Permission to appeal has been granted following the Technology and Construction Court’s (TCC) decision in BDW Trading Limited v Ardmore Construction Limited which confirmed developers can bring adjudications on historical claims under the Defective Premises Act 1972 (“DPA”) as a result of the extended limitation established by the Building Safety Act 2022 (BSA). B P Collins’ dispute resolution team examines the case in more detail and what it could mean for the construction industry.
Background
Ardmore Construction (“Ardmore”) was the contractor for a development of residential flats in Basingstoke (“the Development”) which achieved practical completion between December 2003 and June 2004. BDW Trading (“BDW”) was assigned the contract after practical completion. It claimed Ardmore was liable to it in respect of various fire safety defects at the development and brought an adjudication.
The adjudication did not take place until 2024, 20 years after practical completion however the adjudicator concluded that Ardmore had breached its duties under both the contract and the DPA and awarded BDW over £14 million in damages. While limitation might ordinarily have expired, BDW relied on the provisions of the BSA which increased the limitation period for claims brought under section 1(1) of the DPA from 6 years to 30 years.
The TCC
Ardmore refused to pay the sum awarded by the adjudicator to BDW and so BDW commenced enforcement proceedings in the TCC which Ardmore defended on multiple grounds, the most notable being that (1) the dispute referred to the adjudicator had not crystallised; (2) the adjudicator did not have jurisdiction to determine a claim for breach under the DPA as it did not arise ‘under the contract’; and (3) the works were completed 20 years prior to the adjudication and Ardmore no longer held documentation for the development which put them in an unfair position and amounted to a breach of natural justice.
Crystallisation
Ardmore argued that the dispute between the parties had not crystalised as they had neither admitted nor denied liability for the claim bought against it by BDW. The court rejected this defence and found that Ardmore had tried to avoid crystalising the claim for two years by repeatedly asking for further information whilst also failing to take steps to investigate any possible liability they may have to BDW.
Jurisdiction
It was common ground that disputes arising ‘under the contract’ could be referred to adjudication. However, Ardmore argued that ‘under the contract’ should be construed narrowly and should not encompass statutory claims brought under the DPA. Applying the Fiona Trust principles, the TCC held that parties to a construction contract likely intended for all disputes arising from their relationship to be dealt with by the same means, whether that be adjudication or arbitration. As such in the absence of clear language excluding them, claims under the DPA should be understood to be claims arising ‘under the contract’ and therefore suitable for resolution by adjudication.
Breach of natural justice
The TCC rejected the natural justice challenge. The judge found Ardmore’s record keeping to be deficient and not that the documents had only been disposed of after any relevant limitation period. Moreover, BDW provided the disclosure which had been ordered by the adjudicator to Ardmore and Ardmore did not argue that it was incomplete or documents were missing. The judge also found that Ardmore had failed to carry out its own investigations into the claim.
Lessons learnt
Whilst the decision is subject to appeal it is nevertheless of real importance to the construction industry. It means that historic building safety claims can be referred to adjudication, providing for quicker and more cost effective resolutions than traditional litigation or arbitration. Moreover, the case is a salutary reminder (yet again) of the need for good record keeping to either bring or defend historic building safety claims. The courts will have little sympathy for arguments about a lack of contemporaneous documents. On crystallisation, if faced with a claim then parties should engage, investigate and try to narrow the issues and not deploy delaying tactics.
If you would like further information or advice on a legal matter relating to the construction industry, please contact B P Collins’ dispute resolution lawyers who have construction specialists on 01753 889995 or email enquiries@bpcollins.co.uk.
