1. Leaseholders move closer to Building Liability Order against SPV parent company
Under section 130 of the Building Safety Act the court can make a Building Liability Order against a company that was not responsible for defective construction, but which was ‘associated’ with the company that was responsible. Two companies are 'associated' if one controls the other or a third party corporate body controls both of them. The court has to consider it 'just and equitable' to make such an order and there has to be a 'relevant liability', which is liability under the Defective Premises Act 1972, S38 of the Building Act 1984 (not yet in force) or as a result of a ‘building safety risk’ from fire spread or structural failure. In this way such an order can 'pierce the corporate veil'.
A residents' right to manage company and leaseholders brought claims in respect of defects in, and damage to, a block of flats against the special purpose vehicle developer and its parent company. The claims included a claim against the parent company in respect of the SPV's liability under the Defective Premises Act.
The court ruled that there was a 'relevant liability' but did not make a BLO, which, it said, would be a matter for a further hearing. That was, in particular, to guard against the possibility that the order would be sought against a company other than the parent company, and to give the parent company a proper opportunity to address the issue of whether it would be just and equitable to make such an order, against the background of the judgment.
The court also noted that the Building Safety Act 2022 says little about the procedure to be adopted by a party wishing to seek a BLO but said that it certainly does not require a party to make that claim within existing proceedings. It would be surprising if it did, since the circumstances in which it might be just and equitable to make the order may not arise until after proceedings to establish a relevant liability are concluded and a BLO could be sought against a corporate body that did not even exist at the time of those proceedings. Where it is already in contemplation that an order will be sought against a particular associated company, it seemed to the court sensible and efficient for that claim to form part of the main proceedings, but that does not preclude a subsequent claim for a BLO against some other associated company.
381 Southwark Park Road RTM Company Ltd & Ors v Click St Andrews Ltd & Anor [2024] EWHC 3179
2. Court says adjudication can deal with a DPA claim
Adjudication can, of course, deal with claims under contracts but what about claims not arising under the contract, for instance under the Defective Premises Act, with its newly expanded reach? A 2007 Supreme Court ruling (Fiona Trust) took a pragmatic, commercial, approach to the scope of arbitration clauses, saying goodbye to debates about subtle differences in their wording, on the basis that rational business people would surely want all their disputes dealt with by the same tribunal. But does that approach apply to adjudication? The court in BDW v Ardmore had to decide.
The contract in question, mirroring the wording in s108(1) of the Construction Act, said that either party might refer to adjudication any dispute or difference that "arises under this Contract". The arbitration clause, however, had different wording, stating that "…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…"
The court considered the case law and textbooks and, in particular, Lord Hoffmann's speech in Fiona Trust, which included his opinion that the construction of an arbitration clause should start from the assumption that the parties, as rational business people, are likely to have intended any dispute arising out of their relationship to be decided by the same tribunal. The clause should be construed in accordance with this presumption unless the language makes it clear that certain questions were intended to be excluded from the arbitrator's jurisdiction.
The court noted that Lord Hoffmann's speech confirmed a "strongly signposted" departure from previous linguistic distinctions between disputes arising, on the one hand, "under" and, on the other hand, "arising out of" or "in connection with" the underlying contract between the parties. The court also noted that there is "no logical reason" why the conclusion arrived at by Lord Hoffmann, based on his description of the purpose of an arbitration clause, should not also apply to adjudication provisions whose purpose is similar.
The court consequently considered that the wording of the building contract adjudication clause must be given a wide meaning, unless there was very clear language to indicate the contrary. Its starting assumption was that the parties to the contract, as rational business people, were likely to have intended any dispute arising out of their relationship to be decided by the same tribunal – whether arbitration or adjudication. The nature of the adjudication process and the purpose of the Construction Act appeared amply to support this assumption.
The court also concluded that the contrast between the adjudication and arbitration provisions had no material significance. Without very clear words, it would make little commercial sense for the parties to have intended that their contractual claims could be referred to adjudication and/or arbitration but that any tortious claims (including tortious claims dealing with the same defects and seeking the same relief) could only be referred to arbitration. The courts had also made clear at the highest level that wording in dispute resolution provisions referring to disputes arising 'under' the contract should not be interpreted narrowly.
