Background
Many have come to consider that the law of prescription in Scotland, which deals with the time bar of claims, is now very difficult to understand when that law is being applied to claims for latent defects in the design or construction of a building. One judge recently described the position as 'like a Shakespearean tragedy'.
As readers may know, following upon the decisions of the UK Supreme Court in Morrison (2014) and Gordon's Trustees (2017), many claimants seeking damages for latent defects in construction works have been told that their claims in that connection are time barred (prescribed). While the position is complex, this is because, in essence, the UK Supreme Court told us in those cases that section 11(3) of the Prescription and Limitation (Scotland) Act 1973 ('the 1973 Act'), which deals with when the five-year prescriptive period starts to run, had been wrongly interpreted for about 40 years. The effects of the application of those decisions on Scottish construction cases are still being felt in 2026 and will be for years to come.
The unamended statutory provisions
Section 11 of the 1973 Act in its unamended terms provided that:
(1) Subject to subsections (2) and (3) below any 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 this Act as having become enforceable on the date when the loss, injury or damage occurred…
(3) In relation to a case where on the date referred to in subsection (1) above … the creditor was not aware, and could not with reasonable diligence have been aware, that loss, injury or damage caused as aforesaid had occurred, the said subsection (1) shall have effect as if for the reference therein to that date there were substituted a reference to the date when the creditor first became, or could with reasonable diligence have become, so aware.'
Accordingly, stated shortly, a claim, such as a claim for damages arising out of latent defects in the design or construction of a building, has to be made in relevant proceedings (or relevantly acknowledged) within five years of the claim becoming enforceable or else the claim would be prescribed.
Importantly, section 11(3), as it was originally interpreted, was understood to mean that there was a necessary element of what many referred to in shorthand as 'discoverability', i.e. the prescriptive period did not start to run until the date a person discovered or with reasonable diligence could have discovered not only that they had sustained loss, injury or damage but also that it was caused by an act, neglect or default.
This was of crucial importance in the area of latent defects in construction works, given that they may not be apparent even upon a detailed visual inspection, may be in work that is covered up and thus not readily accessible and, accordingly, may not in fact come to light until years after the relevant construction works were carried out.
Latent defects are not all the same. A latent defect in the design or construction of a building may not result in any observable, physical damage. Construction works can be inherently defective even if there is no physical sign of a problem, for example, when the wrong type of cladding is installed on the exterior of a building which is, in fact, a major fire hazard and endangers human life because it does not meet relevant building standards. By contrast, in some cases, a latent defect might, eventually, give rise to actual physical damage to property, for example, where foundations have been defectively designed or constructed and as a result, over time, the forces produced cause cracks to appear in the superstructure of the building.
The UK Supreme Court's decision in Morrison may have led the way in the judicial reconsideration of section 11(3), but that case arose out of an explosion which caused immediate and obvious physical damage to property.
The UK Supreme Court held in that case that, on a proper interpretation of section 11(3) in its unamended terms, the five-year prescriptive period started to run from the date of the explosion and the resultant damage. The claimant had five years from that date to make a relevant claim.
While that might not be considered a major practical problem in that case because the damage was patent on the date of the explosion, the analysis that led to it was a significant departure from what, until that point in time, had been thought to be the correct interpretation of section 11(3), as indicated above i.e. the prescriptive period did not start until there was actual (or constructive) knowledge of both loss, injury or damage and that it was caused by an act, neglect or default. The significance and importance of that departure from a long-settled position - which position had arisen from the decisions of some very distinguished judges - is perhaps reflected in the fact that the decision of the UK Supreme Court was, unusually, by a 3:2 majority with one of the Scottish judges, Lord Hodge, being one of the dissenting voices. It was thought, however, that there might still be some hope left for the applicability of section 11(3) to postpone the start of the prescriptive period in relation to latent defects because, one of the majority, Lord Reed, stressed that section 11(3)' … is intended to deal with latent damage … ' and ' … addresses the problem which could otherwise arise where there is latent damage, namely that the creditor is unaware of its occurrence, by requiring the date of actual or constructive knowledge of its occurrence to be used instead for the purposes of section 11(1)'.
