HT-2024-000316 - [2024] EWHC 3235 (TCC)

This is a summary judgment application by the Claimant (“BDW”) to enforce an adjudication decision (“the Decision”) made by Mr John Riches (“the Adjudicator”) on 17 September 2024 (as corrected on 18 September 2024), requiring the Defendant (“Ardmore”) to pay £14,454,914.45 by way of damages together with £84,329.00 for the Adjudicator’s costs and expenses. The Adjudicator held that Ardmore had breached its duties under a construction contract (and that limitation did not apply by reason of deliberate concealment) and, separately, that Ardmore was liable under the Defective Premises Act 1972 (“the DPA 1972”).

Ardmore acknowledges that, in the vast majority of cases, the court will enforce the decision of an adjudicator, but it says that this is a rare case in which the court should take a different approach. Specifically, Ardmore raises four grounds of objection to the Decision which it says preclude enforcement. First, that the dispute referred to in the Decision had not crystallised (“Ground 1”), second 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”). I shall refer to Grounds 3 and 4 together as “the Natural Justice Challenges”.

If Ardmore has a real prospect of success on either Grounds 1 or 3, then it will successfully resist enforcement by way of summary judgment. However, if these grounds fail, Ardmore accepts that (owing to the nature of the Decision made by the Adjudicator) it must have a real prospect of success on both Grounds 2 and 4 to resist enforcement.

Ground 2 raises a point of principle which may be of broad interest to the construction industry as a whole, given the current number of disputes in the industry relating to the fire safety of dwellings. Specifically it requires me to consider whether the reasoning of the House of Lords in Fiona Trust & Holding Corp v Privalov [2007] UKHL 40, [2007] 4 All ER 951, HL (“Fiona Trust”), a case in which the court considered the true interpretation of an arbitration clause, also applies to an adjudication provision. Accordingly, I am invited to determine the point even if my decisions on one or more of the remaining three grounds render it unnecessary to do so. Factual Background

On 30 October 2002, the Basingstoke Property Company Limited (“BPCL”), as Employer, and Ardmore, as Contractor, entered into a building contract (“the Building Contract”) for the design, erection and completion of the shell and core, primary services and partial fitting out of apartments at Crown Heights, Basingstoke, Hampshire (“the Development”). Barratt Southern Counties (“BSC”) was appointed as BPCL’s Employer’s Agent. Another Barratt company, Barratt East London (“BEL”) appears also to have been involved. The Contract Sum was £22,593,000.

The Building Contract is a construction contract within the meaning of section 104 of the Housing Grants, Construction and Regeneration Act 1996 (“the HGCRA 1996”).

Article 5 and clause 39A of the Building Contract make provision for the reference of a dispute or difference to adjudication. Clause 39A.2, read together with Appendix 1, provides that “[t]he Adjudicator to decide the dispute or difference shall be either an individual agreed by the Parties or, on the application of either Party, an individual to be nominated” by the Royal Institution of Chartered Surveyors.

By a Deed of Assignment of Building Contract dated 3 November 2004, BDW took an absolute assignment of the full benefit of all of BPCL’s interests and rights under the Building Contract, together with all rights for BPCL to sue or take action in respect of any breach of the obligations contained in that contract.

It seems that practical completion occurred between December 2003 and June 2004.

However, 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 (“the Letter of Claim”), nearly twenty years after practical completion, identifying “fire safety defects at the Development”. I shall return to the detail of the correspondence that then ensued between the parties which is relevant to Grounds 1 and 3, but that correspondence 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.

On 25 March 2024, the President of the Royal Institution of Chartered Surveyors nominated Mr John Riches as the Adjudicator.

In its Referral Notice dated 27 March 2024, BDW set out its case on two alternate legal bases: first, breach of the Building Contract, a claim that was said to be “in time” for limitation purposes by reason of the provisions of section 32(1)(b) LA 1980 on the basis that there had been deliberate concealment of Ardmore’s alleged breaches of duty, including a duty to install fire barriers. Second, a claim under the DPA 1972, limitation no longer being an obstacle owing to the extended limitation period provided by the BSA 2022.

