What is the status of an Adjudicator’s award in the period following the decision but before any subsequent court judgment? Just how “binding” is it?
Last year, in Aspect Contracts v Higgins Construction, the Court of Appeal (reversing the first instance decision) decided that where a paying party wanted to recover money paid in accordance with an Adjudicator’s decision a new cause of action arose at the date of payment. This decision has the effect of restarting the limitation clock and giving the paying party a further period in which to bring a claim in court for the recovery of money paid out pursuant to adjudication.
Then, earlier this month, a differently constituted Court of Appeal gave its decision in another case (Walker Construction v Quayside Homes) in which it found the polar opposite to the Court of Appeal in Aspect.
Quayside’s argument was that the court, when considering a claim that had already been the subject of adjudication, was required to turn the clock back to the position prior to the adjudication. While only expressing obiter comments, which will not generally bind future courts, the Court of Appeal agreed with the first instance judgment in Aspect in particular because section 108(3) of the Construction Act 1996 provides that an Adjudicator’s decision is binding “until” final determination by the Court.
However, between the October 2013 hearing in Walker and the publication of that judgment in February 2014, the Court of Appeal decision in Aspect held that “the accrual of a cause of action is the date of overpayment” and the limitation clock starts then for the paying party.
Walker had already decided that no such new cause of action accrues and so the limitation clock does not start to run afresh.
The law is currently as stated in Aspect as the relevant part of the decision in Walker was obiter and was made without the benefit of the intervening Aspect decision.
It is a widely held view that this produces an unfair result because the party that was originally successful at adjudication does not get the benefit of a restarted limitation clock. It may well be that by the time a paying party decides to challenge an Adjudicator’s award in court, the limitation period in respect of the original dispute has already expired. In that case the originally successful party will be prevented from running the arguments it made in the adjudication and will be unable, for example, to start a counter claim for more than the Adjudicator originally awarded.
Hopefully a definitive answer will be reached by the Supreme Court if permission to appeal the Aspect decision is granted. Of course, construction contracts may themselves contain contractual time bars in terms of when arbitration or litigation may be commenced following an Adjudicator’s decision. These should always be checked carefully to see what, if any, implications there are in relation to statutory limitation periods applying to the underlying dispute and how these may impact on a party’s dispute resolution strategy.