The court considered for the fi rst time the issue of when the cause of action accrues for a losing party to issue proceedings to challenge the outcome of an adjudication. The court found that a party could bring a claim at any time up to six years after it paid money to the winning party in accordance with the adjudicator’s award.

In Jim Ennis Construction Limited v Premier Asphalt Limited [2009] EWHC 1906 (TCC), the TCC had to decide, for the fi rst time, the issue of the nature and date of accrual of the cause of action where a losing party to an adjudication brought under Part II of the Housing Grants, Construction and Regeneration Act 1996 (HGCRA) subsequently commences court proceedings to seek a fi nal determination of the matters decided by the adjudicator, with a view to recovering monies paid to the winning party in compliance with the adjudicator’s decision.

The defendant contended that the cause of action was no different from the dispute referred to adjudication and thus arises at the same time as that underlying cause of action. The court disagreed, noting that where the adjudication provisions of the HGCRA Scheme apply to a contract, the cause of action for the repayment of monies paid lies in breach of an implied term that, where one party has paid monies to the other party in compliance with an adjudicator’s decision, then that party is entitled to have that dispute fi nally determined by legal proceedings and if, or to the extent that, the dispute is fi nally determined in his favour, to have those monies repaid to him. Such a cause of action only arises when the losing party pays monies to the winning party in compliance with the adjudicator’s decision. Section 5 of the Limitation Act applies to such a claim because it is a claim founded on a simple contract, so that the losing party has six years from the date of payment in which to bring legal proceedings to recover that payment.

Such an implied term was seen by the court as “reasonable and equitable” in that:

  • it applied equally to both parties to the contract  
  • it was essential to give effect to the reasonable expectation of the parties, that a losing party to an adjudication who has to ‘pay now, challenge later’ will have the right to recover such payment by legal proceedings that fi nally determine the dispute  
  • it was obvious that such a term was required to give effect to the reasonable expectations of the parties 
  • it could clearly be expressed  
  • it supported rather than contradicted the terms of the scheme that formed part of the contract between the parties  

His Honour Judge Stephen Davies said: “It seems to me that the implied term is necessary to make fully workable the concept of the temporary fi nality of the adjudicator’s decision which lies at the heart of the policy behind the adjudication provisions of the HGCRA. It is in substance no different to the state of affairs which exists in many construction contracts, where there is provision for interim payments under interim certifi cates based on interim valuations, with the fi nal valuation, certifi cate and payment to be made at the end of the contract. If it transpires at that stage that the contractor has been overpaid under the interim certifi cates, then it cannot be doubted that the employer has a cause of action to recover the overpayment. Although standard form contracts will typically make express provision for that eventuality, in my judgment if they did not, such a right would undoubtedly be implied.

The court noted that this could result in unacceptable delay, where for example a party launches an adjudication shortly before the expiry of the six-year limitation period for his claim, succeeds and receives money, only to be met by a claim for repayment just before the expiry of the six-year limitation period for that claim to be made. This would result in the court having to rule on a claim that was 12 years old. However, the fi rst counter-argument is that the initial delay cannot be the fault of the losing party, and the second is that this still produces a fairer result than the one for which the defendant was contending. In any event, given that adjudication is employed in the vast majority of cases precisely because it is a quick remedy, it seems unlikely that any case would take 12 years to reach the court.

The court added, albeit obiter, that, in addition to the cause of action founded on the implied term, the claimant also had a cause of action to recover the monies paid over in restitution. Whether the claim in restitution is subject to any limitation period at all was held to be “far better left for a case in which the point does directly arise for decision.’”

To read the judgment, go to: http://www.bailii.org/ew/cases/EWHC/TCC/2009/1906.html