ASPECT CONTRACTS (ASBESTOS) LTD v HIGGINS CONSTRUCTION PLC
Technology and Construction Court
Akenhead J
23rd May 2013
THE FULL TEXT OF THE JUDGMENT OF AKENHEAD J
Introduction
1. This case raises an interesting and important issue as to when in terms of limitation of action a party which is
dissatisfied with the substance of an adjudicator's decision needs to issue its proceedings or to raise any
counterclaim in those proceedings to challenge and seek to overturn that decision. It is necessary to review the
decision in Jim Ennis Construction Ltd v Premier Asphalt Ltd [2009] EWHC 1906 which decided that there was
an implied term of the contract in that case that when a dispute was referred to adjudication pursuant to the Scheme
for Construction Contracts ("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. Put another way, the issue is whether the paying party's cause or right of action to
recover money paid out pursuant to an adjudicator's decision runs from the date of payment and therefore the six
year limitation period runs from that moment. The alternative view is that the basic cause or right of action in
relation to which the money was paid out commences whenever it otherwise did before the decision was issued.
The Facts
2. Most of the facts have been agreed for the purposes of the determination of the preliminary issues which relate
to the existence of the pleaded implied term, the limitation period applicable thereto, the limitation period
applicable to the counterclaim and the existence or otherwise of a claim for restitution.
3. Aspects Contracts (Asbestos) Ltd ("Aspect") is and was a company which specialises in the provision of
asbestos management services including asbestos surveys. Higgins Construction PLC ("Higgins") is and was a
substantial UK construction company which specialises in the construction and refurbishment of community
housing, education and healthcare properties.
4. Higgins was considering in or about March 2004 whether to contract with Notting Hill Housing Trust for the
demolition and redevelopment of the Ivybridge Estate, Hounslow, London. To that end, Higgins approached
Aspect to carry out an asbestos survey.
5. The following are the agreed facts:
Date
Event
March 2004
The Contract between Aspect and Higgins for Aspect to carry out an asbestos survey and
provide a survey report. The scope of the survey is in dispute.
23/24
2004
March Survey carried out by Aspect
27 April 2004
Survey report sent to Higgins
30 April 2004
Invoice rendered by Aspect to Higgins
24 June 2004
Higgins paid invoice
October 2004
Higgins as main contractor enters into design and build contract with Notting Hill Housing
Trust for demolition and redevelopment of the Ivybridge Estate
9 December Higgins enters sub-contract with Falcon Refurbishment and Demolition for asbestos removal,
2004
demolition and site clearance.
February 2005
24
2005
Alleged discovery of additional asbestos containing material ("ACMs") in the apartment
blocks at the Estate
March Letter from Falcon to Higgins confirming agreement between Higgins and Falcon as to
amount of additional payment to be made by Higgins to Falcon for additional asbestos
removal
19 July - 15 Falcon removed additional ACMs upon instructions from Higgins
August 2005
27 September Piling rig arrives on site: end of period of 21 weeks' alleged critical delay, of which Higgins
2005
alleged that 17 weeks was attributable to discovery of additional asbestos
26 June 2009
Higgins served Referral Notice referring dispute with Aspect to adjudication
28 July 2009
Adjudicator's decision issued
6 August 2009
Aspect paid Higgins £658,017 in compliance with the Adjudicator's decision
3
February Aspect commences current proceedings (with no pre-action protocol procedures or any prior
2012
notice of issue of proceedings). Particulars of Claim served alleging implied term that
unsuccessful party in adjudication entitled to have dispute determined by litigation and to
repayment if successful
4 May 2012
Defence and Counterclaim served. Implied term admitted and no limitation defence pleaded.
Counterclaim seeks difference between the sum claimed as damages in the adjudication and
the lower sum decided on by the Adjudicator
19 June 2012
Reply to Defence and Counterclaim served contending that the Counterclaim is barred by
limitation
31
January Hearing before TCC. Leave granted to amend the Defence and Counterclaim to withdraw
2013
admission about implied term and to plead limitation defence or alternatively that both claim
and counterclaim are not statute barred. Preliminary issues ordered.
6. Although there is an issue between the parties as to the scope of the asbestos survey which Aspect was engaged
to carry out, it is common ground that the contract between the parties incorporated the proposal or quotation
submitted by Aspect to Higgins on 9 March 2004 and that this was accepted orally by Higgins. Neither party has
suggested that there is anything in the documents forming the contract which particularly adds anything to the
debate. There was no express adjudication clause or agreement.
7. It is clear that Aspect and Higgins and/or their solicitors were in contact with each other in 2005 with Higgins
complaining in effect that Aspect had failed to pick up the presence of asbestos and with Aspect denying any
responsibility. The first letter from Higgins complaining to Aspect was dated 21 March 2005 and claims were
intimated as the months went on.
8. The adjudicator, Rosemary Jackson QC, set out in her decision that Higgins was claiming £822,482.67 as
damages broadly for breach of contract for failing to conduct a proper and appropriate survey and failing to
identify the presence of ACM's. She set out the chronology and analysed what the contract was and what the
report produced by Aspect addressed and did not address. She found that there were breaches of contract on the
part of Aspect and that there were damages which together with interest produced a substantial award in favour
of Higgins, albeit some £200,000 less than was being claimed.
9. It remains unclear why Higgins took some four years to proceed to adjudication and why Aspect did not issue
proceedings for 2½ years after the adjudication decision.
The Proceedings
10. In its Particulars of Claim, Aspect "seeks a final and binding resolution of a dispute which was referred to
adjudication". It seeks a declaration that Aspect was not liable to pay damages and/or interest to Higgins in the
amount decided by the Adjudicator or at all. It seeks repayment, or alternatively restitution, of the sum of £658,017
or such other sum as the Court shall determine. It asserts in Paragraph 3 that "the burden of proof upon all issues
of liability and quantum (including the issues as to Aspect's obligations, Aspect's breach of obligation, causation
of loss suffered by Higgins, and recoverability of damages in respect of that loss) is upon Higgins". It sets out at
Paragraphs 6 to 10 what its obligations were pursuant to the contract. It asserts (which is admitted) that the contract
did not comply with the Housing Grants, Construction and Regeneration Act 1996 ("HGCRA") and that the
Scheme for Construction Contracts applied to it. At Paragraph 12, it pleads the implied term which has given rise
to the preliminary issues:
"…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."
Paragraphs 13 to 15 address the performance by Aspect of its obligations with an assertion that the survey was
carried out with reasonable care. Paragraphs 16 to 35 assert broadly that Higgins' allegations in the adjudication
about Aspect's performance and on damages were wrong for a variety of reasons. So far as damages are concerned
a number of the averments are that Aspect do not admit or put Higgins to proof on the issue of damages. There is
then reference to the award of interest being for more than Higgins was entitled and to the adjudicator's decision.
At Paragraphs 40 and 41, it seeks a declaration as referred to above, repayment of the sum of £658,017 awarded
against it by the adjudicator and the costs of the adjudication together with interest on any sums recovered by it.
