The first instance judgement of the Technology and Construction Court (TCC) in this case was reported in the October 2013 issue of CM. However, unsatisfied with the outcome, Aspect decided to refer that decision to the Court of Appeal.
The dispute related to additional asbestos contained within buildings to be demolished by Higgins under a contract for the Notting Hill Housing Trust, in Hounslow, London. Higgins had previously been successful in obtaining an adjudicator’s decision in its favour and a sum of over £650,000 had been paid by Aspect. The award related to the damages suffered by Higgins because Aspect’s survey did not identify all of the asbestos.
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However, the overall timeline involved here was significant. The asbestos survey work was done in early 2004, but the removal work was not done until mid-2005. The adjudication was not brought by Higgins until mid-2009, and Aspect did not instigate litigation aimed at recovering the money paid out following the adjudication until 2012.
The contract was not made as a deed, so a six-year limitation period applied. The first instance TCC judge held that Aspect’s claim for repayment of the £650,000 was out of time, as it was brought more than six years after the cause of action, which had occurred at the time of the survey work.
Aspect appealed against this decision, which otherwise left it with no opportunity of pursuing recovery of the £650,000. The Court of Appeal reviewed the terms of the parties’ contract, which included the Scheme for Construction Contracts in relation to adjudication. Importantly, the Scheme stipulates that the decision of an adjudicator is binding upon both parties, until that dispute is finally determined by legal proceedings, or by agreement.
The Court of Appeal Lords unanimously held that the TCC judgment was wrong. In doing so they found that a previous TCC decision in Jim Ennis Construction v Premier Asphalt [2009] had correctly concluded that the cause of action in relation to the payment of an adjudicator’s decision accrued at the date of the payment, as opposed to the time of the breach. The wording of the Scheme was held to be clear, in that an adjudicator’s decision was subject to an entitlement to have the matter finally decided in legal proceedings, or by agreement.
Aspect was therefore not out of time after all. It had six years from the date of its payment of the £650,000 in 2009 in which to bring proceedings to attempt to recover that money.
Richard Hildrick’s analysis
This Court of Appeal judgment clarifies a potential clash between the right to have a previously adjudicated dispute finally decided by litigation/arbitration, and the normal limitation period of six years (12 years for Deeds).
A losing party in an adjudication therefore has a six-year limitation period (or 12 years as the case may be), starting at the time of the payment of the adjudicator’s decision.
It is notable, however, that both the Construction Act and the Scheme for Construction Contracts include the rider that the adjudicated dispute may also be finally determined by agreement. So it is possible for contracts to be drafted in a way which places a much shorter time limit within which a losing party can refer a previously adjudicated dispute for legal or arbitration proceedings.
For example, the parties can say in their contract that the adjudicator’s decision is binding until finally determined in legal proceedings, which must in turn be commenced within, for example, 28 days after the date of the decision itself. In this way, the parties are effectively saying that if no legal action is instigated in this period, the matter is deemed to be finally binding by agreement.
Parties should also note that whilst the losing party enjoys a fresh limitation period from the date of the adjudication payment, the other party remains restricted by the original limitation period in respect of any counterclaim which they might wish to raise. This means one party can be within its limitation period in respect of a desire to overturn an adjudicator’s decision, while the other party is time-barred from bringing a counter claim.
Richard Hildrick MCIOB is a quantity surveyor, contracts consultant and adjudicator. Tel: 01347 811155; email: [email protected]
