Adjudicators can hear legacy building safety defect claims: BDW Trading Limited v Ardmore Construction Limited [2024] EWHC 3235

The article explores the ruling in this landmark case which now means that a raft of historical building safety disputes between developers and contractors can be referred to adjudication.

Introduction

This is one of the more significant cases of the last year for the construction industry and all those involved in the housebuilding industry. It is one of the first claims to come before the Technology and Construction Court (TCC) involving the interplay between adjudication and the Building Safety Act 2022 (BSA 2022). The BSA 2022 – which was introduced in the wake of the Grenfell Tower fire – retrospectively increased the limitation period for bringing building safety claims under the provisions of the Defective Premises Act 1972 (DPA) from 6 years to 30 years: a dramatic change to the previous position.

Whilst it had already been established that such claims under the DPA – based on a statutory tort – could be brought via the courts or arbitration, before the ruling in BDW Trading Limited v Ardmore Construction, it was unclear if such claims could also be referred to adjudication. Now the TCC has confirmed that building safety claims under the provisions of the DPA (with the extended limitation period courtesy of the BSA 2022) can indeed be pursued via adjudication. Thus, this decision has (potentially) opened the doors for developers to bring adjudications on these types of historical building safety claims. 

Plainly, this decision has far-reaching consequences for the construction industry, as it now means that anyone who entered into a construction contract (as defined in the Housing Grants, Construction and Regeneration Act 1996 (HGCRA 1996) and owed a duty under the DPA can potentially face adjudication referrals on historic building safety claims and cladding-related disputes from projects as far back as 1995. 
It is well-known that Parliament originally intended adjudication to be a rough and ready process to improve cashflow through the contractual chain and for adjudication to be a speedy, temporarily binding and relatively uncomplicated dispute resolution process, so that the parties could know where they stood in a short period. However, over time we have seen adjudication metamorphosed into an elastic procedure which can and does deal with multi-million pound complex disputes, and now (potentially) following this ruling, adjudication can also be used to resolve potentially complex disputes stretching back 30 years where there may well be challenges associated with a potential dearth of contemporaneous documentation and available witness evidence. Indeed, in the BDW v Ardmore case, it was the case that most of the contractor’s staff who worked on the project had left by the time the case entered adjudication.

But, standing back for a moment and seeing the wood for the trees: this decision can perhaps just be seen as a reflection of the recent development of case law - such as, Bresco v Lonsdale (2020), Aspect Contracts v Higgins (2015) and Murphy v Maher (2016) - where the courts have sought to extend the ambit of adjudication. Certainly, we will need to wait for the Court of Appeal’s ultimate ruling on this issue, but the TCC decision does also appear to accord with public policy where it is thought that the government is keen to seek to release the pressure on the court system to other forms of dispute resolution forums.

In this article, we explore the ruling made by High Court Justice Judge Joanna Smith in this landmark case on one of the (four) grounds considered in this case: namely whether the adjudicator had jurisdiction to determine a claim for breach of the DPA, where the right to adjudicate under the contract was limited to disputes arising “under the contract” – referred to below as the “Jurisdiction Ground”.

Factual Background

In October 2002, the Basingstoke Property Company Limited (BPCL), as Employer, and Ardmore, as Contractor, entered into a building contract (Building Contract) for the development of a block of apartments known as Crown Heights in Hampshire (Development).

The Building Contract was a construction contract within the meaning of section 104 the HGCRA 1996.

Article 5 and clause 39A of the Building Contract made provision for the reference of a dispute or difference to adjudication.

By a deed of assignment of the Building Contract in November 2004, BDW took an absolute assignment of the full benefit of all of BPCL’s interests and rights under the Building Contract, together with all rights for BPCL to sue or take action in respect of any breach of the obligations contained in that contract.

Practical Completion occurred between December 2003 and June 2004. Accordingly, until the coming into force of the provisions of the BSA 2022 and the retrospective extension of the limitation period to 30 years, Ardmore had, for some time, a complete limitation defence under the Limitation Act 1980 to any claims that might be brought against it by BDW under section 1(1) of the DPA, which imposes a duty on “[a] person taking on work for or in connection with the provision of a dwelling” to carry out the work in a “workmanlike” or “professional manner” with “proper materials so that as regards that work the dwelling will be fit for habitation when completed.” The case involved alleged cladding and fire cavity defects on the site.

This legislative change to the retrospective limitation period for DPA claims prompted BDW to write a Pre-Action Protocol letter to Ardmore in 2022, nearly twenty years after practical completion, identifying “fire safety defects at the Development”. The claim focused on alleged cladding and fire cavity defects on the site. This culminated in BDW subsequently commencing an adjudication in 2024. BDW set out its case on two alternate legal bases in the adjudication, one of which was a claim under the DPA, limitation no longer being an obstacle owing to the extended limitation period provided by BSA 2022.  BDW sought damages in the sum of circa £15 million.

