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The end of the road?...

Higgins Construction Plc v Aspect Contract (Asbestos) Limited [2015] UKSC 38

On 17 June the Supreme Court handed down its judgment in the matter of Higgins Construction plc (“Higgins”) v Aspect Contract (Asbestos) Limited (“Aspect”). The decision, which focuses on the interaction between the Limitation Act 1980 and the HGCRA 1996,underlines the transient nature of an adjudication award and raises important issues as to the role of adjudication in construction disputes generally.

Background

The case originally concerned a defective asbestos report prepared in respect of a project for the Notting Hill Housing Trust by Aspect, who were sub-contracted to Higgins under a simple contract (i.e. not a deed, with a limitation period for claims of six years).  Higgins referred the dispute to adjudication four years after the alleged discovery of additional asbestos which had not been included in the report, and which, it was alleged, had led Higgins to incur delays and expenditure totalling £822,482 plus interest.  In 2009, the adjudicator found that Aspect had breached its contract and awarded £490,627 plus interest (a total of £658,017) to Higgins, which Aspect paid.

First instance

Two and a half years later, Aspect referred the matter to the TCC, seeking a declaration that it was not liable for the damages awarded by the adjudicator and repayment (or restitution) of the £658,017. Higgins counterclaimed for the remaining £331,855 plus interest, being the sum which had not been awarded at adjudication.

Aspect sought to rely on an implied term under the contract that a party who makes a payment pursuant to an adjudicator’s award could apply to the court to be reimbursed. As it was now six and a half years after the discovery of the breach (giving rise to a potential limitation issue) Aspect argued that a payment of an adjudication award created a new cause of action at the time of payment. It also argued that an equivalent right of restitution existed. At first instance, Akenhead J found that there was no such implied term or right of repayment or restitution as a new cause of action. Aspect appealed.

Court of Appeal

The Court of Appeal held that Aspect’s interpretation was the “true intent of the provision and inherent in the words used” and that the right of repayment under the implied term did exist if Aspect could show that the sum paid had not been due on the merits of the case.  It found that Aspect could show this, and the TCC’s decision was reversed.  Aspect did not make its case for restitution in the Court of Appeal.

The Court of Appeal found that Higgins’ counterclaim was time-barred as the cause of action (the discovery of the breach of Aspect’s sub-contract) had arisen more than six years previously.  Although Higgins had submitted to the Court of Appeal that repayment was unnecessary as Aspect could have brought a claim for negative declaratory relief and a consequential order (which would also have been time-barred), the Court of Appeal considered that this was an “ungainly remedy” and that the issue of repayment was relevant to the adjudication process.  Given the significance of the judgment leave to appeal to the Supreme Court was granted, with both parties also being invited to make submissions regarding restitution.

Supreme Court Ruling

The Supreme Court (Lord Mance) dismissed Higgins’ appeal for the following reasons:

  • The decision of the adjudicator only lasts “until the dispute is finally determined” by other means. Adjudication is a speedy provisional measure.

  • Aspect had a new independent cause of action for having the original dispute finally determined (and for repayment).  The right of Aspect to recover sums paid in respect of an adjudicator’s award would be available if the sums could be shown not to have been due by final determination on the merits of the original dispute.

  • The limitation period for the rights of repayment and restitution began at the point of payment. Given that the trigger for Aspect’s claim was the Adjudicator’s order in 2009 to make payment, it would be wrong to artificially treat the cause of action as having accrued in 2004 or 2005.

  • Higgins’ counterclaim remained time-barred because Higgins did not commence proceedings to have the dispute finally determined within the original limitation period of six years from discovery of the breach.

Higgins’ argument in respect of declaratory relief which had been considered by the Court of Appeal was misconceived because consequential orders cannot be made for the repayment of money for which there is no independent basis of claim. 

Comment

What does this mean for insurers and consultants?  Protracted litigation seems ever more likely, given that a new cause of action for repayment or restitution can be created on the date of payment of an adjudicator’s award.  Parties at adjudication remain time-barred from pursuing remaining sums unless they commence proceedings for final determination within the original limitation period, as they do not benefit from the same accrual of an independent cause of action; the payer’s independent cause of action accrues at the point of payment,.  The decision serves as a reminder of the provisional nature of adjudication and also of the limitation complications that are more likely to arise if an adjudication is delayed and used other than for the purpose for which it was created by statute - namely to provide a streamlined way of resolving issues during current projects. While adjudication has an established and valuable role in resolving construction disputes, the adjudicator’s award should never be seen as the end of the road. 

Contact

For further information please contact Caroline Watkins, Senior Solicitor on +44 (0)20 7280 8921 or Mark Klimt, Partner on +44 (0)20 7280 8802.

By Caroline Watkins and Mark Klimt

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This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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