Aspect Contracts (Asbestos) Ltd v Higgins Construction Plc [2015] UKSC 38

Aspect carried out an asbestos survey for Higgins. An adjudicator ordered Aspect to pay Higgins £658,017. After limitation expired on Higgins's underlying claim, Aspect sued to recover the payment. The Supreme Court held an implied term or restitutionary right allowed recovery within six years of payment.

Facts

Aspect Contracts (Asbestos) Ltd (‘Aspect’) was engaged by Higgins Construction Plc (‘Higgins’) to undertake an asbestos survey and report on blocks of maisonettes in Hounslow which Higgins was considering redeveloping. The survey was carried out in March 2004 and the report dated 27 April 2004. During redevelopment in early 2005, Higgins allegedly discovered and had to remove asbestos containing materials not identified in Aspect’s report.

Following the failure of negotiation and mediation, Higgins referred the dispute to adjudication under the statutory Scheme implied into the contract by section 108(5) of the Housing Grants, Construction and Regeneration Act 1996. By decision dated 28 July 2009, the adjudicator (Ms Rosemary Jackson QC) found Aspect in breach of contractual and tortious duties of care and ordered Aspect to pay Higgins £490,627 plus interest. Aspect duly paid £658,017 on 6 August 2009.

Higgins commenced no further proceedings to recover the balance of its claim (£331,855 plus interest). The limitation periods for the underlying contract claim expired around 27 April 2010 and for the tort claim by early 2011. On 3 February 2012, Aspect itself commenced proceedings seeking repayment of the £658,017, contending that no sum had actually been due. Higgins counterclaimed for the unrecovered balance, but Aspect raised limitation against that counterclaim.

Issues

The principal issues for the Supreme Court were:

• Whether a term should be implied into the construction contract (via the Scheme) entitling a party who paid money under an adjudicator’s decision to recover that sum if the underlying dispute was later finally determined in its favour;
• The limitation period applicable to such a claim;
• Whether, alternatively, the payer had a restitutionary claim to recover the payment;
• Whether Higgins’s counterclaim for the balance was time-barred; and
• Whether Aspect’s only recourse was to seek a declaration of non-liability, which Higgins contended was itself time-barred under sections 2 and 5 of the Limitation Act 1980.

Arguments

Aspect

Aspect submitted that the Scheme necessarily implied a term that, where a party paid money under an adjudicator’s decision, it remained entitled to have the dispute finally determined by legal proceedings and to recover any overpayment. Alternatively, it relied on restitution. The cause of action arose on payment (6 August 2009), so proceedings commenced in February 2012 were within time.

Higgins

Higgins contended that Aspect’s only route to recovery was to seek a declaration of non-liability, with any repayment ordered as consequential relief. Such a claim was time-barred under sections 2 and 5 of the Limitation Act 1980, since the underlying causes of action accrued in 2004/2005. Higgins also argued, in the alternative, that if Aspect had six years from payment, it too should have a fresh six-year period to claim the unrecovered balance.

Judgment

Lord Mance (with whom Lord Wilson, Lord Sumption, Lord Reed and Lord Toulson agreed) dismissed Higgins’s appeal.

The Scheme and adjudication

The Court analysed section 108 of the 1996 Act and paragraph 23(2) of the Scheme, which makes adjudication decisions binding ‘until the dispute is finally determined by legal proceedings, by arbitration … or by agreement’. Adjudication is a provisional, cash-flow mechanism: the recipient is entitled to payment unless and until the substantive dispute is finally determined otherwise.

Rejection of Higgins’s primary case

The Court rejected Higgins’s submission that Aspect’s only remedy was declaratory relief with consequential repayment. It was artificial to treat the claim as based on a cause of action accruing in 2004 or 2005, when its immediate trigger was the 2009 payment. The Court found no authority supporting consequential orders for payment attached to a declaration of non-liability absent some independent juridical basis for recovery. A declaration of non-liability could not sensibly be characterised as a claim ‘founded on’ contract or tort within sections 2 or 5 of the Limitation Act, nor could one identify a date when such a ’cause of action accrued’.

The implied right of recovery / restitution

The Court held it was a necessary legal consequence of the Scheme that the paying party must have a directly enforceable right to recover any overpayment once the dispute is finally determined. This arises either by way of a term implied into the contract (alongside the Scheme provisions themselves implied) or, independently, by way of restitution. Either way, the same restitutionary considerations underlie the right: if the basis of the payment falls away on final determination, repayment must follow. The court also has power to order interest.

Limitation

The cause of action arose on payment (6 August 2009). An independent restitutionary claim is treated as ‘founded on simple contract’ under section 5 of the Limitation Act 1980 (citing Kleinwort Benson Ltd v Sandwell BC). Accordingly, Aspect had six years from 6 August 2009 to commence proceedings. The 2012 claim was in time.

Higgins’s alternative case

The Court rejected the argument that Higgins should have a fresh six-year period from payment to claim the unrecovered balance. The receipt of payment did not generate a fresh cause of action for any further sum. Higgins should have pursued any balance within six years of the original breach.

The ‘one-way throw’

Lord Mance acknowledged that this gave Aspect a tactical advantage but observed this followed from Higgins’s own decision not to commence proceedings within the original limitation period to secure finality. Adjudication is provisional; finality required either litigation, arbitration or agreement.

Scope of final determination

On final determination, the court must examine the whole underlying dispute. The adjudicator’s reasoning has no legal or evidential weight; what matters is whether the payment ordered was substantively justified. Higgins could rely on the full range of its original claim in resisting repayment, and Aspect could re-argue any defences (including set-off) that had been rejected.

Implications

The decision clarifies the limitation framework applicable to statutory adjudication under the 1996 Act and Scheme. Key implications include:

• A party who pays under an adjudicator’s decision has six years from the date of payment to bring proceedings to recover any overpayment, whether the right is analysed as an implied contractual right or a restitutionary claim.
• A party that obtains an adjudication award in its favour cannot achieve finality merely by inaction. To secure finality beyond the original limitation period, it must either commence proceedings/arbitration or obtain the other party’s agreement that the adjudication decision be treated as final.
• The adjudicator’s reasoning has no binding evidential or legal effect on subsequent final determination; the court considers the substantive merits of the dispute afresh.
• Declaratory relief as to non-liability is not, on this analysis, a claim ‘founded on’ contract or tort for sections 2 and 5 of the Limitation Act 1980.
• The obiter remarks of the Court of Appeal in Walker Construction (UK) Ltd v Quayside Homes Ltd [2014] EWCA Civ 93 were overruled.

The case is significant for construction practitioners and parties using statutory adjudication. It confirms the provisional character of adjudication while ensuring a payer is not left without remedy where the underlying limitation periods for the original claim have expired. It also serves as a warning to successful adjudication parties: passive reliance on an award may leave them exposed to repayment claims years later without the ability to defend by reasserting time-barred claims for higher sums.

Verdict: Appeal dismissed. The Supreme Court upheld the Court of Appeal’s decision that Aspect was entitled to bring proceedings to recover the sum paid under the adjudicator’s decision, the cause of action arising on payment (6 August 2009) and being subject to a six-year limitation period running from that date. Higgins’s counterclaim for the unrecovered balance was time-barred.

Source: Aspect Contracts (Asbestos) Ltd v Higgins Construction Plc [2015] UKSC 38