Aspect Contracts (Asbestos) Limited v Higgins Construction Plc

A construction adjudicator’s decision is provisionally binding unless and until the referred dispute is finally determined. The statutory scheme necessarily implies a directly enforceable contractual right to recover any payment which that final determination establishes was not due.

The repayment cause of action accrues when payment is made. It may therefore be brought within six years of payment. Final proceedings must examine the whole original dispute afresh. The adjudicator’s reasoning has no legal or evidential weight, and expiry of the limitation period for an unsettled underlying claim does not make a justified adjudication payment recoverable.

Receipt of an adjudication payment gives the payee no new limitation period for claiming any balance which the adjudicator declined to award.

Aspect Contracts (Asbestos) Limited v Higgins Construction Plc concerned an asbestos survey commissioned by a building contractor. After asbestos was allegedly discovered during redevelopment, an adjudicator awarded the contractor £490,627, interest and fees. The surveyor paid £658,017 in August 2009.

The contractor brought no proceedings for the balance of its claim. After the limitation periods applicable to the original contractual and tortious claims had expired, the surveyor commenced proceedings to recover the adjudication payment. It relied principally on an implied contractual term and alternatively on restitution. The contractor counterclaimed for the unpaid balance.

Akenhead J rejected the alleged implied term and restitutionary claim. The Court of Appeal, [2013] EWCA Civ 1541, reported at [2014] 1 WLR 1220, reversed that decision and held that the statutory Scheme implied a right to recover any overpayment. The central issues were whether the payer possessed a direct repayment right, when that right accrued, what matters could be determined in the repayment proceedings, and whether the payee obtained a fresh period for claiming the unpaid balance.

1. Appeal dismissed unanimously. Lord Mance delivered the judgment, with which Lord Wilson, Lord Sumption, Lord Reed and Lord Toulson agreed. The Court of Appeal had correctly recognised the payer’s right to recover an overpayment resulting from an adjudicator’s decision.

2. Under section 108(3) of the Housing Grants, Construction and Regeneration Act 1996 and paragraph 23(2) of the statutory Scheme, an adjudicator’s decision is enforceable and provisionally binding. Neither party is obliged to commence final proceedings. If neither does so, the decision continues to bind. Adjudication nevertheless remains a speedy provisional mechanism rather than a final determination.

3. The Scheme could not operate coherently unless a party which paid under an adjudicator’s decision could recover any amount later shown not to have been due. The necessary and obvious juridical basis was a term implied into the construction contract by the Scheme. If the basis of payment fell away on final determination, an independent restitutionary obligation would in any event require repayment. A declaration of non-liability alone could not support an order for repayment without an independent right to the money.

4. The repayment cause of action arose from the payment, not from performance of the original contract or commission of the alleged tort. Whether analysed contractually or restitutionarily, proceedings could be brought within six years after payment under section 5 of the Limitation Act 1980. The court also possessed power to award appropriate interest on any overpayment.

5. Final determination required examination of the whole dispute originally referred to adjudication. The contractor could rely on every aspect of its original claim, including matters rejected by the adjudicator. Correspondingly, the payer could rely on any substantive defence or set-off. The adjudicator’s reasoning had no legal or evidential weight. Expiry of the limitation period for an unsettled underlying claim did not render recoverable a payment which had satisfied an obligation that was substantively due.

6. Receipt of payment created no fresh cause of action enabling the payee to claim the balance refused by the adjudicator. Any such balance had to be pursued within the limitation period running from the original contractual breach or tort. The contrary obiter observations in Walker Construction (UK) Ltd v Quayside Homes Ltd [2014] EWCA Civ 93 were wrong and were disapproved.

1. United Kingdom Supreme Court: In Aspect Contracts (Asbestos) Limited v Higgins Construction Plc [2015] UKSC 38, the court unanimously dismissed Higgins’s appeal and affirmed the Court of Appeal’s disposal.
2. Court of Appeal: In [2013] EWCA Civ 1541, reported at [2014] 1 WLR 1220, Longmore, Rimer and Tomlinson LJJ reversed the first-instance decision. The court held that the statutory Scheme implied a right to recover an adjudication overpayment.
3. High Court: Akenhead J, determining preliminary issues on 23 May 2013, held that there was no implied repayment term, that a claim for declaratory relief was time-barred, and that no restitutionary claim existed in the circumstances.