Following the exchange of various pleadings by the parties in the adjudication, over what was an unusually protracted timetable, the Adjudicator decided in favour of BDW: Ardmore was liable under the DPA in respect of fire safety defects. The adjudicator required Ardmore to pay damages.

Ardmore refused to pay the £15M awarded by the adjudicator. So, BDW commenced enforcement action in the TCC. In this article, we explore the ruling made by High Court Justice Judge Joanna Smith specifically on the “Jurisdiction Ground”.

The Jurisdiction Ground

Ardmore argued that the adjudicator had no jurisdiction to make a finding in relation to the DPA claim because the contract stated that only disputes arising ‘under this Contract’ could be referred to adjudication. Moreover, Ardmore argued that this claim fell outside the scope of the adjudication as it did not arise directly from the Building Contract.

Under both section 108(1) of the HGCRA 1996, and Article 5 of the Building Contract, adjudication was stated to be limited to disputes arising ‘under the contract’. By comparison, this differed to Article 6A of the Building Contract relating to arbitration, which stated that disputes arising “under this Contract or in connection therewith” could be referred to arbitration.

Ardmore submitted that the difference in language between Article 5 and Article 6A indicated an intention for Article 5 to be construed more narrowly: that there was in general terms a difference in meaning and scope between the words "under the contract" and "connected with" the contract – the former being more limited in scope than the latter. Accordingly, Ardmore argued that the words "under the contract" were not capable of encompassing a statutory claim under the DPA and that the adjudicator had no jurisdiction to decide that claim.

In order to address this argument, the TCC sought to determine what “under the contract” meant in section 108(1) of the HGCRA. The issue of whether the adjudicator had jurisdiction to determine a claim for breach of the DPA essentially boiled down to whether the Fiona Trust approach to the interpretation of arbitration agreements also applied to adjudication clauses; a point which various leading textbook commentaries disagreed on. As might be recalled, Fiona Trust dealt with whether or not an arbitration clause, which incorporated the words "any dispute arising under this charter" captured disputes relating to bribery. The case set out a presumption in favour of “one-stop” dispute resolution forums - unless there is explicit contractual language to the contrary.

The TCC settled the matter and determined that the reasoning in Fiona Trust should be applied to adjudications.

It was found that there was nothing to establish that the principles in Fiona Trust could not equally apply to adjudication, simply because adjudication was created by statute, rather than being freely agreed by contracting parties as in the case of arbitration. In fact, the TCC reasoned that the Supreme Court's decision in Bresco v Lonsdale (2020) actually lent weight to the fact that in creating the statutory right to adjudicate, Parliament clearly intended that all parties to appropriate contracts should have that right. Specifically, the TCC cited the Supreme Court in Bresco as stating:

“Parliament considered that construction adjudication was such a good thing that all parties to such contracts should have the right to go to adjudication points if anything in the opposite direction. Indeed, the fact that the right to adjudication is statutorily guaranteed is a powerful consideration favourable both to its recognition as a matter of construction ….”

Attempting to draw the strings of the various authorities and textbook commentaries, the TCC started from the assumption that the parties to a contract are rational business people who are likely to have intended any dispute arising out of a contractual relationship to be decided by the same tribunal.

The TCC decided that the term ‘under the contract’ should be taken to mean that commercial parties intended all disputes arising out of the contractual relationship (rather than the contract itself) be capable of being dealt with in the same forum, whether via arbitration or adjudication. There should not be any linguistic or semantic difference between ‘under’ and ‘in connection with’ and, unless there is clear indication to the contrary; in short, following the rationale in Fiona Trust, the TCC confirmed in BDW v Ardmore that absence clear language to the contrary, adjudication covered all disputes connected to the contract, including statutory claims like those under the DPA. This decision reinforces that statutory claims can be adjudicated when intrinsically linked to the contract.

Accordingly, the circa £15m adjudication decision was enforced by Justice Judge Joanna Smith.

Commentary

With the extended limitation periods under the DPA, cases involving historic fire safety defects are becoming more prevalent.  It is essential that those involved in construction projects implement good project governance to maintain sufficient record keeping, including for historical projects, to ensure that they have the best possible chance of dealing with historic building safety and cladding claims.

Building Safety will undoubtedly continue to dominate the construction property real estate landscape during 2025 and BDW v Ardmore is just one of the many interesting building safety cases which have thrown up issues associated with the BSA 2022. Please see link to the following article: The first case on Information Orders in connection with Building Liability Orders.

But….watch this space!

We understand that the Court of Appeal has now granted Ardmore permission to appeal. The construction industry will therefore eagerly await round two – but sadly we will have to wait until 2026.