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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Adams v. Messrs Thorntons WS & Ors [CA190_01.html] ScotCS 1 [2002] ScotCS 121 (26th April, 2002) URL: http://www.bailii.org/scot/cases/ScotCS/2002/121.html Cite as: [2002] ScotCS 121, 2002 SCLR 787

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Adams v. Messrs Thorntons WS & Ors [CA190_01.html] ScotCS 1 [2002] ScotCS 121 (26th April, 2002)

OUTER HOUSE, COURT OF SESSION
CA190/01	OPINION OF LORD MACFADYEN in the cause JOHN DON ADAMS Pursuer; against MESSRS THORNTONS, W.S. and OTHERS Defenders:   ________________

 

 

Pursuer: Logan; Campbell Smith, W.S.

Defenders: Johnston; Balfour & Manson

26 April 2002

Introduction

1. This is an action of damages for alleged professional negligence. The pursuer sues the defenders, a firm of solicitors who formerly acted for him, for recovery of loss which he claims to have suffered as a result of failure on their part to exercise the proper degree of care in connection with a series of related property transactions. The transactions took place in 1990 and 1991. The pursuer admits that he first incurred loss as a result of the alleged negligence in December 1990. This action was raised on 26 October 2001. In these circumstances the defenders plead (plea-in-law 1) that any obligation they may have had to make reparation to the pursuer has been extinguished by prescription in terms of section 6 of the Prescription and Limitation (Scotland) Act 1973 ("the 1973 Act"). The pursuer seeks to rely on sections 6(4) and 11(3) of the 1973 Act as bases for arguing that the defenders' obligation has not been extinguished. The defenders, however, plead (plea-in-law 2) that his averments made for those purposes are irrelevant. The case was appointed to debate in respect of that plea.

The Property Transactions

[2] In order to set the prescription issues in their proper context, it is necessary first to understand the property transactions in relation to which the defenders are alleged to have acted negligently. The pursuer's pleadings are somewhat diffuse, and I find it more convenient to attempt to summarise them than to quote them.

2. The underlying scheme was that a property known as Airlie Lodge, together with the ground attached to it, should be purchased and developed by (i) sub-division of the house into flats, and (ii) the construction of further houses on the adjoining ground. The pursuer avers that the project was to be a joint venture between him and one Ian Sigurd Henderson Barclay ("Mr Barclay"). The pursuer instructed the defenders, who had acted as his solicitors on various previous occasions, to act for him in relation to the main parts of the project. Various versions of the project appear to have been contemplated, but it is sufficient to summarise the contracts which were actually entered into.
3. Airlie Lodge was, at the outset of the series of transactions, owned partly by Mrs Lydia Robb (the southeast part of the house), and partly by Mr and Mrs David Brand (the northeast and the west parts of the house). Mr Brand was a partner in the defenders. By three separate sets of missives ("the first level missives") dated 19 and 24 October 1990 offers to purchase the three parts of Airlie Lodge were made by Ballinard (Property and Investments) Ltd ("Ballinard"), a company owned by the pursuer. Those offers were accepted by Mrs Robb and Mr and Mrs Brand for their respective parts of the house. The prices were to be (i) £112,000 for the southeast part, (ii) £183,000 for the northeast part and (iii) £90,000 for the west part, making a total of £385,000. Entry was to be given on 14 December 1990. The sales were to be implemented by dispositions in favour of Ballinard or its nominees.

[5] The pursuer avers that the acquisition and redevelopment of Airlie Lodge was to be funded partly by a loan from the Clydesdale Bank ("the Bank") and partly by a sub-sale of part of the acquired subjects (i.e. the existing building known as Airlie Lodge together with a limited amount of garden ground) to a company owned by Mr Barclay, which was then called Aberdeen Property Leasing Company Ltd but later changed its name to Apple Limited ("Apple").

