Limitation and Adjudication

These are not two words that necessarily go together but they were the subject of a recent intense debate in the Technology and Construction Court before Mr Justice Akenhead which culminated in a judgement being given on 23 May 2013.

We acted for Higgins Construction Plc. (Higgins) who found themselves facing a claim for repayment of an Adjudication award made in their favour in July 2009.

This claim related to a dispute which arose between Higgins and Aspect Contracts (Asbestos) Limited (Aspect) following a survey carried out by Aspect on a number of flats in apartment blocks. The survey was to ascertain if and how much asbestos was in those properties prior to their demolition. Some asbestos was found and was subsequently removed. However after demolition had started, more asbestos was found in the rubble leading to the site being shut down while the rest of the asbestos was dealt with.

As a result Higgins suffered financial loss and made a claim against Aspect which resulted in Adjudication proceedings being commenced. On 28 July 2009 the Adjudicator found in Higgins’ favour for a majority of its claim. Aspect was represented by its insurers during the Adjudication and following the Decision, payment was made.

In February 2012, some two and a half years later, proceedings were commenced by Aspect through its insurers seeking to have that dispute determined finally by the court and for reimbursement of the amount that it paid out. The Adjudication was run under the Scheme as permitted by the Housing Grants Construction and Regeneration Act 1996. Under that Act, an Adjudicator’s decision is binding upon the parties until the contract is bought to an end by litigation, arbitration or settlement. Aspect chose the litigation route.

A preliminary hearing was held by the court to decide whether the claim was time barred by limitation as the contract between Higgins and Aspect was made in March 2004 and the asbestos was found in February 2005.

Aspect relied on the decision of Jim Ennis Construction Limited v Premier Asphalt Limited decided in 2009. This case found that there was an implied term which allowed the party to seek recovery of the money paid out in respect of an Adjudicator’s decision and that the time for so doing was 6 years from the date of that decision. This in effect meant that the limitation period can be extended by a further 6 years meaning that some claims could come to court some 12 years after the cause of action first arose.

Counsel on behalf of Higgins, Miss Isabel Hitching, argued that this implied term should not be incorporated and the judge agreed. Mr J Akenhead agreed with the analysis of Lord Hoffman in the case of Attorney General of Belize v. Belize Telecoms Ltd a decision of the Privy Council in 2009. In that judgment, in order for a term to be implied, it had to be (a) reasonable and equitable; (b) it must be necessary to give business efficacy to the contract; (c) it must be obvious; and, (d) it must not contradict any express term of that contract.

Aspect also argued that such a term had to be implied to protect its “Human Rights” but that too was rejected by the judge.

As a result of this judgement, the court found that any claim made following adjudication had to be made within the original time limitation period.

This is a common sense judgement which brings certainty back to a construction claims meaning that any party wanting to dispute the Adjudicator’s decision has to do so within the original time limitation period.

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