Liam McKay: ‘Time Bar’: There and back again

Like the titular children’s novel There and Back Again, the law of ‘time bar’ in Scotland has been on a quest in recent years. The treasure is not gold, but something equally valuable: a clear set of rules which strike a fair balance between the interests of would-be claimants and would-be defenders. Liam McKay, Associate at Anderson Strathern, tells the story of this quest and how a recent court decision (Ogilvie Construction Ltd -v- MR Re Glasgow Ltd) brings the journey back to where it started: an interpretation of the law which remains very harsh for would-be claimants.

Generally, a would-be claimant has 5 years to bring a compensation claim against an alleged wrongdoer. This usually involves raising formal legal proceedings in a Scottish court. Such proceedings are often very expensive, time-consuming and can take years to resolve. Bringing a claim is therefore a serious commitment, but sometimes the sums or rights involved are simply too significant to ignore. If that path is taken, it is critical to ensure the claim is brought within the 5-year window.

That period begins on the date on which the would-be claimant first suffers a loss as a consequence of the alleged legal wrong. If a claim is not brought within that 5-year window, the window will slam shut and the claim will become ‘time barred’. A ‘time barred’ claim cannot succeed in court, even though the claim may appear to be very robust and there may be a strong case to answer.

This may sound like a very harsh rule, but it exists to provide fairness to both parties. It is intended to allow the would-be claimant a reasonable period of time to investigate and build their claim whilst also ensuring that the other party does not have to forever worry about, or financially plan for, the risk of a claim being made.

A significant issue with this rule is that a person or a business will only bring a claim if they know that they have one to begin with. In many cases, it will be obvious. A driver involved in a car accident will typically know exactly when they have suffered a loss: the date of the accident. They will know that their vehicle has been damaged, that they have been injured and will usually have a good idea of who is to blame. That awareness of all of these factors will enable them to promptly get to work on building his claim against the other driver.

However, things are not so straightforward in the construction industry. A defect within the fabric of a building, brought about by poor workmanship during construction or the reliance upon poor blueprints, can go undiscovered for many years. So, is it possible to postpone the commencement of the 5-year period?

The answer is: it depends. The law requires a number of boxes to be ticked by the would-be claimant in order to postpone the commencement of the 5-year period. Firstly, the would-be claimant must not have known that they had suffered a loss at the time. Secondly, it must also be the case that the would-be claimant could not have known that they had suffered a loss. In other words, looking at the circumstances in the round, there must have been no reasonable way for the would-be claimant to discover the loss at the time.

Although that may sound straightforward, it is unfortunately not. A number of high-profile decisions in the mid-to-late 2010s by the UK Supreme Court and the Court of Session (Scotland’s highest civil court) imposed a very strict (and, one might argue, very harsh) interpretation on the circumstances in which these boxes can be ticked. The courts concluded that the existence of a loss and the knowledge that a loss has been caused by a wrongful act are two very different things.

This is easiest to illustrate by way of a common example in the construction industry. A housebuilder owns a brownfield site. They engage an architectural firm to design a housing development. The architectural firm then supplies a number of construction drawings. The housebuilder relies on those drawings and engages a contractor to build the development in accordance with the drawings. The works progress to plan, the development is completed and the housebuilder begins to sell off individual plots.

Some years later, the housebuilder learns that there is a defect in the properties that make up the development. The housebuilder cannot sell the remaining plots. Residents begin to demand compensation for the defective homes they have purchased. The housebuilder commissions a report on the cause of the defect. The report concludes that the original blueprints, drawn up and relied upon many years earlier, are defective. The architectural firm was negligent. The housebuilder brings a claim against the architectural firm.

When did the loss occur in this scenario? At first blush, it may seem to have occurred when the housebuilder received the report about the defective blueprints. That was the first moment when the housebuilder became aware of a loss stemming from an alleged legal wrong committed by the architectural firm. The housebuilder did not know about the loss beforehand. How could it have known about a defect in the blueprints when the first symptoms of that defect did not manifest at the development until many years later?

The 5-year period might appear capable of being postponed. However, applying the courts’ strict interpretation of the law, the loss in this scenario objectively occurred from the moment that the housebuilder relied upon the defective blueprints and engaged the contractor to build the development in accordance with those drawings. From that very moment, the housebuilder’s ultimate loss became inevitable. The housebuilder knew that it was spending money to build the development in accordance with the drawings. Therefore, it knew about the expenditure, even though it did not know that the expenditure would ultimately be wasted.

The 5-year window, therefore, began when the housebuilder first relied on the defective blueprints, and the window slammed shut after the expiry of that period even though the housebuilder was unaware of the negligence on the part of the architectural firm until more than 5 years later.

That is a harsh outcome, and the courts have acknowledged as much. Further decisions in the 2020s reinforced this interpretation of the rules.

In 2018, the Scottish Parliament passed a new law called the ‘Prescription (Scotland) Act 2018’ (the “2018 Act” for short). ‘Prescription’ is the technical legal term for ‘time-bar’. In the explanatory notes accompanying the 2018 Act, the Scottish Government explained that its purpose was to make “changes to the law of [‘time-bar’] to address certain issues which have caused or may cause difficulty in practice. These changes are designed to increase clarity, certainty and fairness as well as promote a more efficient use of resources.”

One of the things that the 2018 Act did was to amend the boxes that must be ticked in order to postpone the commencement of the 5-year period. For claims brought after 1 June 2022, and which were not already ‘time-barred’ by that date, it is possible to postpone the commencement of the 5-year period where the would-be claimant did not know, and could not have reasonably known: (i) that a loss has occurred; (ii) that the loss has been caused by an act or omission committed by another person; and (iii) the identify of that other person. If those boxes can be ticked, then the 5-year period will instead start to run on the first date that the would-be claimant knew, or ought to have known, of facts (i), (ii), and (iii).

