A recent TCC decision is the first to enforce an adjudication decision in relation to fire safety defects given under the new liability regime enacted by the Building Safety Act 2022. The adjudication had been brought 20 years after completion of the works in question and the court rejected a number of jurisdictional and natural justice arguments relevant to historical fire safety claims. The court’s decision is likely to encourage the pursuit of such claims through adjudication proceedings, giving comfort to claimants that arguments of this nature need not prevent enforcement.
BDW Trading Ltd v Ardmore Construction Ltd
In 2004, Ardmore completed the construction of a residential development known as Crown Heights in Basingstoke, Hampshire for a total contract sum of £22.6 million. Fire safety defects were subsequently discovered in the development. In 2024, BDW (as assignee under the original building contract) commenced an adjudication against Ardmore in relation to the defects and received a decision in its favour for £14.5 million.
BDW’s claim, brought some 20 years after completion, was made possible by:
- Its case, upheld by the adjudicator, that the limitation period for claims under the building contract did not apply due to deliberate concealment of the defects by Ardmore (this being an exception under the Limitation Act 1980).
- The retrospective extension of the limitation period for claims under the Defective Premises Act 1972 (the “DPA”) brought in by the Building Safety Act 2022 (the “BSA”). For a more detailed explanation of the liability changes made by the BSA, please see our earlier Law-Now here.
Ardmore contested enforcement of the adjudicator’s decision on four grounds, three of which are likely to be of more general application to future adjudications in respect of historic fire safety defects. We consider each of these three grounds further below.
Crystallisation
BDW wrote a Pre-Action Protocol Letter to Ardmore almost two years prior to the adjudication in July 2022. Ardmore took the position that further information and documentation was required in order to allow it to properly consider the claim, bearing in mind the age of the project and the fact that it no longer had access to all of its project records. Ardmore also noted that BDW had not provided details as to the loss suffered and the nature and scope of the remedial works proposed. Ardmore therefore reserved its position pending receipt of the information requested.
BDW provided a small amount of further documentation and invited Ardmore to inspect the defects before remedial works were to commence. Further detail and new particulars of claim were provided 13 days prior to the adjudication, together with a high-level breakdown of the costs BDW was likely to incur on remedial works. BDW’s referral in the adjudication included many documents which had not been previously provided to Ardmore, including two new expert reports.
The TCC rejected Ardmore’s complaint that a dispute had not crystallised prior to the commencement of the adjudication. BDW’s original protocol letter had set out its essential claim well in advance of the adjudication. The lack of documentation and the length of time since completion did not justify Ardmore’s stance of refusing to take a position on the claim. In the court’s judgment, “the passage of time should have provided the impetus to investigate the claim that was being advanced as soon as possible”.
Nor did the fact that the quantum of the claim had only first been set out 13 days prior to the adjudication, and only in high-level terms, justify a conclusion that no dispute over quantum had crystallised. This was sufficient time to give rise to a reasonable inference that the quantum element of the claim was not admitted, particularly in light of prior correspondence as to the liability aspects of the claim which had extended over almost two years.
No jurisdiction over DPA claims
The adjudication clause in the building contract permitted the referral of disputes “under the contract”. This follows the wording of section 108 of the Housing Grants Construction and Regeneration Act 1996 (as amended) (the “Construction Act”). Ardmore argued that this limited the right of adjudication to contractual claims with the result that BDW’s claim under the DPA was beyond the jurisdiction of the adjudicator. Ardmore also relied on the fact that an arbitration clause in the building contract was expressed in broader terms to encompass disputes arising “under this Contract or in connection therewith”. This was said to confirm a narrower intention with regard to the adjudication clause.
A very similar issue with regard to arbitration clauses had been considered by the House of Lords in the well-known Fiona Trust case (decided in 2007). Prior to this case, the scope of an arbitration clause depended upon a careful interpretation of the words used in the clause. A clause referring to disputes arising “under” a contract had been held to be narrower than a clause referring to disputes arising “out of” or “in connection with” a contract. A dispute arising “under” a contract was not thought to include a dispute which did not concern obligations created by or incorporated in the contract in question.
The application of such linguistic distinctions was rejected by the House of Lords. Instead:
“… the construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal.”
Since the enactment of the Construction Act, it has been unclear whether this approach would also apply to the right provided in section 108 of the Act to refer a dispute arising “under” a construction contract to adjudication at any time. As summarised in our earlier Law-Now here, there have been conflicting TCC decisions as to the approach to be taken, with some applying Fiona Trust and others finding that the statutory requirement for adjudication provides a point of distinction.
After very full consideration, the court in this case decided to apply Fiona Trust, finding that BDW’s DPA claim fell within the adjudication clause. In the court’s judgment, the force of the Fiona Trust principle was such that the more expansive wording of the arbitration clause did not “indicate a clear intention that the jurisdiction of the adjudicator would be narrower than that of the arbitrator”.
Inherent unfairness
Ardmore also argued that the pursuit of a claim for design defects in relation to a 20 year old project through adjudication proceedings had resulted in an inherently unfair situation in which it had access itself to almost no relevant contemporaneous documentation and had no option but to rely on documents provided by BDW. The paucity and imbalance of documentation available to Ardmore and the fact that the adjudication process was not able to adequately address such a problem meant, in Ardmore’s view, that natural justice could not be afforded and the decision should not be enforced.
This challenge was also rejected. Ardmore had made various requests for documentation before the adjudication and these had been responded to by BDW. Once the adjudication was commenced, Ardmore sought a direction for the disclosure of a further four categories of documentation. The adjudicator directed BDW to provide these documents and documents were subsequently provided in respect of each category. Ardmore’s final submissions in the adjudication did not suggest that there was any significant disclosure deficit which had produced unfairness. The court rejected the suggestion that the adjudication process had insufficient “teeth” to ensure Ardmore had access to sufficient documentation.
Conclusions and implications
This decision is the first to enforce an adjudication decision in relation to fire safety defects relying on the new liability regime ushered in by the BSA. The three enforcement challenges noted above are ones which are likely to be relevant to many adjudications in relation to historic fire safety defects. The court’s rejection of these challenges is likely, therefore, to provide encouragement to claimant parties that such claims are capable of adjudication without being derailed by jurisdictional and natural justice objections of this nature.
References:
BDW Trading Ltd v Ardmore Construction Ltd [2024] EWHC 3235 (TCC)
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