Verdict on Crown Heights dispute delivered by Technology and Construction Court

The Technology and Construction Court confirmed the wide scope of adjudication clauses, opening the door for developers to bring adjudications on historical defects claims under Section 1(1) of the Defective Premises Act 1972 with extended limitation under the Building Safety Act 2022.

Further, the Technology and Construction Court also gave a useful reminder on when a dispute is deemed to be ‘crystallised’ for the purposes of adjudication. There are implications of this decision for the construction industry.

Factual background

As stated, the dispute concerned alleged fire safety defects at the Crown Heights development in Basingstoke. The Basingstoke Property Company Limited had employed Ardmore Construction Limited as contractor for the development in 2002, which achieved practical completion between 2003-2004.

The building contract was later assigned to BDW Trading Limited, which then wrote a Pre-Action Protocol letter to Ardmore Construction Limited in 2022 alleging fire safety cladding defects at the development.

The matter was ultimately referred to adjudication by BDW Trading Limited in 2024. BDW Trading Limited was successful in the adjudication and Ardmore Construction Limited was found liable for breaches of the contract and the Defective Premises Act 1972.

BDW Trading Limited applied to the Technology and Construction Court for summary judgement to enforce the decision. Ardmore Construction Limited contested this on four grounds, two of which were that the dispute had not crystallised and that the adjudicator didn’t have jurisdiction to hear a Defective Premises Act claim.

Dispute had not crystallised

Ardmore Construction Limited unsuccessfully argued that the dispute had not crystallised, citing that it had not denied liability for claims brought against it and had sought further information on the allegations before responding.

Ardmore Construction Limited submitted that BDW Trading Limited had only set out its full claim in in its letter dated 8 March 2024, which only left 13 days between this and the Notice of Adjudication for the dispute to crystallise.

The Technology and Construction Court rejected this, finding that BDW Trading Limited had set out its essential claim prior to this and also that Ardmore Construction Limited had failed to take steps to investigate liability. Ardmore Construction Limited had tried to avoid crystallisation by asking for further information for two years. The Technology and Construction Court was unsympathetic and found that the dispute had crystallised despite the non-admission.

Although BDW Trading Limited had not been given information on quantum prior to the 8 March 2024, the Technology and Construction Court found that the quantum dispute had also crystallised, particularly given that Ardmore Construction Limited had been aware of the essential claim on liability for some time prior.

Jurisdiction for the DPA claim

Under Article 5 of the contract, disputes arising “under this contract” could be referred to adjudication, mirroring the wording used in Section 108(1) of the Housing Grants, Construction and Regeneration Act 1996.

This differed to Article 6A of the contract relating to arbitration, which read that disputes arising “under this contract or in connection therewith” could be referred to adjudication.

Ardmore Construction Limited submitted that the difference in language between Article 5 and Article 6A indicated an intention for Article 5 to be construed more narrowly. Accordingly, Ardmore Construction Limited argued that the adjudication provision did not apply to the Defective Premises Act claim.

The Technology and Construction Court sought to determine what “under the contract” meant in Section 108(1) of the Housing Grants, Construction and Regeneration Act 1996. In doing so, the Technology and Construction Court confirmed applicability of the Fiona Trust* principles to adjudication provisions, whereby it’s assumed that commercial parties to a construction contract are likely to have intended for all disputes arising from their relationship to be resolved in the same forum, whether arbitration or adjudication.

This means there’s a departure from linguistic distinctions between disputes which arise “under” a contract as opposed to arising “out of” or “in connection with” the contract. Absent clear language to the contrary, the Defective Premises Act claim was deemed to fall within the scope of the adjudication provision.

Other contested grounds

Practical completion had been achieved at some point between 2003-2004. The adjudication took place some 20 years later, in 2024. Ardmore Construction Limited submitted that it lacked contemporaneous documentation and was reliant on BDW Trading Limited’s disclosure, putting it in an unfair position.

The Technology and Construction Court highlighted Ardmore Construction Limited’s deficient record keeping and that it had not accepted an offer to carry out inspections. Moreover, BDW Trading Limited had responded to Ardmore Construction Limited’s disclosure requests and Ardmore Construction Limited had not identified any further necessary disclosure.

The Technology and Construction Court found that Ardmore Construction Limited failed to establish that any disclosure potentially available would have had any significant effect on the adjudication outcome and, accordingly, rejected this challenge.

The Technology and Construction Court dealt briefly with (and emphatically turned down) ground 4, which was that the adjudicator had ignored a material defence to BDW Trading Limited’s deliberate concealment claim.

Extended limitation

It’s notable, but perhaps unsurprising, that the Technology and Construction Court readily applied the Fiona Trust principles to the wording of Section 108(1) of the Housing Grants, Construction and Regeneration Act 1996 and confirmed the wide scope of adjudication provisions, particularly so in relation to language such as “under”, “out of” or “in connection with” a construction contract. Due to extended limitation under the Building Safety Act 2022, contractors may now face adjudication referrals for Defective Premises Act defects claims on historic projects.

This also bears a stark reminder for parties to a construction contract to maintain sufficient record keeping, including for historical projects. The Technology and Construction Court was unsympathetic to the imbalance of knowledge between the parties and BDW Trading Limited’s selectivity in disclosing certain documents.

With the extension of limitation to Section 1 Defective Premises Act claims by the Building Safety Act 2022, parties are now in a position where disputes on projects potentially stretching back as far as 1992 can be referred to adjudication. Contractors should take this as a warning to hold on to their historical building documents as natural justice challenges on the basis of documentation imbalance and the passage of time may be unsuccessful.

Contractors should also note that failing to engage or not actively denying liability does not prevent a dispute from crystallising. If a party has made a claim, it’s important to move into investigating liability rather than sitting and waiting for further information. This may prove fatal where a dispute is deemed crystallised, but a contractor has not taken steps to look into the claim.

*Fiona Trust & Holding Corp versus Privalov [2007] UKHL 40

**Further information is available online at www.clydeco.com