Case Law Update: BDW Trading Limited v Ardmore Construction Limited

Last month, the Technology and Construction Court (“TCC”) handed down its judgment in BDW Trading Limited v Ardmore Construction Limited [2024] EWHC 3235.

The Court confirmed the wide scope of adjudication clauses, opening the door for developers to bring adjudications on historical defects claims under section 1(1) of the Defective Premises Act 1972 (“DPA”) with extended limitation under the Building Safety Act 2022. The Court also gave a useful reminder on when a dispute is deemed to be crystallised for the purposes of adjudication. In this article, we discuss the implications of this decision for the construction industry.

Factual background

The dispute concerned alleged fire safety defects at the Crown Heights development in Basingstoke (the “Development”). The Basingstoke Property Company Limited had employed Ardmore Construction Limited (“Ardmore”) as contractor for the Development in 2002, which achieved practical completion between 2003-2004.

The building contract (“Contract”) was later assigned to BDW Trading Limited (“BDW”). BDW wrote a Pre-Action Protocol letter to Ardmore in 2022, alleging fire safety cladding defects at the development.

The matter was ultimately referred to adjudication by BDW in 2024. BDW was successful in the adjudication and Ardmore was found liable for breaches of the Contract and the DPA.

BDW applied to the TCC for summary judgment to enforce the decision and Ardmore contested this on four grounds. The grounds we will focus on are that the dispute had not crystallised, and that the adjudicator did not have jurisdiction to hear a DPA claim.

Crystallisation

Ardmore unsuccessfully argued that the dispute had not crystallised, citing that it had not denied liability for claims brought against it and had sought further information on the allegations before responding. Ardmore submitted that BDW had only set out its full claim in in its letter dated 8 March 2024, which only left thirteen days between this and the Notice of Adjudication for the dispute to crystallise.

The Court rejected this, finding that BDW had set out its essential claim prior to this and Ardmore had failed to take steps to investigate liability. Ardmore had tried to avoid crystallisation by asking for further information for two years. The Court was unsympathetic and found that the dispute had crystallised despite the non-admission.

Although BDW had not been given information on quantum prior to the 8 March 2024, the Court found that the quantum dispute had also crystallised, particularly given that Ardmore had been aware of the essential claim on liability for some time prior.

Jurisdiction for the DPA claim

Under Article 5 of the Contract, disputes arising “under this Contract” could be referred to adjudication, mirroring the wording used in section 108(1) of the Housing Grants, Construction and Regeneration Act 1996 (“HGCRA”).

This differed to Article 6A of the Contract relating to arbitration, which read that disputes arising “under this Contract or in connection therewith” could be referred to adjudication.

Ardmore submitted that the difference in language between Article 5 and Article 6A indicated an intention for Article 5 to be construed more narrowly. Accordingly, Ardmore argued that the adjudication provision did not apply to the DPA claim.

The Court sought to determine what “under the contract” meant in section 108(1) of the HGCRA. In doing so, the Court confirmed applicability of the Fiona Trust^[1] principles to adjudication provisions, whereby it is assumed that commercial parties to a construction contract are likely to have intended for all disputes arising from their relationship to be resolved in the same forum, whether arbitration or adjudication. This means there is a departure from linguistic distinctions between disputes which arise “under” a contract as opposed to arising “out of” or “in connection with” the contract. Absent clear language to the contrary, the DPA claim was deemed to fall within the scope of the adjudication provision.

Other contested grounds

Practical completion had been achieved at some point between 2003-2004. The adjudication took place some twenty years later, in 2024. Ardmore submitted that it lacked contemporaneous documentation and was reliant on BDW’s disclosure, putting it in an unfair position.

The Court highlighted Ardmore’s deficient record keeping and that it had not accepted an offer to carry out inspections. Moreover, BDW had responded to Ardmore’s disclosure requests, and Ardmore had not identified any further necessary disclosure. The Court found that Ardmore failed to establish that any disclosure potentially available would have had any significant effect on the adjudication outcome, and accordingly rejected this challenge.

The Court dealt briefly with and emphatically turned down ground 4, which was that the adjudicator had ignored a material defence to BDW’s deliberate concealment claim.

What does this mean for the industry?

It is notable, but perhaps unsurprising, that the Court readily applied the Fiona Trust principles to the wording of section 108(1) HGCRA and confirmed the wide scope of adjudication provisions, particularly in relation to language such as “under”, “out of” or “in connection with” a construction contract. Due to extended limitation under the Building Safety Act 2022, contractors may now face adjudication referrals for DPA defects claims on historic projects.

This also bears a stark reminder for parties to a construction contract to maintain sufficient record keeping, including for historical projects. The Court was unsympathetic to the imbalance of knowledge between the parties and BDW’s selectivity in disclosing certain documents.  With the extension of limitation to section 1 DPA claims by the Building Safety Act 2022, parties are in a position where disputes on projects potentially going as far back as 1992 can be referred to adjudication. Contractors should take this as a warning to hold onto historical building documents, as natural justice challenges on the basis of documentation imbalance and the passage of time may be unsuccessful.

Finally, contractors should note that failing to engage or not actively denying liability does not prevent a dispute from crystallising. If a party has made a claim, it is important to move into investigating liability rather than sitting and waiting for further information. This may prove fatal where a dispute is deemed crystallised, but a contractor has not taken steps to look into the claim.