The Gordon's Trustees problem
In the subsequent case of Gordon's Trustees, however, the UK Supreme Court held that the phrase 'loss, injury or damage' in the unamended statutory provisions was 'a reference to the existence of physical damage or financial loss as an objective fact' (emphasis added). Importantly, Lord Hodge, in delivering the judgment of the court with which all the other judges, including Lord Reed agreed, went on to say:
'[21] It follows that section 11(3) does not postpone the start of the prescriptive period until a creditor of an obligation is aware actually or constructively that he or she has suffered a detriment in the sense that something has gone awry rendering the creditor poorer or otherwise at a disadvantage. The creditor does not have to know that he or she has a head of loss. It is sufficient that a creditor is aware that he or she had not obtained something which the creditor had sought or that he or she has incurred expenditure.
[22] This approach is harsh on the creditor of the obligation, where the creditor has incurred expenditure which turns out to be wasted or fails to achieve its purpose, because the circumstances when the prescriptive period begins to run may not prompt an enquiry into the existence or likelihood of such loss. Thus a person may begin a legal action and incur expenditure on legal fees on the basis of negligent legal advice, or he or she may purchase a house at an over-value as a result of the negligent advice of a surveyor. In each case the person may be aware of the expenditure but not that it entails loss. But it offers certainty, at least with the benefit of hindsight… '
Gordon's Trustees is not a construction case, but it has had a profound impact upon the construction sector. Indeed, it is not possible for the writer, after more than 40 years of practice in construction law, to identify another case which has caused so much uncertainty, argument and controversy because of the way it has been applied in construction cases.
The problem is that defects in construction works may be latent, not patent, and as indicated above, there are different kinds of latent defect. It is the application of the decisions in Morrison and Gordon's Trustees in cases of latent defects or latent damage which has shattered more dramatically, the old orthodoxy on the interpretation of section 11(3) and has led to what one judge has described as the '... judicial enfeeblement of section 11(3) … '.
In an article of reasonable size, it is not possible to set out a detailed or, some would argue, a wholly coherent picture in relation to the application of Morrison and Gordon's Trustees by the Scottish courts in construction cases - both at first instance and on appeal - see, for example, Midlothian Council (2019), Franks & Others (2021), WPH Developments (2021 and 2022), Tilbury Douglas (2023 and 2024), Leonardo Hotel Management UK (2024) and Greater Glasgow Health Board (2025 and 2026).
One of the undoubted features of some of these cases, however, is that, thus far, the Scottish courts have taken the view that what was said in Gordon's Trustees means that as soon as there is known expenditure, which with the benefit of hindsight, did not result in what was anticipated because of defective performance, say by a consultant or a contractor, section 11(3) is of no real assistance in delaying the start of the prescriptive period. This is important in the construction sector because expenditure by way of payment is normally incurred to consultants or contractors for work as it is carried out which, in larger construction projects, can be years before all the works are completed and, importantly, before the payer has any reason to believe that there are latent defects in the works as designed and/or constructed. Put another way, the application of Morrison and Gordon's Trustees can result in a position where obligations to pay damages to innocent parties (creditors) for latent defects in the design or construction of a building '…can prescribe before the creditors were aware that they existed'. While that may not, in truth, reflect a proper interpretation of section 11(3) in its unamended terms or what Lord Hodge said in Gordon's Trustees in the context of latent defects or latent damage in construction works (the Supreme Court has not had the opportunity to provide possible further clarification in this area), many, understandably, consider that if that is the position in Scots law as a result of section 11(3) in its unamended terms, Morrison, Gordon's Trustees and the cases that have followed, that is a position which should be unacceptable to Scots law as a matter of principle because it is a position which most people would regard as unfair to prospective claimants.
Many would argue that the subsequent application by the Scottish Courts of what was said in Morrison and Gordon's Trustees, can deprive section 11(3) of any real content and meaning in the context of latent defects or latent damage even though the indication given in Morrison was that the need to deal with the postponement of the start of the prescriptive period in cases of latent damage was the reason for the very existence of section 11(3) in its unamended terms.
While some judges have acknowledged what has been described as the 'harshness' of the application of Gordon's Trustees, that has been little comfort to numerous claimants who have subsequently been told that their claims in respect of latent defects have prescribed as a result.