On 8 May 2024, Ardmore provided its Response to the Referral. Thereafter, over what was an unusually protracted timetable, the parties exchanged additional documents setting out their respective cases (a Reply, a Rejoinder to the Reply, a Surrejoinder, a Rebutter and a Surrebutter). The Decision, running to 166 pages, was provided to the parties on 17 September 2024. The Adjudicator declared that Ardmore had breached its duties under the Building Contract in respect of fire safety aspects in the Development and that it was also liable under the DPA 1972 in respect of the same fire safety defects. He required Ardmore to pay damages and costs in the sums to which I have already referred.

Ardmore subsequently informed BDW that it intended to resist enforcement of the Decision, thereby prompting BDW to issue a claim form seeking enforcement on 1 October 2024, supported by a witness statement from Mr Mark Pritchard of Howard Kennedy LLP, BDW’s solicitors. On 3 October 2024, O’Farrell J granted permission to BDW to issue an application for summary judgement prior to service by Ardmore of either an Acknowledgement of Service or a Defence and gave directions for the hearing of the summary judgment application. Further evidence has since been served on both sides in the form of a witness statement from Ms Georgia Whiting, Legal Counsel for the Defendant and a second statement from Mr Pritchard.

It is common ground that the court may grant summary judgment “on the whole of the claim or on an issue”, if it considers that the relevant party (in this case Ardmore) “has no real prospect of succeeding on the claim, defence or issue” (CPR r.24.3(a)) and “there is no other compelling reason why the case or issue should be disposed of at a trial” (CPR r.24.3(b)). The overall burden of proof rests with BDW to establish that Ardmore has no real prospect of succeeding in the defences it raises against enforcement. However, if BDW adduces credible evidence in support of the application, then Ardmore comes under an evidential burden to prove some real prospect of success or other reason for having a trial (White Book Vol 1 at CPR 24.3.3).

At the hearing, Mr Pliener KC advanced Ardmore’s four Grounds of objection to the Decision at the outset, with Mr Choat KC replying on behalf of BDW - a tacit acknowledgement from both sides that, in an adjudication enforcement, the existence of a decision in the adjudication will almost inevitably mean that it is for the paying party to satisfy the evidential burden of establishing that it has a real prospect of success on one or more of its arguments against enforcement. Ground 1: Crystallisation of the Dispute

To address the contention that the dispute had not crystallised at the time it was referred to adjudication, I need to begin by looking in more detail at the correspondence between the parties starting with the Letter of Claim of 14 July 2022.

Under the heading “The Legal Framework”, the Letter of Claim identified that the obligations owed by Ardmore to BDW were to be found in various sources. It went on to identify that: “the extant cause of action against you is under the Defective Premises

The Letter of Claim then described Ardmore’s obligations (i) under the Building Contract, together with its standard of care under clause 2.5.1 (to which I shall return in more detail in connection with Ground 2); (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.

On 19 October 2022, Ardmore replied to the Letter of Claim seeking voluntary preaction disclosure “of all and any documents BDW has in its possession…relating to the project” in circumstances where, as Ardmore explained, it no longer possessed all project records. Ardmore also sought some specific documents relating to BDW’s standing to bring the claim, together with details of the remedial works that were required and details of the programme of works envisaged.

BDW responded some 9 months later on 20 July 2023. As it recorded in its letter, it had, by this stage, provided Ardmore with certain factual reports as to the condition of the Development together with (on a without prejudice basis) an advice note from its then expert. Beyond these documents, BDW refused to provide anything further, stating that Ardmore now had all that it needed to understand BDW’s position and to “make informed decisions about settlement and how to proceed”. BDW now explained that the basis on which it claimed against Ardmore was threefold: (i) under the DPA 1972; (ii) under the Civil Liabilities (Contribution) Act 1972; and (iii) that “[b]y omitting cavity barriers behind the Ispotherm system above the second storey of the Development, having sought advice from Alumasc who confirmed that cavity barriers were required…, Ardmore deliberately breached its duty under the Building Contract and/or deliberately concealed these defects from BPC and/or BDW (for the purposes of s.32(2) and s.32(1)(b) of the Limitation Act 1980 respectively)”. The letter went on to say that the necessary remedial works would commence on site in October 2023 and it invited Ardmore to inspect the defects before any works were commenced, an offer which Ardmore never took up. The letter provided no particulars as to the nature of the remedial works or their cost.

