Highlands and Islands Airports’ £14m action against Shetlands Islands Council to go to full hearing

Judges in the Inner House of the Court of Session upheld a decision of the Lord Ordinary on the interpretation of sections 6 and 9 of the Prescription and Limitation (Scotland) Act 1973 and, in particular, the meaning of the expression “relevant claim” in section 6(1)(a).

The Lord President, Lord Gill, sitting with Lord Menzies and Lord Drummond Young, heard that the pursuer Highlands and Islands Airports (HIAL), which operates the Shetland airport, entered into a contract with the defender Shetlands Islands Council in January 2005 for professional services in relation to a runway extension.

However, in November 2011 HIAL raised an action for damages against the council, claiming it was in breach of contract and in breach of its duty of care over “defects” in the provision of its services and its failure to correct those defects.

There was no conclusion for payment of damages because, according to the pursuer, the extent of the alleged loss could not then be properly quantified, but it was agreed that the action was raised within the prescriptive period.

Then, in May 2013, the pursuer lodged a proposed amendment to add a conclusion for payment by the defender of £14,210,000 with interest and the closed record was opened up and amended accordingly, though it was agreed that by then the prescriptive period had expired.

The defender argued that when the action was raised, it had declaratory conclusions only and therefore the summons advanced no claim for implement of any obligation on the part of the defender to make reparation to the pursuer.

However, the Lord Ordinary accepted the pursuer’s submission that she should adopt a “purposive approach” to the statutory interpretation of sections 6 and 9 of the 1973 Act and that since prescription involved curtailment of rights, the legislation fell to be construed in a way that “minimised” that effect.

She allowed a proof before answer after concluding that since the action specified the nature of the alleged liabilities in detail with only the quantification of loss absent, the action constituted “a claim in part-implement of the obligations alleged”.

It gave “fair notice” of the claim and she could see “no basis for any prejudice or disadvantage to the defender”.

The defender reclaimed against that decision, on the grounds that the Lord Ordinary erred in holding that the declaratory conclusions sought “part-implement” of the contractual and delictual obligations in respect of which the pursuer now sought payment; and in holding that the action gave fair notice of the claim.

It was also argued that the Lord Ordinary erred in holding that that the action “served justice” in the protection of rights, consistent with the underlying purposes of the 1973 Act; and in placing weight on the pursuer’s argument that it felt that it was unable properly to quantify its claim.

But the appeal judges agreed with the decision of the Lord Ordinary.

In a written opinion, the Lord President – with whom Lords Menzies and Drummond Young agreed – said: “A ‘relevant claim’, so far as is material to this action, is a claim made in implement or part-implement of the obligations, contractual and delictual, on which the action is founded and is a claim made in appropriate proceedings (s 9(1)(a)).

“Section 4(2)(a) implies that the requirement that the proceedings should be ‘appropriate’ refers to the forum in which the proceedings are brought rather than to the form that the proceedings take. The present proceedings are therefore appropriate.”

Lord Gill added: “If the pursuer when raising this action had simply made its best estimate of its loss on the information then available and had made a formal averment that the sum sued for was a reasonable estimate of the loss and damage sustained by it, the question of time bar would not have arisen.

“The pursuer would then have been free to adjust or amend the claim, even after the expiry of the prescriptive period, in the light of further and better information. That, I think, indicates how contrived the case for the defender is.”