Irrespective of what view one might take in connection with the 'harshness' suffered by claimants in light of Morrison, Gordon's Trustees and the subsequent application of those cases by Scottish Courts, the Scottish Law Commission considered whether changes to the underlying statute should be made to address perceived problems with section 11(3) in its unamended terms.
The Scottish Law Commission looks anew at when the prescriptive period should start to run and why.
After the decision of the UK Supreme Court in Morrison, which was the start of the change of the judicial approach to section 11(3), the Scottish Law Commission looked afresh at matters and, in particular, the test which should be applied in determining when the prescriptive period should start to run. In its 'Report on Prescription' in 2017 ('the Commission's 2017 Report') the Commission acknowledged that:
'As a result of that case [Morrison], the law of prescription in relation to claims for latent damage is not as it had previously been thought to be…'.
Many would consider that to be a massive understatement, but the Commission also said:
'The reason for re-visiting the test is fairness: there is a perception that the current law is 'somewhat harsh' and that it has given rise to 'considerable unease' about whether it strikes a fair balance'.
This was against the background that the Commission's 2017 Report also said
'… It is widely recognised that it is unsatisfactory and unjust to have a basic regime for prescription under which people who have suffered loss as a result of another's negligence or wrongful act may, before they even know they have a claim, lose it owing to the operation of prescription…'.
The starting points considered
As a result, the Commission considered four options for the start of the prescriptive period, namely, to postpone the start of the prescriptive period
(1) until the creditor knows of the fact of the loss; or
(2) until the creditor knows of the facts (a) of the loss and (b) the act or omission which caused it; or
(3) until the creditor knows of the facts (a) of the loss and (b) the act or omission which caused it and (c) the identity of the person who caused it; or
(4) until such time as seems to the court to be just and equitable having regard to the circumstances of the case.
The Commission's recommendation
The Commission was of the preliminary view that 'it would be desirable to adopt Option 3 as the discoverability test under section 11(3)'. In the Commission's 2017 Report it subsequently confirmed that was its clear recommendation after a process of extensive consultation.
It is important to note that the Commission's 2017 Report stated:
'In a recent case the issue has arisen whether creditors are aware of 'loss, injury or damage' when they know that they have incurred expenditure but do not know that it was caused by the act, neglect or default of the debtor. [The footnote makes clear that the Commission is here referring to the Scottish Appeal Court's decision in Gordon's Trustees where, applying Morrison, the claim was held to have prescribed]. In that case the pursuers knew that they had incurred a liability to their solicitors in the form of legal expenses but they argued that, since they thought they were simply paying for the solicitors' services, they did not know that they had suffered 'loss' within the meaning of section 11(3), until such time as they became aware that the legal expenses had been incurred as a result of a solicitors' breach of duty. At the time of publishing the present Report, that case is under appeal to the UK Supreme Court. We do not know how the Court will determine the question, which relates of course to the existing wording of 11(3). Our view, so far as the draft Bill attached to this Report is concerned, is that the recommended new test addresses this point by requiring that there be awareness of the factual cause of loss by an act or omission. If creditors are aware that they have incurred expenditure but do not know that the reason they incurred it was an act or omission of the debtor … then they do not yet have the awareness necessary for time to start to run against them under the recommended test' (emphasis added).
The 'recommended test' was, of course, a reference to the new test reflected in the draft Bill appended to the Commission's 2017 Report which adopted Option 3 above and which Bill subsequently became the Prescription (Scotland) Act 2018 ('the 2018 Act').
The amended statutory provisions
The 2018 Act amended the 1973 Act to provide a new test, a revised version of section 11(3), as set out in the Commission's 2017 Report. In that revised version section 11(3) as amended provides that the five-year prescriptive period does not start to run until a person is aware, or with the exercise of reasonable diligence, could be aware of three facts, namely:
(a) that loss, injury or damage has occurred;
(b) that the loss, injury or damage was caused by a person's act or omission and
(c) the identity of that person.
