LEGAL AND GENERAL v HALLIDAY FRASER MUNRO – NAVIGATING PRESCRIPTION IN AN EVER-CHANGING SEA

Introduction

The law of prescription in Scotland is ever evolving. Those involved in litigation within Scotland will be aware of the shifting landscape over the last decade including a decision over the summer in Greater Glasgow Health Board v Multiplex Construction (Europe) Ltd, discussed in our article, Ignorance of a state of affairs is not sufficient for section 6(4): GGHB v Multiplex & Ors | Beale & Co. More recently, the Inner House and Outer House have issued opinions in Tilbury Douglas v Ove Arup [2024] CSIH 15, and GGHB v Multiplex [2025] CSOH 56, both of which provided helpful clarity on the Court’s interpretation of Section 6(4) of the Prescription and Limitation (Scotland) Act 1973 (‘the 1973 Act’).

Section 6(4) provides that:

“In the computation of a prescriptive period in relation to any obligation for the purposes of this section- 

1. Any period during which by reason of –

• fraud on the part of the debtor or any person acting on his behalf, or
• error induced by words or conduct of the debtor or any person acting on his behalf,

the creditor [failed to make] a relevant claim in relation to the obligation…shall not be reckoned as, or as part of, the prescriptive period.”

The Inner House has again revisited this particular provision in the case of Legal and General Assurance (Pensions Management) Limited v The Firm of Halliday Fraser Munro and Others [2025] CSIH 24.

Background

The Reclaimers are Halliday Fraser Munro (“HFM”), a firm of architects. The Respondents, Legal and General Assurance (Pensions Management) Limited (“L&G”), are the second purchasers of Union Plaza, a multi-storey office building in Aberdeen (“the Building”).

In 2007, HFM entered into an agreement with Stewart Milne Central Limited (“the Appointment”) to provide architectural services during the development of the Building. Practical Completion was achieved on 8 July 2008. The Building was sold in August 2008 and thereafter sold again to L&G in December 2013. On 6 January 2014, HFM and L&G entered into a collateral warranty which provided that HFM had used all reasonable care and skill in the performance of their architectural services (“the Collateral Warranty”).

Outer House

L&G served a Summons on HFM on 17 December 2018, alleging defects in the design, application and monitoring of the protective paint system used in the Building. L&G later introduced a further head of claim in relation to defective soffit insulation in the basement, by way of adjustments to their pleadings on 2 February 2021. They claimed that they only became aware of defects in the basement following expert advice in 2020.

HFM maintained that any breach of the Collateral Warranty had not caused L&G loss, since it purchased the Building before the date upon which the Collateral Warranty was executed. HFM also submitted that any obligation to make reparation to L&G had been extinguished by the operation of the five-year negative prescriptive period as provided for under Section 6 of the 1973 Act.

L&G purported that the Collateral Warranty signed in 2014 incorporated the same prescriptive period as would have applied to any claim by the original employer, SMC. L&G relied upon Section 6(4), asserting that L&G, the original employer, and the first purchaser had been induced by HFM’s conduct to refrain from making a relevant claim in relation to HFM’s breaches of duty.

Lord Harrower held: (1) that the Collateral Warranty could provide a basis for recovery by L&G; and (2) that HFM’s words and conduct were “capable of being understood [by L&G] as a false representation which had given rise to an erroneous belief that HFM had complied with their obligations”. Lord Harrower considered that L&G had pled a relevant (i.e. legally valid) case.

Inner House – Decision

HFM appealed to the Inner House.  L&G made oral submissions which amended their primary position pled before the Outer House. L&G argued that the terms of the Collateral Warranty created a “fresh” prescriptive period which ran from the date that the Collateral Warranty which was signed in 2014. L&G submitted that the defective paint issue therefore had not prescribed when the Summons was served in 2018. L&G, however, accepted that the soffit insulation claim had prima facie prescribed, but averred that Section 6(4) applied, submitting that HFM warranted within the Collateral Warranty that they had complied with their obligations under the Appointment, and this had induced them to refrain from making a claim.

