A recent decision by the High Court of England and Wales regarding construction contracts may not hold true in Scotland.

The implication of the court’s ruling is that, even long after a construction contract ends, a dispute can still be referred to adjudication in England and Wales, if it arises in connection with that contract. 

However, construction companies in Scotland may not face such a strict legal interpretation. 

Background

The case involves a construction project to build a block of apartments in Hampshire. Developer BDW took contractor Ardmore to court to enforce an adjudicator’s decision that Ardmore was obliged to pay damages to BDW for breaching statutory duties concerning workmanship and the use of proper materials, specifically fire safety defects that came to light many years after the premises were built.

Ardmore argued that the adjudicator had no jurisdiction to consider the referral because the dispute did not arise under the - long since concluded - construction contract itself, in line with the statutory rules on adjudication found in the Construction Act 1996.

However, the High Court held that the adjudicator could consider referrals arising in connection with the contract, and therefore was able to consider a dispute founded on a breach of a ‘long-tailed’ statutory duty. Furthermore, this could include disputes that arise in connection with statutory duties imposed upon the parties to a construction contract by virtue of legislation.

This means it is possible to make a claim in respect of some of these statutory duties many years after the premises in question have been completed.

Context: Changes to the law

BDW’s right of action against Ardmore stemmed from an England-only duty contained in the Defective Premises Act 1972, in respect of which the Building Safety Act 2022 has retrospectively granted a 30-year enforcement period. 

The 2022 Act largely does not apply to Scotland, but it does allow claims concerning construction product liability, and liability for past defaults relating to cladding products, to be brought in Scotland within periods of 15 or 30 years. By contrast, the general law in Scotland is that actions arising out of defective construction works must be brought within five years.

The High Court’s reasoning was based on an English decision - Fiona Trust & Holding Corp -v- Privalov - which concerned the interpretation of an arbitration clause in English law. It held that, in the absence of clear wording to the contrary, the contracting parties intend that all disputes arising from their contractual relationship be capable of resolution by the same tribunal. 

Thus, where an arbitration clause provided that disputes arising under the contract were to be referred to arbitration, this meant that disputes arising in connection with the contract were also referred. In BDW, the High Court applied this reasoning to adjudication. 

Implications for Scottish construction 

The key question for developers – and their legal advisers – is this: will Scots law allow a dispute to be referred to adjudication where the dispute arises in connection with a construction contract?

If the answer is ‘yes’, then it would be possible for disputes arising in connection with statutory duties – such as liability for construction products or liability for past defaults relating to cladding products – to be referred to adjudication in Scotland, even many years after the premises in question were completed. 

However, the Scottish courts have expressed doubt as to the compatibility of the Fiona Trust case with Scots law, and have traditionally avoided the liberal approach that exists south of the border. 

In a similar case, the – Scottish - Court of Session held that jurisdiction of an arbiter must be construed according to the ordinary rules of contractual interpretation; there was no rule in favour of an innately liberal one.  

Does that mean that the Scottish courts would also avoid a liberal approach when interpreting the limits of an adjudicator’s jurisdiction? It’s debatable. It remains to be seen whether, in Scotland, the law will allow referrals to adjudication in respect of disputes that arise in connection with construction contracts. In this respect the jury is still out.