The Technology and Construction Court has issued its judgement in the case of Aspect Contracts (Asbestos) Ltd v Higgins Construction Plc  EWHC 1322. The judgement explores, in Mr Justice Akenhead's words, "an interesting and important issue". The issue is whether for limitation (i.e. time-bar) purposes, a paying party's cause of action to recover money paid out on an adjudicator's decision runs from the date of payment, or whether no new cause of action is created and instead the limitation period for raising such a claim is the same as that for the underlying dispute.
Facts of Case
Aspects Contracts (Asbestos) Ltd ("Aspect") was contracted by Higgins Construction PLC ("Higgins") to carry out an asbestos survey. The survey was provided but failed to report on the full extent of asbestos present in the building Higgins was demolishing. Higgins incurred additional costs in removing the additional asbestos and, four years after this discovery, referred the matter to adjudication under the Scheme for Construction Contracts (the "Scheme"). The Adjudicator decided in Higgins' favour and Aspect paid £658,017 compensation to Higgins in line with the Adjudicator's decision. (Interestingly, Aspect did not take the UN Convention on Human Rights, Article 1, Protocol 1, argument seen recently in the Scottish case of Whyte & Mackay).
Aspect issued court proceedings two and half years after the adjudication decision alleging there was an implied term that an unsuccessful party in adjudication is entitled to have a dispute determined by litigation and to repayment if successful. Higgins argued that the action was time barred. They argued that the limitation period (in England and Wales) of six years had passed because: (1) the cause of action in contract accrued in April 2004, when the asbestos report had been issued by Aspect, and (2) the cause of action in tort accrued in June 2005, when all damage caused by the additional asbestos discovery had been incurred. Higgins argued that the Housing Grants, Construction and Regeneration Act 1996 and the Scheme did not extend or alter this time bar period; they merely preserved the rights of a party to have a dispute finally determined by the Court.
Ruling in favour of Higgins, Akenhead J held that there is not an implied term in construction contracts that a party has a right to raise a court action to seek repayment of monies paid in compliance with an Adjudicator's decision. There was no doubt that each party had a right to sue on a cause of action for a positive or negative declaration that Aspect was or was not in breach of its contract or duty of care. However, no new cause of action or separately enforceable rights had been created when Aspect paid Higgins the adjudicator's award and so the action was time barred on the basis argued by Higgins.
This judgement provides a useful examination of the authorities relating to implication of terms into a contract, but highlights that for legislation, there is little recognised authority for such an approach.The judgement acknowledged it to be possible that not implying a term to create a new cause of action for those seeking a declaration following an adjudicator's decision, a party could become time barred before even hearing the outcome of an Adjudication, thus losing its protection against an unfavourable decision. However, this was assessed to be such a small risk, that it did not constitute a gap in the legislation which required an implied term to make the contract work. In particular, court proceedings could be raised to preserve rights even while Adjudication proceedings were ongoing.
The Adjudication procedure was designed to be a comparatively speedy way to resolve disputes and the parties had six years within which to raise their claim, therefore it should be very rare circumstances where parties will not be able to raise proceedings within the limitation period.
This case provides a reminder of the importance of being aware of limitation periods applicable to an action. This is particularly acute where a party must undertake an additional dispute resolution procedure, prior to having recourse to the courts. The case confirms that the limitation period will not reset following an Adjudicator's decision and any positive or negative declarations sought will still need to be brought within the limitation period of the underlying action.