Limitation Periods for revisiting disputes after adjudication

Aspect Contracts (Asbestos) Limited –v- Higgins Construction plc [2014] Volume 1 Building  Law Reports, page 79, Court of Appeal

Facts

In 2004 Higgins Construction commissioned Aspect to do an asbestos survey of the Ivybridge Estate in Hounslow.  Higgins’ grievance was that Aspect did not identify the very large amounts of asbestos which Higgins subsequently discovered, and Higgins brought a claim against Aspect for breach of contract in 2009.  The adjudicator awarded Higgins £658,000 against Aspect.

In 2012, 3 years after the adjudication and 8 years after the breach of contract, Aspect went to court seeking a declaration that it was not liable for the extra asbestos, was not in breach of contract and wanted its money back.  Higgins counter-claimed for damages for breach of contract in a larger amount than the adjudicator had awarded it, and also argued that Aspect (which had a normal contract, not a deed) was time-barred because it should have brought its claim within 6 years of the breach.

The Court of Appeal held

1. Following any adjudication decision there is an implied term that the losing party can go to litigation or arbitration seeking a declaration that the decision was wrong and asking for its money back.
2. The limitation period for the loser is 6 years from when it pays over the amount ordered by the adjudication.
3. The person that won the adjudication has no new limitation period.  Time runs for the original winner in the adjudication process on its claim for 6 years or 12 years from the original breach of contract (depending on whether the contract was under hand or executed under seal as a deed).

Comment

This is a very difficult decision which is currently listed to go to the Supreme Court.  Aspect was able to proceed with its claim to seek its money back, but Higgins, which had had a larger claim than the one awarded by the adjudicator, was not able to positively pursue this claim.  All it could do was set off its entitlement on a reactive basis.

In other words, the winner of an adjudication currently has a serious risk that its rights against the loser are time-barred earlier than the loser’s rights of redress.

It is difficult to see how this is fair, and the Supreme Court may restore the situation but at present there is a serious tactical difficulty which can only be addressed by amending the adjudication clause in your contract.  We can suggest a form of words for a new contract and unless the Supreme Court acts very quickly we trust that JCT and NEC will bring out the urgent standard amendments.

For more information, help or advice please contact Rob Langley on 0191 211 7975.