UK: Know Your Limits!

Last Updated: 29 October 2015
Article by Edward Phillips

The Supreme Court decision in Aspect Contracts (Asbestos) Ltd v Higgins Construction plc [2015] UKSC 38 has opened the possibility that a party to a construction contract may commence legal proceedings relating to an adjudicator's decision after the usual limitation period for a breach of contract or any tortious claim has expired.

The facts and key dates

Aspect were engaged by Higgins to carry out an asbestos survey and report on blocks of maisonettes which Higgins was hoping to redevelop. The survey was conducted in March 2004 and was dated 27 April 2004. During the redevelopment in early 2005 Higgins claims to have found and had to have removed asbestos that had not been identified in Aspect's report.

Higgins referred the matter to adjudication claiming £822,482 in damages plus interest. On 28 July 2009 the adjudicator found in favour of Higgins (but not for the full amount claimed) and ordered Aspect to pay Higgins £658,017 which it paid on 6 August 2009. Higgins did not commence any proceedings to recover the balance. The limitation period for Higgins to bring a claim founded on a breach of contract expired on 27 April 2010 (six years from breach) and in early 2011 (six years from loss being suffered) for any action in tort. Aspect did not at any point agree that the decision of the adjudicator was to be binding on the parties.

On 3 February 2012, Aspect commenced proceedings to recover the sum it paid to Higgins on 6 August 2009.

The decision

The Supreme Court held that:

  • Aspect had the benefit of an implied term in its construction contract giving it a right to have the adjudicator's decision finally determined by legal proceedings and to recover any overpayment arising out of the adjudicator's decision.
  • Aspect had a right to seek a final determination by suing on the implied term, with such right arising upon payment of the sums awarded by the adjudicator.
  • Aspect had six years from the date of payment to seek final determination and to recover any overpayment from Higgins.
  • Where a paying party exercises its right to have the adjudicator's decision finally determined by legal proceedings, the whole dispute as referred to the adjudicator will be subject to final determination. However, whilst the paying party has the benefit of a six year limitation period from the date of payment, if the receiving party tries to counterclaim for any increased amounts then such claim will be subject to the normal rules
    on limitation (six years from breach for a claim in contract).

What does this mean for the property industry?

  • The decision of the Supreme Court raises the possibility that a paying party may commence proceedings relating to an adjudicator's decision under a construction contract after the limitation period for breach of contract or any tortious claim has expired. This raises the following issues:
  • Careful wording will need to be included to provide certainty on when the limitation period for claims comes to an end, particularly in the context of whether and when an adjudicator's decision is deemed to be final and binding.
  • The statutory adjudication regime was intended to provide quick justice for parties to a construction dispute. The potential for paying parties to challenge an adjudicator's decision for up to six years after payment brings this principle into question.
  • The fact that a paying party can refer the "whole dispute as referred to the adjudicator" to final determination is problematic. Will parties need to adduce the same evidence to the court as they had originally adduced to an adjudicator (evidence which may have been fairly hastily put together in
    the timeframes required for an adjudication claim)?
  • If, following Aspect, an adjudicator's decision gets referred for final determination by the courts then which party will be responsible for proving its claim? Will the previously successful party be required to prove again that the culpable party was negligent or in breach of contract?

The decision in Aspect v Higgins is a controversial one. A party who was previously the subject of a successful adjudication decision may see the matter reopened – and be subject to a potential repayment claim - up to six years after it received payment from the culpable party, and potentially, as Higgins found, after the end of the limitation period for contractual and tortious claims.

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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