Litigation after an adjudicator has decided – serious technical problems

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Facts

In 2004, Higgins was tendering for demolition and refurbishment of the Ivy Bridge Estate, Hounslow for Notting Hill Housing Trust.  It commissioned an asbestos survey from Aspect and quoted a price relying upon Aspect’s report about the lack of asbestos in the estate property.  It won the contract and subsequently discovered that there was far more asbestos than had been identified by Aspect which meant that Higgins spent a fortune which it could not recover from Notting Hill Housing Trust.  It also suffered 17 weeks of delay as a result.

In 2009 Higgins adjudicated Aspect and got an award of £658,000.  In 2012 Aspect began court proceedings for a declaration that its original report had not been defective or in breach of contract and therefore it must be entitled, under a necessarily implied term in its contract with Higgins, to be repaid the monies ordered by the Adjudicator.

The TCC Judge held that Aspect was time barred, it should have brought its case within 6 years of 2005 when the work was actually done.  Aspect appealed.

Aspect Contracts (Asbestos) Limited v Higgins Construction Plc [2014] BLR 79 Court of Appeal

Court of Appeal Held

  1. There is an implied term in contract for construction operations that where monies are paid from one party to another in adjudication, the paying party has a right to refer the issue to Court, and that right runs from when the money is paid pursuant to adjudication decision.  The 6 years contract period therefore ran from the date of the decision in 2009.  The claim was not time barred.
  2. Meanwhile, Higgins had very substantial further claims against Aspect for breach of contract which it had not pursued (because it was content with the adjudication decision).  Higgins was not able to pursue this because it was time barred as at 2011.  The Court of Appeal considered Higgins ought to have pursued its remedies if it wished, within the limitation period, i.e. “hard lines”.

Commentary

  1. This has produced a very lopsided result.  Nevertheless the unfairness is more apparent than real.  For whatever reason, Higgins obviously decided that it was not worth pursuing Aspect for any more money and had therefore allowed the original time period to expire (in about 2011).
  2. Nevertheless Higgins’ counterclaim rights against Aspect were not extinguished by the law of limitation.  Higgins could therefore still use its rights against Aspect as a defence of set-off.
  3. Nevertheless the winning party to an adjudication would be well advised to make a diary note for when its contractual rights expire.  At that time it should consider whether it wishes to take further action for recovery over and above that awarded in any previous adjudication.

For further information, help or advice please contact Rob Langley on 0191 211 7975.