Considering 'prescription'

As a matter of public policy, statute provides certain limitations of time within which claims for damages must be brought. In England and Wales the limitation period will be six years for a simple contract and 12 years if the contract is executed as a deed.
The right to bring an action to recover damages for a breach of contract will be extinguished where proceedings are not commenced before the expiry of those periods.
If defects are concealed by a contractor, this may result in an extension to the limitation period. Section 32 of the Limitation Act 1980 provides that where an action is based upon the fraud of the defendant, or any fact relevant to the plaintiff's right of action has been deliberately concealed by the defendant, the period of limitation does not begin to run until the plaintiff has discovered the fraud or concealment or could, with reasonable diligence, have discovered it.
In Scotland, limitation is called "prescription", but its effect is essentially the same. A right of action will be extinguished upon the expiry of the relevant prescriptive period. Section 6(1) of the Prescription and Limitation (Scotland) Act 1973 provides for what is termed the "short negative prescription" of five years. If no relevant claim is made within the period of five years, then the obligation to which the claim applied will be extinguished.
There are exceptions to this rule that apply in similar terms to the law in England and Wales. For example, Section 11(3) of the Act provides that where the creditor was not aware, and could not have with reasonable diligence been aware, that loss, injury or damage had occurred, the starting date for the running of time shall be the date when "the creditor first became, or could with reasonable diligence have become, so aware".
In February 2002 I reported a case of Scottish Equitable -v- Miller Construction. Miller claimed approximately £2m in loss and expense arising out of a building contract with Equitable. Equitable countered that the claim had been extinguished by prescription, since five years had passed from the date at which Miller had first been able to enforce its rights during the construction of the works to have the correct amount of loss and expense ascertained.
The Court of Session in Scotland held that the date at which the prescriptive period started to run for such claims was the date of the final certificate under the construction contract, or in the absence of a final certificate, the date of the last interim payment certificate. The fact that loss and expense had been claimed in previous interim certificates was irrelevant, since each of those certificates would be subject to revaluation on subsequent certificates.
Since Miller had commenced its legal proceedings within five years of the date of the last interim certificate, its claim was not time barred.
The question of prescription was examined once again in the more recent case of Musselburgh and Fisherrow Co-operative Society -v- Mowlem Scotland. In this case, the claim concerned the costs of putting right defects in the works.
In early 1991, Mowlem had entered into a building contract with Musselburgh to design and construct Quayside Leisure Centre at Musselburgh, just outside Edinburgh. The contract was the SBCC Standard Form of Building Contract With Contractor's Design, the Scottish version of the JCT 98 WCD form.
The leisure centre opened to the public in May 1992. It included function suites, a bar and restaurant and a swimming pool. The swimming pool, it was later discovered, leaked. There were three primary reasons for the leak.
First, the design of the perimeter overflow channel to the pool and the adjacent walkway around the pool was poor. Watertightness relied upon a sealant at the joint between the overflow channel and the walkway. The sealant had failed. Second, leaks were occurring at the joints between the overflow channel and the drainage pipework. Third, there was seepage of moisture from the swimming pool through the wall of the swimming pool itself.
While the amount of water leaking out of the pool in this way was thought to be quite small, Musselburgh was particularly concerned that this defect threatened the structural integrity of the swimming pool tank.
In all three cases, water was accumulating in a duct that ran under the walkway around the perimeter of the pool and was being drained by a sump pump, which had been installed for this purpose.
On evidence it was disclosed that Musselburgh had been aware of the first two sources of leak since shortly after practical completion of the works. Lord Eassie concluded that in respect of these two defects, Musselburgh could, with reasonable diligence, have ascertained from early 1993 that it was suffering loss in respect of an act, neglect or default of the builder. Since proceedings had not been commenced within five years of that date, it was too late for Musselburgh to recover damages in respect of those defects.
In Lord Eassie's view, however, the third defect was quite different. It was plain from the evidence that nobody had actual knowledge of the existence of the seepage problem through the wall of the swimming pool until an expert had completed an intrusive survey in November 2002.
He was satisfied that there was nothing prior to that date that would have reasonably alerted Musselburgh to the seepage problem. Nor did he accept the argument put forward by Mowlem, to the effect that awareness of the building owner of one defect was sufficient to start the time running for all defects for which the contractor might be responsible. The proper approach for the purposes of the five-year prescription period was to examine each distinct defect and its failure in construction or design separately.
In consequence, Musselburgh was entitled to press its claim for damages in respect of the third defect, since the prescription period in respect of that claim had not expired.