Stuart Thwaites’ case notes: Aspect Contracts (Asbestos)

Aspect Contracts (Asbestos) v Higgins Construction

When a contract is not executed as a deed, a party has six years in which to bring its claim from when the right (or “cause”) of action arose. After that time the defendant has a complete defence to the claim, simply because it has started too late.

Such a timing issue arose this year in the case of Aspect Contracts (Asbestos) v Higgins Construction. Aspect specialises in asbestos management services, including asbestos surveys. Higgins is a construction company specialising in refurbishment of community housing, education and healthcare properties.

In March 2004, Higgins was considering whether to enter into a contract with Notting Hill Housing Trust for the demolition and redevelopment of the Ivybridge Estate in Hounslow, London. Before making a decision, Higgins approached Aspect to carry out an asbestos survey.

After receiving the survey, Higgins undertook the demolition and redevelopment of the Ivybridge Estate.

During the course of the works additional asbestos, not shown on Aspect’s survey, had to be removed, which delayed the project. Higgins also had to pay for the additional asbestos to be removed and blamed Aspect for the resulting delay and, of course, its increased costs.

Higgins began adjudication proceedings against Aspect in 2009 and was successful: Aspect paid Higgins £658,017 pursuant to the adjudicator’s award. So far, so normal, save that Higgins started the adjudication so late.

Two-and-a-half years after the adjudicator’s decision, in February 2012, Aspect decided to bring proceedings against Higgins to get its money back.

Aspect sought a declaration that it was not liable to pay damages and/or interest to Higgins in the amount decided by the adjudicator, or at all. Further, it sought an order for repayment of the monies it had paid to Higgins. Higgins brought a counterclaim for the balance of its loss that it had not previously recovered.

The key preliminary issue in the court proceedings was whether Aspect’s claim (and Higgins’ counterclaim) was time barred.

Aspect contended that there was an implied term of the contract that when it paid the money to Higgins, following the adjudication in 2009, it gave rise to  a new right or cause of action against Higgins, and as a result its claim was not out of time.

The judge held that there was no implied term of the contract. As a result, the “cause of action”, that is, the issue giving rise to the claim, was not the payment to Higgins following the adjudication in 2009, but the breach of contract alleged by Higgins against Aspect in 2004/5. Aspect’s claim (and Higgins’ counterclaim) was out of time.

Stuart Thwaites’ analysis

Aspect lost out on the chance to try to get its money back because it began court proceedings too late. It may or may not have been the subject of a wrongly decided adjudication – we’ll never know.

Such timing issues do not usually arise because adjudications tend to be started fairly promptly when a dispute arises. If the dispute is over money, there is normally a strong incentive to adjudicate if negotiations do not result in payment. If a party is then not happy with the adjudicator’s decision, again proceedings are started fairly promptly as the losing party wants to get its money back as soon as possible.

But where time does become an issue, there are three practical and important points to be taken from this case, which now represents the new law on this issue. First, do not delay in bringing proceedings if you are unhappy with the outcome of an adjudication, at least not until you are sure as to how much time you have to bring those proceedings.

Second, be aware that the starting point for that limitation period is not when you pay out following an adjudicator’s decision but from the date of the underlying (alleged) breach of contract.

Third, if an adjudication is started against you close to expiry of the limitation period (six years if the contract is not executed as a deed), take advice on starting protective court proceedings.

Keeping these points in mind will avoid the very costly mistake that Aspect made.

Stuart Thwaites is senior associate Wright Hassall Tel: 01926 884690 www.wrighthassall.co.uk/