Jim Ennis Construction v Premier Asphalt Limited [2009] EWHC 1906

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summary

An unsuccessful party to an adjudication under the Housing Grants, Construction and Regeneration Act 1996 (the “Construction Act”) could bring a claim to recover monies paid pursuant to the adjudicator's award notwithstanding the fact that its original counterclaim in the adjudication was statute barred by virtue of the Limitation Act 1980.  This was because there was an implied term of the contract that where one party has paid monies to the other party in compliance with the decision of an adjudicator then that party is entitled to have the dispute finally determined by legal proceedings and, if or to the extent that the dispute is finally determined in his favour, to have those monies repaid to him. The cause of action under this implied term arises (and time therefore starts to run) when the losing party pays monies to the winning party in compliance with the adjudicator’s decision.

Technology and Construction Court, His Honour Judge Stephen Davies

Background

Jim Ennis Construction Ltd (“Jim Ennis”) was employed as a sub-contractor to construct road works.  Jim Ennis sub-sub-contracted the laying of asphalt to Premier Asphalt Ltd (“Premier”).  The contract between the parties contained no express adjudication provision so by virtue of s.108(5) and s.114(4) of the Construction Act the adjudication provisions of Part I of the Scheme for Construction Contracts (the “Scheme”) were incorporated as implied terms of the contract.  The employer was dissatisfied with the workmanship of the base course laid by Premier.  Jim Ennis removed the base course and Premier replaced it.  There was no agreement as to who should bear the costs of this work.  Some months later Premier made an application for payment which included a claim for £16k for the cost of the replacement works.  Jim Ennis refused to pay that claim, and also made a deduction of £39k from Premier’s final account for the loss and damage that Jim Ennis had allegedly incurred as a result of Premier’s poor workmanship.  Premier did not take any steps at the time by way of adjudication or litigation to challenge that deduction, but almost 6 years later it referred the dispute about the deduction to adjudication.  The adjudicator upheld Premier’s claim and required Jim Ennis to pay Premier the sum of £39k plus interest of £15k.  Jim Ennis did not agree with the decision but recognised that it was obliged to comply with the decision until the dispute was finally determined, and accordingly made payment to Premier.  Jim Ennis then commenced legal proceedings against Premier.  These legal proceedings were started more than six years after the base course was laid.  Premier made an application to strike out the claim on the ground that it was statute-barred.

Issues

Premier submitted that pursuant to s.5 of the Limitation Act the time limit for a claim founded on simple contract is six years from the date on which the cause of action accrued, that the cause of action arises on breach and that the breach complained of by Jim Ennis (i.e. the shoddy laying of the base course) occurred more than six years before Jim Ennis issued proceedings.   
  
Jim Ennis disputed that its claim was time-barred.

Decision

The Court found:

  • In a contract to which the adjudication provisions of the Scheme apply there is to be implied a term that where one party has paid monies to the other party in compliance with the decision of an adjudicator then that party is entitled to have that dispute finally determined by legal proceedings and, if or to the extent that the dispute is finally determined in his favour, to have those monies repaid to him.
  • The cause of action under this implied term can only arise when the losing party pays monies to the winning party in compliance with the adjudicator’s decision.  This is a claim to which s.5 Limitation Act applies, because it is a claim founded on a simple contract, so that the losing party has 6 years from the date of payment in which to bring legal proceedings to recover that payment.
  • Accordingly, Jim Ennis’s claim was not statute-barred by limitation.  
  • Although it was unnecessary to decide the case (given the Courts conclusions above), the Court also found that Jim Ennis had an alternative cause of action in restitution (crudely put, restitution is a remedy which restores a person to the position that they would have been in if not for the improper action of another).  In coming to this decision the Court found that where a party to an adjudication has paid money or transferred property to another party in compliance with the decision of an adjudicator, then if that decision is subsequently reversed or set aside the paying party is entitled by way of restitution to recover the money paid.  However, it was unclear whether s.5 of the Limitation Act applied to a restitutionary claim of this type or whether no time limit applied.  Given that this question was only of academic interest (because even if s.5 applied, time would start to run from the date of payment), the Court refrained to rule on this particular point. 
  • Having found that the claim was not time-barred, it was also unnecessary for the Court to consider Jim Ennis’ submission that, because Premier had delayed the referral of its dispute to adjudication for so long, it would be unfair to allow Premier to rely on the limitation defence (in legal terminology it was “estopped” from relying on the limitation defence).  However, the Court indicated that if the Court had decided this point then it was unlikely to have been persuaded by Jim Ennis’ submission.  
  • Jim Ennis also submitted that unless it was able to challenge the adjudicator’s decision then its rights under Article 6(1) of the European Convention of Human Rights (the right to a fair hearing) would be breached.  The Court did not address this submission.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

 

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