ADJUDICATION AND THE

‘RESIDENTIAL OCCUPIER EXCEPTION’:

TIME FOR A RETHINK?

A paper based on the joint first prize entry in the

Hudson Prize essay competition 2014 presented at
a meeting of the Society of Construction Law
in London on 12th May 2015

Philip Britton

May 2015

193

www.scl.org.uk
 ADJUDICATION AND THE
‘RESIDENTIAL OCCUPIER EXCEPTION’:
TIME FOR A RETHINK?

Philip Britton*
‘Adjudication in construction contracts is generally
thought to have worked well, and it has certainly
reduced costs. Is it not time for section 106, and the
other exceptions to statutory adjudication, to be done
away with, so that all parties to a construction
contract can enjoy the benefits of adjudication?’
1
COULSON J

Introduction
The arrival of statutory adjudication
When the United Kingdom decided to legislate, in order to make adjudication
available to resolve construction disputes, this provoked debates about which
sorts of dispute should come within the new regime. If the principal mischief
to be remedied was project parties (above all, subcontractors) being
unjustifiably deprived of cash flow, the reforms should focus on security of
payment – hence stage payment requirements, limitations on set-off and a new
right to suspend performance. On one view, adjudication should be restricted
to that objective, excluding from its ambit broader questions like liability,
defects and extensions of time. However, Part II of the Housing Grants,
Construction and Regeneration Act 1996 (HGCRA), following suggestions in
Sir Michael Latham’s final report,2 adopted a wide definition via the phrase
‘dispute arising under the contract’.3

Most jurisdictions which followed the UK’s lead took an exclusively or

primarily cash flow focus, treating adjudication as a form of independent
certification towards interim payments for work done or for goods and

*
Thanks go to Katerina Hoey BSc DipArch MCIArb MSc and to Ronan Champion BSc LLB
MA PhD FCIOB FRICS for additional legal material; and to Jack Stephenson for background
on ‘The Arnolfini Portrait’. The author retains all responsibility for errors and omissions.
1 Westfields Construction Ltd v Lewis [2013] EWHC 376, [2013] BLR 223, para [61].
2 Sir Michael Latham, Constructing the Team: Final Report (HMSO 1994), para 9.14.
Many remained strongly opposed to the inclusion of quality issues within the scope of
adjudication, notably Professor John Uff QC in Frances A Paterson & Philip Britton
(eds), The Construction Act: Time for Review (London, Centre of Construction Law,
King’s College London, 2000), chapter 3.
3 HGCRA s 108(1), which adds: ‘For this purpose “dispute” includes any difference’.
During the lengthy first review of the 1996 Act (2004-2008), some even suggested
broadening this further to ‘arising under or in connection with the contract’; on the
review, see also note 17. For an example of difficulties caused by the present words, see
Hillcrest Homes Ltd v Beresford and Curbishley Ltd [2014] EWHC 280 (TCC), 153 Con
LR 179.

1
services supplied.4 ‘Payment issues’, in this narrow sense, seem in fact to
have been the focus of most UK adjudications – often by subcontractor against
main contractor (as expected), but also by main contractor against employer.
This picture emerges from the copious case law on enforcement of decisions,
as well as from research begun at the Adjudication Reporting Centre at
Glasgow Caledonian University.5

Sir Michael considered that adjudication – whatever its scope – should

guarantee basic standards of speed and procedural fairness. But he wanted the
adjudicator’s decision to be implemented right away, though reached only
‘provisionally’.6 It was to be ‘pay now, argue later’.7 These ideas became
part of the 1996 Act, adopted in the last days of John Major’s Conservative
Government. It fell to Tony Blair’s first New Labour administration to
implement the new regime, notably by organising the drafting of the
Scheme(s) for Construction Contracts – crucial pillars supporting the whole
structure in each part of the UK.8 When the legislation came into force in
1998, the courts generally played the supportive role Sir Michael had hoped
for.9

The ‘residential occupier exception’

The Latham report thought that adjudication should apply to any kind of
construction activity undertaken in a contractual framework. But the passage
of the legislation gave interest groups a chance to argue that their particular
sector or activity should – more often, should not – be included. So the
outcome represents a complex compromise between the guiding principle
encouraged by Latham and these specific interests.10

