Rupert Choat KC and Max Twivy successful in BDW Trading v Ardmore Construction [2024] EWHC 3235 (TCC)

Rupert Choat KC and Max Twivy acted for the successful Claimant in BDW Trading v Ardmore Construction [2024] EWHC 3235 (TCC). The judgment is the first to consider whether an adjudicator has jurisdiction to determine a Defective Premises Act 1972 claim, which involved a determination of whether the reasoning in Fiona Trust & Holding Corp v Privalov [2007] UKHL 40 (concerning arbitration agreements) applies to adjudication clauses. The £14.4m adjudication decision was enforced by Joanna Smith J. Marc Lixenberg acted for BDW, along with Rupert, in the adjudication.

Rupert, Marc and Max were instructed by Mark Pritchard of Howard Kennedy LLP.

Background

The dispute related to a block of apartments known as Crown Heights in Hampshire (the “Development”). Under a JCT building contract (the “Contract”), the Defendant (“Ardmore”) undertook the design and construction of the shell and core, primary services and partial fitting-out of the Development, for which practical completion occurred between December 2003 and June 2004.

The Claimant (“BDW”), which was an assignee of the Employer’s rights under the Contract, referred a dispute to adjudication on 21 March 2024 relating to fire safety defects. In a decision issued in September 2024 (the “Decision”), the adjudicator decided that: (a) Ardmore had breached its duties under the Contract (and that that claim was not time barred by reason of deliberate concealment); (b) Ardmore was liable under the Defective Premises Act 1972 (the “DPA”); and (c) Ardmore was required to pay BDW c.£14.4m by way of damages in respect of the cladding replacement scheme.

Ardmore raised four grounds on which it sought to resist enforcement, which are addressed below.

Whether the adjudicator had jurisdiction to determine a DPA claim / whether Fiona Trust reasoning applies to adjudication clauses

Ardmore contended that the adjudicator did not have jurisdiction to determine BDW’s claim for breach of the DPA, arguing that the scope of the contractual adjudication clause (which provided for the adjudication of any dispute or difference which “arises under this Contract”) did not allow a DPA claim to be referred to adjudication.

The issue of whether the adjudicator had jurisdiction to determine a claim for breach of the DPA essentially boiled down to the question of whether the Fiona Trust approach to the interpretation of arbitration agreements also applies to adjudication clauses. The existing authorities and textbook commentary on that question expressed conflicting views, with Coulson on Construction Adjudication (4^th edn.) stating that the issue “remains open for clarification.  Its potential importance should not be underestimated”.

Joanna Smith J rejected the jurisdiction challenge (paras 34-87), deciding that the Fiona Trust principle does apply to adjudication clauses, for a number of reasons including the following:

• the Judge rejected the suggestion (raised in the case law) that Fiona Trust reasoning does not apply by analogy to adjudication clauses because adjudication is imposed by statute rather than being freely agreed by contracting parties, holding that:

“On the contrary, that Parliament considered all parties to appropriate contracts should have a right to adjudicate “points if anything in the opposite direction”  … I agree with the observations … that “Parliament should, when legislating for the construction industry, be considered to be as concerned with business common sense as contracting parties are taken to be”;

• in rejecting an argument raised by Ardmore that the “underpinning” factors applicable to arbitration which were relied upon in Fiona Trust are not factors which apply to adjudication, the Judge considered that the relevant “underpinnings” for adjudication are “in many ways similar to those identified [in Fiona Trust] for arbitration”;
• Ardmore sought to rely on the different wording of the adjudication and arbitration clauses in the Contract (the arbitration clause used the words “arising under this Contract or in connection therewith”), contending that the different formulations meant that the parties must have intended the adjudication clause to be narrower than the arbitration clause. The Judge rejected that contention, finding that there was no significance in the differing wording of the arbitration and adjudication clauses; and
• Ardmore further submitted that the Contract was entered into before the Fiona Trust decision and the relevant factual matrix at the time of entry into the Contract included the “long standing and well-recognised distinction” between the phrasing of disputes “arising under” a contract and those arising “in connection with” a contract. The Judge rejected that argument, on the basis that there was no clarify or consistency in the case law on that issue prior to Fiona Trust.

Whether the adjudication was unfair owing to the alleged inequality of arms in documentation due to the passage of time since practical completion

Ardmore contended that the adjudication was inherently unfair owing to the inequality of arms in terms of documentation held by the parties, due to (amongst other things) the passage of time (c.20 years) since practical completion. Joanna Smith J rejected that natural justice challenge (paras 92-142), on the basis that (amongst other things):

• Ardmore’s record keeping over the relevant period had been deficient, such that the Judge could only infer that Ardmore’s lack of documentation was not down to disposing of documents after any relevant limitation period had expired;
• in the adjudication, the adjudicator directed that BDW carry out disclosure against categories of documents which Ardmore had considered ‘critical’, and after BDW provided the documents requested Admore did not complain of any omissions in the disclosure provided; and
• Ardmore had failed to satisfy the burden of establishing the materiality of any breach of natural justice. In this regard the Judge held that the breach must be shown to have had “a potentially significant effect” on the overall result of the adjudication in that it is either “decisive or of considerable potential importance to the outcome…and is not peripheral or irrelevant”. The Judge did not follow Constable J’s proposition in Home Group Ltd v MPS Housing Ltd [2023] EWHC 1946 (TCC), at para 50(2), that the breach must be shown to be material “in that it has led to a material difference in outcome”, adding “I can find nothing in Constable J’s earlier analysis of the authorities to support this proposition”.

The Judge also gave guidance on the relevance of the passage of time to allegations of unfairness (at para 119), as follows:

“Ardmore also accepts that the mere passage of time is not in itself enough to create unfairness and it is clear from the authorities to which I have referred that adjudication provisions may be relied upon “at any time”. Nevertheless, in principle it must be the case that the longer the period since the works in respect of which complaint is made, the more careful the court will need to be in scrutinising any complaint of unfairness …”.

The other two grounds for resisting enforcement

A further ground for resisting enforcement raised by Ardmore was non-crystallisation of the dispute prior to the adjudication starting, which was rejected by the Judge (paras 18-33).

The final ground raised by Ardmore was that the adjudicator had failed to consider a material defence relevant to the allegation of deliberate concealment. That ground was rejected by the Judge (paras 143-152) because (amongst other reasons) the issue alleged by Ardmore to have been overlooked by the adjudicator had not been included by Ardmore in a list of issues which it had prepared for resolution by the adjudicator (each of which issues had been dealt with in the Decision).

The full judgment is available here.

See press coverage below:

• The Construction Index
• Construction News (behind paywall)