Practical Law

Recently, I had reason to think about whether the Limitation Act 1980 applies to adjudication. This seems like a “no-brainer” – of course there must be a time limit on the ability to refer a construction dispute to adjudication. Remarkably, though, there is no clear answer and judicial and other opinion on the matter is inconclusive and hard to come by.

I have split my thoughts into two parts – this post is part one.

Is it possible that there is no time limit for bringing an adjudication?

Instinctively, the answer must be no. How could it be that a party who is time-barred from bringing an action in court 6 or 12 years after the cause of action has accrued would be entitled to bring an adjudication at any time outside normal limitation periods? But explaining the answer is not easy.

Limitation Act 1980

There is nothing in the common law that limits the time when an action may be brought. The Limitation Act 1980 establishes limitation periods of (for example) 6 years from accrual of the cause of action for claims founded on breach of simple contracts (contracts that are not deeds). What is being limited is not the rights and liabilities of the parties, but the entitlement to bring an “action” (and even then a claimant may bring an action, and it is for the defendant to raise a limitation defence).

What is an action?

While a dictionary definition of “action” may be wide, other factors point against giving “action” a wide definition, including:

• Section 13 of the Arbitration Act 1996, which states that the “Limitation Acts apply to arbitral proceedings as they apply to legal proceedings”. Section 39 of the Limitation Act 1980 refers twice to “any action or arbitration”, suggesting that the two are distinct. It could be said by analogy that adjudication is therefore not an “action” either for the purposes of the Act.
• In Braceforce Warehousing v Mediterranean Shipping, Ramsey J doubted the parties’ assumption that the Limitation Act 1980 applied to expert determination, although he was not asked to decide the point. Adjudication might be likened to a form of statute or contract-enshrined expert determination. On that basis, adjudication should arguably be treated the same way.
• Section 108(2) of the Housing Grants, Construction and Regeneration Act 1996 (Construction Act 1996) allows a party to give notice of its intention to refer a dispute to adjudication “at any time” . In Connex South Eastern v M J Building Services Group, Dyson LJ held that these words meant that there was no time limit on bringing adjudications. An adjudication may be brought “even after the expiry of the relevant limitation period”. However, he also commented obiter that there is a risk that a respondent might raise a successful limitation defence.

A possible injustice

If the Limitation Act 1980 does not apply to adjudication, this could give rise to significant injustice. Not only would it be unfair for respondents to be faced with claims decades after the accrual of a cause of action (for example, in respect of latent defects), but adjudication was intended to be a process resulting in a temporarily binding decision until the dispute is finally determined, usually by a court or in arbitration. If the Limitation Act 1980 applies to actions in court but not to adjudication, an adjudicator’s decision could become final, binding and unchallengeable. That would be an unintended consequence of the Construction Act’s failure to provide expressly for limitation.

As such, if a court was asked to decide this point, it might leave no stone unturned in search of a reason to apply limitation to adjudication. I will suggest and consider some reasons in part two.

(For an extended version of my thoughts, see our Constructive blog.)