon one view, it is the approach which was adopted by the sheriff in disposing of the matter before her. Moreover, had the approach adopted by counsel for the pursuer been the only one for me to consider, I am bound to say that I would have found considerable force in his submission that the sheriff did not have material before her to entitle her to reach the conclusion that, by looking through a hole in the ceiling in 1990, the pursuer ought to have appreciated that there had possibly been a breach of contract on the part of the defender in relation to the two matters now founded on in the present action.

However, counsel for the defender advanced a quite different line when he came to respond. Essentially, his argument was that paragraph 4 of the letter of 12 August 1982, founded on by the pursuer, did not set out a series of separate obligations but instead constituted a single, or unitary, obligation, which he described as a "build obligation", which stood alone in the letter in question among several other provisions all of which related to matters of letting. In that situation, it was submitted, an identified breach of any part of that obligation constituted a breach of the whole obligation with the consequence that prescription then began to run, with the pursuer for his part being under a duty to identify, so far as he could, any other items of damage attributable to that breach. Developing that argument by reference to the present case, counsel submitted that, when it was discovered in June 1990 that the defender was in breach of paragraph 4 of the letter of 12 August 1982 in respect of the ventilation system, that constituted a breach of the whole provision in the missives; and it was not open to the pursuer thereafter to treat that as a separate matter so as to entitle him to invoke the provisions of section 11(3) some two years later when he received his architect's report in April 1992. While at first sight the foregoing line of argument does not appear to be the one which was followed by the sheriff, I am bound to say that, although her Note, and indeed findings, are somewhat ambiguous in this respect, I think that it is at least possible that her decision was based on the view that the breach of contract in 1990 was sufficient to constitute a breach of the whole obligation owed by the defender so that prescription began to run from that date. On that basis, of course, what the pursuer should, or should not, have become aware of when he looked through a hole in the ceiling in June 1990 becomes quite irrelevant.

In support of his main submission on this matter counsel for the defender pointed first to the actual wording of paragraph 4 of the letter of 12 August 1982. He noted that the provision there consists of only two sentences with the first sentence dealing both with bringing the kitchen ventilation system up to standard and with the conversion of the premises above the restaurant to residential purposes. In that regard he drew particular attention to the fact that the additional works required in connection with the conversion of the premises above the restaurant to residential purposes are said to be included in the bringing of the kitchen ventilation system up to standard. That, it was submitted, clearly indicated that the upgrading of the ventilation system could not possibly be regarded as something quite distinct and separate from the works involved in the conversion of the premises upstairs; and that work in connection with the premises upstairs must include the installation of appropriate fire-proofing and sound-deadening.

Counsel for the defender went on to submit that it would be quite unsatisfactory and contrary to principle to allow a pursuer to have a whole series of claims all of which effectively arose from the same breach of contract. In support of that proposition he referred to Dunlop v. McGowans 1980 SC (HL) 73 where it was held, inter alia, that an obligation to make reparation for loss, injury and damage is a single and indivisible obligation such that only one action can be prosecuted for enforcing it. In the present case, it was submitted, the defender's obligation to make reparation in respect of a breach of the obligation contained in the letter of 12 August 1982 had in effect crystallized in June 1990, and any action to enforce that obligation could only be referable to that date, and not to one or more subsequent dates.

In response on this point counsel for the pursuer submitted that the Dunlop case had not been concerned with one or more obligations but simply with heads of loss. What the court had said there was that, where you have a single default, you cannot have several prescriptive periods referable to the dates when different heads of loss arise. By contrast, it was submitted, you can have defaults of different kinds each of which may be referable to a different obligation, and with, as a result, different periods for prescription. In that connection reference was made to Sinclair v. MacDougall Estates Ltd 1994 SLT 77. Counsel also went on, by reference to paragraph 4 of the letter of 12 August 1982, to take issue with the submission advanced by counsel for the defender to the effect that an obligation to instal appropriate fire-proofing and sound-deadening is comprehended within the same sentence as the obligation in relation to the ventilation system. If that were so, counsel submitted, the second sentence in paragraph 4 would simply be rendered otiose.

The case of Sinclair v. MacDougall Estates Ltd was one where the pursuers, in 1970, had purchased from the builders a newly built flat under an agreement which provided that the flat would "be designed and constructed in an efficient and workmanlike manner and of proper materials and so as to be fit for habitation and so as to comply in all respects with the council's requirements". Certain construction defects were discovered in 1972 and 1977, and much more major defects, requiring substantial remedial work, were discovered in 1988. When the pursuers sought to recover damages from the builders in respect of the defects discovered in 1988 they were met with a plea that any breach had occurred in either 1972 or 1977 with the consequence, in either case, that any obligation owed by the defenders had prescribed.

It is to be noted, however, that in that case the primary matter which the Lord Ordinary had to determine did not relate to an application of section 11(3) of the 1973 Act (although that subsection was advanced in a subsidiary argument presented on behalf of the pursuers). Instead, the primary question before him was whether the incidents in 1972 and 1977 had brought about a concurrence of injuria and damnum such as to satisfy the test laid down in section 11(1) of the Act with the consequence that the defenders' obligation to make reparation for a breach of contract had become enforceable on either of these dates.

In rejecting the defenders' submissions on that matter the Lord Ordinary said (at p. 82I):

In my opinion the foregoing passage makes it clear that the Lord Ordinary was not saying that there can be a series of breaches of a single obligation or duty, with each of those having its own starting time for the purposes of prescription. Instead, it is clear that, on the facts of the case before him, the Lord Ordinary was expressing the view that the incidents in 1972 and 1977 were not referable at all to a failure to comply with the contractual undertaking that the pursuers' flat would "be designed and constructed in an efficient and workmanlike manner and of proper materials" etc. I respectfully agree with the Lord Ordinary's approach, and I do not consider that it is in any way at odds with the decision of the House of Lords in the case of Dunlop v. McGowans.

