Lawyer Highlights Issues Of Construction Contracts Adjudication

A recent Supreme Court case has highlighted the complexities and financial issues in relation to the adjudication process in construction disputes – according to a leading construction lawyer.

In the case of Aspect Contracts (Asbestos) Ltd v Higgins Construction plc, the dispute originated when Higgins alleged that Aspect had failed to determine the full extent of the amount of asbestos in a block of maisonettes that it was developing.

Higgins referred the dispute to adjudication and claimed £822,482 plus interest for breach of Aspect’s contractual and/or tortious duties. On 20 July 2009, the adjudicator found Aspect had been in breach of such duties and awarded Higgins £490,627 plus interest. This was paid in August 2009.
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It was also an implied term of the contract that “the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration … or by agreement.”

The parties however did not agree to treat the adjudicator’s decision as final, nor did Higgins pursue the recovery of the balance of its claim – an amount that stood at over £300,000. The limitation period for doing so expired on 27 April 2010 and in tort by early 2011.

In early 2012 Aspect issued proceedings to recover the sum it had paid to the construction company, whilst Higgins in turn claimed for the balance of its original claim.

The High Court rejected Aspect’s claim on the basis that there was no implied term for repayment and no entitlement to restitution after the expiry in 2010 or 2011 of a six-year limitation period during which Aspect could have claimed a declaration of non-liability with consequential relief.

Aspect’s appeal was however allowed by the Court of Appeal on the basis that the contract did contain an implied term for repayment by Higgins of any sum paid by Aspect which Aspect could show had not been due on the merits. This attracted a six-year limitation period running from the date of Aspect’s payment.

Permission was granted to Higgins to appeal to the Supreme Court as to whether its counterclaim for the balance of £331,855 was allowable, but this was unanimously dismissed.

If a party, therefore, claims recovery of an overpayment made by an adjudicator’s decision, the time period for a time bar under the limitation of action legislation runs from the date of the adjudicator’s decision not the relevant breach of the contract or duty. As such a party may obtain a longer limitation period than thought.

By contrast the cause of action of a party who wished to bring proceedings for more than the amount he had been awarded under such and adjudication accrued on the date of the relevant breach of the contract or duty. Such a party, therefore, will have a shorter limitation period than a party claiming an overpayment.