At Paragraph 42 it pleads:
"Further or alternatively, Aspect paid the said sum to Higgins under compulsion of law. That compulsion
will be released upon judgement hearin Aspect's favour. Aspect will be entitled to restitution of the sum
paid."
11. The Amended Defence and Part 20 Counterclaim denies the implied term saying that there is no necessity or
room for the implication. It asserts that the parties' rights to have a dispute determined by the Court "are preserved
by but do not stem from the" HGCRA and that the HGCRA and the Scheme do not alter or extend limitation
periods for bringing a dispute before the Court. It pleads a limitation defence and denies any entitlement to
restitution. It denies that the onus of proof is on it. It then proceeds to challenge where necessary the remainder of
the Particulars of Claim. Its Counterclaim is predicated on the basis that it is entitled to the full amount claimed
before the adjudicator, namely £822,482.67 and it claims the balance, exclusive of interest, namely £150,776.98.
12. In its Reply, Aspect says that it "seeks a final and binding determination of the dispute which was referred to
the Adjudicator save only" that it did not challenge one finding of breach of contract or negligence, albeit that it
denies that such a breach caused loss. In its Defence to Counterclaim, it pleads at Paragraph 56 that the
counterclaim is statute barred because the alleged cause of action in contract accrued at the latest in late April
2004 when Aspect delivered its asbestos report to Higgins and that the alleged cause of action in tort accrued
when Higgins concluded its contract and sub-contract with its employer and with Falcon respectively alternatively
that all of the damage had been suffered by 22 June 2005 when work recommenced on-site following the delay
and disruption which Higgins claimed were caused by the discovery of ACMs and following its alleged agreement
to pay an additional sum to Falcon.
The HGCRA and the Scheme
13. The HGCRA provided by Section 108 as follows:
"(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—
(a) enable a party to give notice at any time of his intention to refer a dispute to adjudication…
(3)The contract shall provide 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."
14. The Scheme provided:
"2. Where a construction contract does not comply with the requirements of section 108(1) to (4) of the
Act, the adjudication provisions in Part I of the Schedule to these Regulations shall apply."
The Schedule materially provided as follows:
"23.—(1) In his decision, the adjudicator may, if he thinks fit, order any of the parties to comply
peremptorily with his decision or any part of it.
(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."
The Authorities
15. There are various different areas of legal issue between the parties, mainly the implication of terms, what and
when any cause of action arose and restitution and when any cause of action in restitution arose. I will consider
these topics in that order but will address the adjudication aspects under the Discussion head of this judgment.
16. There are two Privy Council decisions of relevance in this context. The relevant dictum from the well known
earlier case of BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 is set out in Attorney
General of Belize v Belize Telecom Ltd [2009] UKPC 10, where Lord Hoffman dovetailed considerations relating
to implied terms into the context of contractual interpretation:
"16. Before discussing in greater detail the reasoning of the Court of Appeal, the Board will make some
general observations about the process of implication. The court has no power to improve upon the
instrument which it is called upon to construe, whether it be a contract, a statute or articles of association.
It cannot introduce terms to make it fairer or more reasonable. It is concerned only to discover what the
instrument means. However, that meaning is not necessarily or always what the authors or 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: see Investors Compensation Scheme Ltd v West Bromwich Building
Society [1998] 1 WLR 896, 912-913. 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. The most usual inference in such a case is that nothing is to happen. If
the parties had intended something to happen, the instrument would have said so. Otherwise, the express
provisions of the instrument are to continue to operate undisturbed. If the event has caused loss to one or
other of the parties, the loss lies where it falls.
18. In some cases, however, the reasonable addressee would understand the instrument to mean
something else. He would consider that the only meaning consistent with the other provisions of the
instrument, read against the relevant background, is that something is to happen. The event in question
is to affect the rights of the parties. The instrument may not have expressly said so, but this is what it
must mean. In such a case, it is said that the court implies a term as to what will happen if the event in
question occurs. But the implication of the term is not an addition to the instrument. It only spells out
what the instrument means.
19. The proposition that the implication of a term is an exercise in the construction of the instrument as
a whole is not only a matter of logic (since a court has no power to alter what the instrument means) but
also well supported by authority. In Trollope & Colls Ltd v North West Metropolitan Regional Hospital
Board [1973] 1 WLR 601, 609 Lord Pearson, with whom Lord Guest and Lord Diplock agreed, said:
"[T]he court does not make a contract for the parties. The court will not even improve the
contract which the parties have made for themselves, however desirable the improvement might
be. The court's function is to interpret and apply the contract which the parties have made for
themselves. If the express terms are perfectly clear and free from ambiguity, there is no choice
to be made between different possible meanings: the clear terms must be applied even if the
court thinks some other terms would have been more suitable. An unexpressed term can be
implied if and only if the court finds that the parties must have intended that term to form part
of their contract: it is not enough for the court to find that such a term would have been adopted
by the parties as reasonable men if it had been suggested to them: it must have been a term that
went without saying, a term necessary to give business efficacy to the contract, a term which,
though tacit, formed part of the contract which the parties made for themselves."
20. More recently, in Equitable Life Assurance Society v Hyman [2002] 1 AC 408, 459, Lord Steyn said:
"If a term is to be implied, it could only be a term implied from the language of [the instrument]
read in its commercial setting."
21. It follows that in every case in which it is said that some provision ought to be implied in an
instrument, the question for the court is whether such a provision would spell out in express words what
the instrument, read against the relevant background, would reasonably be understood to mean. It will
be noticed from Lord Pearson's speech that this question can be reformulated in various ways which a
court may find helpful in providing an answer – the implied term must "go without saying", it must be
"necessary to give business efficacy to the contract" and so on – but these are not in the Board's opinion
to be treated as different or additional tests. There is only one question: is that what the instrument, read
as a whole against the relevant background, would reasonably be understood to mean?
22. There are dangers in treating these alternative formulations of the question as if they had a life of
their own. Take, for example, the question of whether the implied term is "necessary to give business
efficacy" to the contract. That formulation serves to underline two important points. The first, conveyed
by the use of the word "business", is that in considering what the instrument would have meant to a
reasonable person who had knowledge of the relevant background, one assumes the notional reader will
take into account the practical consequences of deciding that it means one thing or the other. In the case
of an instrument such as a commercial contract, he will consider whether a different construction would
frustrate the apparent business purpose of the parties. That was the basis upon which Equitable Life
Assurance Society v Hyman [2002] 1 AC 408 was decided. The second, conveyed by the use of the word
"necessary", is that it is not enough for a court to consider that the implied term expresses what it would
have been reasonable for the parties to agree to. It must be satisfied that it is what the contract actually
means.
23. The danger lies, however, in detaching the phrase "necessary to give business efficacy" from the
basic process of construction of the instrument. It is frequently the case that a contract may work perfectly
well in the sense that both parties can perform their express obligations, but the consequences would
contradict what a reasonable person would understand the contract to mean. Lord Steyn made this point
in the Equitable Life case (at p. 459) when he said that in that case an implication was necessary "to give
effect to the reasonable expectations of the parties."