4. Missives ("the second level missives") dated 7 and 14 December 1990 were entered into between Ballinard and Apple for the sale by Ballinard to Apple of subjects at Airlie Lodge described in the missives by reference to a plan. The price was to be £222,000 and the date of entry was to be 14 December 1990, (i.e. the same as the date of entry under the three sets of first level missives). In that transaction, the defenders acted for both Ballinard and Apple.
5. According to the pursuer's averments, between the date of conclusion of the first level missives and the date of conclusion of the second level missives, it became apparent that there were practical reasons for not using Ballinard as the vehicle for acquisition of the subjects. Consequently, the borrowing from the Bank was undertaken by the pursuer and Mr Barclay jointly and severally as individuals, and it was contemplated that they would be nominated by Ballinard as the disponees under the first level missives. On 13 December 1990 the Bank instructed the defenders to act for them too in connection with the loan and the taking of security for it. The amount of the loan was to be £248,000. The Bank's instructions to the defenders indicate that the security subjects were to be "Ground at Airlie Lodge ...". The pursuer avers that the intention was that the standard security should be over the whole subjects of the first level missives, whereas in fact security was eventually taken only over what might be described as the development ground, i.e. excluding the ground which was the subject of the second level missives. Paragraph 8 of the Bank's instructions to the defenders stipulated that the security should be a first security. I have to say that it is not readily understandable how it was contemplated that, in the context of the acquisition of the subjects under the first level missives and the sub-sale of part of them to Apple under the second level missives falling due for settlement on the same day, namely 14 December, a standard security over the whole property could have been granted in favour of the Bank.
6. A third layer of the property transactions involved the sale of two flats within Airlie Lodge by Apple, one to the pursuer and one to Mr Barclay. Offers to purchase were made on 30 and accepted on 31 January 1991 ("the third level missives"). The prices were £95,000 (the pursuer) and £65,000 (Mr Barclay). The date of entry was in each case to be 1 February 1991. In connection with the third level missives, the solicitors acting for the pursuer and Mr Barclay were James & George Collie, Aberdeen ("Collies"). The defenders again acted for Apple.
7. Various payments were made under the several sets of missives to which I have made reference. First, at the date of entry under the first level missives, the defenders drew down the loan of £248,000 from the Clydesdale Bank, and utilised the borrowed funds to make to Mr Brand, on behalf of himself and the other sellers, a part payment of the sums due under the first level missives. Secondly, on 19 February 1991 Collies, on behalf of the pursuer and Mr Barclay, made payment to the defenders of £132,607.70 towards the prices due to Apple under the third level missives. The defenders paid those funds to Mr Brand (on behalf of himself and the other sellers under the first level missives). That may be regarded, somewhat elliptically, as amounting to (i) payment by the pursuer and Mr Barclay to that extent to account of the sums due by them to Apple under the third level missives, (ii) payment by Apple to the pursuer and Mr Barclay, to that extent, to account of the sums due to them in place of Ballinard under the second level missives, and (iii) payment by the pursuer and Mr Barclay, to that extent, to account of the unpaid balance due by them to the sellers under the first level missives. Thirdly, on 13 March 1991 Collies, on behalf of the pursuer and Mr Barclay, made to the defenders a second payment of £9690 towards the sums due to Apple under the third level missives. The defenders utilised £9349.43 of that sum to make a further and final payment of principal and interest to Mr Brand (on behalf of the sellers under the first level missives). Again, that may be regarded as involving payment of the latter sum by Apple to the pursuer and Mr Barclay, as sellers under the second level missives, and payment of the same sum by them, as purchasers under the first level missives to the sellers under those missives.
8. The effects of those payments were (i) that the sums due by the pursuer and Mr Barclay to Apple under the third level missives were paid in full; (ii) that the sums due by the pursuer and Mr Barclay to the sellers under the first level missives were paid in full; but (iii) that Apple paid to the pursuer and Mr Barclay only £141,952.70 towards the £222,000 due under the second level missives. There was thus an underpayment of approximately £80,000 in respect of the second level missives.
9. There was some delay in executing and recording the deeds necessary to give effect to the various transactions. The disposition delivered at the date of settlement of the first level missives in exchange for the payment of £248,000 was of the development ground only, and bore to be in exchange for receipt of a price of £195,000. The pursuer and Mr Barclay executed a standard security in favour of the Bank over the development ground, but that was never recorded. At that stage the subjects remained burdened by a standard security granted by Mr and Mrs Brand, so that the defenders were unable to comply with the Bank's instruction that the standard security in its favour should be a first ranking security. Eventually, once the price under the first level missives was paid in full in March 1991, the prior standard security granted by Mr and Mrs Brand was discharged. The original disposition in favour of the pursuer and Mr Barclay, and the original standard security by the pursuer and Mr Barclay in favour of the Bank, were superseded, and ultimately the first level missives were implemented by the sellers granting dispositions (a) of the subjects of the second level missives to Apple with the consent of Ballinard, and (b) of the remainder of the subjects of the first level missives to the pursuer and Mr Barclay as nominees of Ballinard. The pursuer and Mr Barclay granted a new standard security in favour of the Bank over the subjects conveyed to them. It is unnecessary to say anything more about the implementation of the third level missives.

The Pursuer's Loss

10. The pursuer's computation of the loss which he seeks to recover from the defenders is set out in article 4 of the condescendence. Since the relevancy of those averments is not under examination at this stage, it is unnecessary to consider them in detail. In the end the pursuer seeks to recover from the defenders the aggregate of all the losses which arose out of the joint venture to redevelop Airlie Lodge. For present purposes, however, it is sufficient to note two points. First, the averments of loss begin:

"The development was seriously underfunded. This arose in part due to the £80,000 shortfall from Apple".

Secondly, in article 6 of the condescendence, the pursuer responds to the defenders' averments in the following terms:

"Admitted that the pursuer in fact incurred his loss in December 1990 when he became committed to the purchase of the ground and the associated bank borrowing but under explanation that he was not then aware of any loss. Admitted that the pursuer was aware by 1995 that the transaction had proved unprofitable but under explanation that he was not aware that this loss had been caused by negligence."

The Alleged Negligence

11. The pursuer's case against the defenders is formulated in contractual rather than delictual terms. It is based on the implied term of the contract between solicitor and client that the solicitor will, in acting for and advising the client, use the knowledge, skill and care of a reasonably competent solicitor. The pursuer formulates a series of particular duties which he maintains were incumbent on that basis on the defenders. These include duties -
1. "to consider the position of the pursuer as an individual and not to act for clients with conflicting interests to the detriment of the pursuer";
2. "to consider the identity of the parties to the joint venture and their respective interests";
3. "to comply with the [Bank's] conditions of loan" (which I understand to be intended as a reference to paragraph 8 of the Bank's instructions to the defenders);
4. "not to encash and pay to the sellers £248,000 for which the pursuer was personally liable without obtaining adequate security";
5. "to take reasonable care that they understood the instructions of the [Bank] as to the extent of the security subjects";
6. "to ensure that the full purchase price [under the second level missives] was paid by Apple or that the interests of the pursuer and the joint venture were otherwise protected"; and
7. "to appreciate that accounting to Apple when sums were due to the pursuer constituted a conflict of interest".

