UK adjudication: Construction Act "Residential Occupier" exception considered by High Court

 The "residential occupier" exception to the compulsory adjudication provisions in section 106 of the Housing Grants, Construction and Regeneration Act 1996 (the Construction Act)  is intended to benefit only those who occupy or intend to occupy a property as their residence. In a recent case the ambit of this exception was considered: Westfields v. Lewis [2013] EWHC 376 (TCC) 27 February 2013.  Michael Mendelblat, a professional support lawyer in our London contentious construction team, reviews this case.

Background

This was an application to enforce an adjudicator's decision which was described by the judge as "hotly contested".  The only issue was whether the Construction Act applied to the contract. The defendant maintained that it did not by reason of the residential occupier exception in Section 106.  Cases on this exception are rare and there is no case in which a defendant has successfully relied on it.  In three cases an unsuccessful defence has been raised, most recently in the case of Shaw [2009]. The test in the Construction Act is twofold, namely whether the defendant occupies, or intends to occupy as his residence the property which is the subject matter of the construction contract. 

Decision

The court first considered the question of intention to occupy.  Having analysed the facts, the court concluded that at the time the contract was made, the defendant intended to let out the property when the works were completed.  There was a series of events indicating the defendants continuing intention to let, in particular emails in which the defendant informed the claimant that delays in the works were impeding the letting of the house in question.

That in itself was sufficient to dispose of the case but the court went further to consider the interpretation of the word "occupies".  It took the view that this means that occupation is to be tested not by a single snapshot in time but instead requires on-going occupation.  Even if the date of the contract itself was crucial, the documentation indicated that the defendant went through a process of moving out of the property which commenced before the date of the contract and concluded after it.  Therefore as at the date of the contract, he did not occupy the property as his residence as he was in the process of moving out to another property with no intention of returning to reside there.

Comment

The case concluded with a comment by the judge to the effect that Section 106 of the Construction Act might now no longer serve any purpose given that adjudication in construction contracts is generally thought to have worked well and reduced costs.  The judge therefore indicated that the benefits of adjudication may usefully be extended to benefit residential occupiers. It remains to be seen whether Parliament will intervene again as it did in relation to the 2009 Act, which made various changes to the original Construction Act, predominately to the payment provisions.