Adjudication and the Defective Premises Act

Stuart Pemble analyses a landmark decision that has confirmed the extent of the amendments made to the Defective Premises Act 1972 following the Grenfell Tower tragedy. Key point The court has adopted a wide interpretation of an adjudication clause to allow an adjudication claim to be decide dunder the revised Defective Premises Act 1972 I suspect the insurance industry is taking a long, hard look at Joanna Smith J’s decision in BDW Trading Ltd v Ardmore Construction Ltd [2024] EWHC 3235 (TCC), which has (with apologies for the big reveal at the start of this note) decided an adjudicator did have jurisdiction to decide a claim brought under the Defective Premises Act 1972. The decision’s importance stems from the fact that the Building Safety Act 2022 amended both the 1972 Act and the Limitation Act 1980 to increase retrospectively the limitation period for bringing a claim under section 1(1) of the 1972 Act from six years to 30 years. These claims centre on whether or not a dwelling (an undefined term in the 1972 Act, but one which includes both houses and flats) is fit for habitation. The facts The dispute related to a block of apartments in Basingstoke which were designed and built between October 2002 and (at the latest) June 2004. The defendant, A, was the contractor and, in November 2004, the original employer assigned the benefit of the contract to B, the claimant. There were a number of alleged fire safety defects (including a failure to install fire barriers). In March 2024, and relying on the extended limitation period under the amended 1972 Act, as well as another limitation argument, B commenced an adjudication against A. That September, the adjudicator decided a number of arguments in B’s favour, including that A was liable under the 1972 Act. He awarded c£14.4m by way of damages. A raised four different arguments to resist enforcement (second spoiler: it lost on them all) but this note shall concentrate on the arguments regarding the 1972 Act. Did the adjudicator have jurisdiction to consider the 1972 Act claim? The argument revolved around the wording of the adjudication clause in in the building contract: the parties could refer any dispute or a difference to adjudication which “arises under this Contract”. That wording follows the underlying statutory provision in section 108(1) of the Housing Grants, Construction and Regeneration Act 1996. A’s main point was that the adjudication provision was narrower than the one dealing with arbitration, which entitled the parties to arbitrate disputes “arising under this Contract or in connection therewith”. It argued that (1) the difference in the two clauses was material, (2) the adjudication provision was narrower and more limited in scope and, in particular, (3) too narrow to encompass a claim under the 1972 Act. On that basis, A claimed that the adjudicator lacked jurisdiction to decide the issue and his award should not be enforced. Fiona Trust A’s challenge effectively depended on whether adjudication clauses should be interpreted narrowly or widely. The narrower the interpretation, the more likely that A would succeed. To answer that question, Joanna Smith J had to consider whether the approach set out by the House of Lords in Fiona Trust and Holding Corp v Privalov [UKHL] 40 regarding the correct interpretation of arbitration clauses should also apply to adjudication ones. Fiona Trust gave a wide scope to the effect of arbitration clauses, starting “with the assumption that the parties… are likely to have intended any dispute arising out of the relationship into which they have entered… to be decided by the same tribunal”. This was an issue on which there was a lack of judicial certainty. As Lord Briggs observed when giving the leading judgment in Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25; [2020] EGLR 29, there “is some reported authority, but little agreement, on the question whether the liberal construction afforded to jurisdiction provisions in arbitration agreements should inform the construction of section 108 of the 1996 Act”. And, in his textbook on adjudication, Sir Peter Coulson, the leading construction judge in the Court of Appeal, commented that the issue “remains open for clarification”, adding: “Its potential importance should not be underestimated.” The decision The judge decided that the Fiona Trust principles did apply and that the adjudicator had jurisdiction: One of the main arguments used to differentiate adjudication from arbitration was the fact that adjudication is imposed by statute rather than freely agreed by the parties. As such, adjudication clauses should be interpreted narrowly. Joanna Smith J took a different view: the fact that parliament considered that “all parties to appropriate contracts should have a right to adjudicate” suggested that a wide interpretation should be given. It made no commercial sense to limit the scope of the adjudication clause. Influenced by the (admittedly obiter) view in Bresco (and disagreeing with HHJ Raynor QC in Hillcrest Homes Ltd v Beresford & Curbishley Ltd [2014] EWHC 280 (TCC); [2014] PLSCS 79) that the courts should adopt a wide interpretation of the phrase “a dispute arising under this contract”, the judge held that this was the case notwithstanding the different wording used in the two clauses: the “contrast between the two provisions… has no material difference”. The fact this contract was entered into before the judgment in Fiona Trust did not mean that a different interpretation should apply, not least because there was no consistency on this issue before Fiona Trust was decided. At the heart of the decision is the judge’s understanding that the purpose of the 1996 Act is for disputes to be resolved speedily. Giving a narrow interpretation to an adjudication clause goes against that. Stuart Pemble is a partner at Mills & Reeve Image © Anthony Harvey/Shutterstock