The statutory changes made clear that it does not matter that a person does not know that the act or omission that caused the loss, injury or damage is 'actionable in law'. Whether it is actionable in law involves knowledge of the law rather than matters of fact. It is very important, however, to reflect properly in any analysis of section 11(3) as amended the full extent of the matters of fact the claimant must be aware of or, upon the exercise of reasonable diligence, could be aware of before the prescriptive period starts to run - that loss, injury or damage has occurred, that it was caused by a person's act or omission and the identity of that person.
The new position was the result of the response of the Scottish Law Commission to Morrison and the Scottish Appeal Court's application of Morrison in Gordon's Trustees followed by statutory intervention by the Scottish Government. It was generally understood to reflect a clear public policy decision aimed at greater fairness by improving the position for claimants after both those decisions. The problem for those operating in or dealing with the construction sector is that some of the comments by the judge in the latest court decision in this area appear to throw doubt upon the efficacy of the changes made to section 11(3).
The new decision from the courts
The recent decision in the cases of Ogilvie Construction Limited v M1 RE Glasgow Limited and Ogilvie Construction Limited v Leach Rhodes Walker Limited ('Ogilvie'), Revised Opinion, 6th May 2026, which were dealt with together, involved claims arising out of defects in the construction of a building. The two defects related to cladding and cavity barriers and, somewhat unusually, the fact that the cladding was defective was known during the carrying out of the original construction works. The case is of interest because Ogilvie is believed to be the first time where the new section 11(3) as amended has been judicially considered. It was section 11(3) as amended which applied to the matters in Ogilvie.
The decision was that the particular claims had prescribed. It is very important to note, however, that the decision was reached after hearing evidence and the case turned very much on its own facts. The case also involved the judge applying law, including the decision of the Scottish Appeal Court in WPH Developments, which he considered was binding on him. All that said, arguments about the proper interpretation of section 11(3) as amended were made.
After quoting section 11 as amended, what Lord Hodge said at para [21] in Gordon's Trustees and what the Scottish Law Commission stated in its report as quoted above (but only the words in bold) the judge said:
'The Commission report pre-dated the decision of the Supreme Court in Gordon's Trustees and the cases that followed. It cannot be assumed that the 2018 Act was intended to address any of the problems that may be considered to have arisen out of those decisions. Apart from that, the approach taken by the Commission in the passage quoted is not consistent with Lord Hodge's judgment and its consideration of what is meant by 'loss, injury or damage'... I do not consider therefore that there is scope for interpreting sub paragraphs (b) and (c) so as to require awareness that the expenditure in question was brought about by a wrong done to them by the debtor' (emphasis added).
Comment
In the context of claims arising out of latent defects in construction works, which in practice are almost invariably claims for damages for breach of contract or breach of duty, it is the judge's more general comments on the interpretation of section 11(3) as amended, as quoted above, which have caused controversy.
Many will be surprised at some of the judge's comments about what he apparently considers to be the continuing impact of Gordon's Trustees upon section 11(3) as amended.
While it is arguable that the language used by the judge in the passage quoted above is, perhaps, not as clear as it could be, his view appears to be that the wording used in section 11(3) as amended does not achieve the result on discoverability desired by the Scottish Law Commission as subsequently backed by the Scottish Parliament in the legislation which amended section 11(3). If that is correct, and a number of commentaries on Ogilvie have already appeared which indicate that is how the judge's decision is being interpreted, it is a very worrying development for those within and outwith the construction sector in Scotland. At the very least, it introduces yet further and highly unwelcome uncertainty into the Scots law of prescription about the proper interpretation of section 11(3) as amended, particularly against the background of the problems caused by the application of Morrison and Gordon's Trustees in construction cases involving section 11(3) in its unamended terms, to which reference has been made above.
What the judge said in Ogilvie about the proper interpretation of section 11(3) as amended is likely to lead those defending claims to argue that the changes to section 11(3) brought about by the 2018 Act have not fundamentally changed the position for claimants having to deal with latent defects. That said, the judge's view is only the view of one judge and not binding upon other judges. Given the particular factual background in Ogilvie, it is not clear if the decision will be the subject of an appeal in which the judge's more general comments quoted above on the proper interpretation of section 11(3) as amended might be considered by the Scottish Appeal Court.
