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Published 18 June 2015
Yesterday's judgment should serve as a caution to any successful party in an adjudication. The Supreme Court has confirmed the Court of Appeal decision as to when any claim should be brought to review an adjudicator's decision.
Although the limitation period for the original claim pursuant to the contract may have expired the unsuccessful party in an adjudication can still bring proceedings for recovery up to 6 years after payment is made.
However a successful party will be time barred from commencing proceedings to confirm the adjudicator's decision or to seek further sums.
In this instance the Court found that Higgin's should have commenced legal proceedings to have the dispute finally determined within the limitation periods applicable to its claims.
The Supreme Court has unanimously decided that an unsuccessful party to an adjudication who has made a payment in compliance with an adjudicator's decision, has the benefit of a six year period from the date it made that payment, as opposed from the date of the original claim, to bring legal or arbitral proceedings to have the dispute finally determined.
Aspect Contracts (Asbestos) Limited (“Aspect”) contracted with Higgins Construction Plc (“Higgins”) to survey and report on a block of maisonettes, which Higgins was considering redeveloping. Aspect provided Higgins with an asbestos report in 2004. However, during the redevelopment works in 2005, Higgins discovered asbestos not identified in Aspect’s report and a dispute arose between the parties.
As a result of the alleged negligent survey, Higgins served a notice referring the dispute to an adjudicator under the Housing Grants Construction and Regeneration Act 1996. The adjudicator subsequently decided that Aspect should pay to Higgins £658,017, which it did in August 2009.
In February 2012 (more than 6 years after the allegedly negligent survey, but less than 6 years after Aspect made the payment to Higgins) Aspect commenced proceedings seeking to recover the payment. The question for the Court was whether Aspect's claim for recovery was time barred.
The Supreme Court held that the decision of an adjudicator is binding until the dispute is finally determined by legal proceedings, arbitration or agreement. A necessary legal consequence of the Scheme for Construction Contracts is that the paying party has a substantive right to recover any overpayment to which the adjudicator’s decision can be shown to have led, once there has been a final determination of the dispute. There was, an implied term in the parties' contract that an unsuccessful party to an adjudication would have a directly enforceable right to recover that payment if, on a final determination on the merits of the original dispute, the payment should not have been due to the successful party.
In light of the above, the Court decided that the relevant limitation period for seeking a final determination was six years from the date of payment made pursuant to the adjudication. As such, Aspect's claim was not time barred.
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