Building safety: Court confirms adjudicators can determine claims under the Defective Premises Act 1972

Why is the court’s decision in BDW Trading v Ardmore Construction important?

This decision represents a key development in the world of adjudication. Given the similarity between the wording of the adjudication clause in this case and Section 108(1) of the Construction Act that enshrines into law a party’s right to refer construction disputes to adjudication, the court’s reasoning suggests parties have the statutory right to refer to adjudication alleged claims under the Defective Premises Act (DPA) 1972 (and some of these DPA claims, as a result of the Building Safety Act could have a 30-year limitation period).

Case background

Ardmore completed the construction of a residential development in 2004. Fire safety defects were subsequently discovered. BDW commenced an adjudication against Ardmore in relation to the defects and received a decision in its favour for approximately £14.5 million.

Ardmore resisted BDW’s enforcement of the adjudicator’s decision,  so BDW applied for summary judgment from the Technology and Construction Court. Central to Ardmore’s defence to BDW’s summary judgment application was that the adjudicator’s jurisdiction was limited by the express wording of the building contract to disputes or differences arising “under this Contract”. Ardmore argued “under this Contract” ought to be interpreted narrowly and as a consequence, this express wording only allowed for an adjudicator to determine breach of contract claims, and not a claim under the DPA.

The DPA imposes statutory duties on those building, taking on work for and/or renting out dwellings to ensure buildings are fit for habitation.

The Building Safety Act 2022 extended the limitation period for DPA claims accruing before 28 June 2022 from 6 years to 30 years. This was key to enabling BDW to bring a fire safety claim against Ardmore for works completed 20 years earlier; any other possible contractual claim would have been time barred. It is relevant that the Building Safety Act also extended limitation for claims under the DPA accruing after 28 June 2022 to 15 years.

Key express contractual provisions

Article 5 of the relevant building contract (dealing with referring a matter to adjudication) provided that:

"If any dispute or difference arises under this Contract either Party may refer it to adjudication in accordance with clause 39A" (emphasis added).

Ardmore contended that for an adjudicator to have jurisdiction over DPA claims, Article 5 needed to replicate the wider wording found in Article 6A (which dealt with referring a matter to arbitration):  

"…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)" (emphasis added).

What did the court decide?

The court held that the adjudicator had jurisdiction to determine a claim under the DPA.

In reaching this decision, the court reasoned:

The starting assumption is that parties to the building contract, as rational businesspeople, are likely to intend that any dispute arising out of their relationship ought to be decided by the same tribunal – whether that tribunal is arbitration, adjudication or court. It is difficult to see why the parties would want to some disputes fall in the ambit of adjudication, and other disputes to be referred to arbitration or litigation only. 

Disputes or differences arising “under this contract” must be “given a wide meaning unless there is very clear language to indicate the contrary”. The court did not consider that the different wording used in the arbitration clause showed the parties clearly intended to refer a narrower ambit of disputes to adjudication that could ultimately be referred to arbitration or litigation.

It is understood that permission is currently being sought to appeal this decision. In light of the amounts involved and the potential importance of this decision, that is perhaps not surprising.

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