24. The same point had been made many years earlier by Bowen LJ in his well known formulation in
The Moorcock (1889) 14 PD 64, 68:
"In business transactions such as this, what the law desires to effect by the implication is to give
such business efficacy to the transaction as must have been intended at all events by both parties
who are business men"
25. Likewise, the requirement that the implied term must "go without saying" is no more than another
way of saying that, although the instrument does not expressly say so, that is what a reasonable person
would understand it to mean. Any attempt to make more of this requirement runs the risk of diverting
attention from the objectivity which informs the whole process of construction into speculation about
what the actual parties to the contract or authors (or supposed authors) of the instrument would have
thought about the proposed implication. The imaginary conversation with an officious bystander in
Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206, 227 is celebrated throughout the common
law world. Like the phrase "necessary to give business efficacy", it vividly emphasises the need for the
court to be satisfied that the proposed implication spells out what the contact would reasonably be
understood to mean. But it carries the danger of barren argument over how the actual parties would have
reacted to the proposed amendment. That, in the Board's opinion, is irrelevant. Likewise, it is not
necessary that the need for the implied term should be obvious in the sense of being immediately
apparent, even upon a superficial consideration of the terms of the contract and the relevant background.
The need for an implied term not infrequently arises when the draftsman of a complicated instrument has
omitted to make express provision for some event because he has not fully thought through the
contingencies which might arise, even though it is obvious after a careful consideration of the express
terms and the background that only one answer would be consistent with the rest of the instrument. In
such circumstances, the fact that the actual parties might have said to the officious bystander "Could you
please explain that again?" does not matter.
26. In BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 282-283 Lord Simon
of Glaisdale, giving the advice of the majority of the Board, said that it was "not…necessary to review
exhaustively the authorities on the implication of a term in a contract" but that the following conditions
("which may overlap") must be satisfied:
"(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to
the contract, so that no term will be implied if the contract is effective without it; (3) it must be
so obvious that 'it goes without saying' (4) it must be capable of clear expression; (5) it must not
contradict any express term of the contract".
27. The Board considers that this list is best regarded, not as series of independent tests which must each
be surmounted, but rather as a collection of different ways in which judges have tried to express the
central idea that the proposed implied term must spell out what the contract actually means, or in which
they have explained why they did not think that it did so. The Board has already discussed the
significance of "necessary to give business efficacy" and "goes without saying". As for the other
formulations, the fact that the proposed implied term would be inequitable or unreasonable, or contradict
what the parties have expressly said, or is incapable of clear expression, are all good reasons for saying
that a reasonable man would not have understood that to be what the instrument meant."
17. I take the law relating to implication of the terms to be properly summarised in this dictum of Lord Hoffman
and there is little that one needs to add. When it comes to interpretation of statute, there is little recognisable
authority that there can in some way be an implied term of a statute. So far as statute is concerned, statutes and
statutory instruments are to be interpreted primarily from the words used on the basis that Parliament can or should
be taken to have meant that the words which had been brought into law broadly mean what they say. Where it is
unclear what Parliament meant, the Courts can have regard to a purposive approach, along the lines of finding a
meaning from the stated purposes and, in certain circumstances, regard can be had to the debates in Parliament to
help determine what Parliament intended.
18. Next, one needs to consider what a cause of action is and when it arises in the context of this case. The real
issue revolves around whether or not Aspect had a cause of action along the lines which it now puts forward which
involves seeking a negative declaration that it was not liable to pay damages to Higgins in the amount decided by
the adjudicator or at all. In his well-known dictum in Letang v Cooper [1965] 1 QB 232 at pages 242-3, Lord
Justice Diplock (as he then was) said:
"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."
19. Issues relating to the accrual of a cause of action often come up in cases involving limitation, amendments
and res judicata. Section 5 of the Limitation Act 1980 states:
"An action founded on simple contract shall not be brought after the expiration of six years from the date
on which the cause of action accrued."
Most cases based in contract involve either debt, breach, termination or the accrual of other contractual rights.
Authorities over many years have established that the cause of action arises in debt, when the sum first becomes
due for payment, for breach of contract when the breach occurs, for or in connection with termination often when
the termination is triggered and for other contractual rights when those rights have actually accrued.
20. One then gets on to a consideration about actions for negative declarations. There are numerous possibilities.
Examples include in the construction or engineering field a threatened termination and a party wants to argue in
court that the other party has no right to terminate at that particular time. One can also think of other examples
where a party is said to be in breach of contract but wishes to have the Court confirm that it is not in breach of
contract at a particular time. Another example is a case like Ericsson AB v EADS Defence and Security Systems
Ltd [2009] EWHC 2598 (TCC), which was not referred to by the parties but which demonstrates that the Court
can grant declarations as to rights or obligations which parties have. In cases such as Ericsson, parties and indeed
the Court would be surprised by an argument that there was no cause of action enabling the Court to give relief
where appropriate. Of course, the Court has a discretion whether to grant a declaration or not and there is much
authority as to whether a declaration should be granted in academic or hypothetical circumstances. Thus, it would
often be the case that the Court would refuse a declaration if there was no dispute at all between the parties but
one party simply wanted a declaration that it had performed its contract perfectly and was not otherwise in breach
of contract; the Court might simply say that it was a waste of court time and the other party's expense to grant any
declaration. That is to be distinguished however from whether there is any cause of action at all because the issue
of whether one secures the relief one is claiming does not necessarily mean that there is no cause of action. I deal
with this topic in further detail in the Discussion part of this judgment.
21. In tort actions, the quia timet jurisdiction particularly in the field of the law of nuisance is predicated on the
basis that the tort in question has not yet been committed but is threatened. Similar considerations apply in relation
to applications for interim injunctions where again it is rarely argued let alone accepted by the Court when granting
the injunction that there is no cause of action because, presumably, a sufficient factual situation exists which
entitles the applicant to a remedy, namely the interim injunction.
22. The question therefore arises as to whether a party to a commercial contract has a cause of action to seek a
negative declaration that it is not in breach of contract. The answer to that question must be in the affirmative,
albeit that the Court retains discretion as to whether to grant such a declaration. It is argued that if such a cause of
action exists this would open the floodgates in the doubtless hundreds of thousands or millions of contracts which
are made every day for the purchase of goods, services and other commodities for people to come to court for
declarations that the goods or services which they have supplied have been provided in accordance with the
contracts. Common sense however and the need and desire for most people to get on with their daily, professional
or commercial lives would suggest that these particular floodgates are unlikely to be opened. The Courts can deal
with purely speculative applications for such negative declarations through the discretion and powers which they
already have.
23. Turning to restitution, one needs to consider the extent to which there is in law any cause of action for
restitution or unjust enrichment. There are numerous ways by which the Court can order the return of money to a
party which has been wrongly deprived of it. For instance, the law relating to mistake, fraud and trust can be
deployed to secure this. If A receives a bill from B for a £1,000 debt and by mistake A pays £10,000 to B, A will
be entitled by one means or another to recover the balance (subject to any specific defence) from B. One would
say then that the cause of action for the return of the money runs from the time of payment because it has obviously
not arisen until the payment is made; there is of course much authority as to the nature of the mistake sufficient
to justify the return of the money. There are a score of grounds for restitution and it is unnecessary to analyse each
and every one in this case.
