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Legal & General Assurance cases
Case: CA68/22 and CA69/22
Friday, 21 March 2025
10:30 to 13:00 then 14:00 until conclusion
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Please note: CA69/22 the 'Superstructure' case settled extrajudicially on 19 March and did not call
Legal & General Assurance cases
CA68/22 and CA69/22
21 March 2025
10:30 to 13:00 then 14:00 until conclusion
First Division
This joint reclaiming motion (appeal) concerns two disputes surrounding an office building in Aberdeen. The appeal raises important issues relating to breach of duty under a collateral warranty and the time from which a collateral warranty runs.
[1] In 2006, Stewart Milne Central Limited (“SMC”) were the heritable proprietors of land at Union Wynd in Aberdeen. They sought to develop the land by erecting a multi-storey office building, to be known as “Union Plaza”.
[2] By April 2007, SMC had appointed Stewart Milne Group Limited (“SMG”) as principal construction contractors for the development together with Halliday Fraser Munro (“HFM”) as architects. In addition, SMC appointed Fairhurst as civil and structural engineers for the development.
[3] A completion certificate for the construction of Union Plaza was issued by the local authority on 8 July 2008. Title to Union Plaza was passed to various companies connected to SMC until it was eventually sold to Legal and General Assurance (Pensions Management) Limited (“L&G”) on 20 December 2013. L&G obtained collateral warranties for the building from both HFM and SMG in January 2014.
[4] L&G had been made aware prior to their purchase of Union Plaza that there had been some water ingress into the basement of the property. They were advised that the water ingress had been remedied. However, water ingress in the basements continued. In May 2018, L&G entered into an agreement with SMG for certain remedial works to be undertaken. Notwithstanding these works, water ingress continued.
[5] In or around November 2018, and in the course of carrying out the remedial works, L&G discovered further consequential defects to the basements. There had been a degradation to the paintwork in the basement consequential of inherent defects in the design and application of a specialised paint used to prevent corrosion.
[6] A summons seeking payment in respect of the basement defects was served by L&G on SMG, HFM and Fairhurst on 17 December 2018.
[7] In August 2020 further defects were discovered relative to the design and installation of the soffit insulation throughout the building. Missing or poorly installed insulation materials had resulted in the risk of exposure of the building’s superstructure in the event of fire.
[8] In October 2020, L&G became aware of defects in the design and installation of a “paint protection system” in the superstructure, together with other fire protection defects.
[9] A further summons in respect of the defects to the superstructure was served by L&G on SMG and HFM on 28 May 2021 and 1 June 2021 respectively.
[10] L&G argued that the words and conduct of SMG, HFM and Fairhurst induced it and their predecessors in title to believe that each had complied with their duties under their contracts with SMC. That was an erroneous belief causing L&G and their predecessors in title to refrain from raising legal proceedings.
[11] SMG, HFM and Fairhurst contended that the claim was out of time. SMG and HFM argued that L&G could not rely on any words and conduct of HFM that was directed at SMC or any previous owner. Fairhurst contended that no reliance could be placed on words or conduct predating the date when prescription would have commenced.
[12] In his decision dated 17 November 2023, the commercial judge found in favour of L&G. He held that the collateral warranty was sufficient for liability to attach to HFM for the cost of repairing a defective building. He rejected the argument that the loss suffered by L&G had already been sustained by purchasing a defective building. The commercial judge considered the provisions of section 6(4) of the Prescription and Limitation (Scotland) Act 1973. L&G were entitled to argue that they were induced to refrain from making a claim due to the understanding that the contractors had complied with their obligations under the construction contract. There was no reason why L&G could not rely on words and conduct of the contractors that they had complied with their obligations under the construction contract. The principle of equivalence allowed the L&G the same rights as those afforded to their predecessors in title to prevent any claim from falling into a legal black hole.
HFM reclaim against the decision of the commercial judge. There are two substantive grounds of appeal. L&G bought a defective building. They are not entitled to claim damages under the law of contract because the collateral warranty upon which the claim is based post-dated their purchase of the property. In any event, L&G’s claim is out of time. The commercial judge erred in holding that an erroneous representation by HFM that they had complied with their contractual obligations could be relied upon by L&G for the purposes of section 6(4) of the 1973 Act.
The First Division will hear the appeal on 21 March 2025.