Extended limitation of claims: TCC confirms that adjudications may still be raised for historical building defects, decades after practical completion

In BDW Trading Ltd v Ardmore Construction Ltd the Technology and Construction Court was faced with circumstances in which a claim's limitation period was retrospectively extended by new legislative provisions. This article provides a summary of the judgment and discusses its key implications for the construction industry.

BACKGROUND

The key parties were Ardmore Construction Limited ("Ardmore"; "the Contractor), Basingstoke Property Company Limited ("BPCL"; "the Employer") and BDW Trading Ltd ("BDW").

BPCL and Ardmore entered into a building contract for the design, erection and completion of the shell and core, primary services and partial fitting out of apartments at Crown Heights, Basingstoke ("the Development"). Practical completion of the Development was achieved between December 2003 and June 2004.

There was later a dispute surrounding alleged fire safety defects between the parties. By a Deed of Assignation, BDW received full benefit of BPCL's rights and interests under the Contract, inclusive of all rights to sue or take action concerning any breach under the Contract.

Until provisions of the Building Safety Act 2022 ("the 2022 Act") came into force Ardmore had a complete limitation defence under the Limitation Act 1980 ("the 1980 Act"), particularly in relation to section 1(1) of the Defective Premises Act 1972 ("the 1972 Act"). Section 1(1) of the 1972 Act imposed a duty on a "…person taking on work for or in connection with the provision of a dwelling…" to perform in a "workmanlike" or "professional manner" with "proper materials so that as regards that work the dwelling will be fit for habitation when completed". This complete limitation defence fell when the 2022 Act introduced a new section 4B into the 1980 Act, which retrospectively increased the limitation period for a claim to 30 years (formerly 6 years).

In 2022, BDW issued a letter of claim nearly 20 years post-practical completion of the Development and a Notice of Adjudication in March 2024.

THE ADJUDICATION

The Notice of Adjudication set out that a dispute in respect of Ardmore's liability to BDW in terms of fire safety defects in the Development had arisen. This was based on Ardmore's breaches of the Contract and/or duties under section 1(1) of the 1972 Act. Damages of £15,037,615.01 (exclusive of VAT) or such other sums as the Adjudicator may decide were sought.

The Adjudicator found that Ardmore breached its duties under the Contract for fire safety in the Development. Damages were awarded to BDW. As Ardmore informed BDW of its intention to resist enforcement of the Adjudicator's Decision, BDW raised enforcement proceedings at TCC.

COURT PROCEEDINGS

Ardmore defended the enforcement proceedings on four grounds:

• Ground 1: Crystallisation of the Dispute – that the dispute had not "crystallised" at the time of referral to adjudication as it had not denied liability for claims and had requested further information on BDW's allegations.
• Ground 2: Jurisdiction over the 1972 Act claim – the Contract contained an Article which reflected section 108(1) of the Housing Grants, Construction and Regeneration Act 1996, in effect limiting an adjudication to disputes which are "under the contract". However, that the Contract also had an Article (relating to arbitration) which allowed matters "…arising under this Contract or in connection therewith…" to be considered. Ardmore argued that the words relating to adjudication should be "interpreted narrowly" and that there is a difference in meaning and scope between the words "under the contract" and "connected with" the contract. Under Ground 2, Ardmore also challenged the length of time that had passed since the dispute had arisen.
• Ground 3: Natural Justice Challenge – Ardmore advanced an argument that was described as "nuanced" by the Court. It was not the complexity of the issues, or the amount of documentation involved, that Ardmore challenged. Instead, it was the "paucity and imbalance of documentation available…. together with a process which is not capable of adequately addressing those problems". Ardmore's position was that it had "almost no relevant contemporaneous documentation" and it had to rely on documents provided by BDW together with the searches made by BDW for documents.
• Ground 4: Further Natural Justice Challenge – Ardmore argued that the Adjudicator ignored a material defence in respect of the claim of "deliberate concealment" of documentation.

BDW argued to the contrary on the above grounds, seeking to enforce the Adjudicator's Decision.

DECISION

The Court held that on basis of Grounds 1 to 4, there was no real prospect for Ardmore successfully defending the claim.

It is worth flagging that:

• In relation to Ground 1, the Court found that the dispute had crystallised even without Ardmore's admission. Ardmore had failed to investigate its liability, and it was also aware of the essential claim on liability.
• In relation to Ground 2 (Ardmore's challenge of the passage of time since the dispute had arisen to when action was taken by BDW) the Court was of the view that "…this unusual feature is not sufficient on its own to establish a real prospect of a defence…".
• In relation to Ground 3, the Court recognised that the Adjudicator deemed the largest part of the Referral to be a fire report and its exhibits and that the Adjudicator already rejected Ardmore's jurisdictional challenge.
• In relation to Grounds 3 and 4, the Court expressed that "it is common ground that adjudication is inherently a rough and ready process and that the threshold for a valid natural justice challenge is high…".

Therefore, the Adjudicator's Decision was enforced by way of summary judgment and Ardmore was ordered to pay BDW £14,539,243.45 together with interest and costs.

IMPLICATIONS FOR THE CONSTRUCTION INDUSTRY

Firstly, this judgment has confirmed the wide scope of adjudication clauses which may enable historical defect claims under section 1(1) of the 1972 Act with the extended limitation under the 2022 Act. It is again highlighted that the Adjudicator's Decision in this case was underpinned by a letter of claim issued some 20 years post-practical completion, which serves as a confirmation that it is possible to adjudicate after all that time if matters relate to the 1972 Act and 2022 Act.

Secondly, it confirms that the court's approach to challenging adjudicator's conclusions "should be slow" and that the threshold for a valid natural justice challenge to have a decision set aside is high.