4 As in Singapore and the Australian ‘East Coast’ model, and more recently in Malaysia
and Ireland: see Jeremy Coggins, Robert Fenwick Elliott and Matthew Bell, ‘Towards
Harmonisation of Construction Industry Payment Legislation: A Consideration of the
Success Afforded by the East Coast and West Coast Models in Australia’ (2010) 10(3)
Australasian Journal of Construction Economics and Building 15.
5 Janey Milligan and Lisa Cattanach, Adjudication Report No 13 (October 2014); its
Figures 4 and 5 show that the largest category of referrals in the period under review
were by subcontractor against main contractor; Table 4 shows that more than half of the
adjudications analysed had payment-related issues as their primary focus, though these
figures do not distinguish between residential and non-residential projects, nor between
corporate and individual construction employers:
<www.cdr.uk.com/documents/Report13_001.pdf>.
6 ‘Provisionally’: the HGCRA s 108(3).
7 Lord Ackner, HL Debs vol 571, col 989 (22 April 1996).
8 The original Scheme for Construction Contracts (England & Wales) Regulations (SI
1998/648) were amended by the Scheme for Construction Contracts (England and
Wales) Regulations 1998 (Amendment) (England) Regulations 2011 (SI 2011/2333);
there are comparable equivalents for Wales, Scotland and Northern Ireland.
9 In the first reported case on the HGCRA, Macob Civil Engineering Ltd v Morrison
Construction Ltd 15 Const LJ 300, 64 Con LR 1, [1999] BLR 93, (1999) 1 TCLR 113,
Dyson J (as he was then) robustly said, para [19]: ‘If his [the adjudicator’s] decision on
the issue referred to him is wrong, whether because he erred on the facts or the law, or
because in reaching his decision he made a procedural error which invalidates the
decision, it is still a decision on the issue’. See also note 24 and its linked main text.
10 One of these interest groups comprises project sponsors from the public sector. From the
start, s 106(1)(b) was used to exclude the head contracts for PFI and PPP projects from

2
However, not all the significant ‘carve-outs’ in Part II of the HGCRA were the
fruit of successful lobbying. Individuals who are construction employers for
residential projects (past, present or future) have little influence in Whitehall
or at Westminster.11 Yet the 1996 Act contains an exception where a
construction employer is an actual or intending residential occupier of a
dwelling. In such a situation, a ‘builder’ – any provider of construction
services, who could be a developer selling ‘off-plan’ or a consultant – cannot
count on the cash flow and adjudication safety net of the statutory regime. Sir
Michael thought that his terms of reference excluded consumer protection
issues; the drafters of the legislation seem simply to have continued down the
same track.

Although this aspect of the 1996 Act is hardly central to its aims and
interventions, the ‘residential construction employer’ is by now a distinct and
well-established, though marginal, figure in the HGCRA landscape. He (or
she) has a status like the miniature dog who lurks at the foot of van Eyck’s
celebrated full-length ‘Arnolfini Portrait’, whose central image is of a richly
dressed fifteenth century couple.12 Our own equivalent, the allegorical and
modernist ‘Security of Payment’ painting, exists in identical versions, Warhol-
style, in London, Edinburgh, Cardiff and Belfast; variants of the same image,
each with a stylised residential employer in one corner, hang in nine other
National (or State) Galleries around the world.13

The paper’s aims

We consider what situations the UK’s ‘residential occupier exception’ – as we
call it – covers, or appears to cover; outline what its consequences are, for
those whose contracts fall within it; look at how evolving consumer protection
– notably the Consumer Rights Act (CRA) 2015 – impacts on residential
construction employers and their suppliers of services; and ask finally whether
the exception should be abolished or modified.

As a situation to which section 106(2) was clearly intended to apply, we

imagine a widow who has no experience in construction and who wants to add

the HGCRA via the original Construction Contracts (England and Wales) Exclusion
Order 1998 (SI 1998/648), replaced by the Construction Contracts (England) Exclusion
Order 2011 (SI 2011/2332). There are now comparable equivalents for Wales, Scotland
and Northern Ireland; and for Ireland in the Construction Contracts Act 2013 (No
34/2013) s 2(3).
11 There is now the HomeOwners Alliance, involved in the development of the RIBA
Domestic Building Contract, note 59: <www.hoa.org.uk>.
12 Jan van Eyck (c1390–c1441) painted the couple in 1434; the painting, in the National
Gallery London, is sometimes known (incorrectly) as The Arnolfini Wedding. The dog,
said to be an early form of the breed now known as the Brussels griffon, may symbolise
loyalty (hence also ‘Fido’ as a generic dog’s name); whether the subjects are really
Arnolfinis, or which, is less certain: <www.nationalgallery.org.uk/paintings/jan-van-
eyck-the-arnolfini-portrait>.
13 Dublin is the most recent acquirer, though its version is not yet on public view: see note
96. Under the Irish Act s 2(1)(b), a project over the basic financial threshold is not
caught by the regime if the contract relates only to a dwelling with a floor area not
greater than 200m2, which one of the parties to the contract ‘occupies, or intends to
occupy, as his or her residence’. Gender-neutrality apart, the quoted text is identical to
the end of the first sentence of our own s 106(2).

