In a landmark decision, the High Court has recently confirmed that disputes relating to the Building Safety Act 2022 (the BSA) can be determined by an adjudicator. 

Facts

The case relates to a dispute between BDW (the developer) and Ardmore (the contractor) regarding a substantial amount of missing cavity barriers from a residential scheme completed over twenty years ago. 

Under the terms of the building contract with Ardmore (the Contract), either party had the right to refer any dispute or difference “arising under [the Contract]” to adjudication (the Adjudication Clause). There was a separate right to refer any dispute or difference as to “any matter or thing of whatsoever nature arising under [the Contract] or in connection therewith” to arbitration (the Arbitration Clause). 

The developer commenced an adjudication, relying on the extended statutory limitation period to the Defective Premises Act 1972 (the DPA) introduced by the BSA. 

The adjudicator determined that Ardmore had breached its duties under the Contract, that it had concealed the missing cavity barriers (and so the claim was not time barred in any event) and that Ardmore was liable under the DPA, awarding a substantial sum of money to BDW.

Challenge to enforcement

Ardmore resisted enforcement of the adjudicator’s decision on four grounds – including that the adjudicator did not have jurisdiction to determine a DPA claim, as such a claim would not fall within the scope of the Adjudication Clause (ie, it did not arise “under the Contract”, but rather was by virtue of statute). 

In essence, the Court found that whether the adjudicator had jurisdiction to determine a claim for breach of the DPA was predicated on whether or not the Fiona Trust principles (as set out by the House of Lords in Fiona Trust & Holding Corp v Privalov [2007] UKHL 40) on the interpretation of arbitration agreements applied in the same way to adjudication clauses. 

One of the Fiona Trust principles is that there is a presumption that parties intend any dispute arising out of the relationship into which they have entered to be decided by the same tribunal (in the case of Fiona Trust, the same arbitral tribunal), unless there is clear agreement to the contrary. The House of Lords firmly rejected that there was any material difference between a dispute "in connection with" a contract and a dispute "arising under" a contract (at least in the case of arbitration clauses). 

Decision

Mrs Justice Joanna Smith rejected the Ardmore’s challenge on all four grounds – and, importantly, held that the contractual right to refer to adjudication disputes that arose “under the contract” included claims under the DPA (and the BSA). So the adjudicator therefore did have jurisdiction to decide the dispute.  

The question as to whether the Fiona Trust principles applied to adjudication clauses was answered in the affirmative, and in doing so, the Court clarified the state of the law – as prior to this judgment, there had been differing views as to whether the Fiona Trust principles applied to adjudication. 

This decision has potentially far-reaching effects, because section 108(1) of the Housing Grants, Construction and Regeneration Act 1996 (the “Construction Act”), which creates the statutory right to adjudicate, uses the same wording as in Ardmore’s Contract: 

“A party to a construction contract has the right to refer a dispute arising under the contract for adjudication under a procedure complying with this section.” 

Impact

The Courts have now confirmed that parties have the option of referring construction disputes under the DPA and the BSA to adjudication. This case likely means, therefore, that many such disputes could be determined more quickly through adjudication, without the parties needing to arbitrate or litigate. 

In due course, we may well also see challenges to enforcement of adjudication decisions being brought on the basis of breaches of natural justice – highlighted in this case by concerns expressed by Ardmore about the adjudicator’s ability to deal with (often complex) latent defect cases. This will be a particular issue where projects have been completed decades ago, where there might be no, or limited, contemporaneous documents available. 

We understand that the Court of Appeal has now granted Ardmore permission to appeal. The construction industry will eagerly await round two.