24. The closest analogy is accepted by both Counsel to be repayments of sums ordered to paid by way of court
judgments or orders that are later set aside or successfully appealed. There is no doubt that the Court has that
power and it, almost invariably and uncontroversially, follows a successful appeal of a money judgement that the
losing respondent on appeal will be required to repay the money paid pursuant to the earlier judgment or order.
But this is addressed in Goff & Jones - The Law of Unjust Enrichment (8th Ed) at Chapter 26 which considers the
nature and extent of the principle which undoubtedly exists. The authors suggest that "successful litigants therefore
commit no wrong when they win a court order that is later held to have been mistaken" (Paragraph 26-03).
However they go on to say in Paragraph 26-04 that the "law of unjust enrichment therefore provides a better
explanation of the claimant's right of recovery" albeit that "some uncertainty attaches to the exact ground for
recovery". The explanation preferred at Paragraph 26-05 "lies in the policy consideration…that the courts' power
to force litigants to transfer benefits to other litigants is partly justified by procedural mechanisms whose function
is to reduce the risk of judicial error". It is, they say, a "policy-based consideration". Reference is made to Lord
Nicholl's dictum in Nykredit Plc v Edward Erdman Ltd [1997] 1 WLR 1627 at 1637 where he proceeded on the
basis that appellate courts have an inherent jurisdiction to order repayment as a means of:
"unravelling the practical consequences of orders made by the courts below and duly carried out by the
unsuccessful party. The result of [a successful appeal] is… that, to the extent indicated, orders made in
the courts below should not have been made. This result could, in some cases, be an idle exercise unless
the [appellate court] were able to make consequential orders which achieve, as nearly as is reasonably
practicable, the restitution which this result requires."
25. The analogy relating to the power of an appeal court or judge setting aside an earlier judgment or order is of
relatively limited value in the context of the current case. If the underlying claim or defence as the case may be is
found on the appeal or setting aside exercise to be a good one and that involves overturning the lower or previous
judgment, then there is a jurisdiction and power for the Court, based primarily on policy grounds, to put right the
consequences of that exercise, including the requirement that money paid pursuant to the earlier order or judgment
be repaid. However, the exercise involves a determination of whether or not the basic case or defence is good in
fact or in law and the repayment power is simply ancillary to and consequential upon that exercise. As detailed
below, there is no appeal against an adjudicator's decision as such.
Discussion
26. I proceed upon the basis that the contract between the parties was a simple one, comprising a quotation by
Aspect to carry out an asbestos survey at a particular site for a particular price which was orally accepted. Both
parties have accepted that this was a construction contract for the purposes of the HGCRA. It then follows that,
because the parties did not make their own contractual provisions for adjudication, the impact of Section 108 (5)
of the Act was to incorporate the adjudication provisions of the Scheme. It is abundantly clear that Parliament and
the drafters of the Scheme did not actually apply their minds to whether or not a new cause of action arose for
either party following the honouring or observance of a valid adjudicator's decision in relation to the recovery in
any later proceedings of a Court or arbitrator which was to be the tribunal charged with the final resolution of
disputes between the parties.
27. Over the 15 years in which the law relating to adjudication in construction contracts has developed, the
following can now be said with confidence to be basic principles:
(a) The decisions of adjudicators can be enforced by the Courts, essentially on the basis that there is a
contractual undertaking in effect that the parties shall treat the decision as binding, albeit for the time
being (see e.g. VHE Construction plc v RBSTB Trust Co [2000] BLR 187).
(b) Those decisions are to be enforced by the Courts even if the adjudicators have answered the questions
or disputes referred to them incorrectly as a matter of fact or of law (see e.g. Bouygues (UK) Ltd v DahlJensen (UK) Ltd [2000] EWCA Civ 507).
(c) Those decisions are to bind the parties to the construction contract until and unless the parties agree
otherwise or the tribunal of final resolution (be it arbitration or a Court) decides otherwise.
(d) It is open to parties to a construction contract or a contract which incorporates comparable
adjudication provisions to those allowed for in the Scheme or by the HGCRA to initiate adjudication
proceedings at any time.
So far as this latter point is concerned, the Latham Report which ultimately led to the Act highlighted difficulties
for parties to construction contracts securing payment and thus in connection with cash flow as did the
Parliamentary debates on the bill. Some commentators have argued that adjudication can or should only be
initiated broadly during the course of the construction contract in question. However that is not a view accepted
by the courts and indeed Section 108(1) of the HGCRA does not on its face impose any temporal limits on when
adjudications can be started. There have been some authorities that suggest that, even if the tribunal charged with
final resolution has embarked on its final exercise of resolving particular disputes, such disputes can
simultaneously be referred to adjudication which will, almost invariably, proceed to a decision somewhat more
quickly than the final tribunal can produce its award or judgment as the case may be. It follows from this that an
adjudication can be started even after the limitation period in question has expired, albeit that the referred claim
may be doomed to failure.
28. One then turns to the particular problem with which the current case is particularly concerned which relates
to whether or not separately enforceable rights or causes of action arise out of an adjudication decision in effect
and in particular which relate to the losing party in the adjudication. The current case is a perfect example. Higgins
successfully secures an adjudicator's decision 4 to 5 years after its adjudicated cause or causes of action (in contract
or tort) have accrued; that decision requires money to be paid by Aspect and indeed it is paid by Aspect a few
weeks later. Does Aspect then have a new cause of action against Higgins to recover the money which it had to
pay out on the temporarily binding decision of the adjudicator or does its cause of action accrue back at the time
when it was (or was not) in breach of its contractual duties or when damage arose caused by any breach of a duty
of care? It has to be said that in all probability in the vast majority of cases it is simply not going to matter because
there will be no limitation considerations; the adjudication will have been concluded and the losing party will, if
it wants to, challenge within a relatively short time thereafter. The reality is that most adjudications are started
whilst or fairly shortly after the construction project in question is being proceeded with. The problem however
does arise in the current case because, if Aspect's cause of action accrued in 2004 or 2005, its claim is barred by
limitation. This problem, if such it is, has only risen in this case because Aspect or its insurers chose not or
otherwise failed to initiate proceedings until some 2½ years after the adjudication.
29. Another factor to bear in mind is that of the many thousands of adjudications pursued over the last 15 years
only a small percentage end up in the Courts on disputed enforcements. Although there are no statistics, it is not
unreasonable to assume that many contractual parties either accept the adjudication decisions or negotiate their
final accounting without any challenge through the final resolution tribunal. In this case, for instance, I assume
that Higgins was content to accept its approximately 2/3rds recovery through the adjudication process with a view
simply "to" let sleeping dogs lie".