On 25 August 2023, Ardmore responded noting that BDW had not provided details as to, amongst other things, the loss BDW had suffered and the nature and scope of the remedial works. Ardmore observed that this information was essential to enable it to consider BDW’s claim and provide a meaningful letter of response and reserved its position pending receipt of such information.

After a further 6 months’ delay, on 8 March 2024, BDW wrote to inform Ardmore that it considered a dispute to have arisen “as to Ardmore’s liability for breaches of (a) the Building Contract…and/or (b) the Defective Premises Act 1972 (and/or clause 2.5.2 of the Building Contract) – in relation to fire safety defects at the Development”. This letter went on to provide more detail in relation to what had now been narrowed down to two asserted claims; first the contract claim (which, for the first time identified a number of specific provisions of the Building Contract which it was said Ardmore was in breach of and relied upon the provisions of section 32(1)(b) and 32(2) LA 1980) and second the DPA 1972 claim. Various new particulars of the DPA 1972 claim were provided, including as to automatic opening vents, insulated spandrel panels and the use of silicon mastic. Finally, the letter asserted that BDW intended to procure the carrying out of remedial works and that the loss and damage it was likely to incur in so doing was £14,580,714.76. Attached to the letter was a high level breakdown of this figure. BDW sought payment from Ardmore within 7 days (a period subsequently extended), failing which it expressed the view that it would “proceed to adjudication without further notice”.

Ardmore responded on 20 March 2024, alleging that an adjudication would be oppressive, unreasonable and in breach of natural justice. It also asserted that no dispute had arisen, essentially because the 8 March 2024 letter had “pivoted in its presentation of [the] claim” from a freestanding DPA 1972 claim to a breach of contract claim and that no, or no sufficient, details had been provided as to the proposed remedial works and the quantum breakdown. Ardmore said that it remained committed to considering the claim “but is not in a position to know whether there is actually a dispute (or its scope) until the further information is provided”. Ardmore went on to suggest that the only fair way of resolving any disputes between the parties would be by way of arbitration under the Building Contract.

BDW issued its Notice of Adjudication the following day (21 March 2024). BDW’s subsequent referral included two expert reports, neither of which had previously been provided to Ardmore.

On 28 March 2024, Ardmore wrote to the Adjudicator challenging his jurisdiction on the grounds, inter alia, that there was properly ‘no dispute’ on a major element of the claim. The basis for this challenge was explained by reference to the fact that (i) Ardmore had not been provided (prior to the Adjudication) with the vast majority of the documents relied upon by BDW in its Referral; (ii) these documents “go to the heart of the dispute”; and (iii) Ardmore had not been given a reasonable period of time in which to admit or deny the claim. On the latter point, Ardmore asserted that “[a] period of 13 days before commencing this adjudication is clearly not a reasonable time in relation to the size, detail and staleness of this claim”. BDW rejected these concerns at some length in a letter dated 2 April 2024.

In a short decision on Jurisdiction issued on 4 April 2024, the Adjudicator rejected this challenge to his jurisdiction. At paragraphs 11 and 12 of his decision he said this:

“11.

The claim is exactly what it was on 14 July 2022. The dispute is not therefore an unknown entity.

12.

In broad terms the nature of the dispute is known and the further documents provided in this adjudication simply go to the claim and are not sufficient to make it an unknown or a new claim”.

Against this background, Mr Pliener advances four propositions in support of the contention that no dispute has arisen such that the Adjudicator had no jurisdiction to determine BDW’s claims: