KEYWORDS: LIMITATION PERIODS AND APPEAL FROM ADJUDICATIONS

KEY TAKEAWAY

This is the first decision of the Supreme Court of the United Kingdom on a construction adjudication.

An unsuccessful party in an adjudication under the Housing Grants, Construction and Regeneration Act 1996 (UK) (the Act) can bring a claim to have the adjudication decision challenged within six years of the unsuccessful party making payment. This limitation period begins to run from the date the unsuccessful party makes a payment to the successful party pursuant to the adjudication.

The facts

In March 2004, Higgins Construction Plc (Higgins) contracted with Aspect Contracts (Asbestos) Limited (Aspect) for Aspect to conduct an asbestos survey on blocks of maisonettes that Higgins was considering for development (the Contract). It was undisputed that the Contract was a "construction contract" under the Act. Aspect conducted the survey and provided a report on 27 April 2004.

The development went forward and in early 2005 Higgins alleged that it had found asbestos material not previously identified in the Aspect report. As a result, a dispute arose between Higgins and Aspect regarding the unidentified asbestos material.

Ultimately, Higgins referred the dispute to adjudication, claiming over £800,000 in damages, plus interest. Higgins could refer the dispute to adjudication because of sections 108 and 114 of the Act, which implied a term into the Contract providing for a process of adjudication.

Higgins succeeded during the adjudication and was awarded £490,627 plus interest.

Importantly, the implied adjudication clause provided that:

"the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration ... or by agreement".

The parties did not agree to consider the adjudication final and Higgins did not commence any action to recover the £331,855 balance of its claim or otherwise finally determine the dispute.

The limitation period for any claim Higgins had regarding the dispute had expired in early 2011. However, on 3 April 2012, Aspect commenced proceedings for recovery of the amount paid to Higgins on the basis that no payment was due on the merits of the original dispute. Higgins counterclaimed for the £331,855 balance of its original claim.

Aspect's claim

Aspect rested its claim either on the presence of an implied term or on the doctrine of restitution. The relevant term that Aspect submitted was implied was one entitling it to repayment:

"in the event that a dispute between the parties was referred to adjudication pursuant to the Scheme and one party paid money to the other in compliance with the adjudicator's decision made pursuant to the scheme, that party remained entitled to have the decision finally determined by legal proceedings and, if or to the extent that the dispute as finally determined in its favour, to have the money repaid to it." 132

At first instance, Akenhead J rejected Aspect's claim that there was an implied term for repayment on the basis that it was not reasonable, equitable or necessary to give business efficacy to the contract, nor was there a policy reason to override this decision.133 His Honour also rejected Aspect's claim that it had a separate cause of action in restitution.134 The Court of Appeal reversed Akenhead J's decision, holding that the contract did contain the implied term as submitted by Aspect. Aspect did not pursue its restitutionary claims on appeal.135

Higgins was granted permission to appeal to the Supreme Court of the United Kingdom and submissions were invited on the basis of both restitution and the implied term.136

Findings

The Supreme Court considered that the main issue was whether Aspect was able to "disturb" an adjudicator's decision by bringing proceedings after the limitation period for Higgins under the original contract, in tort and contract, had lapsed.137 Lord Mance held that this hinged on whether Aspect could bring a claim to recover the sum it had provisionally paid under that adjudication determination.138 That is, Aspect must be able to establish that the sum originally paid was not due in the original dispute. His Lordship expressed Aspect's position as being that there were rights and liabilities not identified in the adjudication decision that entitled it to payment, and that these arose by way of an implied term or restitution.139

However, the Court expressed the implied term slightly differently, as:

"a directly enforceable right to recover any overpayment to which the adjudicator's decision can be shown to have led, once there has been a final determination of the dispute." 140

What limitation period applied to Aspect's claim?

As Aspect's claims arose independently as a result of the adjudication payment and was only for repayment of it, the Court held that the relevant limitation period for such a claim started to run from the date of the payment to Higgins.141 The Court also held that this allowed Aspect to pursue determination of the parties' original rights and liabilities for the purpose of determining whether any over-payment had occurred.142

The Court refused, however, Higgins's counterclaim on the basis that it was time barred. Higgins's claim did not relate to the adjudication payment and as such its limitation period ran from the original claim, not the date of payment.143

http://www.bailii.org/uk/cases/ UKSC/2015/38.html

Footnotes

132 At [7]
133 Aspect Contracts (Asbestos) Ltd v Higgins Construction Plc [2013] EWHC 1322 at [45] (Akenhead J)
134 Aspect Contracts (Asbestos) Ltd v Higgins Construction Plc [2013] EWHC 1322 at [48] (Akenhead J)
135 At [9]
136 At [10]
137 At [16]
138 At [16]
139 At [17]
140 At [23]
141 At [21]–[22] and [25]
142 At [31]–[32]
143 At [33]

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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