Outer House allows Leonardo Hotel cladding action to proceed despite prescription challenges

About this case:

• Citation:
  [2026] CSOH 103
• Judgment:
  External link
• Court:
  Court of Session Outer House
• Judge:
  Lord Richardson

Lord Richardson held that although several of the hotel tenant’s arguments on prescription were irrelevant, it had pled a sufficient case that alleged physical concealment of defects induced it and the landlord to refrain from making claims. Building Design Partnership Ltd was also permitted to proceed with its claim against Kingspan Insulation Ltd concerning alleged misrepresentations about insulation used in the development.

T Young and White, instructed by Morton Fraser MacRoberts LLP, appeared for Leonardo Hotel Management (UK) Ltd. MacColl KC, instructed by Clyde & Co LLP, appeared for Galliford Try Building 2014 Ltd. Thomson KC and Hamilton, instructed by Kennedys, appeared for Building Design Partnership Ltd. Dean of Faculty Roddy Dunlop KC and Ysabeau Middleton, instructed by Balfour and Manson LLP, appeared for Kingspan.

The action concerns alleged defects in the cladding system of the Leonardo Inn Hotel at Union Square, Aberdeen. Galliford Try’s predecessor was the design and build contractor, Building Design Partnership was the architect and Kingspan manufactured Kooltherm K15 insulation incorporated into the works.

Practical completion of the part of the development containing the hotel was certified in February 2009. Leonardo later took a lease imposing a full repairing obligation and received collateral warranties from Galliford Try and Building Design Partnership. Leonardo alleges that defects in the cladding were caused or materially contributed to by breaches of contractual and delictual duties and seeks the cost of repairs which it says it is obliged to undertake. Proceedings were raised in February 2021.

Second debate on prescription

The case had previously been debated before Lord Richardson in 2024. A second debate followed after Building Design Partnership brought Kingspan into the proceedings following publication of reports by the Grenfell Tower Inquiry, Leonardo developed its prescription pleadings and the Inner House issued further decisions on section 6(4) of the Prescription and Limitation (Scotland) Act 1973 and collateral warranties.

Galliford Try and Building Design Partnership maintained that Leonardo’s claims had prescribed. Kingspan supported those arguments and separately contended that Building Design Partnership’s claim against it was time-barred. Building Design Partnership’s claim against Kingspan is based on alleged fraudulent or negligent misstatements in technical information concerning Kooltherm K15 which, it says, caused it to specify the product for the development.

Lord Richardson accepted the defenders’ construction of the collateral warranties.

Galliford Try’s warranty provided that it could rely on equivalent rights of defence against Leonardo to those available under the original building contract. Lord Richardson held that this included prescription defences. He rejected Leonardo’s reliance on provisions requiring professional indemnity insurance and imposing a 12-year contractual longstop. Those provisions could operate alongside the normal law of prescription.

Building Design Partnership’s warranty was differently worded, but Lord Richardson reached the same conclusion. Its provision that the architect would have no greater duties or obligations “in time or in nature” supported the conclusion that it could rely on prescription defences available under its original appointment.

Loss ‘locked in’ when lease signed

Lord Richardson also rejected Leonardo’s argument that entering into the lease did not constitute loss for the purposes of section 11(1) of the 1973 Act. The relevant loss occurred when Leonardo entered the lease and assumed the repairing obligation. Its argument that pure economic loss did not arise until it was or reasonably could have been discovered did not represent Scots law. 

The court also reconsidered its earlier view on section 11(3) following the Inner House decision in Tilbury Douglas Construction Ltd v Ove Arup and Partners Scotland Ltd. Lord Richardson held that the later authority was a sufficiently significant development to justify revisiting the issue. Applying its reasoning, Leonardo’s losses associated with repairing the cladding were “locked in” when it entered the lease in December 2009, even though nobody then knew repairs would be required.

Leonardo’s section 11(3) averments were therefore irrelevant.

Leonardo nevertheless preserved its case under section 6(4), which excludes from the prescriptive period time during which a creditor refrains from making a claim because of fraud or an error induced by the debtor’s words or conduct.

Lord Richardson rejected the argument that recent Inner House authority restricted the provision to conduct going beyond the “everyday” performance of contractual services. He said section 6(4) required the creditor to plead that it was in error and therefore refrained from making a claim, the period during which that occurred, and words or conduct by the debtor which caused the error. There was “no support in the language of the provision” for an additional restriction on the type of conduct capable of inducing it.

Leonardo averred that Galliford Try physically concealed the alleged defects as construction progressed by covering them with other materials, alongside failures to identify and report defects. Lord Richardson considered that sufficient for inquiry. At its most basic, Leonardo’s case was that the conduct meant neither it nor the landlord could physically see defects incorporated into the building. That distinguished the claim from cases based only on generic assertions that contractual obligations had been properly performed.

The same conclusion was reached in relation to Building Design Partnership. Leonardo averred that the architect failed to identify or report defects and allowed construction to proceed so that they became physically concealed. Lord Richardson held that an alleged failure to act could constitute relevant conduct for section 6(4), and the issue required evidence.

Kingspan claim also survives

The court separately rejected Kingspan’s attempt to dispose of Building Design Partnership’s claim against it.

Building Design Partnership alleged that Kingspan made continuing misrepresentations concerning Kooltherm K15. Kingspan argued that any representation ceased to be continuing once the product had been specified and incorporated into the hotel. 

Lord Richardson disagreed. The fact that a misrepresentation had been acted upon and caused actionable loss did not necessarily mean it had ceased to have continuing effect for the purposes of section 11(2). Whether further reliance remained reasonable depended on the circumstances of the particular representation.

Building Design Partnership had therefore pled a relevant case under section 11(2). It also had a relevant case under section 6(4). Kingspan relied on a 2017 Wintech report as showing that Building Design Partnership either knew or ought reasonably to have discovered the true position concerning K15.

Lord Richardson held that the report was not sufficiently clear to conclude at debate that the architect necessarily had actual knowledge. What could have been discovered with reasonable diligence was also a value judgment which, except in an obvious case, should be made after hearing evidence.

He noted that Building Design Partnership relied on a subsequent Atelier Ten report which concluded that K15 was compliant. Lord Richardson therefore refused the motions for absolvitor or dismissal made by Galliford Try, Building Design Partnership and Kingspan.

With the exception of the specific prescription averments held irrelevant, he allowed a proof before answer and put the case out by order so that a diet could be fixed and any further procedural steps addressed.