By Jamie Robb, senior solicitor at BTO Solicitors
THE high profile Gorebridge ‘Gas Street’ case recently hit the headlines again following a decision by the Court of Session to dismiss the £12 million damages claim raised by Midlothian Council against several parties which advised on the project.
The case, concerning the construction of a social housing development in Gorebridge, Midlothian, brings the topic of prescription in the context of a construction claim to the fore. Site investigations and assessment for the project were undertaken by a number of advisers between 2004 and 2006, with construction taking place from 2007 to 2009. Residents took occupation in June 2009.
However, on 7 September 2013 some of the residents began feeling unwell and a family was taken to hospital. Experts suggested that a 25-year build-up of pressure had led to dangerous gases from disused mines penetrating the homes, which had not been installed with gas proof membranes.
After evacuating residents, the council made the decision in 2014 to demolish all 64 houses on the development and rebuild them with protective gas membranes in place. It also raised proceedings against several parties involved in the development, seeking damages of around £12 million – the cost of demolishing and rebuilding the development.
In August 2017, a judge dismissed the action against the first defender, a firm called Bracewell Stirling Architects. In June 2018, it was ruled that another defender, RPS Planning and Development Ltd, could also be removed from the action. This left two companies for the council to pursue a claim against – Raeburn Drilling and Geotechnical Ltd, and Blyth & Blyth Consulting Engineers, the second and fourth defenders respectively.
The case against Blyth & Blyth was raised on 4 September 2018, with the council alleging that the firm’s workers didn’t carry out proper investigations and that an “appropriate” assessment would have revealed the risk of gas penetrating the homes. The Council alleged that Blyth & Blyth had failed to advise it to install gas proof membranes within the development. In this action, the issue was whether any obligation the company might have to make reparation had been extinguished through the operation of short negative prescription.
Under Section 11(3) of the Prescription and Limitation (Scotland) Act 1973, any pursuer seeking damages must raise an action within five years of becoming aware of having suffered loss, injury or damage. While it was once considered that the beginning of the five year period was postponed until the pursuer knew that the loss, injury or damage had been caused by fault or negligence, the high profile ICL Plastics factory case in 2014 changed this. The Supreme Court ruled that the start of the five year period should only be postponed until the pursuer knew he or she had suffered loss, injury or damage – nothing more.
The law was further developed in the recent case of Gordon’s Trustees v Campbell Riddell Breeze Patterson LLP in which the Supreme Court clarified that knowledge of loss, injury or damage was to be determined objectively and with the benefit of hindsight. A pursuer could be aware of the incurring of expenditure but not know that such expenditure was a loss until much later. That did not prevent the prescriptive clock from starting to tick.
In the Gorebridge case, it was agreed that the alleged breach of contract by Blyth & Blyth occurred in or around 2006 when carrying out assessments on the site. The question for the court was when awareness of loss occurred. The court accepted the council was unaware that anything had gone awry until the first tenant fell ill, but didn’t accept that this was also when awareness of loss occurred.
The court stated that as soon as construction began in December 2007, the council knew it was incurring expenditure on building the development in reliance on Blyth & Blyth’s advice. Whilst the council was not aware that the expenditure was wasted or would fail to achieve its purpose, “…as matter of objective fact, and with the benefit of hindsight, the expenditure was wasted and did fail to achieve its purpose. As a matter of objective fact it was ‘loss, injury or damage’”.
As this was more than five years before the action was raised in September 2018, any obligation on Blyth & Blyth to make reparation had expired.
The case serves as a further reminder of the importance, in the context of prescription, of looking at expenditure with the benefit of hindsight to determine whether that expenditure is loss by another name.
The court considered that while the application of Section 11(3) of the 1973 Act, “undoubtedly has a narrower ambit” than was understood prior to the ICL Plastics case, there remained circumstances where it would continue to postpone the commencement of the prescriptive period and the enactment was therefore not “redundant”.
As noted by Lord Docherty, who presided over the case, when the Prescription (Scotland) Act 2018 is brought into force, it will “effect substantial amendment to Section 11”. However, transitional provisions have not yet been published and until then, the decision in the Gorebridge gas case provides welcome guidance on the issue of prescription within the realm of construction related disputes.