A recent TCC decision has considered the longstanding debate over whether and how the Limitation Act 1980 (“the Limitation Act”) applies to adjudication proceedings. The debate stems from the fact that the definition of “action” in the Limitation Act only refers to court proceedings and that the Arbitration Act 1996 specifically provides that the Limitation Act applies to arbitration proceedings. The court concluded that the Limitation Act does apply to adjudication proceedings and that in simple cases a limitation defence may also be raised via a Part 8 claim to defend enforcement proceedings.
LJR Interiors Limited v Cooper Construction Limited
In August 2014 LJR entered into a contract to carry out dry lining, plastering and screed works for Cooper. The contract comprised a letter and revised quotation from JLR and a purchase order form Cooper. There was no provision within the contract for referring disputes to adjudication and therefore the adjudication provisions of the Scheme for Construction Contracts (the “Scheme”) applied.
LJR completed its works in October 2014. Almost eight years later in July 2022, LJR submitted a payment application to Cooper by way of its Application No. 4 in the sum of £3,256.58 plus VAT. Cooper did not respond to the payment application either by paying it or issuing a pay less notice. LJR then referred the dispute to adjudication in September 2022 seeking payment of the sum claimed by Application No. 4.
Cooper argued in the adjudication that LJR’s claim was time-barred because it was not brought within six years of the date on which the cause of action accrued in accordance with section 5 of the Limitation Act. Cooper asserted that the cause of action actually accrued in November 2014 or March 2015 as the sums claimed related to an earlier application for payment submitted by LJR.
The adjudicator concluded that Application No. 4 was a valid application for payment as nothing in the Scheme placed a time limit on when an application could be made. The adjudicator’s understanding was that “the general rule in contract is that a cause of action accrues when the breach takes place” and that LJR’s cause of action accrued when Cooper failed to pay the sum claimed by LJR by the final date for payment on 28 August 2022. The adjudicator went on to conclude that “the limitation period pursuant to section 5 of the Limitation Act therefore has not expired”.
In response to enforcement proceedings brought by LJR, Cooper commenced Part 8 proceedings seeking a declaration that LJR’s claim under Application No. 4 was time-barred.
Does the Limitation Act apply in adjudication proceedings?
When considering the application of the Limitation Act to adjudication proceedings, the court noted that section 38(1) of the Limitation Act provides that the “‘action’ includes any proceedings in a court of law, including an ecclesiastical court” and that the scope of the Limitation Act has been expressly extended to cover arbitral proceedings by section 13(1) of the Arbitration Act 1996. However, there is no such express extension to include adjudication proceedings.
The court acknowledged that whilst the application of the Limitation Act to adjudication proceedings “appears to be a statement of the obvious”, no authority was cited in support of it.
The court concluded that “the context does require the term “action” in the non-exhaustive definition provided by section 38 of the Limitation Act 1980 to be read as including adjudication proceedings” and therefore the Limitation Act does apply to adjudication proceedings.
Limitation as an enforcement defence
The court also considered whether a limitation defence could be used to defeat enforcement proceedings by way of separate Part 8 proceedings or whether enforcement should be granted immediately with the limitation defence in the Part 8 proceedings left for determination at a later date. Special rules apply as to when a discrete issue such as this can be raised, on its merits, to defend enforcement proceedings. These are now incorporated in the TCC Guide as follows:
- The issue is a short and self-contained point which arose in the adjudication.
- It requires no oral evidence, or any other elaboration beyond that which is capable of being provided at a short enforcement hearing.
- The issue is one which it would be unconscionable for the court to ignore.
The court considered that the limitation point raised by LJR fell within these rules and it was therefore permissible for it to be raised, by way of Part 8 proceedings, to defend enforcement.
Conclusions and implications
This decision provides helpful confirmation that a limitation defence can be raised in adjudication proceedings and can in simple cases be used to defeat adjudication enforcement proceedings where the defence was rejected in the adjudication proceedings. Whilst, as the court noted, this conclusion is to a certain extent “a statement of the obvious”, there was no clear authority on the point.
Parties who consider that an adjudication claim may be time-barred should ensure that the limitation defence is clearly raised in the adjudication so that it can be considered by the adjudicator and can be relied upon in defence of any adjudication enforcement proceedings should the adjudicator fail to properly consider the issue.
LJR Interiors Ltd v Cooper Construction Limited  EWHC 3339 (TCC)