Adjudication near the end of limitation

Up until the case of Jim Ennis Construction Ltd v Premier Asphalt Ltd [2009] a key question over adjudication and limitation i.e. the last date by which a claim can be started, remained unanswered. That question was whether an adjudicator's decision which is delivered close to or after the expiry of the limitation period effectively becomes final (rather than interim) by virtue of the fact that it is then not possible to commence proceedings in relation to that dispute within the applicable limitation period. This case considered this question.

In the above case it was decided that the obligation to comply with the adjudicator's decision gives rise to a new cause of action in respect of that decision. Therefore the paying party would have 6 years from the decision (the new cause of action) in which to litigate or arbitrate to overturn the adjudicator's decision.

The judge in the case felt that the contract between the parties included an implied term that money to be paid following an adjudicator's decision may be recovered in later legal proceedings i.e. litigation or arbitration, if these proceedings were to reach a different result to the adjudicator's decision regarding the same dispute. He felt that this implied term was necessary to make the concept of the "temporary finality" of the adjudicator's decision fully workable. Section 108(3) Housing Grants, Construction and Regeneration Act 1996 provides that the contract shall provide that the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, arbitration or by agreement. 

The Court's decision is a sensible and practical result. It means the losing party can comply with the adjudicator's decision and then start court proceedings or arbitration if it disagrees with that decision. The limitation period should not affect this because time starts to run from the date of the adjudicator's decision. Any other result would undermine the adjudication process and would give parties the opportunity to wait until the limitation period had almost expired, before starting adjudication knowing that the temporary nature of the adjudicator's decision would become permanent.

However, one the effect that the decision in this case may have is that in order to stall a limitation defence, all you need to do is to commence adjudication. As such it will be interesting to see to what extent this judgement is followed in future cases.

For more information on any of the issues mentioned in this article, please contact Stephen Clarke or Laura Nichols.

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