The court clarifies that an adjudicator's decision on payment of his fees is not susceptible to review, even if the adjudicator's decision is not enforced

It has become somewhat rare for the court to refuse to enforce an adjudicator’s decision; even rarer still to find judicial authority on the ‘residential occupier exception’. The high court in RBH Building Contractors Limited v Ashley James and another did just that – it considered the test for when the residential occupier’s exemption applies and consequently refused to enforce the adjudicator’s decision. The residential occupiers were however still left liable for the adjudicator’s fees.

The facts

RBH Building Contractors Ltd (RBH), entered into an oral contract with Mr and Mrs James to demolish and rebuild a luxury home in Devon. Payments were agreed at £1,000 per week for supervision and project management and, an additional fee of £10,000 per month for up to 18 months for supervision and project management. RBH was also to be reimbursed for any costs incurred in procuring subcontractors and materials. Work started in January 2022 but stopped by April 2024 after a breakdown in the relationship, at which point RBH had already been paid approximately £1.3 million. It was common ground that Mr James, one of the owners of the property, worked in the property business.

RBH applied for a further payment of £663,016.16 via email with a supporting breakdown of costs. The Jameses issued a pay less notice, reducing the sum due to zero with reasons set out in an informal letter containing explanatory bullet points. Notably, they did not rely on the residential occupier exception to refuse further payment at this stage. 

RBH commenced an adjudication on the basis that no valid pay less notice had been served - a classic ‘smash and grab’ approach relying on a procedural technicality. The Jameses on the other hand challenged the adjudicator’s decision on the basis that the residential occupier exception applied. The adjudicator decided that he had jurisdiction and proceeded to award RBH the full amount it claimed. He also decided that Mr and Mrs James were liable (on a joint and several basis) to pay his fees of £9,638 + VAT.

The decision

Section 106 of the Housing Grants, Construction and Regeneration Act 1996 (the Construction Act) states that Part II of the Construction Act does not apply to residential occupiers. This has the effect that adjudication will not be available in a construction contract with a residential occupier unless there is an express clause in the contract providing for its inclusion.

The court gave guidance on how to assess whether the exclusion applied finding:

1. What mattered was the employer’s intention at the time of the formation of the contract;
2. The interpretation of section 106 needs to be approached with common sense – it ought to be obvious on a brief consideration of the facts; and
3. An objective test is to be applied.

Having considered the available factual evidence, the judge found that Mr and Mrs James were residential occupiers and that the section 106 exemption applied. The adjudicator therefore had no jurisdiction to decide the dispute between the parties and the adjudicator’s decision would not be enforced.

The judge then went on to find that he had no authority to reverse the adjudicator’s findings as to who should pay his fees because the Construction Act treats the adjudicator’s fees as ancillary and separate to the dispute to be decided. He also noted that there was good reason to have a blanket rule that adjudicator’s fees are not susceptible to review.

Conclusion

From the James' perspective, they were left with the slightly unsatisfactory position of having successfully resisted enforcing the adjudicator’s decision (and therefore avoiding having to pay over £600,000) but still being liable for the adjudicator's fees of over £10,000 (VAT inclusive).

It is not at all uncommon for parties to be unhappy with either an adjudicator’s decision, or the allocation of responsibility for payment of their fees, or indeed both. This case however is the court’s most recent decision finding that the adjudicator’s fees cannot be reviewed.

The full judgment: RBH Building Contractors Limited v Ashley James and another