“Well, one of them must be wrong!” − The Court of Appeal disagrees with itself

Two differently constituted panels sitting in the Court of Appeal within one month of each other have come to contradictory conclusions on the same question.

It is a question relevant to the construction industry as that is where these circumstances are most likely to arise since it relates to adjudication − the procedure specifically devised for resolving disputes in that context.  And it is important because it determines when a party who is unhappy with an adjudicator’s decision who wants to litigate in respect of the matters in dispute, must issue proceedings before the claim becomes time-barred.

The scenario which faced the courts in both cases was as follows:

• The unsuccessful party to an adjudication makes payment in accordance with the adjudicator’s decision
• The unsuccessful party then seeks to challenge the validity of the payment made in the courts
• In such circumstances, when does the limitation clock start ticking on the unsuccessful party’s right to challenge the (allegedly unnecessary) payment?

The two cases are Aspect Contracts v. Higgins Construction [2013] EWCA Civ 1541 and Walker Construction v. Quayside Homes [2014] EWCA Civ 93 heard in October and November 2013 respectively (though judgments were handed down in November and February).

In Aspect, the Court of Appeal (consisting of Lord Justices Longmore, Rimer, and Tomlinson) decided that the paying party accrues a new cause of action at the date of payment.  This overturned Akenhead J’s first instance decision, which preferred that the cause of action accrued “whenever it otherwise did before the decision was issued”.  The result being that under the Court of Appeal’s view, the paying party has a far longer limitation period to challenge the payment.

The Court of Appeal arrived at this conclusion on the basis that adjudication is only intended to be binding until final determination of the matter, with Longmore LJ stating:

“If the final determination decides that a particular party has paid too much, repayment must be made.”

The decision in Aspect can be contrasted with that of Walker.

In Walker, the Court of Appeal (consisting of Lord Justices Laws, McFarlane and Gloster) preferred Akenhead J’s first instance reasoning in Aspect. Gloster LJ gave the leading judgment. The Court of Appeal therefore held that the cause of action arises from:

“the underlying construction contract itself and was thus subject to the six year limitation period applicable to that contract.”

Given the polarity between these two decisions, coupled with their close proximity in terms of timing, it is perhaps possible that the Court of Appeal’s decision in Aspect did not come to the attention of the differently constituted members in Walker. Nevertheless, consequently considerable uncertainty surrounds the issue.

The good news is that Aspect is due before the Supreme Court in April 2015 so the conflict should be resolved very soon.

For what it’s worth, my money is on the Supreme Court endorsing the first instance decision such that the (shorter) ordinary contractual limitation period applies.  Watch this space for a suitably triumphalist − or humble response to the Supreme Court’s decision next year!

Michael Bonning is an Associate in Michelmores LLP’s Construction Team with specialist expertise in adjudication and High Court enforcement proceedings.