Court of Appeal - 29 November 2013

As we all know, adjudication is designed to expedite dispute resolution and facilitate cash flow. An adjudicator's decision is binding until the dispute is finally determined. Aspect (Aspect Contracts (Asbestos) Limited v Higgins construction Plc [2013] EWCA Civ 1541) considered the issue of limitation and how late that determination can take place.

The decision has created a potentially uneven playing field for parties and could open up a tranche of historic adjudications to further litigation.

Adjudication/ First Instance

Higgins employed Aspect to conduct an asbestos survey in 2004. In 2005, asbestos was found, at odds with the survey, causing critical delays to the building project.

In 2009, Higgins referred the dispute to adjudication under the applicable Construction Contracts (England and Wales) Regulations 1998. The adjudication awarded Higgins 75% of the sum claimed and Aspect promptly paid.

Aspect issued proceedings to overturn the adjudicator's decision in 2012. Higgins defended and counterclaimed for the 25% not awarded at adjudication. At first instance, Akenhead J ruled against Aspect: (i) there was no Jim Ennis implied term (Jim Ennis Construction Limited v Premier Asphalt Limited [2009] EWHC 1906 (TCC)) entitling Aspect to challenge the adjudication decision; and (ii) Aspect couldn’t sue for a declaration of non-liability as its Claim Form was time-barred (over six years had elapsed from the alleged breach). Higgins' counterclaim was accordingly also time-barred.

Court of Appeal

On appeal it was held that the binding nature of the adjudication was intended to be temporary to allow later proceedings to achieve finality. There had to be some mechanism to allow recovery where a sum had been wrongly paid beyond the limitation period. Secondly, negative declaratory relief was an ungainly remedy.  Aspect was accordingly allowed to pursue its claim.

A partially successful party (in adjudication) must now bring proceedings within 6 years of the date of the breach to attempt full recovery. A wholly or partially unsuccessful losing party wanting to recover money paid, now has 6 years from the date of the payment under the adjudication to attempt final determination.

The lesser of two evils?

The upshot is an uneven playing field. The previous position allowed a crafty referring party to commence adjudication immediately before the limitation expired, issuing (but not serving) a Claim Form. If the responding party lost the adjudication, they had no means to challenge through litigation; they would be time-barred. The new position is no fairer. An unsuccessful responding party can now attempt to recoup its money paid up to 6 years after the payment date and the successful referring party will be time-barred to counterclaim (if over 6 years from the breach).

Implications

Unsuccessful parties may now reopen cases after 6 years from their breach and conduct potentially 'risk free' litigation at least in terms of counterclaims. One potential solution could be to agree standstill agreements to stop time running, but would the unsuccessful party ever agree? Whilst the Act (The Housing Grants, Construction and Regeneration Act 1996) should probably be amended to contain a suitable provision, for example that a claim should be commenced within the limitation period or 2 years from the adjudication decision, this is unlikely to happen for some time.