30. There has only been one case on adjudication in which the current issue has been directly considered and
decided. His Honour Judge Stephen Davies decided in Jim Ennis Construction Ltd v Premier Asphalt Ltd [2009]
EWHC 1906 (TCC) that there was an implied term of the underlying construction contract whereby an
unsuccessful party to an adjudication was entitled to be repaid all sums paid by it in compliance with an
adjudication decision; there was therefore a new cause of action arising as at the date of payment if and to the
extent that as a matter of fact or law that party was not liable to pay the sums decided as due by the adjudicator.
This case is referred to and commented upon in Coulson on Construction Adjudication (2nd Ed 2011) as such
without approval or disapproval (Paragraph 2.142-3 and 14.21). The decision certainly merits respect. The real
issue is whether the learned judge was right.
31. The facts in the Jim Ennis decision were slightly different to the current case. The claimant sub-contractor had
in 2002 withheld payment against the defendant sub-sub-contractor of some £16,000 claimed by the defendant
for work done for replacing allegedly defective work done by the defendant and also deducted a further £38,000
for its own cross claims relating thereto. In the 2008 adjudication, the defendant commenced adjudication and
secured a decision requiring the claimant to pay the £38,000 plus interest back to the defendant. The claimant subcontractor issued proceedings in 2009 to recover those sums back. The case, which involved seeking to strike out
the claimant's claim as bound to fail by reason of limitation, was dealt with on written submissions.
32. HHJ Davies concluded at Paragraph 16 of his judgment following amongst others the VHE decision that "the
obligation to comply with the adjudicator's decision does indeed give rise to a new cause of action in favour of
the successful party to compel the losing party to comply with that decision". I agree with this view as entirely
logical and supported by authority. He went on to say in the next paragraph:
"Of course that conclusion is not in itself sufficient for the Claimant in this case, because the Claimant
is seeking to have the court finally determine the dispute decided by the adjudicator, as opposed to
seeking to enforce the adjudicator's decision. It does however provide the platform for the Claimant's
second submission that there is additionally an implied term that an unsuccessful party is entitled to bring
court proceedings to have the dispute referred to the adjudicator finally determined and, if successful in
persuading the court to reach a conclusion different to that reached by the adjudicator, to be repaid all
sums paid by him in compliance with the decision."
33. There then follows the rationale of his decision:
19. If it is the referring party who is dissatisfied with the adjudicator's decision, so long as he is within
the limitation period applicable to the underlying cause of action he can simply bring legal proceedings
in respect of that cause of action. It is difficult to see how he can suggest that his right to have the dispute
finally determined by legal proceedings entitles him to commence those proceedings outside the
limitation period applicable to the underlying cause of action. Where, however it is the responding party
who is dissatisfied with the adjudicator's decision, then the question arises as to the source of his right,
which has never been disputed, to challenge the decision by legal proceedings and recover sums paid in
compliance with it. Although there are of course some cases where the dispute referred to adjudication
is not about money that is relatively unusual; typically the dispute referred to adjudication is a money
claim. In such cases, the responding party may simply assert a pure defence, it may (subject to
compliance with the withholding requirements of the HGCRA) assert a defence by way of set-off or
cross-claim, or it may (as in this case) assert both a pure defence (to the claim for payment for the
replacement works) and a cross-claim (setting off its cross-claim for losses flowing from the defective
original works against money otherwise admitted due to the Claimant). In all such cases, however, the
responding party has not suffered any actual loss as at the date of referral precisely because he has refused
to pay the responding party and thus is not out of pocket. It follows that he would not on a conventional
analysis have a cause of action against the referring party at that stage, other than perhaps one for nominal
damages for breach of contract.
20. Although not conceded in terms, it is I think implicit from the footnote to paragraph 20 of Ms Sims'
submissions that she accepts that in principle it would be open to the Claimant to bring legal proceedings
seeking a negative declaration, i.e. that it had no liability to the Defendant. These legal proceedings could
be brought either before the adjudication, in response to a threatened claim by the Defendant, or after an
adjudication, if resulting in a decision adverse to the Claimant. It is clear from the decision of the Court
of Appeal in Messier-Dowty v Sabena [2000] 1 WLR 2040, referred to in the current White Book Service
2009 at paragraph 40.20.2, that the court has a discretion, which should be approached pragmatically,
whether or not to grant a negative declaration, that it should not be reluctant to do so where to do so
would help to achieve the aims of justice, but that since to do so would reverse the usual role of claimant
and defendant and thus might result in procedural complications and lead to potential injustice, caution
should be exercised in deciding whether or not to exercise the discretion. It may well be, therefore, that
the court would be more inclined to make a negative declaration on an application by the losing party to
the adjudication than it would before an adjudication had even been commenced, unless some good
reason could be shown for seeking a declaration at that stage. Ms Sims' point is, I think, that one
undesirable result of a finding by this court that this case was statute-barred would be to lead parties in
the position of this Claimant to issue proceedings for a negative declaration out of an abundance of
caution in every case where a claim which had been made but neither referred to adjudication nor agreed
was approaching the expiry of the relevant limitation period.
21. There is, it appears to me, a real difference between issuing legal proceedings seeking only a negative
declaration (i.e. that the claimant is not liable to the defendant), and issuing legal proceedings seeking
the return of sums paid in compliance with an adjudicator's decision on the footing that on a final
determination of the dispute the claimant has no liability to the defendant. In the latter case the claimant
is asserting a state of affairs which entitles him to a substantive remedy, viz the repayment of money,
which therefore seems to me to be in substance the assertion of a cause of action for the repayment of
that money. However, what is the cause of action on which the claimant in such a case can rely?
23. Although the Defendant contests the Claimant's case, its case consists merely of a bare denial; it does
not advance a positive case as to why the requirements for implication are not met. Insofar as the
Defendant appears to be saying that there is no need for the implication of such a term because the
Claimant has his cause of action in relation to the underlying dispute, that does not seem to me to answer
the objection that the only claim which a losing party in the position of the Claimant here could assert in
relation to the underlying dispute would be either a claim for nominal damages for breach of contract or
a claim for a negative declaration. It does not seem to me that any claim on the underlying cause of action
could include a claim for the substantive relief of an order for repayment of the monies which he has
paid in compliance with the adjudicator's decision. The other possible counter-argument, which the
Defendant does not make because it appears not to accept that there is any claim in restitution, is that the
availability of a claim in restitution means that there is no need for any implied term. However it does
not seem to me that the availability of an alternative claim in restitution is fatal to the implication of an
implied term; indeed if anything it supports it, because it shows that on an objective basis the parties
must be taken to have understood that there was a right to repayment of monies paid in compliance with
the adjudicator's decision if the final determination of the dispute by legal proceedings produces a
different result.
24. In my judgment the implied term contended for by the Claimant satisfies the 5 requirements identified
in the BP Refinery case, for the reasons set out by Ms Sims in her submissions. It is a reasonable and
equitable term which applies equally to both parties to the contract; it is essential to give effect to the
reasonable expectation of the parties (that a losing party to an adjudication who has to 'pay now challenge
later' will have the right to recover such payment by legal proceedings finally determining the dispute);
it is obvious that such a term is required to give effect to the reasonable expectations of the parties; it can
clearly be expressed; it supports rather than contradicts the terms of the Scheme which form part of the
contract between the parties. I am satisfied therefore that in a contract such as this to which the
adjudication provisions of the Scheme apply there is to be implied a term that where one party has paid
monies to the other party in compliance with the decision of an adjudicator then that party is entitled to
have that dispute finally determined by legal proceedings and, if or to the extent that the dispute is finally
determined in his favour, to have those monies repaid to him.
