RBH Building Contractors Ltd v James [2025] EWHC 2005 (TCC) concerned RBH’s Part 7 application for summary judgment to enforce an adjudicator’s decision, and the Jameses’ Part 8 application for declaration to the effect that the employers’ payless notice was valid. The defendants also resisted summary judgment on the footing that the contract in question was a construction contract with a residential occupier, hence the adjudicator had no jurisdiction to determine the dispute between the parties.  Finally, the court considered whether it had the power to reverse the adjudicator’s decision on fees if the underlying award was overturned.

The court dismissed RBH’s application for summary judgment, finding that the Jameses had a “real prospect” of succeeding in their defence that they were residential occupiers, thus potentially invalidating the adjudicator’s jurisdiction. Furthermore, the court found the payless notice served by the Jameses to be valid, concluding that the adjudicator’s original decision on this point was wrong. However, despite overturning the substantive part of the adjudicator’s decision, the court declined to alter the adjudicator’s order regarding his fees, adhering to established legal precedent that such decisions are generally not subject to review by the courts.

Background to the Dispute

The Jameses purchased a property in Ferndown, Saunton, North Devon, with the intention of demolishing and reconstructing it. They agreed an oral contract in January 2022 for RBH to provide site and project management services for the construction of a large luxury house. RBH was to be paid: a weekly fee of £1,000; a monthly fee £10,000 for 18 months for supervision and project management; plus reimbursement for subcontractor and material costs. RBH also claimed entitlement to a fee for overheads and profits. When works ceased in April 2024, RBH had received £1,310,039.

On 18 November 2024, RBH served a payment application with a gross valuation of £1,973,055 and payment due of £663,016. On 27 November 2024, the Jameses served a letter which they contended was a valid payless notice, disputing items totalling £1,245,145 with a payment due sum of £nil. Then, on 6 December 2024, RBH commenced a notified sum adjudication and as there was no written contract, subject to the residential occupier exception, there would be the right to adjudicate pursuant to the Act and the Scheme.

In the adjudication, the Jameses argued that the contract was with residential occupiers, meaning the adjudicator had no jurisdiction. They said that, at the time of the contract, they intended to occupy the property upon completion and they subsequently changed their minds. The adjudicator rejected the Jameses’ jurisdictional objection, relying partly on a planning application tick-box for “market housing” and the submission of a payless notice, which he took as an admission that the Statutory Scheme applied. He decided that the application was the notified sum by default and that the Jameses were liable to pay his fees of £9,638 plus VAT.

Part 7 Application – The Residential Occupier Exception

Section 106(2) defines a construction contract with a residential occupier as one which principally relates to operations on a dwelling which one of the parties to the contract occupies or intends to occupy as his residence. The court said that the intention to occupy must be determined at the time of contract formation and that post-contract events can be relevant in objectively determining that intention.

RBH relied heavily on commercial loans taken by the Jameses, which included undertakings that, “the charged property is not used as and will not be used as a dwelling by the borrower or a related person of the borrower” and that, “the loan will be used for business purposes.” Mrs James also signed declarations stating, “We declare, confirm and certify that neither myself, ourselves or any of my/our family or close relatives nor my/our partners reside nor have any intention to reside at the property” and “I am entering this agreement wholly or predominantly for the purposes of a business carried on by me or intended to be carried on by me.”

The court found that the Jameses had a real prospect of establishing that the residential occupier exception in section 106 is engaged and the application for summary judgment was dismissed. This was due to the substantial body of evidence from the Jameses, including their consistent statements of intent, selling their previous home, act of living on site in a caravan, architect’s corroboration, registration for the local GP and electoral roll, and personal design specifications for a competitive swimmer.

Part 8 Application – Validity of the Payless Notice

Section 111(4) of the Act requires a payless notice to specify both “the sum that the payer considers to be due on the date the notice is served” and “the basis on which that sum is calculated.” The court recited the principles from Advance JV v Aniska Limited [2022] on the content of payment and payless notices including that: the notices should be viewed objectively as if one was a reasonable recipient at the scene;  the purpose of the notice is relevant; the notice must comply with statutory requirements in substance and form; it is a question of fact and degree whether the notice is valid; must free from ambiguity; and provide an adequate agenda for adjudication.

RBH argued that the notice didn’t comply with section 111(4)(b) as it didn’t sufficiently explain why sums were zero or provide an adequate basis for withholding £663,000. However, the Jameses successfully argued that the letter of 27 November 2024 plainly satisfied the requirements and would be “understood by any reasonably objective reader who had knowledge of the contract works”. The Jameses provided a table to the court with how their email commentary related to the payment application, and effectively identified and provided reasons for disputing specific, quantified items in RBH’s claim.

The court noted the draconian consequences of invalidity and that the Scheme was not intended to encourage overly technical arguments. The letter dated 27 November 2024 was a valid payless notice. Consequently, no sums were due to RBH pursuant to its payment application, and the adjudication was wrongly decided.

Adjudicator’s Fees

Established authority in both English and Scottish courts (lead by Castle Inns (Stirling) Ltd v Clark Contracts [2005] Scot CS CSOH 178 and followed by the authorities of England and Wales) generally holds that an adjudicator’s decision on fees is final and not subject to challenge in subsequent litigation as there is no contractual mechanism for reconsideration of fees. Further, the authorities provide that there is no commercial necessity for fee decisions to be reconsiderable and such an exercise would be impracticable in this arena.

On that last point as to the practicality of reconsidering fees, the Jameses argued that here there was a single substantive issue which is distinguished from Castle Inns. The judge said he was not persuaded that Castle Inns can be distinguished because the decision is plainly put on a broad footing, and in any event, all the authority points in one direction.

Finally, the Jameses argued that this is an example of where a term ought to be implied into the contract through the officious bystander test or by Aspect Contracts v Higgins [2015] UKSC 38. The court was not persuaded and held that this would be inconsistent with the statute and the authorities.  The judge concluded that, “there is some merit in having a clear rule that the adjudicator’s decision as to fees is not susceptible to review.”

Conclusion

This case provides an insight on the residential occupier exception with the court finding that the Jameses had a “real prospect” of succeeding in its defence and therefore the court could not grant summary judgement under CPR Part 24.3. Of note, the judge stated that there was a “good deal more evidence available to me than was available to the adjudicator”, implying that even when the court refuses to enforce the decision of an adjudicator, that is not necessarily damning.

In fact, the consensus might be that the adjudicator was correct in deciding they had jurisdiction. The judgment states that the planning application for the new home included a ticked box for “market housing”, opposed to “self-build”, and that the adjudicator found this to be decisive of the Jameses’ intentions. The adjudicator was regulated by the RICS at the time and the RICS guidance note states that, “If the adjudicator concludes that there is clearly no threshold jurisdiction, then they should resign”. Therefore, this does not appear to be a situation where the adjudicator ought to have resigned.