Has BDW v Ardmore [2024] expanded the use of adjudication in construction PI disputes?

It is almost a year since the Technology & Construction Court (TCC) handed down its judgment in BDW Trading Ltd v Ardmore Construction Ltd [2024]. It was a significant decision as the case confirmed that, in principle, adjudicators do have jurisdiction to determine claims made under the Defective Premises Act 1972 (the DPA 1972) and that such claims may have the benefit of the extended limitation periods for claims under the DPA 1972 effected by the Building Safety Act 2022 (the BSA).  

From the perspective of those in the professional indemnity market, this clarification from the TCC potentially opened the door for substantial claims under the DPA to be made in respect of projects that were completed decades ago. It also made the use of adjudication in such claims against design & build contractors and consultants far more attractive to potential claimants.  

The BDW v Ardmore decision: a summary

The TCC decision arose in the context of an application to enforce an adjudicator’s decision relating to a contract that was entered into on 30 October 2002 for the design and construction of apartments in Basingstoke.

The building contract had (1) a clause providing for the resolution by adjudication of any dispute/difference that “arises under this contract” and (2) an arbitration clause for the resolution of disputes/differences “arising under this Contract or in connection therewith”.
The wording of the adjudication clause (unsurprisingly) mirrors s108(1) of the Housing Grants, Construction and Regeneration Act 1996, as amended, which provides: “A party to a construction contract has the right to refer a dispute arising under the contract for adjudication ….”.

At some point following the Grenfell tragedy, it became apparent that there were fire safety defects in the apartment development and remediation works would be needed. One of BDW’s (successful) claims against Ardmore in the adjudication was for tortious breach of the DPA 1972, revived by “the retrospective extension of time to the limitation period for claims under the DPA 1972 effected by the BSA 2022”. 

Ardmore’s argument on this point in the enforcement proceedings was that the wording of the adjudication clause was not wide enough to encompass a tortious claim for breach of the DPA 1972, meaning that the Adjudicator had no jurisdiction to determine a tortious claim for breach of the DPA 1972.

The TCC held (in favour of BDW) that the Fiona Trust & Holding Corp v Privalov [2007] also known as Premium Nafta Products Limited and others v Fili Shipping Company Limited principle applied to adjudication clauses as well as arbitration agreements. The Fiona Trust principle provides that where there is no clear wording to the contrary, contracting parties intend that all disputes arising from their contractual relationship should be resolved by the same tribunal. In the BDW v Ardmore judgment, Mrs Justice Joanna Smith set out the application of the principle in this case:

“… I am inclined to agree with Mr Choat that, absent very clear words, it would make little commercial sense for the parties to have intended that their contractual claims could be referred to adjudication and/or arbitration but that any tortious claims (including tortious claims dealing with the same defects and seeking the same relief) could only be referred to arbitration”.

Adjudication in construction PI

At the time adjudication provisions first came into effect in 1998, there was understandable concern that construction professionals would be ambushed via adjudication on large complex disputes where claimants had taken months to prepare their case, leaving respondents with a few weeks (at most) to prepare a full response. For the most part, this never transpired, with UK claims pursued primarily through the pre-action process, followed by proceedings in the TCC. 

Whilst faster than previously, these processes are still relatively lengthy and expensive. Adjudication, on the other hand, is known for its speed and cost-effectiveness and so, from this perspective, it is just as attractive to respondents as to claimants.  To a large extent, the quality of adjudication decisions has been good and whilst in theory, an adjudication decision is only temporarily binding, in many cases, the award unravels the dispute which is then settled. 

Interestingly, over the last couple of years, there has been a markedly increasing number of adjudications against design and build contractors and consultants - those claims however are not limited to building safety issues. 

In our recent experience, claimants now seem more willing to consider adjudication as a viable step. Whilst we have seen the tactical deployment of adjudication against construction professionals, often with little warning and tight deadlines, viewed positively, adjudication could in the right circumstances be used to advantage by combining readiness with strategic planning.

For instance, strategically, respondents to a claim in the pre-action stage could elect to pick off one element of the claim to refer to adjudication for a declaration (eg, was a contractual notice served by the contractor in accordance with the contractual provisions). Whilst the risks of such a step would need to be carefully balanced, if selected carefully and narrowly, the determination of one issue could facilitate a swift settlement and a substantial saving in respect of costs. More generally, for design & build contractors and consultants and their PI insurers, whilst the timescales of an adjudication can be challenging, readiness is paramount and there are steps that can be taken in advance which in the most part accord with good business practice in any event:

• Maintain comprehensive project records, even after completion, to support the defence of potential future claims;
• Take steps to identify historical projects with completion within 30 years of 28 June 2022 (which could therefore fall within the extended limitation period effected by the BSA) – consider whether any that may have building safety issues that could give rise to a resurrected claim;
• Put robust internal processes in place for identifying and reporting adjudication notices; 
• Ensure early engagement with threats of adjudication to establish whether, in fact, adjudication is likely; and 
• Check notification provisions in the PI policy which may require immediate reporting of adjudication proceedings.

Adjudication: is it all bad?

A year on from BDW v Ardmore [2024] decision, adjudication remains a powerful tool in construction disputes and one that professionals and insurers must be prepared to navigate. As it cannot be avoided, it can potentially be used to strategic effect – a proactive dispute hack, rather than a reactive risk.

Adjudication in construction PI disputes more generally is likely to be utilised more and more. Preparation, responsiveness, and strategic foresight are all key to managing the risks and opportunities it presents. A robust response, accompanied by well-considered documentary and witness evidence is key as a successful result can lead to early finality (in respect of liability and costs). It can also mean that a claim that might ordinarily have proceeded for many years, is stopped at, or very close to, source.  

What trends and challenges do you see on the horizon for construction professionals? We’d love to hear from you.

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BDW Trading Ltd v Ardmore Construction Ltd [2024]