RBH Building Contractors Ltd v James

In this case, an adjudicator’s decision was not enforced because the defendants claimed the contract was a construction contract with a residential occupier and, without an adjudication clause, the adjudicator lacked jurisdiction to determine the dispute.

During the adjudication the defendants, Mr & Mrs James (no relation to the author!), had objected to the adjudicator’s jurisdiction on the basis that they were residential occupiers and therefore sought to resist the summary enforcement of a ‘smash and grab’ adjudicator’s decision in RBH’s favour in the sum of £665,000.

RBH said that Mr & Mrs James were property developers and that they had never occupied it and never intended to occupy it as their residence.

At the summary judgment hearing, whilst it was accepted as a matter of fact that they never occupied the house, they argued that when they entered into the contract they had an intention to occupy it.  Subsequently they decided to sell the property and hence why they did not argue that they were going to occupy it.  They stated that their intention changed because their finances were such that they were compelled to put the property up for sale.  For the judge, the factual issue which arose on the residential occupier point was: what was their intention objectively determined at the time of the contract?

RBH’s position was that they had never been informed that Mr and Mrs James intended to occupy the property and that this was a purely development opportunity.

However, the judge noted there was evidence (registering with a local GP, going onto the electoral roll, as well as screenshot of messages with friends) which supported the James’s case on their intention at the time of the contract.  That evidence, if accepted, would have been determinative.  However, this was an application for summary judgment and there was conflicting evidence which meant that this issue would have to be determined in the future at a trial.

In practice, it is always wise to have a formal contract e.g. a JCT minor works contract with an adjudication clause so that such points can be put beyond doubt but this was a case where there was certainly a triable issue as to whether the residential occupier exception applied.

The case was also interesting on the question of whether there was a valid pay less notice issued by Mr & Mrs James.  The pay less notice was in the form of a letter with 11 bullet points and the letter disputed items to the value of over £1.2m and RBH had claimed the balance due of £665,000.  The letter took issue with specific quantified claims which were in bullet points one to five, seven and nine.  In the remaining bullet points the letter rejected certain heads of claim wholesale without referring to figures.  The quantified and unquantified heads exceeded £665,000, and so the notice concluded that the sum owed was nil.

The judge considered how the bullet points and letter which related to the payment application would have been understood by any reasonably objective reader who had knowledge of the contract works.  In his view, on that basis, the bullet points set an adequate agenda for an adjudication by identifying specifically which elements of the payment application were not accepted and why.  The judge did not accept that the letter had to set out an arithmetical calculation in order to amount to a valid pay less notice.

Despite the judge’s finding, it is usually best practice to set out why each item in an application for payment is rejected and include a revised valuation, something which would have avoided much of the dispute in this case.