25. It seems to me that the implied term is necessary to make fully workable the concept of the temporary
finality of the adjudicator's decision which lies at the heart of the policy behind the adjudication
provisions of the HGCRA. It is in substance no different to the state of affairs which exists in many
construction contracts where there is provision for interim payments under interim certificates based on
interim valuations, with the final valuation, certificate and payment to be made at the end of the contract.
If it transpires at that stage that the contractor has been overpaid under the interim certificates, then it
cannot be doubted that the employer has a cause of action to recover the overpayment. Although standard
form contracts will typically make express provision for that eventuality, in my judgment if they did not
such a right would undoubtedly be implied…
26. It could I suppose be objected that this could result in unacceptable delay, where for example a party
launches an adjudication shortly before the expiry of the 6 year limitation period for his claim, succeeds
and receives money, only to be met by a claim for repayment just before the expiry of the 6 year limitation
period for that claim to be made, with the result that the court would have to adjudicate on a stale claim
12 years old. However the first counter-argument is that the initial delay cannot be the fault of the losing
party, and the second is that this still appears to me to produce a fairer result than the one for which the
Defendant is contending in this case. In any event, given that adjudication is employed in the vast
majority of cases precisely because it is a quick remedy, I doubt very much that cases such as the present
case are likely to occur frequently, still less the extreme example which I have just given.
Restitution
28. Although strictly unnecessary given my previous conclusion, I should also address the Claimant's
alternative argument that it has a cause of action for the repayment of money in restitution. Ms Sims
relied upon the principle, summarised in Goff & Jones' The Law of Restitution (7th edition, 2007) at
paragraph 16-001, that where a party to legal proceedings has paid money or transferred property to
another party in compliance with a court order, then if that order is subsequently reversed or set aside the
paying party is entitled by way of restitution to recover the money or property paid or transferred. The
Defendant does not challenge that principle, but disputes that it has any application to monies paid in
compliance with the decision of an adjudicator. Whilst I can see that there is a difference between
adjudication, which is the creature of contract (albeit one which statute requires be written in to the
contract whether the parties like it or not), and legal proceedings, it nonetheless seems to me that the end
result is still the same, namely that the claimant has been required to pay the defendant money under
compulsion as a result of the decision of a decision-maker with jurisdiction to rule on the relevant dispute,
so that if the decision is subsequently set aside a restitutionary claim ought in both cases to lie to recover
the payment. If the only point of difference is that an adjudication is contractual in origin, then
presumably the same objection would apply to an arbitration award subsequently set aside on an appeal
to the court on a point of law, which would at first blush produce a surprising and unjust result. The
Defendant's suggestion that the payment by the Claimant was voluntary is completely at odds with the
express obligation imposed by the HGCRA and the Scheme to comply with the decision; it can scarcely
be supposed that a claimant would have to require the defendant to issue enforcement proceedings in the
TCC to obtain a judgment to enforce the decision before a subsequent claim in restitution would be
available to him.
29. I therefore conclude that the Claimant has a cause of action to recover the monies paid over in
restitution in addition to the cause of action founded on the implied term.
Limitation period applicable to the claim in restitution
30. Ms Sims contended that the Limitation Act does not apply to restitutionary claims. She relied upon
the fact that restitutionary claims are not specifically dealt with in the Limitation Act, and she refers to a
discussion by Professor McGee in his publication Limitation Periods (5th edition, 2006) at paragraphs
4.006 – 4.007 to support her argument to this effect. Although it is true that Professor McGee does
suggest that the view, expressed by Hobhouse J. (as he then was) in Kleinwort Benson v S Tyneside MBC
[1994] 4 All ER 972, to the effect that a claim for money had and received fell within s.5 Limitation Act,
should be treated with caution, it is clear that this view is not shared by Goff and Jones, who in chapter
43 of their book, devoted to the defence of limitation in restitution claims, accept that the assumption
(that s.5 applies to money had and received cases) 'must be made, though the words used cannot be
regarded as felicitous' (paragraph 43-001). Although Goff & Jones do not specifically consider the case
of claims for the recovery of money paid over under a court order, the general approach appears to be
that in personal restitutionary claims at law a 6 year limitation period will apply by virtue of s.5
Limitation Act.
31. In any event, since it is clear in my judgment that even if the usual 6 year limitation period applies it
will run from the date of payment (see Goff & Jones, paragraph 43-002), so that the Claimant's claim in
restitution is not statute-barred even on that basis, there is nothing to be gained from my expressing any
concluded opinion as to whether the claim in restitution is subject to any limitation period at all, which
is far better left for a case in which the point does directly arise for decision. I am wholly unable to accept
the Defendant's argument that the limitation period in restitution runs from the date when the adjudicator
decided that the Claimant should have paid the Defendant, viz January 2003. There is no logical basis
for this argument, and it is inconsistent with the cases cited in paragraph 43-002 of Goff & Jones."
34. It is clear that a number of concessions were made by the defendant in that case which are not made in the
current case with little or no coherent argument or pleading in that case against the existence of an implied term.
It appears also to have been conceded or never disputed by the defendant in that case that there was a "right…to
challenge" the adjudication decision by legal proceedings and recover sums paid in compliance with a decision.
(Paragraph 19).
35. It is legitimate to start consideration of whether or not there is an appropriate implied term by reviewing the
nature of adjudication and an adjudication decision. It is legally and procedurally very different from the judgment
of a court or an award from an arbitrator because they are final and binding, subject to any appeal, whilst the
adjudication decision is only temporarily binding pending any final resolution. There is no appeal on fact or law
from an adjudication decision. Furthermore, there is no suggestion (and rightly so) in the Scheme and most
standard form contracts that adjudication is a compulsory step in the dispute resolution process: a party may
choose to go to adjudication, usually if it wants a quick and enforceable decision, but it does not have to go down
that route. Either party to a construction contract can go directly to the final dispute resolution tribunal, arbitrator
or court as the case may be, to have its claims and disputes resolved. In arbitration, although an award is usually
agreed to be final and binding, there is a right to seek to appeal laid down by statute in the Arbitration Act 1996
(Section 69); given the tight timetable required to seek permission to appeal, the reality is that a dissatisfied
arbitration party will almost invariably not honour the award pending its application and any subsequent appeal.
There is little or no jurisprudence about what the Court can do following a successful appeal, apart from
confirming, varying, remitting or setting aside the award (Section 69(7)), although Section 69(8) says that the
decision of the court on an appeal shall be treated as a judgment of the Court which might well let in the inherent
jurisdiction of the Court as suggested by Lord Nicholl in Nykredit.
