Key points
• The Supreme Court has extended the limitation period available to a party looking to challenge a construction adjudicator’s award
• This has resulted in parties to construction contracts looking to draft around the effects of the decision
Being a High Court judge can be a lonely job. You are in an exclusive club – there are only 108 of you – so there’s not much of a support network. You have to decide the most important legal disputes we have as a society, often involving complicated issues of fact and law with consequences that go beyond the fates of the parties involved. You could be forgiven the occasional sleepless night.
Then, your decisions can be reviewed on up to two occasions by members of even more exclusive judicial groups – the Court of Appeal and Supreme Court. If you are on the receiving end of a differing appellate point of view, things can appear rather unfair.
Now put yourself in the shoes of Akenhead J.
The original decision
In Aspect Contracts (Asbestos) Ltd v Higgins Construction plc [2013] EWHC 1322 (TCC); [2013] PLSCS 119, the judge decided a dispute about whether or not Aspect – the unsuccessful party to an adjudication about an allegedly negligent asbestos survey – could try to recover the money it had paid to Higgins following the adjudicator’s decision. The problem was that the limitation period under the contract for the asbestos survey had expired. Aspect therefore argued that there was an implied term under the Scheme for Construction Contracts (England and Wales) Regulations 1998 (SI 1998/649) (“the scheme”) – which had governed the adjudication – that any dispute which has been referred to adjudication can then be finally determined by legal proceedings. Limitation for claims brought under the implied term would run from the date when the unsuccessful party complied with the adjudicator’s award.
Akenhead J rejected this argument; in his view, Aspect should have commenced proceedings for a final determination of the adjudicator’s award within the limitation period of the underlying contract.
Akenhead J’s approach makes legal sense. There is nothing obviously wrong (apart from a lack of appellate support) with deciding that adjudication is a right that can exist only under a contract (and is therefore subject to that contract’s limitation periods), not something that creates a fresh cause of action. Indeed, his analysis was approved on an obiter basis by one constitution of the Court of Appeal in Walker Construction (UK) Ltd v Quayside Homes Ltd and another [2014] EWCA Civ 93; [2014] 1 EGLR 97.
Unfortunately for the judge, that court was not the one that mattered. When Aspect was considered on appeal ([2013] EWCA Civ 1541; [2013] EWCA Civ 1541; see “No limitation?”, EG, 8 February 2014, p109) his decision was unanimously overturned.
The law as it now stands
In the Supreme Court ([2015] UKSC 38; [2015] PLSCS 182, Lord Mance held that Aspect was entitled to recover any overpayment made as a result of the adjudicator’s award. This was a “necessary legal consequence” of the scheme and arose as a result of either the implied term dismissed by Akenhead J at first instance or an independent claim under the doctrine of unjust enrichment (a point which had also been rejected at first instance and abandoned by Aspect on appeal, until the Supreme Court invited both parties to make submissions on it). Lord Mance also agreed that the limitation period for this claim should be six years from the date of payment of the original adjudicator’s award. He stressed that the approval of Akenhead J’s approach in Walker Construction was wrong.
Higgins had also run a counterclaim that it should be entitled to claim the balance of the money which it had applied for in the adjudication (although it won, it had not persuaded the adjudicator to award it everything which it sought). It also lost that argument, with Lord Mance stressing that Higgins’s counterclaim was not a fresh cause of action but simply revisited the original dispute. It was time barred.
What next?
This is only the third time that the Housing Grants, Construction and Regeneration Act 1996 (“the 1996 Act”) has been considered by the highest court in the land. Back in 2007 (Melville Dundas Ltd (in receivership) and others v George Wimpey UK Ltd and others [2007] UKHL 18; [2007] PLSCS 84; see “A good decision – but bad law”, EG, 7 July 2007, p295), the House of Lords decided that an employer could still withhold payment where the contractor became insolvent before the final date for payment but the employer had not served a withholding notice (now called a pay less notice). Melville Dundas has been criticised for its failure to uphold the 1996 Act’s mandatory payment provisions and parliament subsequently amended the Act to limit the situations in which other employers could act as Wimpey did.
The pendulum swung back in the 1996 Act’s favour in Reinwood Limited v L Brown & Sons Ltd [2008] UKHL 12; [2008] 2 EGLR 1. The court upheld an employer’s withholding notice where an extension of time was granted before the final date for payment of the amount to which the notice related, but after the payment had actually been made.
However, despite the Supreme Court’s continuing support, the decision in Aspect might be the most Pyrrhic of victories for adjudication and the 1996 Act. The judgment has resulted in parties looking to exclude its effect by agreeing clauses which state that the limitation period for enforcing adjudicators’ awards is no different to that in the underlying contract. Which makes one wonder whether poor Akenhead J might have got it right all along.
