Jim Ennis Construction Ltd v Premier Asphalt Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 24 July 2009 |
| Neutral Citation | [2009] EWHC 1906 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: TCC 48/09 |
| Date | 24 July 2009 |
[2009] EWHC 1906 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
MANCHESTER DISTRICT REGISTRY
TECHNOLOGY AND CONSTRUCTION COURT
Manchester Civil Justice Centre,
1 Bridge Street West,
Manchester, M60 9DJ
His Honour Judge Stephen Davies
Case No: TCC 48/09
Ms Alice Sims, counsel (instructed by Halliwells LLP, Liverpool) for the Claimant
Mr Charles McDermott (of Bermans LLP, Liverpool) for the Defendant
Introduction
This judgment determines the preliminary issue as to whether or not the Claimant's claim is statute-barred under the Limitation Act 1980. The particular issue raised, as to which there appears to be no previous authority directly on point, is the nature and date of accrual of the cause of action where a losing party to an adjudication brought under Part II of the Housing Grants, Construction and Regeneration Act 1996 (' HGCRA') subsequently commences court proceedings to seek a final determination of the matters decided by the adjudicator with a view to recovering monies paid to the winning party in compliance with the adjudicator's decision. In summary, the Claimant contends that the cause of action is separate and distinct from the cause of action in respect of the dispute referred to adjudication, and does not arise until the date of payment in compliance with the decision, whereas the Defendant contends that the cause of action is no different from the dispute referred to adjudication and thus arises at the same time as that underlying cause of action. If the Claimant is right, this action is not statute-barred; if the Defendant is right, it is statute-barred.
Factual background
The facts of the case as pleaded in the Amended Particulars of Claim, which are not in dispute so far as the determination of the preliminary issue is concerned, can be briefly stated as follows:
(1) The Claimant was employed by Taylor Woodrow as subcontractor to construct the road works to the main entrance of a Tesco supermarket at Centenary Way, Burnley, Lancashire. Taylor Woodrow was the main contractor and the employer was Lancashire County Council ('LCC').
(2) By an order dated 9 April 2002 the Claimant sub-sub-contracted the supply, laying and rolling of the bituminous macadam surfacing to the Defendant.
(3) The resultant contract contained no express adjudication provision, so that by virtue of s.108(5) and s.114(4) HGCRA the adjudication provisions of Part I of the Scheme for Construction Contracts ('the Scheme') were incorporated as implied terms of the contract.
(4) On 29 May 2002 LCC's Engineer wrote to Taylor Woodrow complaining about the base course laid by the Defendant. The Claimant removed it and on 18 June 2002 the Defendant replaced it. At that stage there was no agreement as to who, if anyone, should bear the costs associated with this work.
(5) Some months later, on 17 December 2002, the Defendant made what appears to have been its final application for payment, within which was included a claim for £16,821.94 (net of 2.5% discount) for the cost of the replacement works. The Claimant refused to pay that claim, asserting that the Defendant was not entitled to be paid for the replacement works because they were necessary to remedy the Defendant's original defective work. Furthermore, the Claimant also claimed to be entitled to deduct from the Defendant's final account its cross-claims for loss and damage alleged to have been caused by the laying of the original base course. The total amount deducted from the Defendant's final account amounted to £38,647.22.
(6) The Defendant did not take any steps by way of adjudication or litigation to challenge that deduction at the time, but almost 6 years later, on 15 September 2008, it referred the dispute about the deduction to adjudication. This was of course within the applicable 6 year limitation period for a claim in contract founded on the non-payment of its final application for payment, but was outside the 6 year period for the Claimant to advance a claim for damages for breach of contract in relation to the alleged defects in the Defendant's original work.
(I should record that the Claimant, rightly in my opinion, does not advance a case to the effect that by waiting until September 2008 the Defendant was deliberately seeking to secure the benefit of a limitation defence in any subsequent litigation; that would be to attribute to the Defendant a Machiavellian degree of anticipation of future events.)
(7) An adjudicator was duly appointed and on 13 November 2008 he gave his decision, which upheld the Defendant's claim and required the Claimant to pay the principal sum of £38,647.22 together with interest thereon of £14,829.10, a total of £53,476.32.