36. There undoubtedly is a jurisdiction available to parties to a contract to seek and to the Court to grant negative
declarations. In Messier-Dowty v Sabena [2000] 1 WLR 2040, referred to by HHJ Davies, the Master of the Rolls,
Lord Woolf said that the "use of negative declarations domestically has expanded over recent years", in
"appropriate cases their use can be valuable and constructive" and there was "no valid reason for taking an adverse
view of negative declaratory relief" (Paragraph 36). He refers to the fact that there were "numerous cases where
without objection negative declarations have been granted". He went on to say at Paragraph 41 that the:
"approach was pragmatic. It is not a matter of jurisdiction. It is a matter of discretion. The deployment
of negative declarations should be scrutinised and their use rejected where it would serve no useful
purpose. However where a negative declaration would help to ensure that the aims of justice are achieved
the courts should not be reluctant to grant such declarations. They can and do assist in achieving
justice…So in my judgement the development of the use of declaratory relief in relation to commercial
disputes should not be constrained by artificial limits wrongly related to jurisdiction. It should instead be
kept within proper bounds by the exercise of the courts' discretion."
He went on at Paragraph 42 to say:
"While negative declarations can perform a positive role, they are an unusual remedy in so far as they
reverse the more usual roles of the parties. The natural defendant becomes the claimant and vice versa.
This can result in procedural complications and possible injustice to an unwilling 'defendant'. This in
itself justifies caution in extending the circumstances were negative declarations are granted, but, subject
to the exercise of appropriate circumspection, there should be no reluctance to their being granted when
it is useful to do so."
37. It follows that Aspect had a cause of action in effect for a negative declaration that it was not in breach of its
contractual or tortious duty of care as from the time that it provided its report in April 2004. It is difficult to
speculate without knowing what facts might have been deployed what a court might have decided for example in
May 2004, albeit that, if there was no hint or suggestion at that stage from Higgins that it was in any way
complaining about the report, the relevant court might well have dismissed a claim by Aspect for a negative
declaration that Aspect was not in breach of contract, even if there was evidence of proper performance, simply
by reason of the types of concern expressed by Lord Woolf in the Messier-Dowty case; it might well not be useful
or sensible and it would be a waste of costs and court time to grant such a declaration. The position however is
different on the facts of this case because complaints were clearly raised in 2005 by Higgins directed against
Aspect and the Court may have been more disposed at that stage to grant a negative declaration (if factually
justified). At least, Aspect could have made an informed decision, commercially and legally in conjunction with
its lawyers and insurers, as to whether this was worthwhile.
38. One therefore needs to move on in the light of the matters raised in the three preceding paragraphs to consider
whether there is an implied term. I take the considered wisdom on implied terms now to be encompassed by the
Privy Council decision in the Attorney General of Belize case. The contract in this case is a simple one, albeit that
it was a construction contract within the meaning of the HGCRA. The contract must be treated as having
incorporated the Scheme. It is worth considering Paragraph 23(2) of the Schedule to the Scheme in a little detail:
"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." (Emphasis added)
One needs to bear in mind what it is that the adjudicator is deciding: it is the dispute which has been referred to
him or her. That dispute may be a contested claim for a debt, for damages or for a declaration (positive or negative).
That claim will usually involve some sort of (at least alleged) cause of action which is said to have accrued before
it has been disputed. Thus, in the current case, it was Higgins' contested claim for damages for contractual
negligence which was referred to adjudication. Such cause of action did not and does not disappear by reason of
the adjudication process or decision; it existed and is as good before as it is after the decision.
39. All that Paragraph 23(2) provides is that the decision on the referred dispute shall be temporarily binding
unless and until the dispute is finally resolved and that meanwhile the parties are to comply with the decision.
There still remains a dispute between the parties until the final resolution. I disagree with the view expressed by
HHJ Davies that Paragraph 23(2) in some way provides a "platform" for the implication of a term, if by that
expression he meant that this opens the way to the implication.
40. It is helpful to consider the 5 point list set out in the BP Refinery case in the context of whether such an implied
provision would spell out in express words what the contract between the parties incorporating the Scheme, read
against the relevant background, would reasonably be understood to mean. The implied term relied upon is:
"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."
I attach little importance to the fact that this implied term runs to 73 words because I have no doubt that it could
be reduced verbally, although it is sometimes said that the longer the implied term the less likely it is that the term
"goes without saying". The five factors on the BP Refinery list are:
"(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract,
so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes
without saying' (4) it must be capable of clear expression; (5) it must not contradict any express term of
the contract".
41. Unlike Counsel, I will not consider each of these separately. What one has to weigh up on each side of the
argument for or against implication are primarily these factors:
(a) There is no doubt that each party here and any party to a construction contract had and has a right to
sue on a cause of action for a positive or negative declaration that Aspect was or was not in breach of its
contract or duty of care. That right was not circumscribed in any way by the simple contract into which
they entered.
(b) Each party had a legally enforceable right at any time after a dispute arose to refer it to adjudication.
(c) The decision of any given adjudicator on any given dispute by operation of law was or would be
binding on the parties unless and until it was finally resolved by the Court.
(d) Both in Court and in adjudication, all defences, including limitation, would be open to the defending
party.
(e) The creation in effect by way of implication of a term along the lines pleaded creates a new cause of
action as from the date of payment ordered to be made by an adjudicator's decision which would have
the effect of extending the period in which the underlying dispute can be litigated or arbitrated (but only
by the party required to pay) for an additional six years from the date of payment, without the risk of a
limitation defence being raised.
(f) There is a possible undesirability for the party which might be criticised for instance for breach of
contract or as owing money having to pursue a claim for a negative declaration within six years of
performance under the contract to avoid the possibility of a limitation defence being raised against it.
(g) There is a theoretically possible risk to the party which does not yet wish to seek such a negative
declaration that, if it decides to wait to see what the outcome is of an adjudication brought against it
within a few weeks of the potential expiry of the limitation period, it might not have time within the
limitation period to seek a negative declaration after the decision has been issued let alone honoured by
it; it might then be faced with a limitation defence and not be able to recover payment pursuant to a
decision which as properly analysed by a judge or arbitrator might turn out to be wrong.
(h) Against that, the responding party in adjudication in the theoretical scenario could, as soon as the
belated adjudication is threatened or started, issue its proceedings for a negative declaration which would
protect it against an unfavourable outcome in the adjudication decision.
(i) There is of course a risk, albeit a very small one, that, if the belated adjudication is started by a party
whose claim is in truth already barred by limitation, the adjudicator might get it all wrong and (legally
or factually unjustifiably) reject the limitation defence in the adjudication; there would then be no
comeback for the losing party, unless it had instituted its claim for a negative declaration within the
limitation period for seeking such a declaration.
42. The parties have argued respectively that there is or there is not a gap in what the parties via the Scheme must
be taken to have agreed. I do not consider that there is in reality any real gap. Either party could go to the Court
(as the final resolution tribunal) at any time (at least after performance) for a positive or negative declaration that
it or the other was or was not in breach of contract; the fact that commercially it might not want to do this at a
given stage or that it might want to wait to see what the other party did does not mean that there would not be a
cause of action by which such a declaration was sought.
