BDW Trading Limited v Ardmore Construction Limited [2024] EWHC 3235 was a dispute concerning a block of apartments known as Crown Heights in Basingstoke (the development). Ardmore, under a JCT building contract, was responsible for the design and construction of the shell, core, primary services, and partial fitting-out of the development. Practical completion was achieved between December 2003 and June 2004.
Fast forward to 2024, nearly 20 years later, BDW (as the assignee of the original building contract) initiated adjudication proceedings to recover costs associated with fire safety defects in the development.
Central to this case was the amendment introduced by Section 135 of the Building Safety Act 2022, which extended the limitation period for claims under Section 1(1) of the Defective Premises Act 1972 (DPA) from six years to thirty years. This retrospective extension made it possible for BDW to bring a claim which would otherwise have been time-barred. Prior to this case, many construction litigators would have thought Technology and Construction Court litigation was the only viable forum for such disputes. However, Joana Smith J held that Ardmore’s breaches, including those under the DPA, could be adjudicated and the £14 million adjudication decision was enforceable.
Her judgement has confirmed that adjudication is not confined to contractual disputes but extends to statutory (and likely tortious) claims “arising under the contract”. Adopting a broad interpretation of the principles in Fiona Trust & Holding Corp v Privalov [2007] UKHL 40 the decision is authority for the fact that, if you “chose” adjudication in your contracts, that choice (even though imposed by statute) extends wider and for longer than you might think.
What does this mean for you?
Higher Barrier to Crystallise?
Definitely not.
Ardmore attempted (unsuccessfully) to argue that the dispute had not crystalised.
Applying usual principles, the judge held Ardmore’s failure to respond substantively to the dispute or accept liability meant there was clearly a difference or dispute on liability.
Asking for information will not, necessarily, prevent the dispute crystallising.
Wider Scope for Adjudication
Joana Smith J confirmed adjudication provisions apply broadly to claims “under,” “out of,” or “in connection with” construction contracts. This includes but is not limited to claims brought under the DPA and could well include common law claims, provided these arise under the contract.
At first glance, the extension of the limitation period, combined with the opening up of adjudication as a dispute resolution possibility, may appear to open the floodgates for adjudications on historic defects. However, it is important to note that adjudication is only available where there is a “construction contract” under the Housing Grants, Construction and Regeneration Act 1996. Not all agreements will qualify, for example, development agreements that include land transfers will fall outside of this scope, as do collateral warranties (following Abbey Healthcare v Simply Construct).
Parties to construction or other development contracts should take the time to consider their current agreements and those currently in negotiation to understand whether adjudication is available under the agreement or contract, and whether they might want or can limit the scope of adjudication. Being clear on the parties’ drafting intent may prevent unexpected claims from arising in the future.
Deeper dive for documents
Another of Ardmore’s arguments was the inequalities in arms in documentation.
Joana Smith J showed little sympathy for Ardmore’s argument, however, and highlighted Ardmore’s issues with poor record keeping regardless of the lapse of time.
Claims about historic projects place a significant burden on parties to retain and access project records.
The evidential burden is exacerbated with the time pressure within the short adjudication timescales. Contractors, developers and employers alike should ensure robust record-keeping and long-tail retention practices to avoid being disadvantaged by documentation imbalances.
Insurance Considerations
With the extended limitation period, the risk profile of historic building projects has now increased once more. Parties to the construction contract may now adjudicate a claim from as far back as 1992, leaving parties even more vulnerable to disputes arising from past works. This decision could see a rise in insurance premiums and / or tighter exclusions as occurred post-Grenfell, when cladding became effectively uninsurable, particularly in professional indemnity policies.
Another potential insurance consideration is that adjudication tends to be riskier than litigation. Although more often than not it is cheaper, in terms of legal costs, the compressed timescales, and lack of time to examine documents and seek expert evidence can make the process less straightforward to predict. Insurers tend to be risk averse and, again, may push up premiums to account for this increased risk.
Although we are yet to see a comprehensive reaction from insurers, the decision has the potential to further hinder the profitability of construction projects. However, what is clear is that developers and contractors should take the time to carefully review policy wording to ensure that adjudication costs are covered.
Current claims
Many in the industry will be party to an ongoing dispute, which may or may not have ticked into litigation. Following BDW v Ardmore it may be sensible to reevaluate strategy and consider whether time and money can be saved by rolling the dice on adjudication.
Rough justice it may be, but adjudication has just grown extra teeth.