The art of interpretation in dispute resolution: Lessons from BDW Trading v Ardmore Construction

As a construction professional, I am certain that you have by now come across the judgment in BDW Trading Limited v Ardmore Construction Limited [2024] EWHC 3235 (TCC).  This article provides a brief discussion on the significance of the judgment which has introduced the possibility of contractors now being faced with adjudication proceedings for claims under the Defective Premises Act 1972 (DPA 1972). 

Prior to the decision in BDW v Ardmore, it was rare for contractors to be in this position. Many of these disputes were outside the standard six or twelve year limitation period as they concerned works carried out many years ago, and where disputes were within the limitation period, disputes referred to adjudication would be in contract or tort rather than under the DPA 1972. It was generally thought that the contractual and statutory rights to adjudicate disputes were limited. Absent agreement, a party seeking to refer a claim under the DPA 1972 to adjudication and seeking to rely on the retrospectively extended limitation period pursuant to Section 135 of the Building Safety Act 2022 (BSA 2022) which inserted a new section 4B into the Limitation Act 19080 (LA 1980) would be met with the objection that the adjudicator did not have the jurisdiction to decide the dispute. 

However, in relying upon the wide principles of interpretation established in Fiona Trust & Holding Corp v Privalov [2007] UKHL 40, it has now been decided an adjudicator can have jurisdiction over matters in dispute under the DPA 1972.

The facts of the case illustrate the challenges that are implicit in adjudicating these types of disputes and why some commentators take the view that such matters are not suitable for adjudication.

The Case 

Basingstoke Property Company (BPC) entered a JCT building contract with Ardmore in October 2002 for the construction of apartments at Crown Heights, Basingstoke. In November 2004 the contract was assigned by Deed of Assignment to BDW, with practical completion having occurred between December 2003 and June 2004.

Fire safety cladding defects subsequently came to light in or around 2019, some 15 years after practical completion.

Accordingly, until the coming into force of the provisions of the BSA 2022, Ardmore had, for some time, a complete limitation defence under the LA 1980  to any claims that might be brought against it by BDW under section 1(1) of the DPA 1972, which imposes a duty on “[a] person taking on work for or in connection with the provision of a dwelling” to carry out the work in a “workmanlike” or “professional manner” with “proper materials so that as regards that work the dwelling will be fit for habitation when completed”.

Section 135 of the BSA 2022 inserted a new section 4B into the LA 1980 which had the effect, amongst other things, of increasing retrospectively the limitation period for a claim under section 1(1) of the DPA 1972 from 6 years to 30 years, thereby raising the spectre of a claim being pursued against Ardmore for its work on the Development.

This legislative change prompted BDW to write a Pre‑Action Protocol letter to Ardmore on 14 July 2022 (“Letter of Claim”), nearly twenty years after practical completion, identifying “fire safety defects at the Development”.

The Letter of Claim then described Ardmore’s obligations (i) under the Building Contract (including its standard of care under clause 2.5.1); (ii) under the DPA 1972; and (iii) under the relevant Building Regulations. The claim was said to be based on the use of an inappropriate cladding system (an Alumasc product, rather than the Sto product set out in the design intent) and on the failure to install horizontal fire barriers. BDW set out, at some length, a chronology of what it considered to be relevant extracts from contemporaneous correspondence on the subject of the inclusion of fire barriers and attached copies of this correspondence to the letter at Appendix 3. BDW asserted a breach of Ardmore’s duty under the DPA and made clear that the identified defects had put BDW “at substantial risk of loss”. BDW stated that it would particularise its losses in due course. 

Correspondence then ensued between the parties which culminated in BDW issuing a Notice of Adjudication dated 21 March 2024. The Notice of Adjudication asserted that a dispute had arisen as to Ardmore’s liability to BDW in respect of fire safety defects in the Development, arising by reason of Ardmore’s breaches of the Building Contract and/or its duties pursuant to section 1(1) DPA 1972. 

BDW sought damages in the sum of £15,037,615.01 (excluding VAT), or such other sum as the Adjudicator may decide.

In September 2024, after an extended adjudication, the adjudicator decided the dispute requiring Ardmore) to pay £14,454,914.45 by way of damages together with £84,329.00 for the Adjudicator’s costs and expenses.

BDW sought to enforce the decision in the TCC and Ardmore challenged jurisdiction on several grounds:

• First, that the dispute referred to in the Decision had not crystallised (“Ground 1”);
• Ssecond, that the Adjudicator had no jurisdiction to determine a tortious claim for breach of the DPA 1972 (“Ground 2”);
• Third, that the Adjudication was inherently unfair owing to the inequality of arms in terms of documentation (“Ground 3”); and Fourth, that the adjudicator intentionally failed to consider a material defence relevant to the allegation of deliberate concealment against Ardmore (“Ground 4”).
• Grounds 3 and 4 together are referred to as as “the Natural Justice Challenges”.

In a lengthy judgment all grounds were rejected but Grounds 3 and 4 - the Natural Justice Challenges - were rejected as the mere passage of time did not make the process unfair and on the facts the process had been fairly managed, and it was clear the adjudicator had considered all material defences raised in the adjudication. The discussion of the Natural Justice Challenges is a useful reminder of the approach of the courts but in this article, we consider Ground 2.

