The Building Safety Act 2022 (the BSA) has significantly altered the liability landscape for property developers and those working in the construction industry.

As a result of the BSA and the judgement in BDW Trading Ltd v Ardmore Construction Limited [2024] EWHC 3235 (TCC), there could be large claims in adjudication for projects finished up to 30 years ago made against Defendants without sufficient records to defend themselves.

With such significant implications and consequences, it’s crucial for those working in the construction industry to protect themselves.

In particular, there are steps companies can take to protect themselves in these cases and to help cooperate with insurers in these complex issues. Where insurers have already excluded exposure to these claims it is even more important to maximise whatever protection is available.

There are a number of ways companies can help protect themselves with the professional support and advice of both construction and legal professionals, with risk assessment, document management and legal representation.

  • Companies should assess which prior contracts could be at risk of a claim under the extended limitation periods.
  • The records of such historic projects should be reviewed to determine what information is (or is not) available, with assessment of how these can be accessed quickly. It is not helpful to have records for an adjudication lasting 4 weeks if it takes a month to get the records from the archive.
  • As there is now a 15-year liability period, records should be kept for at least that period, in a way which provides suitable access.
  • As liability periods are longer than they were before, it may be necessary to amend contracts, subcontracts, and other agreements, such as warranties and guarantees, to account for the longer liability period, eg requiring consultants to maintain Professional Indemnity insurance for 15 years instead of the current standard of 12 years.
  • Where claims are made or threatened under the BSA, suitable representation should be put in place as soon as possible. Adjudication is a fast paced, rough and ready process. In our experience it is very helpful to have an established relationship, with a team that has the relevant knowledge, skills and experience to represent you in a high pressure and time constrained environment. If it’s necessary to apply to extend the four-week timetable then this should be done as soon as possible and with the correct technical and legal support to argue your case.
  • Claims under the BSA will be made by claimants who will have obtained detailed expert evidence. Efficient provision of expert evidence for the defendant is crucial.
  • Where there are site inspections available, they should be done with the expert assistance of construction and legal professionals such as HF and Quigg Golden. This is particularly important to collate the best possible defence in the absence of relevant documentation.
  • Where it is necessary to litigate to challenge an adjudication the involvement of construction and legal professionals allows the collation of the necessary arguments to protect the position and evaluate chances of success.

Contact Gordon walker or John Doherty for focused support and advice from the combined legal and construction professional capability of HF and Quigg Golden.

 

Key Information re the BSA and BDW Judgement

 

Changes to Limitation Periods

Prior to the BSA, the limitation period was a maximum of six years for a breach of a contract (or twelve years for breach of a contract under a deed), and six years from the date of damage for negligence. The time for negligence claims can be extended if the damage was not immediately discoverable, subject to a longstop of fifteen years.

There is also the possibility of a claim for contribution or indemnity following settlement or judgment. For example, if an employer wins a claim against a contractor, the contractor has two years to make a claim against a sub-contractor or professional advisor.

Even though the basic limitation periods can be extended, records are often kept by many construction Companies only for a period of 6 years.

 

The Building Safety Act and Limitation

Following the Act, if a dwelling has become unfit for habitation, (which includes a risk to people’s safety from the spread of fire, or the collapse of some or all, of the building) the limitation period has been retrospectively extended to 30 years for works completed prior to June 2022. Going forward for works completed after June 2022, the limitation period has been increased to 15 years.

The BSA is aimed at protecting residents, and envisions that developers bear the cost for remedial actions, while also allowing those developers to pursue claims against contractors, suppliers or designers depending on where the responsibility for the issue lies. This means residents will often claim against developers, who will look to pass on the claim to contractors or subcontractors as appropriate. This means anyone in the supply chain could be affected.

 

The BDW Judgment

The BDW judgment is a case where these longer limitation periods applied.

BDW, the developer (after an assignment) claimed against Ardmore (the contractor), on a property finished before June 2004, which meant that under the previous regime Ardmore would have had a complete limitation defence. However, following the BSA, limitation did not expire until 2034 and BDW was able to pursue its claim.

It did so in an Adjudication. Previously it was thought that due to the wording of the act providing for construction adjudications, an adjudicator could only consider disputes arising directly under a contract, i.e. limited to claims for breach of that contract. However, the Courts had expanded this in a non-construction case, deciding that provided there was a sufficient relationship to the works under the contract, and applying business common sense, the claim in that case could be dealt with by way of adjudication.

The court in BDW applied this logic (even though the claim arose under the BSA) and concluded that an adjudicator could consider claims under the BSA.

We expect that recourse to adjudication will be a course of action that will be followed by many Claimants in similar circumstances.

 

Adjudication: A Rough and Ready Process

As it is not meant to be a final tribunal, Adjudication is a fast paced (weeks rather than months), rough and ready process with very limited time for disclosure, and little time to properly consider anything disclosed. Decisions can be revisited in courts, but the general rule is that parties will have to comply with the decision, including make any payments, before that revisit can commence.

Defending an adjudication is always difficult given the short time span. The time scale is a significant challenge, given companies could have limited records of projects due to the passage of time. Finding documents may take time or be impossible.

This was a point considered in BDW, with the TCC deciding that it would not prevent the enforcement of the £14m decision. The court determined that Ardmore’s record keeping was deficient, and as it was that failure that rendered it dependent on BDW’s disclosure, it was not unfair. The court did not consider the argument that Ardmore had no reason to keep documents beyond the previously standard limitation periods. While that potential argument remains open, defendants need to operate on the assumption that a lack of records will not provide a suitable defence.

To compound the issue, even the winding up of a company may not prevent the transfer of liability, as a Building Liability Order can transfer the liability to related entities if it is “just and equitable to do so”.

 

Construction