BDW Trading Ltd v Ardmore Construction Ltd [2024] EWHC 3235
3. How far does your variation clause stretch?
Variation clauses in a contract enable an employer to require the contractor to make changes, for instance, as in JCT wording, to the design, quality or quantity of the relevant works. But just how far might a variation clause stretch? Might it, for instance, enable an employer under a contract for one data centre, to add two more?
In deciding a case about eligibility for capital allowances for constructing buildings in an enterprise zone, the Supreme Court had to consider this very question, when applying clause 12 of the 1998 JCT Standard Building Contract with Contractor's Design.
The Court said it was clear, and not in dispute, that the very concept of a right to give instructions "effecting a Change in the Employer's Requirements" required one to ask: change from what? It noted that there was an express limit on the changes which might be made under clause 12, which could only be made within the confines of "alteration or modification of the design, quality or quantity of the Works". "The Works" meant "the design, construction and commissioning work comprising an industrial unit to accommodate the manufacture of an eight inch board on Site C" and a Change under clause 12 could only be to the extent that what was sought to be substituted by the requested Change were still design, quality and quantities of what was substantially the same building (i.e. in this case an industrial unit (as described)).
The Court gave a naval example. A shipbuilding contract for the construction of an aircraft carrier might contain a right to alter or modify aspects of its design, quality or quantities. But if the Admiralty decided instead that it wanted a nuclear submarine, that would not be a matter of alteration or modification to the design, quality or qualities of the specification for the aircraft carrier. That specification would have to be abandoned and completely replaced.
The right to require a Change plainly did not extend to choosing, by way of a supposed Change, some completely different type of building, on a different site. To construe clause 12 as enabling the employer to demand the construction of almost any other building whatever, regardless of location, subject only to the contractor's right of refusal if exercised reasonably, would lead to an outcome, in terms of the breadth of the employer's unilateral rights, which departed fundamentally from the structure of the agreement.
The Court also discussed the issue of whether alterations by contracting parties to their rights and obligations are variations of the original contract or a replacement of it. Noting that it deals with practical legal questions and does not seek to provide exhaustive abstract statements of the law, the Court said that the parties' common intention governs the nature of their contractual arrangements. Freedom of contract is a basic principle of the common law, whose centrality and force means that, purely in terms of the general common law, parties to an agreement have a wide margin of choice in deciding whether an alteration in their contractual relationship should be achieved by the mechanism of variation or replacement. This is generally to be determined according to their common intention, assessed in the usual objective way, within wide parameters and subject to limits only at the margins; for instance it would bring the law into disrepute if the parties specified that some change in their contractual relations should take effect as a variation rather than a replacement, even though that was utterly absurd.
Cobalt Data Centre 2 LLP & Anor, R. (on the application of) v Revenue and Customs [2024] UKSC 40
4. Restructure of Industry Competence Steering Group
The Industry Competence Steering Group has become a formal working group of the Industry Competence Committee under the Building Safety Regulator.
Sector-led groups, key topic groups, and working groups in the new structure will produce competence frameworks mapped to the BS 8670 series. They will also create guidance and implementation programmes to enable culture change in relation to competence across the built environment. Another key role of these groups is to provide forums for industry feedback relating to the understanding of legislation and barriers to its implementation.
See: https://www.constructionleadershipcouncil.co.uk/news/industry-competence-steering-group/
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https://www.constructionleadershipcouncil.co.uk/wp-content/uploads/2024/12/ICSG-announcement-v7.pdf
5. New FIDIC practice note on appointment of dispute boards
FIDIC has published a new practice note on the appointment of dispute boards: Practice Note II Appointment of Dispute Boards. The note highlights many of the key aspects of the appointment of dispute boards.
6. PPN 015 and PPN 018 published
The government has published PPN 015 and PPN 018 (with guidance), which set out how payment approaches can be taken into account in the procurement of major government contracts.
PP015 replaces PPN 10/23 from 24 February 2025 and PPN 018 replaces PPN 015 from 1 October 2025.
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