£11.5m action against builders of Cairngorn funicular railway allowed to proceed

£11.5m action against builders of Cairngorn funicular railway allowed to proceed

A commercial judge in the Outer House of the Court of Session has allowed a proof in an £11.5 million action raised against two companies contracted to build and maintain a funicular railway in the Cairngorns after ruling that the claim had not expired by prescription.

Highlands and Islands Enterprises averred that work undertaken by Galliford Try Infrastructure Ltd and AF Cruden Associates Ltd, now in liquidation, was in breach of contract and delictual obligations. Its case was that it had been presented with a fundamentally defective railway on which it would now have to incur major repair costs as a result of the defenders’ negligence.

The case was heard by Lord Sandison, with G Walker KC appearing for the pursuer and MacColl KC appearing for the first defender. No appearance was made by the second defender.

Reasonable diligence

From 1999, the pursuer entered into arrangements for the design and construction of a funicular railway which came to be known as the Cairngorm Mountain Railway, near Aviemore. It contracted with the first defender for the construction of the railway and with the second defender as the project civil and structural engineer. The railway began operation in December 2001 but suspended operations in October 2018.

Originally, the second defender was responsible for carrying out regular inspections of the railway but was replaced by another company, ADAC, in 2014. The following year, ADAC reported on potentially serious structural issues that in 2018 became sufficiently serious to warrant closure. It was the pursuer’s position that the defects in the railway were the results of breaches of contract and delictual duties by the defenders during the design and construction of the railway.

The first defender argued that any claim against it in relation to breach of duty had prescribed.  Any claim said to have arisen as a result of defects must prima facie have become enforceable at the latest by the date on which the railway was completed and entered into service, namely 24 December 2001. In any event, the pursuer had been advised more than 5 years prior to raising the action of cracking in the scarf joints, which would have triggered the prescriptive clock.

Counsel for the pursuer argued that it could not have been aware that it had suffered relevant loss until the first ADAC report in 2015 and could not until then have discovered the error by the use of reasonable diligence. The fact that it had been left in ignorance as to the existence of the material defects ought not to put it in a position where time would run against it for the purposes of prescription. The cracking in the railway previous reported was a minor defect that did not constitute a major repair.

Less than frank

In his decision, Lord Sandison observed: “It is common ground that the pursuer’s claim entails that prima facie prescription would have operated to extinguish the obligations that it seeks to enforce against the first defender by 24 December 2006. In such circumstances, it is for the pursuer, as the putative creditor in the obligation in question, relevantly and specifically to aver circumstances capable of bringing the case within the ambit of the primary provisions of either or both of sections 6(4) or 11(3) of the Prescription and Limitation Act (Scotland) Act 1973.”

Addressing reasonable diligence, he said: “I do not accept the first defender’s submission that the pursuer’s position must be read as involving the tacit suggestion that what it actually did amounted to the exercise of reasonable diligence on its part, or, in consequence, that reasonable diligence would have disclosed the existence of material defects more than five years before the raising of the action. Although those might well be reasonable inferences to draw from the pursuer’s pleadings, they are not inevitable such inferences.”

He continued: “The pursuer’s position in this regard might be thought to be less than frank, but it is one that is open to it given that the burden of raising questions of reasonable diligence in this context rests with the defender. The benefit of such scant pleading which is gained for the purposes of debate may transpire to carry a disadvantage at proof, both in relation to the evidence which the pursuer is permitted to lead, and as to the incidence and scale of any award of expenses, should it transpire that its position in this connection was truly insupportable.”

Turning to the relevance of the scarf joint cracking, Lord Sandison concluded: “Had the pursuer given more detail about the nature of the cracking as reported to it and the costs incurred by it in repairs, then it might have been that enough would have been put in issue to make an inquiry into the question of materiality appropriate. However, as matters stand the poverty of the pursuer’s pleadings on the question simply fails to place before the court sufficient factual material to form a proper basis for any such enquiry. The pursuer’s claim that it was not aware of having suffered loss and damage in relation to the scarf joint cracking more than 5 years before it raised the action is insufficiently specific to proceed to proof.”

Lord Sandison therefore allowed the action to proceed to proof, with the case put out by order to discuss the consequences for the pleadings of the pursuer’s averments on the scarf joints not being apt to form part of that proof.

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