Clarity on time-bars in adjudication

The recent Technology and Construction Court (TCC) case of LJR Interiors Ltd vs Cooper Construction Ltd [2023] EWHC 3339 (TCC) considered the longstanding debate over whether and how the Limitation Act 1980 applies to adjudication proceedings. The debate stems from the fact that the definition of “action” in the Limitation Act only refers to court proceedings and that the Arbitration Act 1996 specifically provides that the act applies to arbitration proceedings. The court (His Honour Judge Jonathan Russen KC) concluded that the Limitation Act does apply to adjudication proceedings and that in simple cases a limitation defence may also be raised via a Part 8 claim to defend enforcement proceedings.

In August 2014 the parties entered into a written contract whereby LJR Interiors Ltd agreed to carry out drylining, plastering and screed works for Cooper Construction Ltd. The contract comprised LJR’s letter and revised quotation and Cooper’s purchase order. There was no provision within the contract for referring disputes to adjudication and therefore the Scheme adjudication provisions applied.

LJR completed its works in October 2014. However, almost eight years later in July 2022, LJR submitted a payment application to Cooper by way of its Application No 4 in the sum of £3,256.58 plus VAT. Cooper did not respond to the payment application either by paying it or by issuing a pay less notice. LJR then referred the dispute to adjudication in September 2022, seeking payment of the sum claimed by Application No 4.

Cooper argued in the adjudication that LJR’s claim was time-barred because it was not brought within six years of the date when the cause of action accrued in accordance with section 5 of the Limitation Act. Cooper asserted that the cause of action actually accrued in November 2014 or March 2015 as the sums claimed related to an earlier application for payment submitted by LJR.

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The adjudicator concluded that Application No 4 was a valid application for payment as nothing in the Scheme placed a time limit on when an application for payment could be made. The adjudicator’s understanding was that “the general rule in contract is that a cause of action accrues when the breach takes place” and that LJR’s cause of action accrued when Cooper failed to pay the sum claimed by LJR by the final date for payment on 28 August 2022. The adjudicator went on to conclude that “the limitation period pursuant to section 5 of the Limitation Act therefore has not expired”.

LJR sought to enforce the adjudicator’s decision. Subsequently Cooper commenced Part 8 proceedings, seeking a declaration that LJR’s claim under Application No 4 was time-barred and thus attempting to resist the enforcement of the adjudicator’s decision on that basis.

Does the Limitation Act apply in adjudication proceedings?

When considering the application of the Limitation Act to adjudication proceedings, the court noted that section 38(1) of the Limitation Act provides that “action includes any proceedings in a court of law, including an ecclesiastical court” and that the scope of the Limitation Act has been expressly extended to cover arbitral proceedings by section 13(1) of the Arbitration Act 1996. However, there is no such express extension to include adjudication proceedings.

The court acknowledged that while the application of the Limitation Act to adjudication proceedings “appears to be a statement of the obvious”, no authority is cited in support of it.

The court concluded that “the context does require the term ‘action’ in the non-exhaustive definition provided by section 38 of the Limitation Act 1980 to be read as including adjudication proceedings” and therefore that the Limitation Act does apply to adjudication proceedings. The court did note, however, that the conclusions reached about the basis on which the Limitation Act applies to adjudication proceedings should be read with “caution” as they are largely the product of the TCC judge’s own thoughts, rather than being based on a full legal argument.

The court also considered whether a limitation defence can be used to defeat enforcement proceedings by way of a Part 8 claim. The court considered that this would satisfy the test in Hutton Construction Ltd vs Wilson Properties (London) Ltd [2017] EWHC 517 (TCC) in order to resist summary judgment on an adjudication enforcement application by seeking declaratory relief by way of Part 8 proceedings. The court considered that the limitation point would be one which on “a summary judgment application it would be unconscionable to ignore”. This is provided that the party relying on the point had previously raised it with the adjudicator.

Conclusions and implications

While it would appear to a certain extent “to be a statement of the obvious” that the Limitation Act should apply to adjudication proceedings, there was no clear authority on the point. The TCC case of LJR Interiors Ltd vs Cooper Construction Ltd has confirmed the position that a limitation defence can be raised in adjudication proceedings and can in simple cases be used to defeat adjudication enforcement proceedings provided that the limitation point was raised in the adjudication proceedings.

As a result, parties who consider that a claim in adjudication may be time-barred should ensure that the limitation defence is clearly pleaded in the adjudication so that it can be considered by the adjudicator and can be relied upon in defence of any adjudication enforcement proceedings, should the adjudicator fail to properly consider the issue.

Jenny Whipps is a senior associate in CMS’s infrastructure, construction and energy disputes team in Sheffield