Subject to express contractual provisions, the usual position is that claims, whether for breach of contract or negligence, become time barred after a certain period of time:
- 6 years from the date of breach under a simple contract
- 12 years from the date of breach under a contract executed as a deed
- In a tortious claim, 6 years from the date the loss is suffered
But what is the position in relation to an adjudicator's decision? The Supreme Court in Aspect v Higgins has now clarified this issue.
By way of background, in 2009 Higgins commenced an adjudication claim of some £822k. The claim related to an allegation that Aspect negligently failed to identify asbestos on a development site. Higgins was awarded £490k and Aspect paid up.
The limitation period for claims under the contract expired some time in 2010, i.e. 6 years from the date of the alleged breach by Aspect. The limitation period for a negligence claim expired in early 2011.
Some time later, Aspect commenced Court proceedings for the recovery of the sum paid to Higgins. Higgins argued that the claim was time barred.
The Court held that the limitation period ran for 6 years from the date Aspect made payment to Higgins. It also held that it was too late for Higgins to pursue a counterclaim for the balance of the £332k it was not awarded in the adjudication. This was because the limitation period in relation to that claim (i.e. breach of the original contract) had already expired.
In practical terms, to avoid this scenario arising, parties to a construction contract have the following options:
- to agree that the adjudicator's decision is final and binding in relation to the "dispute"
- to agree to a "standstill period" to ensure that the successful party's position is not prejudiced by the expiry of the limitation period in respect of its original claim
- if the above two options are not available, the successful party may need to issue its own Court proceedings prior to the expiry of the limitation period to finally determine the dispute.
COMMENT: To avoid the effect of this decision, our advice is to include bespoke express provisions in construction contracts which determine the applicable limitation periods.