The pursuer avers that the defenders were in breach of those duties.

12. Since the only matter under discussion at the debate was the relevancy of the pursuer's averments bearing on the issue of prescription, it is not appropriate that I should discuss in detail the pursuer's formulation of his averments of duty and breach of duty on the part of the defenders. To say the least, some of them could be more clearly expressed. Taking a very broad view of them, however, it appears to me that they are concerned essentially with three matters. First, there is the background complaint that the defenders acted in the transactions for a range of clients whose interests were in conflict. They acted for (i) the pursuer as joint venturer, (ii) Mr Barclay as joint venturer, (iii) initially two, and latterly all three, of the sellers under the first level missives; (iv) the pursuer's company, Ballinard, (v) Mr Barclay's company, Apple, and (vi) the Bank. Secondly, there is the complaint that at the date for settlement of the first level missives, the defenders drew down the loan of £248,000 and paid it to the sellers, although (a) they were not at that stage in a position to comply with the Bank's requirement that the Bank obtain a first ranking security, (b) the disposition received in exchange, and the standard security granted in favour of the Bank, related only to the development ground, and (c) the value of the ground over which the pursuer and Mr Barclay were at that stage able to give security to the Bank was less than the amount of the borrowing. Point (c) is made in averments which note that the aggregate purchase price under the first level missives was £385,000, that the sale price under the second level missives was £222,000, and that the value of the development ground left in the hands of the joint venture (£385,000 - £222,000 = £163,000) was therefore insufficient to afford adequate security for the sum borrowed (£248,000). The nub of that complaint is that the pursuer expected his personal liability to the Bank in respect of the loan to be adequately covered by the existence of heritable security over subjects of sufficient value, but that in drawing down and paying away the sum that they did in the circumstances that prevailed the defenders left him instead with a personal liability which was inadequately covered by the heritable security. Thirdly, there is the complaint that the defenders allowed Apple to receive delivery of the disposition of the subjects of the second level missives, although the payments Apple had made fell about £80,000 short of the price due by them.

Prescription

13. In the circumstances which I have outlined, it was common ground between the parties at the debate that if attention were focused only on sections 6(1) and 11(1) of the 1973 Act the proper conclusion would be that any obligation on the part of the defenders to make reparation to the pursuer would have been extinguished. The breaches of the duty imposed by the implied term of the contract relied upon all took place between December 1990 and, at the latest, March 1991. Loss first resulted to the pursuer in December 1990, as he admitted. It therefore followed that in the absence of a relevant claim or relevant acknowledgement, the prescriptive period would have expired between December 1995 and March 1996. The action was not raised until 26 October 2001.
14. While dealing with the matter of prescription generally, I should note that in the course of the debate it was recognised that whereas in the case of a single breach of contract time runs under sections 6(1) and 11(1) of the 1973 Act from the date when loss attributable to that breach of contract first occurs (Dunlop v McGowans 1980 SC (HL) 73) and does not start to run afresh in respect of further loss arising later from the same breach of contract, if there are several separate breaches of contract, time runs in respect of each breach from the separate date on which loss attributable to the particular breach first occurred (Cole v Lonie 2001 SLT 608). It follows that if the pursuer here is alleging a number of separate breaches of duty on the defenders' part committed on separate dates and causing loss on separate dates, the running of the prescriptive period requires to be considered separately in respect of each breach. In the event, however, counsel were agreed that in the particular circumstances of this case no practical purpose would be served by addressing the prescription of the obligation to make reparation for each alleged breach of contract separately. I therefore proceed on that basis.
15. Given the situation described in paragraph [15] above, the pursuer seeks to postpone the date at which the defenders' obligation to make reparation would prescribe until after 26 October 2001 by relying on two further provisions of the 1973 Act. First, he relies on section 11(3), the effect of which is that where, on the date on which, by virtue of section 6(1), time would begin to run, the creditor in the obligation "was not aware, and could not with reasonable diligence have been aware, that loss, injury or damage caused as aforesaid [i.e. by an act, neglect or default] had occurred", time will instead begin to run only on "the date when the creditor first became, or could with reasonable diligence have become, so aware". Secondly, he relies on section 6(4) which provides inter alia that in the computation of a prescriptive period there shall be left out of the reckoning "any period during which by reason of ... error induced by words or conduct of the debtor or any person acting on his behalf, the creditor was induced to refrain from making a relevant claim in relation to the obligation".
16. In the course of the debate it was accepted by Mr Logan, for the pursuer, that the onus of establishing that the computation of the prescriptive period was affected by section 11(3) or section 6(4) was on the pursuer. It was therefore for the pursuer to make relevant and sufficiently specific averments of circumstances pointing to the application of those provisions, and to the conclusion that by virtue of one or other or both of them the defenders' obligation to make reparation had not been extinguished prior to the raising of this action.

The Section 11(3) Issue

(a) The Defenders' Submissions

17. Mr Johnston for the defenders submitted that the pursuer's contention that by virtue of section 11(3) time did not begin to run in respect of any obligation on the defenders' part to make reparation to the pursuer until August 2000 was not supported by relevant and sufficiently specific averments. The core averment was to be found in article 6 of the condescendence:

"The pursuer was not, and could not have been with reasonable diligence, aware that the defenders had been at fault until shortly after receipt of the KPMG report in August 2000".

The KPMG report there referred to was obtained by Mr Barclay's executors for the purpose of an action of accounting which the pursuer raised against them in connection with the joint venture. The pursuer averred earlier in article 6 that the shortfall in the sums paid by Apple under the second level missives was first disclosed to him when he read the KPMG report. Mr Johnston did not dispute that the pursuer had adequately averred that he did not have actual knowledge that his loss was due to the defenders' breach of duty until August 2000. He submitted, however, that in order relevantly to invoke section 11(3), the pursuer required to aver not only an actual lack of such knowledge, but also that he could not with reasonable diligence have acquired such knowledge. It was that second part of the averments necessary to support a case under section 11(3) that was not set out with sufficient specification in this case. Mr Johnston submitted that the pursuer's averments did not adequately explain what steps the pursuer took to ascertain the cause of his loss, and why he could not, in the course of reasonable diligence, have done more than he did.

18. Before turning to an examination of the averments which the pursuer makes in support of the core averment quoted in paragraph [18] above, Mr Johnston referred to a number of authorities on section 11(3). He began with Glasper v Rodger 1996 SLT 44. In that case, after observing (at 47F) that the lack of awareness which requires to be established for the purpose of section 11(3) is a lack of awareness that a loss has occurred caused by an act, neglect or default which gives rise to an obligation to make reparation for it, Lord President Hope went on to say (at 47I-K):

"In the present case the pursuers' lack of awareness, according to their averments, relates not to the question of causation, but to the fact that they had sustained a loss in the first place. A party who is aware that he has sustained loss, injury or damage may reasonably be expected to take some steps to find out what has caused that loss. Failure to do this will call for an explanation, if the test of reasonable diligence to which section 11(3) refers is to be capable of being satisfied. But a lack of awareness that loss, injury or damage has been sustained at all gives rise to a different question. This is not whether reasonable diligence has been exercised in order to discover whether a loss which the pursuer knew about was 'caused as aforesaid' - that is, by an act, neglect or default giving rise to an obligation to make reparation. It is whether, in all the circumstances, the pursuer had any reason to exercise reasonable diligence in order to discover whether a loss had occurred."

The Lord President went on (at 48B) to adopt from Peco Arts Inc v Hazlitt Gallery Ltd [1983] 1 WLR 1315 at 1323A-B the following dictum of Webster J:

"... reasonable diligence means not the doing of everything possible, not necessarily the using of any means at the plaintiff's disposal, not even necessarily the doing of anything at all; but that it means the doing of that which an ordinarily prudent [person in the position of the plaintiff] would do having regard to all the circumstances of the [case]".

Mr Johnston also cited Beveridge & Kellas WS v Abercromby 1997 SC 88, and Britannia Building Society v Clarke 2001 SLT 1355. In the latter case, having distinguished it from Glasper on the ground that it was not a case in which the pursuers were unaware of having suffered any loss at all, I said (at 1359C):

"I am therefore of opinion that this is a case in which the bare averment that the pursuers could not with reasonable diligence have become aware earlier that they had a claim does not constitute a relevant invocation of section 11(3). To make a relevant case the pursuers would, in my opinion, have had to set out facts and circumstances explaining why they could not, with reasonable diligence, have discovered earlier than 1996 that they had suffered loss due to an act, neglect or default".

19. Against the background of those authorities, Mr Johnston turned to examine the pursuer's averments. He pointed out that there was no averment that the pursuer had done anything before 1995 to investigate whether he had a claim. That was, however, in the context of the admission, already noted, that he "was aware by 1995 that the transaction had proved unprofitable under explanation that he was not aware that this loss had been caused by negligence". In article 6 the pursuer sets out a narrative of what he had done between 1995 and 2000. That narrative may be summarised as follows. By March 1995 the Bank was demanding repayment of the amount outstanding on the loan account, which was then in excess of £240,000. A meeting with the Bank took place, at which the pursuer was accompanied by Mr J. S. Robertson ("JSR"), a partner of the defenders. At the meeting it was agreed that the pursuer's company, Tay Hotels Ltd, and Apple would each buy one of the remaining plots for £100,000, and in return the Bank agreed to write off some interest. The pursuer, the averments continue, did not understand why the deficit on the account with the Bank was so great. He discussed the matter with JSR, and it was agreed that Mr Barclay had not contributed his share of the development costs. JSR suggested an action of accounting against Mr Barclay. The pursuer's financial circumstances were at that stage straitened, and he could not afford to pursue such an action. The joint venture accountant, Mr McKenzie sought information from the defenders which they did not provide. Apple's accountants also refused to disclose information. As a result Mr McKenzie, it is averred, was unable to ascertain how the pursuer's loss had arisen. JSR did not disclose to the pursuer the underpayment by Apple under the second level missives, or that the Bank loan had been drawn down in contravention of the Bank's instructions, or that the standard security in the Bank's favour covered only the development ground and not Airlie Lodge itself, or that Mr and Mrs Brand's standard security had remained in place when the loan was drawn down. The pursuer's averments then continue with the narrative that in 1998 he again raised the issue of his losses with JSR. He was referred to the defenders' court partner, Mr Milne. Mr Milne undertook to investigate the matter. It was difficult to obtain information from Mr Barclay's executors. The investigation "fell asleep" on two occasions. Precognitions were taken and meetings held. It was not obvious to the pursuer or Mr Milne that the underlying problem had been the defenders' negligence. The action of accounting was eventually raised against Mr Barclay's executors. The pursuer was not aware, and was not told by Mr Milne, that Apple had not paid the purchase price under the second level missives in full. Independent accountancy advice was obtained. An issue arose as to who the joint venture partners had been. It was in the course of the action of accounting that KPMG were instructed by the executors and prepared the report which was disclosed to the pursuer in August 2000. As previously noted, the pursuer claims that it was sight of that report which brought home to him awareness that his loss had been caused by breach of duty on the part of the defenders.
20. Mr Johnston submitted that the pursuer's narrative, which I have just summarised, of what he had done, and why he had done no more, to investigate the cause of his loss did not amount to relevant and specific averments that he had used reasonable diligence to find out the cause of his loss once he became aware in early 1995 that he had sustained it. That was particularly so when account was taken of all the matters of which the pursuer admitted he was aware and the dates on which he acquired the various pieces of knowledge. The items of knowledge (with the date of acquisition of the knowledge, where mentioned, in brackets) included:

