Construction professionals who win an adjudication claim could find themselves facing a future challenge which could reduce their payment with no prospect of an increase following a decision in the Supreme Court.
The Supreme Court decided that an unsuccessful claimant in an adjudication could bring a claim for recovery up to six years from the date it was paid. In comparison the successful claimant could only take action for up to six years from the original claim. This could mean that the unsuccessful claimant could win a reduction in their payment, but the successful party would be time-barred from seeking a further sum.
In 2004, Higgins Construction appointed Aspect Contracts to undertake an asbestos survey at a site in Hounslow. Higgins then appointed an asbestos removal contractor, who allegedly found further asbestos not identified in Aspect’s survey. Higgins took Aspect to adjudication claiming compensation for delay and was awarded nearly £500,000.
In 2012, more than six years after Aspect undertook the asbestos survey but less than six years from the date that the adjudication settlement was paid, Aspect started proceedings against Higgins to recover that payment.
When the case was first heard in the Technology and Construction Court (TCC) the judge decided that Aspect’s claim was time-barred. The Court of Appeal and Supreme Court disagreed, saying that a party has a right to recover any overpayment revealed by the final determination of the dispute. It decided that the time limit for recovery would be six years from the date of payment.
“The Supreme Court’s decision will come as a surprise to many, who viewed Akenhead’s judgment in the TCC as the more commercial and workable approach,” said law firm Osborne Clarke in a blog posting.
Professionals who are due payment should consider taking prompt action to enforce their award following an adjudication says James Burgoyne, Director – Claims & Technical, Brunel Professional Risks. “But more often than not it is the professional who is on the receiving end of an adjudication. The Aspect decision may lead to attempts to change standard approaches to adjudication in professional’s appointments, and professionals should be wary that these do not compromise their professional indemnity insurance. Many professional indemnity insurance policies contain exclusions of adjudications which are final and binding, and adjudication provisions which are more onerous than the Scheme for Construction Contracts under HGCRA.”
Law firms DAC Beachcroft and Osborne Clarke have published further details of the case.