Referring an adjudicated dispute to Court – How long have you got?

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Aspect Contracts (Asbestos) Ltd v Higgins Construction Plc [2015] UKSC 38

Facts

Higgins engaged Aspect to produce a report on asbestos in a block of flats.  Aspect produced a report in April 2004, but Higgins later found more asbestos in the property that the report set out.  Higgins launched an adjudication, claiming over £800,000 plus interest.  Higgins won, but was awarded only £490,000 in a decision dated 28 July 2009. Aspect paid up on 6 August 2009.

Higgins did not commence proceedings for the balance of its claim, and the limitation periods for a claim in contract and tort expired.

Then, in February 2012, Aspect issued court proceedings to recover the sums it had been ordered to pay by the adjudicator.  In doing so, Aspect argued that there was an implied term that a party ordered to pay money by an adjudicator has a right to have that issue finally determined, and the monies repaid if successful.  Higgins argued that the claim was time-barred and also launched a counterclaim for the balance of the £800,000 not awarded to it by the adjudication.

Held

The High Court decided that there was no such implied term.

This was appealed by Aspect, ultimately to the Supreme Court, which reversed the decision.  The Supreme Court concluded that it was a necessary consequence of the adjudication Scheme implied by the 1996 HGCRA, that “Aspect must have 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“.  Rather unfortunately for Higgins however, the Supreme Court also went on to decide that its counterclaim for the balance of the £800,000 was time barred.

Comment

Parties that have been ordered to pay money pursuant to an adjudicator’s decision have 6 years in which to launch a claim at Court to reclaim those monies.  In other words, a new cause of action is generated from the decision of the adjudicator.

However, the crucial point to note is that this is only in respect of the party which has been ordered to pay money by the adjudicator.  If a successful party is not satisfied with the decision then it must make a claim at Court within the limitation period for the original cause of action.

This is illustrated by the present case.  Higgins was not awarded its full claim in the adjudication, by some £300,000.  However, it did not launch a claim at Court to recover the remainder.  Thus, while Aspect had 6 years from the date of the adjudication decision in 2009 to bring a claim to reclaim the monies paid, Higgins still only had 6 years from the date that the wrong occurred in the first place (2004) in which to bring a claim for the outstanding sums.  This applied even when the claim had been raised as a counterclaim.

Parties to construction contracts should take three lessons from this:

  1. if you have been ordered to pay monies by an adjudicator, you have 6 years from the date of the decision to launch a claim to get it back and you will benefit from deliberately waiting until any counterclaim would be time-barred;
  2. if you are not satisfied with an adjudicator’s decision for any other reason, you must launch a claim at Court within the limitation period from the date that the breach occurred in the first place. Otherwise, that claim will be lost forever; and
  3. consider whether to amend future contracts to provide that all adjudication decisions shall be time-barred if the adjudicated dispute is not referred to court or arbitration (as appropriate) within a limited period of time – say 6 months.

For more information, help or advice please contact Rob Langley on 0191 211 7975 or [email protected]