Limitation periods and adjudication

The whole idea of construction contract adjudication was not to interfere with the two granddads of the dispute business: litigation and even older arbitration. Keep that in mind please while I tell you about a recent case in the Technology and Construction Court called Aspect Contracts (Asbestos) Ltd vs Higgins Construction Plc. Fifteen years ago the idea of new adjudication not interfering with litigation or arbitration was explained by the judge: “Parliament has not abolished arbitration or litigation of construction disputes. It has merely introduced an intervening provisional stage in the dispute resolution process”. Since then we have been trying in adjudication to make a silk purse out of a sow’s ear. What I mean is that all we invented was a super-fast announcer called an adjudicator who declared what the contract rights are. That’s all.

The announcement in the Aspect and Higgins adjudication was that the contract intends that Aspect does not owe Higgins the £822k it claimed; it owes £658k instead. And, if Higgins didn’t like that result it could start afresh in litigation or arbitration. And, if Aspect didn’t like that result it too could start afresh. And, if it did come to litigation or arbitration the adjudication result makes no odds. The trial is a completely re-argued case as though the adjudication never happened. True, when judge or arbitrator decides what Higgins is or is not owed the amount paid-in on consequence of the adjudication is taken into account. The adjustment is easy.

So keep in mind that adjudication is only an announcement of what the contract says. It adds no rights, nor takes away rights. But in this Aspect vs Higgins case it was argued that adjudication giveth and taketh rights as to what’s known as “limitation periods”. The limitation period is six years for an ordinary contract and 12 years if it is a contract under seal (ie a deed).

Keep in mind that adjudication is only an announcement of what the contract says. It adds no rights, nor takes away rights. But in this Aspect vs Higgins case it was argued that adjudication giveth and taketh rights

In this case it was argued that a new limitation period runs from the date of an adjudicator’s award. A case a few years ago said so.

The story goes like this. In March 2004, Aspect surveyed for asbestos on a site in Hounslow for Higgins. When Higgins eventually won the work and came to do demolition, it found additional asbestos. Higgins said it caused 17 weeks delay. Five years later Higgins began adjudication against Aspect claiming the £822k losses. The adjudicator’s award was in July 2009. Three years further down the line, Aspect began litigation in the same claim. Wait, wait: that litigation is eight years after Aspect performed its contract.

The limitation period, meaning the latest date to begin litigation, is six years, so time ran out in March or April 2010. No, no, said Aspect, the six years runs afresh from the adjudication July 2009 date. Do you see how it is being argued that the adjudication process injects a right, injects a term instead of merely announcing what the existing contract rights are? Aspect cleverly argued that this new limitation period was in the contract all the time. It admitted there was no express right, meaning nothing written down in the Aspect and Higgins contract. Instead it argued it was an implied term, a sort of silent missile intended to win an argument.

This judgment is ideal for all of us disputomaniacs to better understand how implied terms might be part of the contract.

Aspect cleverly argued this new limitation period was in the contract all the time. It argued it was an implied term, a sort of silent missile

At the heart of the notion is to “give effect to the reasonable expectations of the parties” “to give business efficacy to the transaction as must have been intended by both parties who are business men.” And as soon as you stand back and think about adjudication in construction you might see that there is not much room for sliding in an implication that the limitation period of six years starts all over again when an adjudicator’s decision lands on the party’s desks. After all, it was wide open for Aspect to commence litigation as soon after the adjudicator announced what was due to Higgins; being well within the limitation period. It was even open to Aspect to begin litigation when Higgins was merely asking Aspect to pay up. It is even likely that Aspect knew of the claim ages before the adjudication and could have grasped the nettle of litigation.

The court could see no room for any such implied term, so as to start a limitations clock ticking.

Be careful though. There is an express time limit in some contract documents. NEC3 is one such. You have only 28 days to go off to litigation or arbitration from the adjudicator’s Decision. That’s how an express term works.

Tony Bingham is a barrister and arbitrator at 3 Paper Buildings, Temple