The Scottish Government explained that this change in the law would address “concerns” that the courts had been interpreting the pre-existing law in a manner “perceived to be detrimental to a fair balancing of the interests of [would-be claimants] and [would-be defenders].” In summary, it was hoped that the 2018 Act would address the perceived harshness.

On 6 May 2026, the Court of Session published a decision on the very first case to consider the implications of the changes brought about by the 2018 Act. Notably, the court concluded that the language of the 2018 Act does not in fact address the perceived harshness and that the interpretation of the boxes established by the decisions from the mid-to-late 2010s and cemented by further decisions in the 2020s remains unchanged.

How then have we come full circle? The Court of Session provided a detailed and technical explanation as to why the 2018 Act does not solve the dilemma. It boils down to the language used in the 2018 Act. The bottom line is that the Act continues to use the word “loss”, and it does not expressly change the law with regard to what the word “loss” means. Therefore, in determining whether box (i) has been ticked, the law has not changed.

So, what about boxes (ii) and (iii)? These are the new boxes. The court explained that the commencement of the 5-year period does not hinge upon whether a would-be claimant is aware, or ought to have been aware, that their loss has been caused by a legal wrong, such as breach of contract or negligence. The 5-year period commences when the would-be claimant is aware (or, when they should have been aware) that they had incurred a loss – some kind of a deficit – because of an act or an omission of someone else.

Returning to the example used earlier, the housebuilder suffers a loss when it relies upon the blueprints and instructs the contractor to build the development in accordance with those blueprints. At that point in time, the housebuilder knows that it is incurring expenditure because of an act: reliance on blueprints. The production of those blueprints was, in turn, an act of the architectural firm, the identity of which is known to the housebuilder.

It does not matter that the housebuilder does not know that the production of the defective blueprints was tainted by negligence. Nor does it matter that the housebuilder does not know that the act of relying on those blueprints, which resulted in the expenditure, which will ultimately prove to be wasted, was brought about by a legal wrong.

It is important to note that the Court of Session acknowledged the perceived harshness that the law on ‘time-bar’ continues to be subject to. The court also noted that the groundwork for the 2018 Act was laid prior to further decisions of the appeal courts in the late 2010s, which cemented that perceived harshness. The Court of Session concluded by saying that:

“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.”

It would therefore appear that we have gone “there and back again” because the Scottish Parliament and the courts are continuing to grapple with a meaning of “loss” that is fair for everyone. Should the 2018 Act have gone further by making clear that the word “loss” should be interpreted as meaning a loss that has been caused by a wrongful act or omission of a known party? Or should the courts have adopted a less technical or literal approach when interpreting the language of the Act in favour of a more purposive approach?

After all, a party may know that they have incurred expenditure or that they have not received what they expected. They may also know that this is down to the action or inaction of another party, but unless they know that the action or inaction was wrongful in some sense (i.e. that it was a breach of contract or an incident of negligence) they will not have any reason to bring a claim unless it is possible to postpone the commencement of the 5-year window until such future time as the party gains this awareness.

Was it not the purpose of the 2018 Act to fix this seeming unfairness? On the other hand, just how long should a contractor or professional services firm be expected to ringfence a large sum of money on the off chance that a claim may be brought many years down the line? Would it not be better to invest that money in new projects, thereby helping to enhance the growth of the industry? All of these points are debatable, and undoubtedly, there will be differing viewpoints amongst differing sectors of the construction industry on the “right” and “wrong” answers.

Last week’s decision is a ‘first instance’ decision. This means that it is a standalone decision by one judge in one particular case. It does not establish a binding legal precedent for other cases. Other judges may, however, find the reasoning to be helpful and persuasive. The harsh approach established by the decisions of the mid-to-late 2010s originated from the appeal courts. It therefore seems more likely than not that it will be up to the Court of Session’s appeal court in Edinburgh and potentially the UK Supreme Court in London to have the final say on whether the 2018 Act means that their old decisions are no longer relevant and applicable.

It could take a year or two for an appeal to run its course, especially if it goes all the way to London. In the meantime, the key takeaway from last week’s decision is that the law on ‘time-bar’ remains very case sensitive and that the rules postponing the commencement of the 5-year period remain subject to very harsh interpretation indeed.

There are steps that those in the construction industry can take today to mitigate against the risk of ‘time-bar’:

• Investigate the works upon completion and check to ensure that they have been constructed properly and in accordance with all relevant contractual, statutory, and industry requirements and guidelines. This is preferable to simply assuming that the project has gone to plan and that if everything looks OK, it probably is. This can be an expensive matter, and a debate can arise as to who ought to foot the bill for this (should contractors be obliged to prove that they have built the works correctly?)
• If you are the end-user of a new premises, and you did not instruct the contractor or any of the parties involved in the design of the premises, ensure that you receive the benefit of a collateral warranty when taking over responsibility for the premises. This will help to ensure that, if an initial check identifies a problem, you have a right of recourse against the contractor or architectural firm, as the case may be.
• Lastly, don’t bury your head in the sand by assuming that an issue with the premises will probably resolve itself. Seek legal advice as soon as possible. This helps to maximise the options available to you and, should court action be necessary, reduces the risk of ‘time-bar’.   

Liam McKay is an Associate in the Contentious Construction team at Anderson Strathern.