Ground 2 that the Adjudicator had no jurisdiction to determine a tortious claim for breach of the DPA 1972.

 Ardmore relied upon the specific wording of the dispute resolution clauses within the building contract to make its point.  The contract referred to arbitration and adjudication as forms of dispute resolution. The adjudication clause in Article 5 of the contract stated:

“if any dispute or difference arises under this Contract either Party may refer it to adjudication in accordance with clause 39A.”

In contrast, the arbitration clause in Article 6A stated:

“if any dispute or difference as to any matter or thing of whatsoever nature arising under this Contract or in connection therewith…shall arise between the Parties…it shall be referred to arbitration.”

According to Ardmore, the arbitration clause was positioned in a wider sense which showed an intention to bring disputes of any kind, in connection with the contract through arbitration. Ardmore emphasised that this intention did not apply to adjudication as the clause was written more narrowly. 

The Court found that Ardmore could not resist enforcement on this matter and the argument around lack of jurisdiction, the key focus of this argument, rested upon the applicability of the Fiona Trust Principles to adjudication. 

The Fiona Trust Principles 

The principles we derive from the Fiona Trust case are based on the notion that interpretation is at the centre of understanding the intentions behind a relevant clause.

The case concerned a dispute between parties to eight charter agreements; the Owners rescinded the charterparties on the basis that they were null and void, having been entered into because of bribery. The Charterers attempted to arbitrate the issues instead of litigating the matter, while the Owners believed that the dispute could not be arbitrated due to the wording of the arbitration clause. The arbitration clause within the charters stated that “any dispute arising under this charter” would be referred to arbitration. The Owners’ argument was that as the charters did not technically exist since they were void due to illegality any dispute was not necessarily, “arising out of” it and thus could not be arbitrated and could only be litigated. In deciding whether the issues could be arbitrated, Lord Hoffman stated that the starting point for rational businessmen is that they would not have wanted issues which resulted from the same contractual relationship to be heard by different tribunals. He emphasised that if there was a desire to exclude certain issues from arbitration or another form of dispute resolution then this must be stated explicitly. The parties are free to draft an arbitration clause as they choose.

The Court decided that the reasoning of Lord Hoffman applied to adjudication in BDW v Ardmore – the basis being that if you can interpret dispute resolution clauses in relation to arbitration more widely, the same logic should be applied to adjudication clauses. It did not matter how narrowly the relevant contractual terms were written in the contract. The fact that arbitration (under the Arbitration Act 1996) and adjudication (under the Housing Grants, Construction and Regeneration Act 1996) both have a statutory basis, makes a strong argument for the applicability of the Fiona Trust principles in this case – any other approach would likely have been regarded as too rigid. 

The court relied also on the decision of the Supreme Court in Bresco Electrical Service Ltd v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25, stating:

“I do not consider the fact that different wording was used for the arbitration clause at Article 6A to indicate a clear intention that the jurisdiction of the adjudicator would be narrower than that of the arbitrator (as opposed to, say, indicating merely that the draftsman was following the wording of section 108 HGCRA 1996 for the purposes of the adjudication provision) and I agree with BDW that, on a true interpretation, the contrast between the two provisions therefore has no material significance. The courts have made clear at the highest level that wording in dispute resolution provisions referring to disputes arising ‘under’ the contract should not be interpreted narrowly and in Bresco the Supreme Court took the view, albeit obiter, that the statutory underpinning of the (in this case express) contractual right to adjudicate is a factor which, if anything, weighs in favour of giving a broad interpretation to the phrase “a dispute arising under the contract”.

The court distinguished other authority Hillcrest Homes Ltd v Beresford and Curbishley Ltd [2014] EWHC 280 which had concluded that the statutory wording should be given a narrower interpretation due to the statutory compulsion lying behind the conferral of the contractual right to adjudicate.

Conclusion

The effect of this case is that there is jurisdiction to adjudicate issues under the DPA 1972 which means that we can expect to see more of these cases coming to light. 

Permission to appeal this decision has been granted though the grounds are not known to the writer at the time of writing. The hearing is listed to be heard before April 2026. Until the appeal is heard, contractors should take care to be in the position to defend disputes concerning defective cladding and fire safety defects in adjudication and be aware of the fact that any adjudication decisions will be enforced.

The historical nature of these claims will not provide an excuse for failing to properly prepare. The court was critical of Ardmore’s lack of preparedness and record keeping, stating:

“In so far as Ardmore had a paucity of information going into the adjudication by reason of either its poor record keeping or its own decision not to carry out any detailed investigations into the issues raised in the Letter of Claim and subsequent correspondence, including its decision not to inspect the Development when it had the opportunity to do so, that seems to me significantly to colour its natural justice complaint. Neither of these things would appear to be the consequence of the 20-year passage of time since the works. Specifically, I consider that it is difficult for Ardmore credibly to complain that it was not in a position to know what had actually been installed at the Development when it chose not to carry out its own inspection.”

Adjudicators should take note of the possible challenges based on natural justice and be astute to manage the process fairly but may do so in the knowledge that provided that is done, such challenges will not find sympathy with the court.