The recent case of BDW Trading Ltd v Ardmore Construction Ltd [2024] is the first of its kind by directly relying on the extended limitation periods introduced by the Building Safety Act 2022 (BSA).
Although it stems from a summary judgment, the case gives us a useful insight into what legal arguments are likely to fail in court and we may continue to see the courts act in favour of upholding these limitation periods.
The facts
In October 2002, Basingstoke Property Company Limited (BPCL) entered into a JCT Design and Build contract with Ardmore Construction Ltd (Ardmore) to design and construct some apartments. The apartments reached practical completion between December 2003 and June 2004, and BPCL subsequently assigned the contract to BDW in November 2004.
Section 135 of the BSA came into force in June 2022. This increased limitation periods for claims related to historic building safety issues under the Defective Premises Act 1972 (DPA) retrospectively from 6 years to 30 years for dwellings constructed prior to that date. The DPA imposes a duty on anyone carrying out works on a dwelling to carry out these works in a “workmanlike” or “professional manner” with “proper materials” so that the dwelling will be “fit for habitation.”
Having identified fire safety defects in the apartments and with the extended limitation period, BDW issued a letter of claim against Ardmore in July 2022. BDW alleged that the fire safety issues derived from Ardmore’s breaches of contract and/ or their statutory duties pursuant to the DPA. The dispute was subsequently referred to adjudication in March of this year.
In September this year, the adjudicator delivered his decision; declaring that Ardmore had breached their duties under the contract in respect of the fire safety defects, and that Ardmore was also liable under the DPA for the same fire safety defects. Ardmore was ordered to pay damages amounting to £14,454,914.45 and £84,329.00 in costs.
Ardmore refused to pay, which led BDW to seek enforcement. Before Ardmore could acknowledge service or respond to this claim, BDW was granted permission to apply for summary judgment on the basis that (i) Ardmore had no real prospect of defending the case and (ii) there was no other compelling reason as to why the case should reach trial.
The case
Ardmore sought to defend the application on four grounds:
The dispute had not crystallised
Firstly, Ardmore argued that a dispute had not crystalised at the time BDW commenced adjudication proceedings as the nature of the claim had changed from a freestanding claim under the DPA to a breach of contract claim.
For a dispute to crystalise, there needed to be evidence that Ardmore did not admit these claims. Ardmore argued that they never actually denied liability, but because (i) 20 years had passed since practical completion of the apartments and (ii) they lacked the project documentation, they could neither admit nor deny the claims. The court rejected these arguments. Smith J held that the letters of claim sent by BDW to Ardmore in July 2022 (the DPA claim) and July 2023 (the contractual claim) were enough for Ardmore to respond to, or at least investigate. As Ardmore continued to be silent on the claims, this silence was enough to demonstrate that a dispute had indeed crystallised.
The adjudicator had no jurisdiction
Secondly, Ardmore argued that the adjudicator lacked jurisdiction to determine the DPA claim on the basis that it did not arise ‘under the contract.’ In support of this argument Ardmore drew a distinction between the wording of Articles 5 and 6a of the JCT contract, which provided that
- Article 5 [in respect of the right to adjudicate] “If any dispute or difference arises under this Contract either Party may refer it to adjudication in accordance with clause 39A”; and
- Article 6a [in respect of the right to arbitrate] “…if any dispute or difference as to any matter or thing of whatsoever nature arising under this Contract or in connection therewith…shall arise between the Parties…it shall be referred to arbitration in accordance with clause 29B and the JCT 1998 edition of the Construction Industry Model Arbitration Rules (CIMAR)”
Ardmore argued that this difference in drafting indicated a clear intention by the JCT draftsmen to make the right to adjudicate more limited in scope than the right to refer a dispute to arbitration, or at the very least an uncertainty which required clarifying.
In defence of this BDW sought to rely on the principles established by the House of Lords in Fiona Trust which confirmed that dispute resolution procedures should not be interpreted narrowly. Moreover, BDW highlighted that the contract also provided for like liability under the DPA. Therefore, the DPA claim also arose under the contract, albeit subject to a limitation period of 30 years.
The court agreed with BDW. Smith J held that whilst Fiona Trust was decided in respect of an arbitration clause; there was nothing in the contract that demonstrated a clear intention to exclude the Fiona Trust principle. Furthermore, because clauses 2.5.1 and 2.5.2 of the contract extended Ardmore’s liability under the contract to include liability under the DPA where (i) the work involved work to a dwelling and (ii) where an architect would have the like liability under that act, the court concluded that it would be odd if the adjudicator’s jurisdiction did not also extent to the DPA claim. Accordingly, Smith, J held that the adjudicator did have jurisdiction to hear the DPA claim.
Breach of the rules of natural justice
Relying on the decision in Whyte v Mackay Ltd v Blyth & Blyth Consulting Engineers Ltd [2013], Ardmore argued that it would be a breach of the rules of natural justice for the court to allow enforcement of the adjudicator’s decision. The fact that the claims had been pursued 20 years after practical completion, in circumstances where Ardmore had little documentation relating to the project other than that supplied by BDW, was inherently unfair. The adjudication process did not allow sufficient time to facilitate proper disclosure which would help address the unfairness.
Whilst Smith J noted that the adjudication process was not designed to produce perfect outcomes, but to resolve disputes quickly; for Ardmore to succeed on this ground there would have had to have been something so unfair about the claims that doing so could not bring about proper justice. In considering the chronology of the claims, the court decided that passage of time alone was not sufficient to meet the threshold to breach the rules of natural justice. Furthermore, the lack of documentation was more to do with Ardmore’s inadequate record keeping, particularly since there had been previous disputes between the parties in relation to this project.
Further breach of natural justice
Finally, Ardmore argued that the adjudicator had breached the rules of natural justice by deliberately ignoring a defence which Ardmore put forward. The court decided not to decide on this argument, having decided the other arguments in favour of BDW.
The Birketts View
The decision in this case is significant, as it provides much needed clarity on the scope of adjudication provisions under Article 5 of the JCT suite of contracts; confirming that it can extend to historic claims for fire safety defects under the DPA. This will be welcome news to employers, who will now be able to pursue such claims via the albeit ‘rough and ready’ adjudication procedure, as opposed to more costly and protracted litigation.
However, there are other key takeaways worth noting:
- The importance of clear legal drafting – whilst Ardmore could not have foreseen the Grenfell tragedy, or the implementation of the BSA; to address the purported uncertainty between Articles 5 and 6a on which it subsequently sought to rely; the court once again highlighted the importance of clear and unequivocal drafting.
- Natural Justice – the decision also provides a helpful indication of where the bar sits for arguments of natural justice to succeed; confirming that future attempts to defeat claims relying on this extension are unlikely to be successful.
- Records – again, the devil is always in the detail. The perceived inequality caused by a lack of documentary evidence during the adjudication procedure could have been addressed had Ardmore retained documents relating to the project. This is no doubt an issue which will be highlighted in future adjudications.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at January 2025.