The door is open for adjudicating claims under the Defective Premises Act 1972

The Technology and Construction Court handed down a significant judgment on 16 December 2024 in BDW Trading Limited v Ardmore Construction Limited [2024] EWHC 3235 (TCC) which has important implications for building safety claims and the wider construction industry. Critically, the judgment held that an adjudicator has jurisdiction to determine a claim under the Defective Premises Act 1972 (“DPA”) for works completed 20 years prior to the claim being brought.

Background

Ardmore Construction Limited (“Ardmore”) entered into a JCT building contract (the “Contract”) with Basingstoke Property Company Limited for construction works at Crown Heights, Basingstoke, Hampshire (the “Development”). The Contract was entered into on 30 October 2002 and assigned to BDW Trading Limited (“BDW”) on 3 November 2004. Practical completion was achieved between December 2003 and June 2004. Prior to the Building Safety Act 2022 (“BSA”) coming into force, the limitation period under the DPA was six (6) years from practical completion; therefore, Ardmore had a complete limitation defence to claims against it under the DPA. The BSA changed this through the introduction of amendments that had the effect of retrospectively increasing the limitation period for claims under the DPA from six (6) years to 30 years, which provided BDW an avenue for a claim against Ardmore.

The DPA imposes a duty on a “person taking on work for or in connection with the provision of a dwelling” to carry out work in a “workmanlike” or “professional manner” with “proper materials and so that as regards that work the dwelling will be fit for habitation when completed”.

BDW identified fire safety defects in the Development and issued a notice of adjudication on 21 March 2024 relating to such defects (the “Adjudication”). The dispute concerned whether Ardmore was liable to BDW in relation to the fire safety defects due to Ardmore’s breach of the Contract and/or its duties under the DPA. BDW sought damages of circa £15 million from Ardmore.[1]

The adjudicator decided that Ardmore had (1) breached its obligations under the Contract, but that claim was not in time and (2) was liable to BDW under the DPA. The adjudicator ordered damages of approximately £14.4 million in favour of BDW.

Ardmore sought to resist enforcement and BDW issued a claim for summary judgment seeking enforcement of the Adjudication.

The Enforcement Proceedings

While Ardmore raised four grounds on which it sought to resist enforcement, this blog focuses on Ground 2 being that the adjudicator had no jurisdiction to determine a tortious DPA claim.

To succeed in Ground 2, BDW had to prove that Ardmore had no real prospect of success.

Ground 2: Did the adjudicator have jurisdiction to determine the DPA claim?

Ardmore argued that the adjudicator did not have jurisdiction to determine BDW’s claim under the DPA. If the adjudicator did not have jurisdiction to determine a DPA claim, BDW would be required to make a claim through the courts, which would likely result in significant cost and delays.

Joanna Smith J rejected Ardmore’s arguments and found that the adjudicator had jurisdiction to decide the DPA claim.

A key issue was whether the Fiona Trust principle as it applies to the interpretation of arbitration provisions also applied to adjudication. In Fiona Trust, the House of Lords established a presumption that commercial parties are likely to have intended that any disputes arising between them will be decided by the same tribunal.

The Judge determined that the Fiona Trust principle applies to adjudication provisions. In her reasoning, Joanna Smith J rejected the contention that the Fiona Trust principle does not apply to adjudication by virtue of adjudication being derived from statute rather than contract and held at [58]:

“On the contrary, that Parliament considered all parties to appropriate contracts should have a right to adjudicate “points if anything in the opposite direction” … In my judgment, the origin of the clause (whether by express agreement or Parliamentary provision) does not affect the principles of interpretation in Fiona Trust”.

Ardmore further contended that that different wording in the adjudication and arbitration clauses in the Contract meant that the parties intended the adjudication clause to have a more limited scope than the arbitration clause, and that the words “under the Contract” are not capable of encompassing a claim under the DPA. Therefore, the adjudicator did not have jurisdiction to determine the claim. The Contract contained the following clauses:

1. Article 5 (adjudication): any dispute “arising under this Contract” may be referred to adjudication; and
2. Article 6A (arbitration): that disputes “arising under this Contract or in connection therewith” shall be referred to arbitration (emphasis added).

The Judge rejected this argument and found that there was no significance in the differing wording between the arbitration clause and the adjudication clause. She emphasised at [78] that the “courts have made clear at the highest level that wording in dispute resolution clauses referring to disputes arising ‘under’ the contract should not be interpreted narrowly” and the Supreme Court has taken the view, that “the statutory underpinning of the .. contractual right to adjudicate is a factor which, if anything, weighs in favour of giving a broad interpretation to the phrase “a dispute arising under the contract””.

Analysis

The determination that a claim under the DPA can be referred to adjudication is a significant finding for the construction industry given the current number of disputes concerning building safety of dwellings. The decision confirms that parties to a potential claim under the DPA, can refer the dispute to adjudication, which may result in faster and more cost-effective resolution. This is consistent with the Government’s policy that the party responsible for the relevant defects bears the costs, as well as its intention that buildings are remediated quickly to ensure that people are safe in their homes.

However, parties need to be cognisant of the temporarily binding nature of an adjudicator’s decision. Furthermore, given the clear impact of the judgment to the industry, it seems likely Ardmore will seek leave to appeal. Therefore, as with building safety matters generally, the position may yet evolve.

If you have any questions in relation to a potential claim under the DPA, or building safety defects generally, please contact our Construction Team.

 

[1] BDW argued that the claim for breach of the Contract was not time-barred due to deliberate concealment.

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