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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Aspect Contracts (Asbestos) Ltd v Higgins Construction Plc  EWCA Civ 1541 (29 November 2013)
Cite as:  BLR 79,  EWCA Civ 1541,  49 EG 77,  Bus LR 367, 151 Con LR 72,  1 WLR 1220,  CILL 3449,  2 CLC 1019,  WLR 1220,  WLR(D) 463
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY & CONSTRUCTION COURT
THE HONOURABLE MR JUSTICE AKENHEAD
Strand, London, WC2A 2LL
B e f o r e :
THE RIGHT HONOURABLE LORD JUSTICE RIMER
THE RIGHT HONOURABLE LORD JUSTICE TOMLINSON
| ASPECT CONTRACTS (ASBESTOS) LIMITED
|- and -
|HIGGINS CONSTRUCTION PLC
WordWave International Limited
A Merrill Communications Company
165 Fleet Street, London EC4A 2DY
Tel No: 020 7404 1400, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Ms Isabel Hitching (instructed by Silver Shemmings LLP) for the Respondent
Crown Copyright ©
Lord Justice Longmore:
"(1) A party to a construction contract has the right to refer a dispute arising under the contract for adjudication under a procedure complying with this section.
For this purpose "dispute" includes any difference.
(2) The contract shall include provision in writing so as to-
(a) enable a party to give notice at any time of his intention to refer a dispute to adjudication…
(3) The contract shall provide in writing that the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement.
The parties may agree to accept the decision of the adjudicator as finally determining the dispute….
(5) If the contract does not comply with the requirements of subsections (1) to (4), the adjudication provisions of the Scheme for Construction Contracts apply."
The Scheme is scheduled to Regulations made pursuant to the 1996 Act and paragraph 23 of the Schedule provides:-
"23. (1) …
(2) The decision of the adjudicator shall be binding on the parties, and they shall comply with it until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement between the parties."
March 2004 Aspect carried out their survey
27 April 2004 Aspect sent survey report to Higgins
24 June 2004 Higgins paid Aspect's invoice
February 2005 Alleged discovery of additional ACMs
July 2005 Additional ACMs removed by Falcon
27 September 2005 Quantification of delay attributable to ACMs
26 June 2009 Higgins refers dispute with Aspect to adjudication
6 August 2009 Aspect pay £658,017 by reason of adjudicator's decision
3 February 2012 Aspect issue Claim Form
4 May 2012 Higgins' Defence and Counterclaim served.
Ironically, it was only when a limitation defence was pleaded by Aspect in their Reply and Defence to Counterclaim that Higgins sought and obtained permission to plead that Aspect's claim was itself barred by lapse of time.
i) Was it an implied term of the parties' contract that an unsuccessful party to adjudication would be entitled to seek a final determination by litigation and, if successful, recover payment made?
ii) If there was such an implied term, what was the applicable limitation period for a claim seeking to enforce it?
iii) What was the limitation period applying to Higgins' counterclaim?
iv) Did Aspect have a claim in restitution?
The answers given by the judge were (1) No (2) not applicable but (if applicable) 6 years from payment (3) 6 years from breach (4) No. The main reason why the judge decided that there was no implied term was that it was unnecessary. It was unnecessary because the unsuccessful party in the adjudication could always sue for a declaration that he was not liable (as Aspect had done in the Claim Form in this case). That gave rise to the further question whether a traditional 6 year time bar applies to a declaration of non-liability. Although that question was not formally one of the preliminary issues, the judge decided that a declaration of non-liability was an assertion of a cause of action and was time-barred on the facts of the case because the claim form was issued more than 6 years after the alleged breach of contract or duty. He therefore dismissed the claim.
i) the true question was how the contract, subject as it was to the Scheme for Construction Contracts scheduled to the relevant Regulations, should be construed;
ii) on its true construction the contract provided for the parties' contractual rights to be revisited after the adjudication had completed; if on assessment of those rights, either party had paid too little or too much, that could be decided and any over-payment should be returned;
iii) if it was right to base this conclusion on an implied term, such a term was to be implied because that was how the statutory scheme worked;
iv) in any case the various tests for implication of terms were all satisfied;
v) it followed that Aspect's claim to repayment accrued on payment of the sum assessed by the adjudicator and was well in time;
vi) if there was no such claim and Aspect's only claim was for a declaration that they were not liable to Higgins, such claim had been made and was subject to no time-bar because the Limitation Act 1980 had no application to negative declarations; and
vii) Higgins were in a different position since they always had a claim for negligent work done by Aspect; that claim could not be brought more than 6 years after the alleged breach of contract or duty and was now accordingly time-barred, as the judge had rightly held.
i) any term entitling Aspect to be repaid sums paid by them pursuant to the adjudication could only be an implied term;
ii) none of the tests for implied terms could be satisfied on the facts of the case; it was, in particular, unnecessary to imply any such term because Aspect had always had the alternative remedy of issuing proceedings for a declaration that they were not liable to Higgins (as they had in fact done in February 2012);
iii) there was no defect or disadvantage in that remedy because it was always open to the court to order money to be re-paid as part and parcel of its jurisdiction to grant a declaration of non-liability if it was just and convenient to do so;
iv) such declaration did, however, have to be claimed within 6 years from the supposed breach of contract or duty; since it had been claimed more than 6 years after that date it was now time-barred and the judge was right to dismiss the claim; and
v) (by way of cross-appeal) if Aspect did have a good claim which was not time-barred, then any implication must work in favour of both parties; Higgins' counterclaim for sums additional to those awarded by the adjudicator was not therefore time-barred and should be allowed to proceed.
Construction of the Contract
"The decision of the adjudicator shall be binding until the dispute is finally determined by legal proceedings by arbitration … or by agreement between the parties."
It is thus clear that the binding nature of the adjudication is intended to be temporary and is liable to be displaced by subsequent legal proceedings, arbitration or agreement. It is, however, to be binding and, if money is decided to be payable, it has to be paid. If such payment is made but subsequent proceedings, arbitration or agreement decide that it should not have been paid, there must be some mechanism whereby it can be recovered. Although paragraph 23(2) does not say, in actual words, that any overpayment is recoverable, that seems to me to be the true intent of the provision and is inherent in the words used.
"… that in the event that any dispute between the parties was referred to adjudication pursuant to the Scheme and one party paid money to the other in compliance with the adjudicator's decision made pursuant to the Scheme, that party remained entitled to have the dispute finally determined by legal proceedings and if or to the extent that the dispute was finally determined in its favour, to have that money repaid to it."
Up to the words "legal proceedings" the proposed implied term says no more and no less than paragraph 23(2) of the Scheme. The following phrase spells out, in actual words, what I have said is already inherent in the words used and to be the true intent of paragraph 23(2).
"16. …The court has no power to improve upon the instrument which it is called upon to construe … It is concerned only to discover what the instrument means. However, that meaning is not necessarily or always what the authors or the parties to the document would have intended. It is the meaning which the instrument would convey to a reasonable person having all the background knowledge which would reasonably be available to the audience to whom the instrument is addressed … It is this objective meaning which is conventionally called the intention of the parties, or the intention of Parliament or the intention of whatever person or body was or is deemed to have been the author of the instrument.
17. The question of implication arises when the instrument does not expressly provide for what is to happen when some event occurs …"
"A cause of action is simply a factual situation the existence of which entitles one person to obtain from the court a remedy against another person."
Lord Justice Rimer:
Lord Justice Tomlinson: