The Supreme Court clarifies that claims arising from payments made pursuant to adjudicator's decisions are fresh causes of action
The Supreme Court has clarified that any claim arising from a payment made pursuant to a provisional adjudicator's decision, is a fresh cause of action generated by the payment itself and is independent of any contractual limitation period affecting the underlying claim. It therefore remains an option for paying parties who are on the wrong end of such an adjudicator's decision, to subsequently challenge it in court proceedings, even if the limitation period applying to the underlying claim has expired.
Aspect Contracts (Asbestos) Limited was originally retained by Higgins Construction Plc in 2004 to carry out an asbestos survey on a block of maisonettes which Higgins hoped to redevelop. The survey report was delivered in April 2004, however during the redevelopment in early 2005, Higgins found unexpected asbestos containing materials which required removal. After failed attempts at negotiation and mediation with Aspect and after a considerable period of time, Higgins referred the dispute to adjudication, claiming breach of contract and/or tortious duty of care, and damages of over £800,000. The adjudicator issued her decision and ordered Aspect to pay Higgins £490,000 in damages, interest amounting to just over £166,000 and her fees of £8,750 plus VAT. Aspect paid Higgins £658,017 on 6 August 2009. Although Higgins had not recovered the entirety of its claim, it did not commence proceedings for the balance. The limitation period expired in April 2010 for any contractual claim and at the latest by the beginning of 2011 for claims in tort. However, Aspect subsequently issued proceedings in February 2012 to recover the sum it paid pursuant to the adjudicator's decision on the ground that no sum was in fact due to Higgins and thus the £658,017 was repayable. Higgins counterclaimed for the balance of £331,855 owing under its original claim.
In the Technology and Construction Court (TCC), Aspect argued that there was an implied term that a party which had paid money pursuant to an adjudicator's decision, remains entitled to have the decision finally determined by legal proceedings and to have the money repaid if the dispute was finally determined in its favour. The TCC found that there was no such implied term and that Higgins' counterclaim was time-barred. Further, in the absence of mistake or duress or a right to have the adjudicator's decision set aside, there could be no claim in restitution. Disagreeing, the Court of Appeal found there was an implied term that any overpayment relating to an adjudicator's decision could be recovered.
The Supreme Court agreed with the Court of Appeal and, additionally, gave Aspect permission to rely on restitution as an alternative claim to its primary claim for an implied term. It commented that adjudication is perceived as a speedy provisional measure and as such, an inability to recover a payment made pursuant to an adjudicator's decision would not make sense. Lord Mance stated: "it is a necessary legal consequence of the Scheme implied by the 1996 Act into the parties' contractual relationship 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." He went on to find that Aspect's cause of action arose from the date of payment to Higgins and as such, a claim could be brought at any time within six years from then. Higgins however, was time-barred from pursuing its counterclaim. This was a consequence of Higgins' own decision not to commence legal proceedings within the relevant limitation periods.