ASPECT CONTRACTS (ASBESTOS) LTD V HIGGINS CONSTRUCTION PLC

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:

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 judgementhearin 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 WestBromwichBuilding 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 WestMetropolitanRegionalHospital 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?