(8) Although the Claimant did not accept the adjudicator's decision, it recognised that by virtue of paragraph 23(2) of the Scheme the decision was binding on it and that it was obliged to comply with the decision until the dispute was finally determined by legal proceedings, arbitration (if applicable) or agreement, so that it paid the £53,476.32 to the Defendant.
(9) On 18 December 2008 the Claimant sent a letter of claim to the Defendant pursuant to the Pre-Action Protocol for Construction and Engineering Disputes, advising of its intention to seek a final determination of the dispute by legal proceedings. There being no agreement, on 15 April 2009 the Claimant issued the instant proceedings in the Manchester Technology and Construction Court.
Procedural history
Shortly before the first Case Management Conference the Defendant made an application to strike out the claim on the ground that it was statute-barred under the Limitation Act. The argument advanced was that by virtue of s.5 Limitation Act the time limit for a claim founded on simple contract is 6 years from the date on which the cause of action accrued, that the cause of action in contract arises on breach, and that on the Claimant's pleaded case the breaches complained of against the Defendant must have occurred before 29 May 2002, when the LCC Engineer wrote to Taylor Woodrow complaining of the laying of the original base course.
The Claimant responded to that application by producing a skeleton argument, prepared by Ms. Sims of counsel, in which she contended that:
(1) The cause of action in contract arises pursuant to an implied term. As pleaded, the Claimant contends that it was an implied term of the contract that where a dispute arises which is referred to adjudication then the 'losing party' who complies with the adjudicator's decision and pays sums to the winning party is entitled to reclaim those sums in legal proceedings, or (as pleaded as an alternative formulation) to re-argue the dispute in subsequent court proceedings and, if successful, to be repaid all sums paid.
(2) On a true analysis, the cause of action arises not earlier than either the date of the adjudicator's decision or the date of payment in compliance with that decision.
(3) In the alternative, on a true analysis the cause of action is restitutionary, which is a claim for equitable relief, and s.36 Limitation Act operates to disapply s.5 and s.9 in such case
(4) In the further alternative, by waiting until after 6 years from the date of its breach before referring the dispute to adjudication the Defendant has either waived its right to plead limitation as a defence or is estopped from relying on the limitation defence.
Ms Sims also submitted that at the very least these points were not bound to fail, so that it would be inappropriate to strike out the claim. At the Case Management Conference it was agreed that the limitation issue was better determined once and for all as a preliminary issue rather than on a strike out application. Ms Sims, recognising that the Particulars of Claim did not plead a claim in restitution and, furthermore, that the pleaded claim went further than the implied term in seeking to recover all losses said to have been suffered as a result of the Defendant's breach rather than limiting the claim to the amount paid under the adjudicator's decision, asked for and received permission to file an amended Particulars of Claim before the preliminary issue was decided. The Amended Particulars of Claim filed pursuant to that permission included a claim in restitution and also limited the claim to the amount paid under the adjudicator's decision.
The parties also agreed that the preliminary issue could most conveniently be determined by exchange of written submissions without the need for a further hearing and, pursuant to the order made at the Case Management Conference, I received written submissions from the Claimant and the Defendant. I also received supplementary submissions from the Claimant and from the Defendant.
The respective submissions
The Defendant's submissions were concise. The Defendant:
(1) repeated its case that the claim was one for damages for breach of contract occurring before 29 May 2002, to which s.5 Limitation Act applied;
(2) contended in relation to any alternative claim in restitution that since the adjudicator decided that the Defendant was entitled to have been paid its December 2002 application in January 2003, any cause of action ran from that date;
(3) contended that the Claimant was not compelled by law to comply with the adjudicator's decision, and did so voluntarily, as opposed to awaiting enforcement proceedings in the TCC.
The Claimant's submissions ran to 13 pages and referred to a number of authorities and academic texts. In summary, the Claimant's arguments were as follows:
(1) The decision of the adjudicator gives rise to an independent cause of action, separate and distinct from the underlying cause of action in respect of the dispute submitted to adjudication.
(2) The implied term contended for by...
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