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Adjudication: Decisions and Limitation Periods

Construction lawyers have been closely following the case of Aspect Contracts (Asbestos) Ltd v Higgins Construction Plc which ultimately landed in the Supreme Court with a decision made on 17 June 2015. The case concerned a report prepared by Aspect in relation to asbestos containing material (“ACM”). A dispute arose in which Higgins argued that Aspect had failed to carry out its survey and prepare the report with reasonable skill and care as ACM was found where there should not have been any (according to Aspect’s report).

Higgins was successful in adjudication proceedings although it was awarded only part of the sum claimed. The sum awarded was paid by Aspect and Higgins took no further action in respect of the balance of its claim. The limitation period for bringing the original claim eventually expired. Aspect then commenced litigation proceedings to recover the sum it paid to Higgins on the basis that the adjudicator’s decision was wrong.  

At a preliminary issue hearing in the TCC, the Court found in Higgins’ favour that there was no implied term or restitutionary right which would allow Aspect to pursue its claim based on a new cause of action (to seek final determination of the adjudicated dispute and the return of the sums paid to Higgins). Aspect appealed, and the Court of Appeal reversed the TCC’s decision. Finally, Higgins appealed to the Supreme Court and argued that if a new cause of action was created for the paying party, it should be entitled to counterclaim the balance of the sum it claimed in the adjudication proceedings.

The Supreme Court upheld the Court of Appeal’s decision, finding that the adjudicator’s decision did create a new cause of action for the paying party creating a new limitation period of 6 years and rejected Higgins argument that it should be entitled to pursue its counterclaim.

The judges took the view that Higgins could at any time have pursued the balance of its claim in litigation if it was not happy with the adjudicator’s decision and/or could have asked Aspect to agree that the decision was final and binding. The Court also confirmed that it must be able to look at the whole dispute when considering the sums paid and would not be restricted to considering only the issues raised in the adjudication, which suggests that the paying party will be able to raise matters in support of its position which it perhaps did not set out during the adjudication proceedings.

What does this mean for the future? Parties to adjudication proceedings (or indeed who have taken part in adjudication proceedings in the last 6 years) will need to consider whether to take any action to try to make those proceedings final and binding, whether through direct agreement with the other party if that is possible or through pursuing any outstanding matters in litigation. It may also be worth considering including adjudication provisions in your contracts to make adjudication decisions finally binding unless a claim is brought within a set period of time following the adjudicator’s decision.

For more detail on this case and its implications (or if you have any burning questions) please contact the team on construction@bpe.co.uk to book onto our next seminar on 6th October.

You can contact Emilie on emilie.sclater@bpe.co.uk or 01242 248296. Please note that Emilie will be on maternity leave from 16th September. If you have any queries after that date, please get in touch with Jon Close.

These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice. 

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