In that case a firm of solicitors failed to serve a notice to quit timeously on a tenant with the result that their client was unable to obtain vacant possession on the desired date. In order to meet a plea of prescription it was argued on behalf of the pursuer that each item of loss arising less than five years before the commencement of proceedings was unaffected by prescription. Both the Inner House and the House of Lords rejected that argument. In doing so, Lord Keith, who delivered the leading speech, said (at p. 81):

Both the case of Dunlop and the case of Sinclair, to which I have earlier referred, were of course primarily concerned with determining the date of concurrence of injuria and damnum, and not with questions of discoverability as they arise under section 11(3) of the Act. However, in my opinion the case of Dunlop clearly vouches the proposition that, in circumstances where injuria and at least some damnum have occurred on a clearly identifiable date, that date will mark the beginning of the prescriptive period notwithstanding that other items of loss may not be revealed until a later date. Likewise, in my opinion, the case of Sinclair is authority for the view that, where damnum becomes apparent, it is necessary to consider to what injuria it relates. If it arises from the same injuria as has founded a claim in respect of some earlier loss, then on the authority of Dunlop the prescriptive period will have been running since the date of that earlier loss. If, on the other hand, it is found (as was the case in Sinclair) that any earlier loss was not occasioned by the same injuria, then the prescriptive period will start to run only when the relevant injuria and damnum coincide.

In the present case it was, as I have already noted, a matter of agreement that injuria and damnum (albeit not identified at the time) had in fact coincided in 1982 when, accepting the pursuer's averments pro veritate for present purposes, the defender had failed to do what he was required to do in terms of paragraph 4 of the letter of 12 August 1982. As I have already observed it was probably inevitable in the present case that this should be accepted given that we are not concerned here with a latent, and slowly emerging, defect of the kind which occurred, for example, in the case of Sinclair but rather with a failure at a single point in time to do certain things which were required in terms of a contract. However, the fact that injuria and damnum had both coincided many years before any question of proceedings between the parties had arisen does, in my view, make it more difficult for the pursuer to suggest, as was done on his behalf, that in the present case there was not a single injuria and a single damnum but at least three separate injuriae and damna each of which gave rise to a separate claim, and each of which was susceptible to the operation of a different prescriptive period. If there was here a single injuria, then the discovery of any aspect of damnum would in my view, and on the authority of Dunlop v. McGowans, start the running of the prescriptive period notwithstanding that other heads of loss might not be discovered until a later date. On the other hand, if there were truly a number of different obligations incumbent on the defender, and as a consequence a number of quite distinct injuriae, then, on the authority of Sinclair, it might be possible to invoke section 11(3) on more than a single occasion.

The question in the present case therefore comes to be the one postulated by counsel for the defender, namely: Does paragraph 4 of the letter of 12 August 1982 set out a number of distinct obligations or does it, to use counsel's words, contain a single, unitary, "build obligation"? In my opinion the submission advanced by counsel for the defender on this point is to be preferred. The first point of note, I think, is that the paragraph in question is in fact somewhat vague and general in its terms. It mentions the kitchen ventilation system specifically, but there is no specific reference to anything else, least of all fire-proofing or sound-deadening. If those matters arise at all under the paragraph they must do so as a consequence of the very general words which follow the reference to the ventilation system. However, I agree with counsel for the defender that it is of some significance that the obligation in respect of the ventilation system is said to include any additional works in connection with the conversion of the premises above the restaurant to residential purposes. In my opinion those additional works must have comprehended any works necessary in respect of fire-proofing and sound-deadening; and the way in which the sentence is drafted clearly suggest to me that everything in the sentence was intended to represent a single obligation on the part of the defender. It may be true, as was suggested by counsel for the pursuer, that such a reading of the first sentence in the paragraph may render the second sentence otiose. But that fact alone cannot in my opinion detract from what I consider to be the clear effect of the first sentence in the paragraph.

In the whole circumstances, therefore, I consider that, whatever else it may have included, the obligation undertaken by the defender in 1982 was a single obligation in respect of the kitchen ventilation system, and the provision of fire-proofing and sound-proofing between the basement and the upper flats. That being so it must follow, in my opinion, that, when the pursuer discovered a failure in respect of part of that obligation in June 1990, the prescriptive period in respect of the whole obligation began to run as from that date with the consequence that the defender's obligation to make reparation prescribed in June 1995, that is to say nearly two years before the commencement of the present proceedings. It follows that the present appeal must be refused.

For the sake of completeness I should perhaps add that in the course of the appeal hearing there was some discussion regarding the matter of onus of proof with counsel for the pursuer submitting that in a case like the present one it is for the defender to establish that an obligation has prescribed, and counsel for the defender submitting the contrary. So far as I can see, each of these competing viewpoints finds some support in, respectively, the case of Sinclair v. MacDougall Estates Ltd and the case of Glasper v. Rodger. Thankfully, I have not found it necessary to determine this appeal by reference to questions of onus, and I therefore reserve my opinion on that point.

Finally, I should record that, apart from agreeing that the appeal should be certified as suitable for the employment of junior counsel (which I have done), counsel otherwise invited me to reserve questions of expenses meantime. In the circumstances I have taken that course. However, I made it clear that, if parties are able to agree how expenses should be disposed of after they have had an opportunity to consider this judgment, I shall be happy to deal with that matter on the basis of an agreed motion without the necessity of a further hearing.