(1)	that the defenders were acting for a number of parties with conflicting interests;
(2)	that in February 1991 the settlement of the first level missives remained partially unimplemented;
(3)	that the sums due by the pursuer and Mr Barclay to Apple under the third level missives had been paid to Apple (April 1991);
(4)	that some of that money had been used to pay the balance due to the sellers under the first level missives;
(5)	that he had signed the disposition in favour of Apple;
(6)	that the transaction had proved unprofitable (1995);
(7)	that he owed substantial sums to the Bank (March 1995);
(8)	that at about that time the Bank threatened to call up its standard security;
(9)	that his indebtedness to the Bank was greater than he expected it to be;
(10)	that the £100,000 paid by Tay Hotels Ltd was high in comparison to the value of the land thereby acquired;
(11)	that the defenders were to deal with the conveyancing in respect of the transfer to Tay Hotels Ltd; and
(12)	that the account of Tay Hotels Ltd had been debited and the pursuer's and Mr Barclay's joint account had been debited with £100,000 (July 1995).

Mr Johnston submitted that there were two other factual considerations which ought to be taken into account. They were (i) the pursuer's admission (in article 2) that he had prior knowledge of property development, and (ii) the involvement of other advisers to the pursuer besides the defenders, namely Mr Rennie of Collies and Mr McKenzie, his accountant.

21. In all the circumstances, Mr Johnston submitted, it could not be said that the pursuer had relevantly and sufficiently specifically averred that he had acted with reasonable diligence, and that his ignorance of the fact that his loss was attributable to the defenders' breach of duty continued until August 2000 despite the exercise of reasonable diligence on his part. He appeared to rely on averments that (1) the defenders continued to act for him until 2001, and (2) that he had instructed them for many years, had a close friendship with JSR, and trusted them completely and relied on their advice. Given his admitted knowledge of the conflict of interests in which the defenders had allowed themselves to be placed, those considerations did not assist the pursuer. Two other factors were irrelevant, namely (a) the averment that between 1995 and 1998 the pursuer did not pursue the action of accounting against Mr Barclay's executors for want of funds, and (b) the averment that Mr McKenzie did not pursue inquiries on the pursuer's behalf because he was owed fees by the pursuer. Such considerations of impecuniosity were irrelevant to the question of reasonable diligence.

(b) The Pursuer's Submissions

22. Mr Logan submitted that the section 11(3) issue could not be resolved without proof. Matters of fact required to be addressed and determined. His motion was accordingly not that the defenders' second plea-in-law should be repelled, but that it should be reserved to proof before answer.
23. Mr Logan submitted that, so far as actual knowledge was concerned, the pursuer averred that he did not know that his loss was due to the defenders' breach of duty until after August 2000. That was borne out by the file note of 23 November 2000 (No. 6/45 of process). There was therefore no lack of specification so far as the averment of lack of actual knowledge was concerned. What was in issue was the sufficiency of the pursuer's averments in support of the proposition that he could not with reasonable diligence have been aware that the defenders were at fault until August 2000.
24. Mr Logan submitted that the pursuer's position was that, until March 1995 he was not aware that he had suffered loss. When he became aware, at that stage, that he had suffered loss, his reaction was to wonder why the deficit on the Bank account was so great. It was accepted that, from that date, he was put on inquiry as to what the cause of his loss was. In light of that situation, the pursuer did two things. First, he spoke to JSR, the partner in the defenders in whom he reposed particular trust. As the pursuer's averments disclosed, in discussion with him the cause of the loss was identified as Mr Barclay's failure to contribute his share of the development costs. JSR's advice was that an action of accounting should be raised against Mr Barclay. That was eventually done in 1998. Secondly, the pursuer spoke to his accountant, Mr McKenzie. The pursuer's averments set out the various difficulties Mr McKenzie had in determining where the pursuer's loss arose. He was unable to obtain all the necessary information, from the defenders and from Apple's accountants. It was to be remembered that the pursuer's role in the joint venture was as site agent, and Mr Barclay and an associate of his, Mr Gray, were to "deal with the paperwork" (see article 2 of the condescendence). In these circumstances, it could not be said as a matter of pleading that the pursuer was bound to fail to establish that the steps which he had taken, after learning of his loss in 1995, amounted to reasonable diligence in pursuit of the ascertainment of the cause of his loss. He had sought advice, and such advice as he had received tended to indicate that the loss he had suffered had been caused otherwise than by negligence on the part of the defenders. It was also to be remembered that throughout the relevant period the defenders allowed the conflict of interest in which they found themselves to continue. Reference was made to Beveridge & Kellas v Abercromby at 92G, where significance was attached to the fact that the solicitors had suggested to their client that she should seek other advice. No such suggestion had ever been made by the defenders to the pursuer in the present case. Notwithstanding the pursuer's awareness that the defenders were acting for other parties, he had come to the transaction as an established client of the defenders and they had continued to act for him throughout. It could not, in these circumstances, be said that reasonable diligence required him to seek advice elsewhere.

