Background
In October 2002, Ardmore entered into a contract with Basingstoke Property Company, for the development of a block of apartments in Hampshire. Practical Completion occurred between December 2003 and June 2004. And in November 2004, Basingstoke assigned its rights and interests under the Contract to BDW.
How much?
On 14 July 2022, BDW issued a Letter of Claim to Ardmore. This was followed, on 21 March 2024, by a Notice of Adjudication, and a Referral on 27 March 2024.
BDW’s claim concerned Ardmore’s liability for fire safety defects. BDW contended that these defects arose due to Ardmore’s breaches of:
- the Contract; and/or
- its duties under the Defective Premises Act 1972 (DPA).
The Adjudicator determined that Ardmore breached its duties under both the Contract and the DPA and ordered Ardmore to pay BDW £14,454,914.45 in damages plus the adjudicator’s costs.
How long?
The case is noteworthy because PC was achieved in 2004, yet the Adjudication did not take place until 20 years later – in 2024.
In the normal run of things, the Limitation Act 1980 requires that claims for breach of contract in England and Wales must be brought within 6 years (or 12 years in the case of a deed). However, that period can be extended where there has been a deliberate concealment of the breach, which BDW said was the case here.
BDW was also able to rely on a new provision of the Building Safety Act 2022, which increases the limitation periods – from 6 to 30 years – for claims brought under Section 1(1) of the DPA. BDW argued that the Defective Premises claim was therefore within the thirty years allowed by the BSA.
What happened next?
Ardmore refused to pay the £14m awarded by the Adjudicator, so BDW commenced enforcement action in the Technology and Construction Court. Ardmore sought to resist enforcement various grounds, including:
- Ardmore said that the adjudicator had no jurisdiction to determine a claim for breach of the Defective Premises Act, as the right to adjudicate was limited to disputes arising “under the contract”.
- Ardmore also complained that there was a breach of natural justice. Given the lapse of time since practical completion, Ardmore said that the adjudication was inherently unfair due to inequality of arms in terms of documentation. Ardmore complained that it was forced to rely on BDW's documents.
The court's decision
The TCC dismissed all of Ardmore's objections and enforced the Adjudicator’s decision, requiring Ardmore to pay the £14m awarded by the Adjudicator.
In deciding that the Adjudicator had jurisdiction to deal with claims under the Defective Premises Act, the court followed the principles of the Fiona Trust case. The Fiona Trust concerned whether or not an arbitration clause, which incorporated the words "any dispute arising under this charter" captured disputes relating to bribery. The case set a presumption in favour of “one-stop” dispute resolution forum - unless there was explicit contractual language to the contrary.
Applying the Fiona Trust to the present case, the judge held:
"Although the Fiona Trust principle applies to arbitration clauses…Fiona Trust confirms a 'strongly signposted' departure from previous linguistic distinctions between disputes arising on the one hand 'under' and, on the other hand, 'arising out of' or 'in connection with' the underlying contract between the parties. Such distinctions 'reflect no credit upon English commercial law'."
The judge found that there was nothing to suggest that the Fiona Trust principle cannot equally apply to Adjudication, simply because Adjudication was created by statute. The Supreme Court's decision in Bresco v Lonsdale [2019] lent weight to the fact that in creating the statutory right to Adjudicate, Parliament clearly intended that all parties to appropriate contracts should have that right.
The judge also rejected Ardmore's natural justice challenge. Whilst the passage of time was a relevant consideration, Ardmore’s lack of documentation was due to its own poor record-keeping during the Contract and its failure to undertake its own investigations into the claim. The Adjudicator had ordered the disclosure by BDW of certain documentation to Ardmore. The court found that the adjudication process was therefore fair.
Key takeaways
This decision is extremely significant for the construction industry. It means that a raft of building safety claims can now be referred to adjudication – giving parties more timely and cost efficient decisions. This is particularly important in the current economic climate, where insolvency rates mean that time can be a crucial factor in dispute resolution strategy.
The case also highlights the extended limitation periods introduced by the BSA 2022 which can allow claims to be brought many years after the completion of a project. In this case, the claim was brought around twenty years post PC, and resulted in Ardmore having to pay BDW £14.5million. It is essential that those involved in construction projects implement good project governance and record keeping to ensure that they have the best possible chance of dealing with historic cladding claims.
If you would like to discuss the key takeaways further please contact Katherine Doran or Hayley Swanson.
