UK: Supreme Court clarifies time limits for court proceedings following adjudication

We previously reported (here) on the Court of Appeal's decision in Aspect Contracts (Asbestos) Ltd v Higgins Construction plc, considering an important issue regarding the limitation periods applying in a situation where a party makes a payment pursuant to an adjudication decision and subsequently seeks to recover that payment through court proceedings.

That decision was subsequently appealed and the Supreme Court has now handed down its judgment in the case, upholding the Court of Appeal's decision: Aspect Contracts (Asbestos) Ltd v Higgins Construction plc [2015] UKSC 38 .   Michael Mendelblat of our Construction team considers the Supreme Court's decision below.

Adjudication – Payment

This is the first case to reach the Supreme Court in relation to the adjudication provisions of the Construction Act.  It has considerable practical implications for both paying and receiving parties in adjudication.

The case arose from a contract between Higgins, a contractor, and an asbestos specialist, Aspect.  Aspect carried out on an asbestos survey for Higgins and reported in April 2004.  When the project began, more asbestos was discovered than had been referred to in the survey report.  Higgins maintained that Aspect had delayed the project and claimed for their losses.

Neither negotiation nor mediation resolved the dispute and in June 2009 it was referred to adjudication by Higgins who claimed some £800,000.  In July 2009, the adjudicator awarded them about £480,000 which was paid in August of that year.  Therefore, there was a shortfall as regards to Higgins' claim but, had they chosen to do so, they were still in time to issue proceedings for it.  However no proceedings were issued by either party to seek final determination of the dispute.

In February 2012, Aspect commenced proceedings to recover the payment it had made.  It said the contract contained an implied term that a paying party was entitled to have the decision determined by legal proceedings and, if successful, to have the money repaid to it.  It said that it had 6 years from the date of payment to enforce this right.  It also argued for a restitutionary claim for payment and maintained that Higgins could no longer claim for the remaining amounts sought in the adjudication as such a claim was statute barred.

Aspect failed in the TCC but the Court of Appeal reversed this decision.  The Supreme Court decided that the implied term was somewhat different, namely a right to recover an overpayment resulting from the adjudicator's decision following a final determination of the dispute.

The Supreme Court found that this term only applied to claims by the paying party.  In the circumstances which had arisen, the receiving party could not seek the balance it had claimed in the adjudication as it was statute-barred.  The Court held that the  Court of Appeal's decision in Walker Construction (UK) Ltd v Quayside Homes Ltd [2014] EWCA Civ 93 was wrong on this point, insofar as it had followed the approach of the TCC.

The Supreme Court also held the court could reach a final determination on the whole of the dispute. This could incorporate claims which had not been made in the adjudication but not those which were statute barred.  The limitation period for proceedings in respect of the claims which had failed in the adjudication was that applicable to the underlying contract.

Conclusion 

The nature of the implied term in respect of repayment is now clarified.  So is the limitation period applicable to a claim for repayment and this will probably extend beyond the contractual limitation period for other claims.  However this extended period only benefits a paying party.  The receiving party is still bound by the limitation period applicable to the underlying contract and therefore may need (as in this case) to act speedily to preserve his rights.