(c) Discussion

25. To make a relevant case under section 11(3) a party must make averments that, until a date less than five years before the raising of the action, he both (a) did not actually know, and (b) could not with reasonable diligence have become aware, that he had suffered loss caused by act, neglect or default. In the present case, the pursuer avers that he did not in fact know that the loss, of which he had become aware in March 1995, was caused by the defenders' breach of duty until August 2000. That is, in the context of this action, a relevant averment of lack of actual knowledge.
26. The pursuer's averment is that he did not know that he had suffered loss until March 1995. In respect of the averments relating to the period between the occurrence of the loss in December 1990 and the pursuer's realisation that it had occurred, the matter must in my view be approached in the way outlined by Lord President Hope in Glasper at 47I-K. The question is "whether, in all the circumstances, the pursuer had any reason to exercise reasonable diligence in order to discover whether a loss had occurred". It does not seem to me that there is anything in the pleadings to suggest that the pursuer was put on inquiry before March 1995. I did not understand Mr Johnston to argue otherwise. I am therefore of opinion that the pursuer has made averments relevant to postpone the commencement of the prescriptive period until March 1995.
27. The real issue under section 11(3) is whether the pursuer has made relevant and specific averments in support of the proposition that, once he became aware of his loss in March 1995, he could not with reasonable diligence have discovered earlier than he did that his loss was attributable to professional negligence on the defenders' part. Mr Johnston was, in my opinion, correct in his submission that the bare averment that the pursuer "could not have been with reasonable diligence aware that the defenders had been at fault until ... August 2000" could not be regarded as sufficient by itself. I did not understand Mr Logan to argue otherwise. What are required, in my opinion, are averments of facts and circumstances explaining why the pursuer could not, with reasonable diligence, have discovered before August 2000 that the loss he had recognised in March 1995 was the result of professional negligence on the defenders' part (Britannia Building Society v Clarke, at 1359C).
28. It cannot, in my view, be said that the pursuer offers no such explanation. The issue comes to be whether the explanatory averments which he does offer, viewed in light of the admissions of knowledge which he makes, can be regarded as supporting the proposition that the connection between the pursuer's loss and professional negligence on the defenders' part could not have been uncovered with reasonable diligence. To deal first with the explanatory averments, it seems to me that they comprise two separate threads. The first thread is that, on discovery in March 1995 that he owed more than he thought he should have owed to the Bank, the pursuer consulted JSR. He had been a client of the defenders for many years and had a close friendship with JSR. He trusted the defenders and relied on their advice. On this occasion, JSR identified the problem as a failure on Mr Barclay's part to contribute his share of the development costs, and advised that the appropriate remedy was to sue for an accounting. Leaving aside for the present the question of conflict of interest, it seems to me that for the pursuer to consult his established solicitors with a view to identifying the cause of his loss cannot be said to have been inappropriate. It is a step which might be regarded as prima facie consistent with the exercise by the pursuer of reasonable diligence. Equally, it seems to me that for the pursuer to accept the resultant advice, and accept, as it were, the solicitor's diagnosis of the cause of the problem, is prima facie consistent with the exercise of reasonable diligence on his part. It is true that there was then a delay of some three years (1995 - 1998) before the advice was acted upon to the extent of making the investigations necessary for the purpose of raising the action against Mr Barclay's executors, and that the reason for that period of inaction is said to have been the pursuer's impecuniosity. I accept that in many contexts the pursuer's inability through impecuniosity to take steps that reasonable diligence would otherwise require would be irrelevant. I am of opinion, however, that the delay in raising the action against Mr Barclay's executors falls into a different category. That delay was not delay in taking steps that reasonable diligence required with a view to ascertaining the cause of the pursuer's loss. On the contrary, by the stage at which the delay occurred, the pursuer had taken the steps that he maintains constituted reasonable diligence on his part - he had sought legal advice as to the cause of his loss and had received and accepted advice to the effect that the cause lay in Mr Barclay's under-contribution to the joint venture. He now maintains that that advice was wrong, but that does not mean that reasonable diligence for the purpose of section 11(3) required him to do more after he had accepted the advice.
29. The second thread of the pursuer's explanatory averments involves an account of steps taken on the pursuer's instructions by his accountant, Mr McKenzie, by way of investigation of the cause of the loss. It is narrated that those investigations were frustrated in a number of ways, and latterly were not pursued because Mr McKenzie's fees remained unpaid. It is, in my view, difficult to see what contribution, if any, those averments make to supporting the proposition that the pursuer exercised reasonable diligence in investigating the cause of his loss. In particular, it is difficult to see how they relate to the other averments of his seeking and accepting advice as to the cause of the loss from JSR.
30. I do not regard the pursuer's admissions (see paragraph [21] above) as precluding the possibility that his explanatory averments disclose the use of reasonable diligence. Many of them go merely to knowledge of loss. The one on which Mr Johnston particularly relied was the admission of knowledge that the defenders were acting for a number of parties with conflicting interests. He submitted, in effect, that the pursuer could not say that he exercised reasonable diligence by seeking and relying on advice from the defenders, when he knew that they were also acting for other parties with conflicting interests. I do not consider that the point can be taken as far as that. I accept that the pursuer's knowledge of the fact that the defenders were acting for parties with conflicting interests is something that must be taken into account in judging whether the steps that the pursuer says that he took, by way of consulting the defenders, to find out the cause of his loss amounted to reasonable diligence. There must also, however, be taken into account the history of the pursuer's relationship with the defenders, the averment that he had established trust in them, the averment that in the context of the joint venture it was he who came to them first as a client, and the averment that they continued to act for him, and did not suggest to him (c.f. Beveridge & Kellas v Abercromby at 92G) that he should seek other advice. I do not consider that the pursuer's knowledge of the conflict of interest can be regarded as automatically precluding the possibility that the pursuer's acceptance of and continued reliance on the advice of the defenders constituted reasonable diligence on his part.
31. In the result, I am of opinion that it cannot be said at this stage that, if the pursuer proves the averments which he makes, he is bound to fail to make out the proposition that until August 2000 he could not with reasonable diligence have become aware that his loss was caused by professional negligence on the part of the defenders. He has set out in averment a narrative of the steps he took to ascertain the cause of his loss. Whether those steps amounted to the exercise of reasonable diligence is a matter on which a concluded view can only be reached in light of the whole circumstances, applying the criterion of what would have been done by an ordinarily prudent person in the pursuer's position (Glasper at 48B, following Pico Arts Inc at 1323A-B). I therefore take the view that the defenders' second plea-in-law, so far as relating to the averments invoking section 11(3), ought not to be repelled at this stage, and that those averments should be admitted to probation before answer. The averments forming the second thread of the pursuer's explanation seem to me to be of more doubtful relevancy than the averments constituting the first thread. I am of opinion, however, that the appropriate course is to admit them too to probation.

