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Does the Limitation Act 1980 apply to adjudication?

Your starting point, like mine, to the above question, which I will leave you to mull over the Easter break, is likely “of course!”. But why?

This question was first explored by Peter Clyde in his blog in 2012. Since then we have had the benefit of the Supreme Court’s decision in Aspect Contracts (Asbestos) Ltd v Higgins Construction plc, but does this change the analysis?

Why would it not apply?

The Limitation Act 1980 operates to bar the remedy but it does not extinguish a right. The various time bars in the Limitation Act 1980 are said in particular to stop an “action”.

Section 38(1) defines an “action” as including:

“… any proceeding in a court of law, including an ecclesiastical court (and see subsection (11) below).”

Adjudication does not fall easily under the description of “court of law”.

Notably, when the Limitation Act 1980 came into force in 1981, section 34 expressly stated that it applied to arbitration. Section 34 was only repealed in 1997 once the Arbitration Act 1996 came into force, with section 13 of that Act stating:

“The Limitation Acts apply to arbitral proceedings as they apply to legal proceedings.”

Parliament (seemingly recognising that an arbitration might not be a court of law) could easily have included a similar provision in the Construction Act 1996. However, it did not do so. Instead, section 108(2) sets out a right to give a notice of adjudication “at any time”.

While not directly addressing this question, there are several court decisions that support the view that adjudication proceedings are not an action subject to the Limitation Act 1980:

On the other hand, in Connex South Eastern v M J Building Services, Dyson LJ while commenting that the reference to “at any time” meant there was “no time limit” on adjudication, stated that a party who commenced an adjudication after the expiry of the relevant limitation period:

“… runs the risk that, if the limitation defence is taken, the adjudicator will make an award in favour of the respondent.”

However, this comment was obiter and not subject to full analysis or discussion.

Overall, as a matter of principle, the more likely answer appears to be that the Limitation Act 1980 would not apply to adjudication (at least on the current drafting of the two relevant statutes).

Would a decision after the expiry of the limitation period be enforceable?

Assuming a limitation defence would not be available in the adjudication, would it be a defence on enforcement?

On the current limited range of defences available to adjudication enforcement, there is not a clear principle that would justify resisting enforcement (if the court accepts that the Limitation Act 1980 does not apply to the adjudication).

However, what would the court do if the responding party launched a Part 8 cross-claim, similar to the Hutton v Wilson guidance, seeking a final declaration that the claim is time-barred?

What would be the relevant limitation period for any court proceedings challenging the adjudicator’s decision?

As a matter of merits, this appears to be the most attractive answer. In other words, party A can commence and obtain an adjudicator’s decision after the expiry of the limitation period, but party B can immediately commence court proceedings in which its limitation defence would apply.

But does this work as a matter of principle and analysis?

In Aspect v Higgins, the Supreme Court confirmed that:

  • A new cause of action arose to comply with the adjudicator’s decision. Therefore, if party A obtains an adjudicator’s decision in its favour one year before the expiry of the limitation period for the original claim, it would (for a simple contract) have another six years to enforce it.
  • The paying party, party B, has a cause of action to recover any overpayment following an adjudicator’s decision that arises on the date of payment. Therefore, if party B pays a sum due under an adjudicator’s decision one year before the expiry of the limitation period for the original claim, it can (for a simple contract) commence proceedings within six years, even after the expiry of the limitation period for the original claim, to recover it.
  • Party B, when claiming repayment of an overpayment could not rely on the limitation period for party A’s substantive claim having expired by the time of party B’s claim to allow it to recover the full overpayment. (“Any limitation period which would apply to a claim for such a sum [i.e. Party A’s underlying claim], if it had not yet been settled, is in these circumstances quite irrelevant.”)

How far does the third point go?

The Supreme Court in Aspect v Higgins was dealing with an underlying limitation period that expired after the adjudication but before the subsequent court proceedings. Such a situation may be distinguished if the court in the subsequent proceedings is considered to be deciding the claim at the time of the adjudicator’s decision.

However, the Supreme Court’s comments, the broad nature of the implied term in Higgins v Aspect and the fact that party A would not be seeking a remedy in any overpayment court proceedings, could suggest that the expiry of the limitation period for the underlying claim would be irrelevant even if it had expired before the adjudication.

The situation could be even more complicated if an adjudication was commenced before the expiry of the limitation period but a decision only made after.

On any view, while the “right” answer may seem clear to most, the logic and reasoning to get there is not.

Concluding thoughts

As a matter of principle, there is much to be said for the surprising answer that the Limitation Act 1980 does not apply to adjudication. However, the more problematic question that then arises is whether an adjudicator’s decision after the expiry of the limitation period is of any benefit to the successful party.

It is perhaps surprising that after over 20 years, the court has not been asked to decide this point. Albeit, that itself might suggest that practitioners and adjudicators have a firm view on what the “right” answer, at least on the merits, ought to be.

Nevertheless, one day a party with a nailed-on claim, save for limitation, might consider it worth the risk of finding out if adjudication really is unlimited!

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