You are dissatisfied with an adjudicator’s decision, but pay the successful party. However, you can litigate or arbitrate the dispute (as provided for in the contract) afresh, hopefully with a different outcome. How long do you have to start those proceedings – does the original limitation period apply, or does it start again once you have paid out?
This thorny issue was dealt with in Aspect Contracts (Asbestos) Ltd v Higgins Construction Plc [2013] EWHC 1322 (TCC). Here, the Technology and Construction Court decided there is no new cause of action once payment is made. The decision raises an interesting and important issue as to when a party, which is dissatisfied with the substance of an adjudicator’s decision, needs to issue its proceedings or raise any counterclaim in those proceedings to challenge and seek to overturn that decision.
Aspect specialised in the provision of asbestos management services including asbestos surveys. Higgins specialised in the construction and refurbishment of community housing, education and healthcare products. In 2004, Higgins approached Aspect to carry out an asbestos survey in relation to the demolition and redevelopment of the Ivybridge Estate, Hounslow, London. It was subsequently necessary for additional asbestos to be removed and Higgins alleged that 17 weeks of delay to the project was attributable to discovery of additional asbestos.
The problem here was that Higgins had obtained an adjudication decision four to five years after the adjudicated cause or causes of action (in contract or tort) had accrued. Aspect had paid the monies to Higgins within a few weeks of the decision.
When did Aspect’s cause of action against Higgins, to recover the monies it had to pay out on the temporarily binding decision, accrue?
- when it paid the monies, or
- back to the time when it was (or was not) in breach of its contractual duties, or when damage arose which was caused by any breach of duty of care (2004 or 2005)?
This problem does not usually arise, since most adjudications will be commenced during, or shortly after, the construction project ends and any challenge will be pursued shortly after that. However, in this case there had been delays. Higgins had not adjudicated until 2009 and Aspect had not commenced legal proceedings until some two and a half years after the adjudication. The problem for Aspect was that if its cause of action arose in 2004 or 2005, its claim would be statute barred (it having only six years to bring the claim).
Aspect relied on an implied term that a paying party pursuant to an adjudication under the Scheme for Construction Contracts (the Scheme) was entitled to have the dispute finally determined by legal proceedings; and to repayment of the monies it had paid out in the event that the legal proceedings were decided in its favour.
It was held that the implication of the implied term was not reasonable, equitable or necessary to make the contract work. The only risk that theoretically existed was that if just before the expiry of a limitation period, a party like Aspect waits to see what the result of an adjudication claim against it would be, its later claim for a negative declaration might fail if the limitation defence was deployed. However, the risk was very small because adjudications were often commenced close to the beginning of the limitation period.
The judge found against Aspect. As with any losing party, Aspect could have made a claim for a negative declaration at any time – it did not have to wait for an adjudication decision and the dispute had not changed. It had two and a half years before the limitation period expired to go to court to have the dispute finally resolved without fear of any limitation defence being raised.
There could be no implied term as argued by Aspect. Further, the “essential claimed cause of action relied upon by Aspect involving a negative declaration that it was not in breach of contract or duty and that Higgins did not incur the loss eventually found by the adjudicator to be due is barred by limitation”. Consequently, Higgins’ counterclaim was also barred by limitation. Both claim and counterclaim were dismissed.
Implication of the implied term was not reasonable, equitable or necessary to make the contract work. The only risk that theoretically existed was that if just before the expiry of a limitation period, a party like Aspect waits to see what the result of an adjudication claim against it would be, its later claim for a negative declaration might fail if the limitation defence was deployed. However, the risk was very small because adjudications were often commenced close to the beginning of the limitation period.
There could be no implied term as argued by Aspect. Further, the “essential claimed cause of action relied upon by Aspect involving a negative declaration that it was not in breach of contract or duty and that Higgins did not incur the loss eventually found by the adjudicator to be due is barred by limitation”. Consequently, Higgins’ counterclaim was also barred by limitation. Both claim and counterclaim were dismissed.
COMMENTARY
It is clear that a dissatisfied losing party must act quickly in challenging an adjudication decision by commencing litigation or arbitration (as provided by the contract) so that any subsequent claim is not time-barred. Akenhead J also highlighted that parties should consider carefully (both legally and commercially) the use of negative declarations in establishing any potential liability and in particular the fact that such a declaration can be sought at any time after an alleged breach of contract or tortious duty. There is every reason for a dissatisfied party to examine its options at an early stage and, needless to say, within the appropriate original limitation period
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