43. A factor to be borne in mind is how the proposed implied term would deal with a set-off and counterclaim
arising on the dispute referred to adjudication or with a referring party which does not recover all of what it is
claiming in the adjudication. One can take very typical building contract examples where a sub-contractor claims
on an invoice for £50,000 which may or may not be challenged in itself but the main contractor raises a crossclaim for defects or delays for, say, £60,000; the adjudicator decides that the set-off is proved to the value either
of £30,000 or £60,000 and awards the balance of either £20,000 to the sub-contractor or £10,000 to the main
contractor. On the first example, the main contractor could pursue its counterclaim (and set-off) within six years
(without fear of the limitation defence) from the time when it paid £20,000 to the sub-contractor, although any
claim for a positive declaration that the sub-contractor had been in breach will run (limitation-wise) from the date
of the original breach; any claim by the sub-contractor for the balance of its account will run from the date when
the money was originally due. On the second example, the main contractor has no new cause of action because it
has not paid any money but is restricted to a cause of action for a positive declaration that it was entitled to the
damages which (limitation-wise) relates back to the date of the breach whilst the sub-contractor has two causes
of action, the first being a claim on the invoice which dates back to when the money originally fell due and the
second being for the recovery of the £60,000 paid pursuant to the adjudication decision. One can legitimately ask
whether the parties must be taken to have agreed that this relatively common permutation is to produce these
consequences, which could be said to be anomalous.
44. The reality is that, as here, the party ultimately found by the adjudicator to be in breach (Aspect) has to pursue
a claim for what is in essence, practice and effect a claim for a negative declaration which it could have brought
at any time after performance; it did not have to wait until the adjudicator issued his decision. When one looks at
Aspect's pleading, the fundamental claim is for a negative declaration that it was not in breach of contract and it
relies on the fact that it performed the contract fully and properly at the time. The dispute is no different now in
essence to what it was in this context in 2005 or at the time of the adjudication.
45. It could be said arguably that there are "pros" and "cons" when one looks at the various factors but at best or
at worst they balance each other. It is, in my judgment, not possible to say that implication of the pleaded term is
reasonable, equitable or necessary to make the contract work (business efficacy) and it does not go without saying.
It is, however, just about capable of clear expression and, unsurprisingly in this simple contract, it does not
contradict any express term. The only risk on analysis which theoretically exists is that, if a party like Aspect
waits to see what the result of an adjudication started against it just before the expiry of a limitation period will
be (which is not this case), its later claim for a negative declaration may well fail if the limitation defence is run
against it. Of course, in the commercial world and in real life, as here, adjudications are started usually well within
the limitation period and often close to the beginning of it so that the losing party will, almost invariably, be able
well within the limitation period to initiate its own proceedings to put right any factual or legal error made by the
adjudicator. The risk therefore is not only very small but is one for which each party to a contract does have a
remedy, which is to commence its proceedings (within 6 or 12 years after performance) and even for a negative
declaration within the limitation period. It must be a rare case in which a term will be implied to provide for a
very small risk which is unlikely to and need not occur. Against that risk, one is seeking to imply a term in effect
into statutory wording which Parliament either did not think about or, if it did, decided to do nothing about in
terms of expressing such a term. If one was to ask the question: does the Scheme as a statutory instrument properly
construed mean in effect that the losing party is to be given a new right to sue as from the date of payment of the
adjudication decision for the recovery of sums paid, the answer would be in the negative. There is nothing in the
Parliamentary debates (at all or certainly put before the Court) to suggest that Parliament meant in effect to create
in every construction contract incorporating the Scheme an implied term along the lines suggested by Aspect in
this case. I can not see any overriding policy reason why such a term should be implied.
46. It was argued that Article 6(1) of the European Convention on Human Rights requires the state to provide a
right to challenge an adjudication decision before a judicial body with full jurisdiction. Adjudication in itself is
not as such subject to the fair trial requirement albeit that authorities have established that decisions will not be
enforced where there has been a material or significant failure to comply with the rules of natural justice. However,
this argument is somewhat circular because there is a right effectively to challenge an adjudication decision and
the fact that there may be in rare circumstances be a limitation defence (if it is deployed) does not mean that the
party can not seek to challenge it. The European authorities relied upon, Albert and Le Compte v Belgium (1983)
5 EHRR 533 and Crisan v Romania (27 May 2003) are two very different types of case not involving adjudication
as such but respectively a challenge to a medical conduct tribunal and Romanian County Court's finding that it
had no jurisdiction to review the lawfulness of a particular Commission's decision. Adjudication is the creature or
consequence of a commercial or professional contract, voluntarily entered into by the parties. There is still access
in any event following an adjudication decision (in this case) to the Court which will have the effect of deciding
whether the adjudicator got it right or not. In this case, in any event, Aspect had 2½ years before the limitation
period expired to go to the Court to have the dispute finally resolved without fear of any limitation defence being
raised.
47. That then leaves the argument relating to restitution. Somewhat oddly (or perhaps unsurprisingly), the
Limitation Acts do not identify a limitation period for a claim in restitution as such. That is most likely because
restitution insofar as it gives rise to a cause of action in itself in reality arises under some other head of law like
trust, conversion, tort or otherwise, which do attract limitation provisions. The payment following the adjudicator's
decision was not paid under any mistake but because the contract between the parties in effect required it to be
made. It was not paid under duress. Indeed, it was not argued that, in terms of restitution, there is any other actual
or analogous basis for recovery other than the appellate basis where restitution also is treated as arising, as
indicated earlier in this judgment, as a policy consideration when judgments are successfully appealed or
otherwise set aside. This latter analogy does not readily "work" in the context of adjudication because there is no
appeal or judicial setting aside process as such. The underlying dispute is simply referred to the Court or to an
arbitrator (as the case may be) for final resolution.
48. This is exactly what has happened here with Aspect seeking a negative declaration that some nine years ago
it was not in breach of contract. If for any reason (limitation or on the merits), it loses, then it will not be entitled
to the repayment which it seeks. If however it was to succeed, the primary and initiating relief would be the
declaration and the secondary and consequential relief would be the return of the money, (as it might turn out)
wrongly paid. Put another way, it could not get any money back unless and to the extent that it secured an
appropriate negative declaration as to liability or quantum. It follows that one does not reach the analogous
position which would follow from a successful appeal or setting aside of a judgment. There is no separate cause
of action in restitution.
49. The cause of action for a negative declaration is in contract and tort and the limitation period or a cause of
action based on a contract not under seal is six years from the latest date when the contract was performed because
there could be no breach after performance (at least for a simple contract such as the current one).
Conclusion
50. It follows from the above that there is no implied term as pleaded and that the essential claimed cause of action
relied upon by Aspect involving a negative declaration that it was not in breach of contract or duty and that Higgins
did not incur the loss eventually found by the adjudicator to be due is barred by limitation. It also follows that
Higgins' counterclaim for the balance of its loss is also barred by limitation. In consequence, both claim and
counterclaim should be dismissed.