The Section 6(4) Issue

1. The Defenders' Submissions
2. Mr Johnston identified as the core averment made by the pursuer in invoking section 6(4) the following sentence in article 6 of the condescendence:

"Separatim the error of the pursuer was induced by the words and conduct of the defenders and in particular Mr Milne."

That averment and such of the pursuer's earlier averments as might be regarded as supporting it were, he submitted, irrelevant and lacking in specification. In support of that submission he advanced three arguments.

3. First, Mr Johnston submitted that any obligation on the part of the defenders to make reparation to the pursuer had already prescribed before Mr Milne became involved in the matter. Leaving section 11(3) out of account, the defenders' obligation was extinguished, at the latest, in March 1996. The first averment of involvement on Mr Milne's part was that the pursuer was referred to him by JSR in March 1998. A case under section 6(4) based on error allegedly induced by words or conduct of Mr Milne thus could not save the defenders' obligation from prescription.
4. Mr Johnston's second argument relied on the language of section 6(4). He pointed out that the word "induced" appeared twice in the subsection. There required to be error on the part of the pursuer "induced" by words or conduct of the defenders or any person acting on their behalf. In addition the pursuer required to be "induced" by that error to refrain from making a relevant claim. There were, Mr Johnston submitted, no relevant averments of how the defenders or anyone on their behalf induced error in the pursuer. For that purpose the various averments that JSR and Mr Milne did not disclose various things to the pursuer were of no avail.
5. Thirdly, Mr Johnston submitted that, in order to make a relevant case under section 6(4), it was necessary for the pursuer to identify the beginning and the end of the period during which the running of the prescriptive period was interrupted. Only by identifying the period in question could the pursuer ask the court to leave it out of the reckoning when calculating the prescriptive period. Here there were no averments which provided a basis for the deduction of any particular period.
6. Mr Johnston cited BP Exploration Operating Co Ltd v Chevron Transport (Scotland) 2002 SC (HL) 19 in which the operation of section 6(4) was considered by the House of Lords. He referred in particular to the speech of Lord Hope of Craighead at paragraph [33] (page 30F-G) where his Lordship said:

"I would hold, therefore, that the period of time covered by the word 'refrain' in section 6(4) includes time when the creditor does nothing to enforce the obligation, whether or not this is the result of a conscious decision on his part not to press the claim. ...[It] is not necessary for the creditor to identify the date when he would have made the claim but for the error. But the prescriptive period will only be interrupted if he can show that the reason why he did nothing to enforce the claim against the debtor was because he was misled by ... error induced by the debtor's words or conduct."

At paragraph [35] (page 31D) Lord Hope added:

"The removal of the error restores the creditor to the state of knowledge which enables him to make a relevant claim. There is no longer any reason why the prescriptive period ... should not run."

The same point was made concisely by Lord Millett at paragraph [108] (page 57H):

"This period [excluded by section 6(4)] is coterminous with the subsistence of the error in question".

Reference was also made to the speeches of Lord Clyde (at paragraphs [63] to [66], pages 39B-40F) and Lord Millett (at paragraphs [102] to [105], pages 56G- 57F).

