This article was produced by Nabarro LLP, which joined CMS on 1 May 2017.
Why the Supreme Court's first adjudication decision makes for uncomfortable reading
Imagine that you won an adjudication some years ago. You weren't awarded quite as much as you would have liked, but you could live without the shortfall. Fast forward a few years and the losing party has dragged you into court. He wants his money back. You decide to fight fire with fire, and make a counterclaim for the shortfall you never had. Now imagine being told that you're out of time for making your claim but the loser can still have his day in court.
Hard to imagine?
This is pretty much what happened to the building contractor Higgins Construction Plc. Higgins had entered into a construction contract with Aspect Contracts (Asbestos) Limited. Higgins allegedly discovered asbestos while undertaking some redevelopment work. The asbestos had not been identified by Aspect in its survey and a dispute followed.
Higgins referred the dispute to adjudication, claiming £822,000. The adjudicator told Aspect to pay £490,000 plus interest. Aspect duly paid £658,000 to Higgins on 6 August 2009. Higgins did not pursue the balance of its claim. And Aspect did nothing. Until 2012.
Surprise!
Without warning, Aspect started court proceedings against Higgins in 2012. Aspect wanted its money back, all £658,000 plus interest.
Tick tock, different clocks?
Higgins was out of time for making a counterclaim for the balance of its claim. The 'limitation period' had expired. Its claims should have been made within six years from the alleged breach of contract or tort by Aspect. This meant that Higgins' claims ran out of time in 2010 (contract) and 2011 (tort).
Higgins argued that Aspect's claims should be subject to those same time limits. The Technology and Construction Court agreed with Higgins. The Court said that Aspect's 2012 proceedings had been started too late and should fail.
Aspect referred the matter to the Court of Appeal, which took a different view and said that Aspect's claims had been made in time.
And so Higgins appealed and asked the Supreme Court to decide whether the Higgins and Aspect claims were subject to different limitation clocks. In a judgment delivered on 17 June 2015 the Supreme Court said that they were.
An independent right
The Supreme Court decided that Aspect acquired an independent right to repayment of the money it had paid in accordance with the adjudicator's award. That independent right arose upon and by reason of the payment it had made. As a result, the Supreme Court said that the time limit for Aspect to start court proceedings was six years from 6 August 2009, the date it had made the payment. On the basis that the proceedings were started in 2012, Aspect was not out of time and its claim could proceed.
A one-way throw?
The Supreme Court dismissed Higgins' complaint that to allow Aspect's claims to run to a different clock would be to permit a "one-way throw". In other words, a losing party in Aspect's position could strategically wait until the other side was out of time for making its claims and then launch its own proceedings. And by doing so, it had the potential to improve, without any risk of worsening, its position.
The Supreme Court said this was how things should be. It was, the Court said, a consequence of adjudication being binding only on a temporary basis, until the matter is finally determined by legal proceedings, arbitration or agreement. The Court noted that Aspect had never agreed to accept the adjudicator's decision as final, and Higgins had decided not to start court proceedings to confirm the adjudicator's decision. The result might well be considered to allow Aspect to make a one-way throw, but that was the proper outcome.
Can you imagine?
How many adjudications have there been with an adjudicator's award similar to that in the Higgins/Aspect adjudication? Rather a lot. And how many of those paying parties might now be dusting off those decisions and looking at their limitation clocks? Can you imagine?
The detail
You can find the Supreme Court press summary: https://www.supremecourt.uk/cases/docs/uksc-2014-0021-press-summary.pdf
The full judgment is also available: https://www.supremecourt.uk/cases/docs/uksc-2014-0021-judgment.pdf
