The landmark case confirms for the first time that adjudication can be used to determine a claim under the Defective Premises Act 1972 (DPA) with extended limitation under the Building Safety Act 2022 (BSA).

The finding handed down on 16 December 2024 by Mrs Justice Joanna Smith DBE will have implications for the construction industry as whole, in particular given the current number of disputes relating to the fire safety of dwellings.

Facts:

Basingstoke Property Company Limited employed Ardmore as contractor for the development of apartments at Crown Heights, Basingstoke, in 2002. Practical completion took place between 2003 and 2004. In 2005, the building contract was assigned to BDW.

Surveys carried out in May 2020 identified fire safety defects at the development – “the presence of a void between the insulation and internal block leaf and an absence of any horizontal fire barriers”. At the time Ardmore had a complete limitation defence under the Limitation Act 1980 (LA). The BSA, however, inserted a new section 4B into the LA extending retrospectively the limitation period for claims under section 1(1) DPA (Duty to build dwellings properly) from 6 years to 30 years.  

BDW referred the dispute to adjudication and sought damages in the sum of £15,037,615.01.

The adjudicator found Ardmore liable for breaches under the building contract and, separately, the DPA; Ardmore was required to pay £14,454,914.45 by way of damages and £84,329.00 for the adjudicator’s costs and expenses.

Ardmore indicated that it would resist enforcement, so BDW sought to enforce the judgment by means of summary judgement.   

Issues:

Ardmore disputed the adjudicator’s decision on four grounds:

1. The dispute had not crystallised at the time it was referred to adjudication;
2. The Adjudicator had no jurisdiction to determine a tortious claim for breach of the DPA;
3. The Adjudication was inherently unfair owing to the inequality of arms in terms of documentation;
4. The Adjudicator intentionally failed to consider a material Defence relevant to the allegation of deliberate concealment against Ardmore.

The Ground 2 dispute concerned the meaning of the words “under the contract” in section 108(1) HGCRA. This wording was mirrored in Article 5 of the building contract as compared to the arbitration provision in Article 6A which used the words “arising  under  this  Contract  or  in  connection  therewith”.

Ardmore argued that the building contract intended the words in Article 5 to be narrow in scope and that the words “under the contract” could not be capable of encompassing a claim under the DPA; the adjudicator therefore had no jurisdiction to decide that element of the claim.   

BDW, however, argued that dispute resolution provisions should not be interpreted narrowly and that the Fiona Trust reasoning should apply to adjudication provisions as it does arbitration provisions.

In the Fiona Trust case it was found that there was no substantive difference between the phrases “arising under” and “arising out of” for the purposes of an arbitration clause. Joanna Smith J agreed that the principles should apply to adjudication provisions, whose purpose is similar. The wording therefore encompassed the claim under the DPA.

Looking ahead:

The finding on Ground 2 was recognised as of particular importance to the industry as a whole given the current number of disputes relating to the fire safety of dwellings.

In addition, the response to Ground 1 provided guidance on crystallisation of disputes for the purposes of referrals to adjudication; it was found that BDW had set out its “essential claim” and that Ardmore’s failure to engage pending receipt of further information did not prevent the dispute from crystallising and it had, therefore, crystallised at the point it was referred to adjudication. This highlights the importance of engaging early on with any potential disputes.

The finding in response to Ground 3 highlighted the importance of effective record-keeping in the industry; Ground 3, a “natural justice challenge”, argued unfairness due to “the paucity and imbalance of documentation available to Ardmore together with a process which is not capable of adequately addressing those problems”, but failed on an analysis of the facts.

Considered briefly, in respect of Ground 4, also a “natural justice challenge”, it was found that the defence in question had not been identified as one of the issues for determination by the Adjudicator and had not been raised as a defence in any submission to the Adjudicator.

Key takeaway:

Fiona Trust principles apply to adjudication provisions; such provisions will therefore be interpreted widely and can encompass historical defect claims under section 1(1) DPA and the extended limitation periods introduced by the BSA.

Case: 

BDW Trading Ltd v Ardmore Construction Ltd [2024] EWHC 3235 (TCC)