7. The Pursuer's Submissions
8. Mr Logan submitted that on a fair reading of the pursuer's pleadings, his case was that he had been induced by the actings of JSR and Mr Milne into the error of thinking that the cause of his loss was Mr Barclay's under-contribution to the joint venture, and had in the requisite sense been induced by that error not to make a relevant claim against the defenders. He did not suggest that the averred failure of JSR and Mr Milne to inform him of various matters by itself comprised the acts which induced the error. The words or acts that induced the error were the advice given by JSR that the cause of the loss was Mr Barclay's under-contribution, and that his remedy lay in an action of accounting against Mr Barclay, and the actings of Mr Milne in pursuing the action against Mr Barclay's executors. Reference was made to Robertson v Watt & Co (Second Division, 7 April 1995, unreported), in which a case under section 6(4) was admitted to probation on averments that the defenders, her solicitors, had advised her that her only claim lay against another party.
9. Mr Logan further submitted that the pursuer's averments made it adequately clear that the period which the pursuer sought to have left out of the reckoning began in March 1995, when JSR first gave the advice that the remedy lay against Mr Barclay, and ended in August 2000, when the pursuer read the KPMG report. That was the period during which the error subsisted.
10. Mr Logan accepted that section 6(4) alone could not save the defenders' obligation to make reparation from prescription. That was because the period between the concurrence of injuria and damnum (March 1991 at the latest) and the making of a relevant claim (on 26 October 2001) was ten years and seven months, whereas the maximum period which could be excluded from the reckoning under section 6(4) was from March 1995 to August 2000, some five years and five months. Even leaving the latter period out of the reckoning, more than five years passed after the relevant date without the making of a relevant claim. The case under section 6(4) was, however, relevant in combination with partial success of the section 11(3) case. If the section 11(3) case were to succeed in postponing commencement of the prescriptive period until March 1995, on the basis that until then the pursuer was unaware of his loss and had not been put on inquiry, but were to fail to postpone it further because the view was taken that the cause of the pursuer's loss could then have been discovered by reasonable diligence, reliance on section 6(4) could exclude the period between March 1995 and August 2000 from the reckoning, yielding the result that a relevant claim was timeously made.
11. Discussion
32. Although there is no single averment which identifies the period which the pursuer seeks to have excluded from the reckoning of the prescriptive period by virtue of section 6(4), I am prepared to accept that on a fair reading of his pleadings the period during which he claims to have laboured under error is said to have begun in March 1995 and ended in August 2000. I therefore reject Mr Johnston's submission that the pursuer's pleadings do not sufficiently specifically identify the period in question.
33. It is, in my view, unfortunate that the core averment of the section 6(4) case appears to concentrate on the words and conduct of Mr Milne. The reference to "the defenders and in particular Mr Milne" might be read as narrowing down the reference to the defenders to mean in particular Mr Milne. I am persuaded, however, that that would be an unduly restrictive reading. On consideration of the pursuer's pleadings as a whole, it is in my view reasonably clear that he is founding on error originally induced by the advice given by JSR and maintained in existence by the conduct of Mr Milne in pursuing the action against Mr Barclay's executors. The pursuer, it seems to me, founds on his various averments of non-disclosure of information to him by JSR and Mr Milne not as the basis of the error, but as an explanation of why he was not disabused of the error earlier than he was. In that context those averments are in my view relevant. In my view, the averments in support of the pursuer's case under section 6(4), tested by the criteria laid down in BP Exploration, are sufficient to justify enquiry.
34. Mr Johnston sought to distinguish Robertson v Watt & Co on the ground that in that case the solicitors' advice was that her claim lay against a named party "and no one else", whereas here JSR's advice that a claim lay against Mr Barclay was not reinforced with advice that there was no claim against anyone else. I do not regard that as a valid ground of distinction. What matters, it seems to me, is whether the advice that the pursuer's loss was attributable to under-contribution by Mr Barclay and that the appropriate remedy was an action of accounting against him induced error on the part of the pursuer which induced his failure to make a relevant claim against the defenders. In my view, the averments which the pursuer has made are relevant to be admitted to enquiry on that issue, notwithstanding the absence of express advice that there was no claim available against anyone other than Mr Barclay.
35. Mr Johnston was, of course, correct in his submission that section 6(4) alone could not save the pursuer from the plea of prescription. If the section 11(3) case fails, the section 6(4) case cannot reduce the reckonable period sufficiently to make the raising of this action timeous. In my view, however, given that the section 11(3) case is to be admitted to probation, it does not follow that the section 6(4) case can be excluded from probation. In my view, Mr Logan correctly identified the way in which a combination of section 11(3) and section 6(4) might serve to defeat the plea of prescription.

Result

36. For the reasons which I have given, I am of opinion that the defenders' second plea-in-law cannot be sustained at this stage. I am of opinion that the pursuer's averments are sufficient to make it appropriate to order enquiry on both the section 11(3) and the section 6(4) issues.
37. At the debate there was some discussion of whether, if the averments which had been discussed were relevant for enquiry, the proof before answer should be in respect of the whole case, or should be restricted to the question of prescription. I am inclined towards the view that allowance of a proof before answer restricted to the issue of prescription would be the expedient course to follow. I propose, however, to give parties an opportunity to give that matter further consideration before making any order.
38. I shall accordingly put the case out By Order for discussion of the scope of the proof before answer to be allowed, to fix a diet for such proof, and to discuss any further procedural steps that may be appropriate in preparation for it. I shall reserve the expenses of the debate.