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Adjudication and Fire Safety Claims: Expanding the Boundaries of Jurisdiction Under the Defective Premises Act 1972

January 2025

The recent High Court decision in BDW Trading Limited v Ardmore Construction Limited reinforces parties’ ability to resolve fire safety claims on residential projects via adjudication. This case confirms that adjudicators’ jurisdiction to decide disputes arising ‘under the contract’ extends to causes of action under the Defective Premises Act 1972 (DPA). The case underscores the courts’ general reluctance to interfere with adjudication decisions, despite complex arguments on jurisdiction and fairness.

Background

Parties to a construction contract have the right to refer a dispute arising under the contract for adjudication. This right arises by operation of the S108 of Housing Grants, Construction and Regeneration Act 1996 unless the parties have included an express clause to that affect under their contract.

What is meant by “under the contract” has been a point of contention. If considered in the narrow sense, this wording would only allow claims for breach of contract (for breaches of the terms of the contract in question) to be referred to adjudication. However, if taken more broadly this could allow wider claims arising out of the parties’ relationship to be captured, for instance those arising under the DPA.

The House of Lords provided guidance on what claims may be deemed to have fallen under the contract for the purpose of an arbitration clause, in an earlier shipping case known as the Fiona Trust.  The fundamental principle of the judgment in the Fiona Trust was that of “business common sense” and that where there is an arbitration provision, unless there is clear wording to the contrary, it must be assumed that parties to the contract intend for all disputes arising out of their relationship (associated with the relevant contract) to be captured by the arbitration clause. This therefore adopted the broader understanding of what is meant by under the contract. This decision has been followed for adjudication business, being a dispute resolution procedure under the relevant contract.

The remaining question, therefore, is to what extent this judgment is applicable to construction contracts and adjudication clauses.

Facts of the case

This case arose from an adjudication, referred by BDW, concerning fire safety defects at the Crown Heights development in Basingstoke, where Ardmore acted as the Contractor. Practical completion was achieved between December 2003 and June 2004, but in 2024, BDW initiated adjudication, claiming damages for breach of contract and under the DPA.

Prior to the Building Safety Act 2022 (BSA) coming into effect, any claim brought under the DPA would need to be commenced within 6-years of completion of the project. The BSA[1] extended that period to 30 years for projects completed before 28 June 2022 (and 15 years for projects completed after that date). Therefore, this claim under the DPA was time barred in statute, but was then revived by the BSA which enabled BDW the opportunity to commence a claim which had previously expired.

The adjudicator awarded BDW £14.45m in damages and costs.

Ardmore refused to make payment of the awarded monies, and so BDW commenced enforcement proceedings. Ardmore sought to resist enforcement of the adjudicator’s decision on four grounds:

• Ground 1 – the dispute referred to adjudication had not yet crystallised;
• Ground 2 – the adjudicator lacked jurisdiction to decide DPA claims;
• Ground 3 – procedural unfairness due to Ardmore’s lack of documentation; and
• Ground 4 – the adjudicator failed to consider a material defence.

We will briefly consider Grounds 1, 3 and 4, albeit these are fact specific grounds and so the judgment is of more limited applicability to alternative scenarios. Ground 2 is of wider interest as it determines whether claims brought under the DPA could be considered as arising under the contract and is therefore our primary focus.

Jurisdiction to consider claims under the DPA

The contract in question, based on the JCT 1998 form, expressly provided for disputes arising “under the contract” to be referred to adjudication. Ardmore argued this wording excluded DPA claims, while BDW contended for a broader interpretation aligned with the Fiona Trust finding.

Mrs Justice Joanna Smith (Smith MJ) ruled in favour of BDW, holding that “the relevant “underpinnings” for adjudication are in many ways similar to those identified by Lord Hoffmann for arbitration [in Fiona Trust] and […] this strongly supports the application of the Fiona Trust principle to adjudication provisions.” As a result of this finding, the distinction between disputes “arising under” and “arising out of” or “in connection with” the contract is now largely obsolete for both adjudication and arbitration provisions. The adjudicator was therefore judged to have jurisdiction to decide claims arising under the DPA as opposed to those strictly arising ‘under’ the contract.

Other grounds

The court also dismissed Ardmore’s arguments on unfairness and procedural irregularity, emphasising the high threshold for resisting enforcement of adjudication decisions.

