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The long-running construction bond dispute between east London theatre the Hackney Empire and insurer Aviva is set to enter a new stage after Aviva lodged an appeal against a High Court ruling that it was liable to pay a £1.1m surety bond.

The Court of Appeal civil division confirmed this week that an appeal had been lodged by Aviva against the High Court’s ruling last September that the insurer was liable to pay out on a £1.1m surety bond.

The case concerns Aviva’s refusal to pay up when the Hackney Empire’s contractor and project manager Sunley Turriff Construction (STC) went into administration in 2003 despite having agreed a £1.1m bond with the contractor.

STC was carrying out an £11m refurbishment on the Victorian theatre, which was backed with £1.1m donation from Lord Sugar as well as funding from the Heritage Lottery Foundation and the Arts Council.

STC had agreed to complete works by 2 September 2002 but the date was revised several times as the contractor - whose turnover averaged £100m - suffered diminishing margins. Work halted when 80 workers walked off site after hearing STC had gone into administration.

In September, Mr Justice Edwards-Stuart rejected Aviva’s main defence that payments made by Hackney Empire of £750,000 to the contractor to help with cashflow problems in the months before it failed had invalidated the bond.

The court did not order payment as the case was restricted to issues of liability rather than quantum, meaning another court case on the level of payment due to Hackney Empire is likely.

The judgment came as a relief to the many contractors and clients that rely on bonds for security on projects.

However, the move by Aviva to appeal the ruling means the dispute is now set to run on.

The Court of Appeal has yet to set a date for the appeal to be heard.

An Aviva spokeswoman confirmed that the insurer had received permission to appeal from the Court of Appeal.