Some will consider that very serious questions arise out of the judge's comments on the interpretation of section 11(3) as amended. Was too much emphasis placed on Gordon's Trustees and what it said about the meaning of 'loss, injury or damage' in section 11 in its unamended terms rather than stressing the need for all three of the limbs (a), (b) and (c) above to be satisfied before the prescriptive period starts to run under section 11(3) as amended? In light of the terms of the Commission's 2017 Report and the resulting changes to section 11(3), did the judge's comments place too much emphasis on what was said by Lord Hodge in Gordon's Trustees when interpreting quite different statutory provisions which, it was understood, had been fundamentally altered by the 2018 Act to try to achieve greater fairness for claimants? Have the changes to section 11 brought about by the 2018 Act failed to resolve the perceived problems with section 11(3) in its unamended terms, as the Commission and the Scottish Parliament intended?
Given the background set out above, many reasonably considered that the wording of section 11(3) as amended was intended to delay the start of the prescriptive period until all three facts set out in (a), (b) and (c) of section 11(3) as stated above were known or could be known upon the exercise of reasonable diligence and that included, importantly, knowledge that the loss injury or damage was caused by the act or omission of a specific person (or persons).
It is true, of course, as the judge states, that the Commission's 2017 Report pre-dated the decision of the UK Supreme Court in Gordon's Trustees and the cases that followed it, but many would argue:
(i) the Commission looked at the matter of principle raised in Morrison and the effect of that case. The Scottish Appeal Court's decision in Gordon's Trustees, which applied Morrison, was mentioned in the Commission's 2017 Report, as reflected in the fuller quote from it set out above. The Commission stated expressly that in its view the statutory changes it proposed addressed the main point understood to be raised in Gordon's Trustees'… by requiring that there be awareness of the factual cause of loss by an act or omission' before the prescriptive period started to run;
(ii) the intention behind the changes made to section 11, particularly section 11(3) after Morrison and the Scottish Court of Appeal's decision in Gordon's Trustees, was clear - to delay the start of the prescriptive period until all three of the facts set out above were known or could be known upon the exercise of reasonable diligence and
(iii) the statutory provisions as amended need to be considered and interpreted as a whole and courts should be very slow to find that the intention behind the changes to section 11(3) has not been given effect by the subsequent changes to the legislation recommended in the draft Bill appended to the Commission's 2017 Report and subsequently passed into law by the Scottish Parliament.
What one judge has described as the 'judicial enfeeblement of section 11(3) in its former terms' has forced legal advisers into a position where they have had to advise clients for years that the law of prescription in Scotland in the context of latent defects in construction works is difficult and in a state of flux. It was thought by many, however, that the new section 11(3) as amended had opened up a new, fairer, chapter for claimants and that over time the problems created by Morrison and Gordon's Trustees would dissipate as more and more claims became governed by the changed regime set out in section 11(3) as amended. However, that scenario is now considered to be much less certain as a result of what the judge said in Ogilvie about section 11(3) as amended. There is a danger that the ' … judicial enfeeblement of section 11(3) in its former terms' is replaced by judicial enfeeblement of section 11(3) in its amended terms.
Looking at matters more broadly, it is surely time for more clarity and certainty as well as a period of stability in the Scots law of prescription. The position in relation to section 11(3) as amended is fundamental to Scots law and needs to be clarified as soon as possible to avoid yet more uncertainty, argument and costly disputes.
The problem is that even if another judge takes a different view to that apparently taken by the judge in Ogilvie, that leaves us with two competing views of judges at first instance. Which view is right probably won't be resolved until the matter is addressed by the Scottish Appeal Court or even the UK Supreme Court. The Scottish Law Commission is unlikely to look at the matter again until the correct interpretation of section 11(3) as amended has been considered by an appellate court. Further legislation might even be required. All that could take years and will be regarded by many in the construction sector and beyond it as a highly regrettable state of affairs.
Further, as a result of the uncertainties surrounding the Scots law of prescription, there is now a trend developing under which contracts with consultants and contractors for construction works to be carried out in Scotland are being made subject to English law. That is because it is believed by some that the quite different limitation regime under English law gives greater clarity and is fairer to claimants in relation to latent defects than that which applies under the Scots law of prescription. The decision in Ogilvie and some of the commentaries upon it may cause that trend to continue.