The questions before the Court were as follows:

• whether L&G were precluded from relying on the Collateral Warranty granted by HFM because it was entered into after they purchased the Building; and
• whether the claims against HFM had prescribed by operation of the five-year prescriptive period.

In relation to question (1), HFM argued that, as the Collateral Warranty was executed after the date of purchase of the Building by L&G, reliance could not be placed upon the Collateral Warranty as L&G had already suffered loss at the point of purchasing the Building, due to becoming burdened with a defective building with a reduced value. Any breach of the Collateral Warranty could not cause L&G to suffer loss.

The Inner House rejected HFM’s averments, holding that the fact the Collateral Warranty was signed after L&G acquired the Building had “no bearing on…whether [HFM] fulfilled their contractual obligation or promise”. The Court also rejected the notion that the Collateral Warranty did not create a “fresh” prescriptive period for L&G, noting that, in the absence of a contractual limitation, “it does not follow from the fact that parties have agreed that there should be equivalence of duties and obligations that they must also be taken to have agreed that there should be equivalence of defences”. It was decided that the earliest date from which the prescriptive period began to run was the date of the Collateral Warranty in 2014.

L&G’s averments in respect of Section 6(4) were held to be irrelevant. The Court referenced the historic application of the principle in Caledonian Railway Co v Chisholm¸ where circumstances involving false pretences and deceit which deprived the creditor from making a charge had resulted in the running of prescription being suspended. The Court considered that no such circumstances had arisen in this case and noted that it was “circular and illogical” to assert that representations within the Collateral Warranty, which itself is alleged to have been breached, caused L&G to refrain from bringing a claim under Section 6(4).

The Court observed that all of the matters that L&G had relied upon in respect of the protective paint system “were all matters in respect of which HFM were either performing their obligations in compliance with their appointment or issuing documentation under it. The matters…were nothing more than the provision of services and requests for payment, such matters were not sufficient to constitute words or conduct for the purposes of Section 6(4).”

The Inner House firmly reinforced the principles set out in the recent judgment in Tilbury Douglas Construction v Ove Arup, wherein Lord Malcolm suggested that it is doubtful that Section 6(4) is aimed at everyday conduct such as providing services or accepting payment for those services.

Comment

The opinion of the Inner House puts it beyond doubt that Section 6(4) will not operate in circumstances where a creditor has “merely asserted that it has performed its contractual obligations or has not been negligent.”

It is likely that where a Pursuer offers to prove any of the following as a means of delaying the prescriptive period under Section 6(4), it will likely be bound to fail in its action:

• Words or conduct in relation to duties of monitoring or inspecting.
• Request for payment for work undertaken.
• Certification of sums payable under a construction contract.
• The issuing of a certificate of practical completion.

Drawing all of this together, if a Pursuer wishes to rely upon the protection afforded under Section 6(4) it is clear that it will require to aver significantly more than words or conduct of a Defender in the ordinary course of the provision of their services. It appears that a Pursuer will now need to rely on specific examples whereby a Defender can be said to have induced a Pursuer into believing something different from the “status quo”.

The decision is a certainly a welcome one from an insurer / insured client perspective when faced with complex professional indemnity construction claims. Averments as set out above will now not be a matter for Proof (trial) as they are simply irrelevant pleadings in support of a Section 6(4) argument. This means that Defenders in such claims may proceed to a Debate (hearing on legal arguments) to deal with such averments in Court actions. A Debate would therefore save costs and time as compared to a lengthy and expensive Proof.

While the issue of prescription remains a complex area of law in Scotland, this recent Inner House decision will make litigation more difficult for Pursuers where there is a clear prescription defence to advance.

Want to know more?

Beale & Co have extensive experience advising on complex professional negligence claims. If you are interested in discovering more about the issues covered above or wish to understand how these apply to your contracts or business practices, please contact the authors or your usual Beale & Co contact.