A recent decision of the Court of Appeal has given authoritative guidance as to the limitation period applicable to proceedings brought for the repayment of sums paid under adjudication decisions. The decision overturns the previous decision of Mr Justice Akenhead in the TCC and provides some welcome clarity on this important topic.

The claimants, Aspect Contracts (Asbestos) Ltd (“Aspect”), issued proceedings in the TCC on 3 February 2012 to recover the sum of £658,017 paid to Higgins Construction plc (“Higgins”) on 6 August 2009 pursuant to an adjudication award made on 28 July 2009.

Higgins argued that Aspect’s claim for repayment was out of time on the basis that it was made more than six years since the accrual of the cause of action on which the original adjudication was based. Mr Justice Akenhead agreed and held that Aspect’s claim for repayment was time-barred. Aspect appealed.

In considering the appeal, the Court of Appeal considered the words of paragraph 23(2) of the Scheme for Construction Contracts, which states:

“The decision of the adjudicator shall be binding until the dispute is finally determined by legal proceedings by arbitration… or by agreement between the parties.”

Counsel for Aspect argued that it was an implied term of the contract (which was subject to the Scheme) that, to the extent a dispute was finally determined in its favour, a party was entitled to have money paid under an adjudication award repaid to it. Counsel for Higgins argued that such a term should not be implied as the losing party in an adjudication could bring proceedings for negative declaratory relief and could, as a part of that relief, ask the court for an order for repayment.

The Court of Appeal agreed that paragraph 23(2) should be interpreted in the manner suggested by Aspect, although it doubted whether an implied term were needed to achieve that result. Lord Justice Longmore held:

“Although paragraph 23(2) does not say, in actual words, that any overpayment is recoverable, that seems to me to be the true intent of the provision and is inherent in the words used.”

As the court found the entitlement to repayment to be in the Scheme itself, it provided a separate cause of action from that giving rise to the original adjudication and did not therefore require the type of negative declaratory relief argued for by Higgins. As such, the cause of action for repayment had accrued on the date of the overpayment and was not linked to the date of the original breach or entitlement. Aspect’s appeal was therefore allowed.

The Court of Appeal’s decision expands the scope for challenging adjudicator’s decisions and means that challenges may now be brought within 6 years from the date of payment of the adjudicator’s decision or 12 years in the case of deeds. The decision also closes a potential tactical device created by the original decision, whereby a claimant could launch an adjudication close to the limitation period for the original breach or entitlement, giving the responding party little or no time to challenge any successful award in subsequent court proceedings.

Reference: Aspect Contracts (Asbestos) Ltd v Higgins Construction Plc [2013] EWCA Civ 1541