Ground 1 – the dispute referred had not yet crystallised;

Ardmore pleaded that the dispute had not crystallised by reason that BDW had failed to submit sufficient details on remedial proposals and quantum, Ardmore had never actually denied the allegations and BDW’s case continually changed, only being notified to Ardmore 13 days prior to commencement of the adjudication. Smith MJ was not convinced by these points, and emphasised the low bar to proving a dispute has crystallised.

Ground 3 – procedural unfairness due to Ardmore’s lack of documentation:

Smith MJ found that Ardmore’s lack of documentation was not as a result of the limitation period having previously expired (and then retrospectively being extended by the BSA), and documents therefore being destroyed. Rather, it was held that Ardmore’s lack of documentation was as a result their poor document management and therefore they should not be able to rely on this as procedural unfairness.

Ground 4 – the adjudicator failed to consider a material defence:

Ardmore suggested that the adjudicator deliberately failed to consider a defence put forward by them. Smith MJ rejected this as a ground for resisting enforcement. Ardmore had previously provided a list of issues for the adjudicator to consider, and this defence was not identified for consideration. It therefore was not required to be dealt with in the adjudication.

Implications

This judgment is a landmark for construction law in terms of adjudicating on fire safety claims post-BSA. It confirms that claims under the DPA can be referred to adjudication as if they were simple breaches of the underlying contract, offering an expedited procedure for resolving disputes tied to the extended limitation periods arising from the BSA, without the need for court proceedings. This may therefore see a rise in fire safety disputes being referred to adjudication at first instance as opposed to court proceedings. Considering the time and evidential pressures of adjudications, this in principle serves to benefit claimants. Defendants tend to be ‘on the back foot’ in adjudications as they have less control over the procedural timetable and the documentation relied on, particularly as in this case when the works are c20 years old.

For contractors and other supply chain parties who are aware of potential fire safety claims against them, this ruling emphasises the need (subject to any case specific sensitivities) to engage actively with any prospective claimant and investigate allegations. The Court found that Ardmore, in this case, failed to investigate the allegations once the issues were raised despite being invited to participate in site inspections. This led to them having only limited information to assist their defence when the adjudication was commenced. The Court also found that because of this, procedural arguments were raised as a last-ditch attempt to avoid liability (which ultimately failed). Had they engaged more actively, they would likely have had more opportunity to consider their position and substantively assess BDW’s case prior to commencement of the adjudication.

Taking a step back and considering this judgment with other recent decisions, it remains uncertain as to whether it will be as ground-breaking as it first may appear, including freeing up the Courts from dealing with fire safety claims.

Firstly, it remains that only parties to a construction contract for construction operations can adjudicate. Following the Supreme Court’s decision in Abbey Healthcare (Mill Hill) Limited v. Augusta 2008 LLP (formerly Simple Construct (UK) LLP)[2], parties to a collateral warranty that does not include a separate or distinct obligation to carry out construction operations for the beneficiary cannot adjudicate. Furthermore, for claims related to works carried out towards the end of the extended limitation period for DPA claims there will need to be an examination of the contractual matrix to assess whether the original contracting parties are still the relevant parties, including whether the claimant is responsible for any rectification works and has suffered or will suffer the loss. This may not be the case for buildings that have been sold since completion. These factors may limit the number of claims which are suitable for adjudication following this decision.

Secondly, a claim under the BSA/DPA typically requires extensive evidence to identify the damage and how caused by the defendant, which will require careful timetable management by an adjudicator to ensure a fair process. Such claims are unlikely to be dealt with in the 28-day period and more likely will involve a number of submissions and other case management tools by the adjudicator, such as meetings and answers to technical questions. This will increase the costs of such an adjudication.

In addition, and as already intimated by Ardmore following the judgment, given the enforced adjudicator’s decision is only temporarily binding a full claim on the issues is likely and so will still take up the courts’ resources.

Finally, this case reiterates the courts’ adamance to uphold adjudication decisions unless there are clear and exceptional grounds to refuse enforcement. Procedural arguments rarely succeed. The courts have again inferred that Parliament’s intention is for adjudication to be a reliable first port of call for disputes in the construction industry.

Conclusion
The judgment in BDW v Ardmore strengthens the position of claimants using adjudication to pursue fire safety claims and underscores the courts’ commitment to upholding adjudication as a fast and effective dispute resolution process. Should you require information on any of the points raised in this update, please contact our lawyers or visit our website.

[1] Section 135 of the Building Safety Act 2022

[2] [2024] UKSC 23

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