3
a modest extension to her between-the-wars semi-detached home in Ruislip
Gardens.14 She and a local builder meet over mugs of tea in her kitchen; they
agree the main features of the project and its cost, no other professionals (and
no paperwork other than an ‘estimate’) being involved. On any test, our
widow is a consumer: ‘an individual acting for purposes that are wholly or
mainly outside that individual’s trade, business, craft or profession’.15 Her
builder is clearly a trader acting as such, so his contract with her is a ‘business-
to-consumer’ one (B2C) for the supply of services, in our case made ‘off-
premises’.16

Scope of the exception

Statute and case law
The key provision is section 106(2) of the HGCRA, which remains in force
exactly as originally enacted:
‘A construction contract with a residential occupier means a
construction contract which principally relates to operations on a
dwelling which one of the parties to the contract occupies, or intends to
occupy, as his residence.
In this subsection “dwelling” means a dwelling-house or a flat; and for
this purpose –
“dwelling-house” does not include a building containing a flat; and
“flat” means separate and self-contained premises constructed or
adapted for use for residential purposes and forming part of a
building from some other part of which the premises are divided
horizontally.’17

14 This is a mostly twentieth-century suburb in northwest Greater London, its above-ground

Tube station on the Central Line opening in 1948. In 1954 John Betjeman (knighted
1969, Poet Laureate 1972-1984) memorialised its island platform in the opening stanza
of his whimsical poem ‘Middlesex’: ‘Gaily into Ruislip Gardens/Runs the red electric
train/With a thousand Ta’s and Pardon’s/Daintily alights Elaine’.
15 CRA 2015 s 2(3): see note 88 and its linked main text. This is – intentionally – very
close to the definitions in article 2(b) of the 1993 Directive, note 65, and article 4 of the
2013 Directive: note 106.
16 This brings in information rights derived from the EU Consumer Rights Directive: see
note 85 and its linked main text.
17 The Secretary of State, but now also the Welsh Ministers in relation to Wales, have
power under s 106(3) to modify the text of s 106(2); see also now s 106A. During the
review of the HGCRA and the Scheme, launched in earnest by the Chancellor of the
Exchequer in the 2004 Budget and kick-started by a further report from Sir Michael
Latham, the Construction Umbrella Bodies Adjudication Task Group argued for
abolition of the exception. However, perhaps because of opposition from architects, this
proposal never reached the shopping-list that was the review’s eventual outcome. With
wide industry support, a package of modest, but real, other improvements was eventually
implemented. Those changes needing legislation eventually became Part 8 of the Local
Democracy, Economic Development and Construction Act (LDEDCA) 2009: see note
36, also Jenny Gillies, ‘The new Construction Act’, TECBAR Review, Autumn 2011:
<www.tecbar.org>.

4
The original draft of what became this section adopted a shorter formula: ‘a
dwelling, the whole or any part of which is the subject of operations to which
the [construction] contract relates’. This, it was thought early on, might make
contracts escape the future Act too easily. The present words appear to avoid
the problem, as Lord Lucas (for the Government) suggested:
‘… we decided that the most equitable and generally satisfactory way of
proceeding was to restrict the exemption to contracts whose primary
purpose related to a dwelling for one of the parties. This would still
allow the exemption to cover contracts on second homes… and also to
cover contracts where some of the work applied to a separate flat, a
garage or an outhouse. It would not, however, allow rich individuals to
avoid the Bill by adding penthouse flats to their office blocks.’18

Only six cases appear to have considered section 106(2) – all in the TCC, so of
limited value as authority, even in the same court.19 In each, the construction
employer was attempting to resist enforcement of an adjudicator’s decision –
and in the end failed, for a variety of reasons.20

Such paucity of case law may be a good sign, if it means that this generally
unregarded aspect of the 1996 Act seldom gives rise to problems in practice.
But perhaps few residential construction employers, especially on smaller
‘one-off’ projects, have the knowledge or resources to rely on section 106(2),
before an adjudicator and/or in court. Some may pay up when the other party
threatens or launches a referral; others may resist, in the end going along with
an adjudication. Crucially, an unrepresented consumer as defending party
may not realise that failing to challenge the adjudicator’s jurisdiction at this
stage could lead a future court to treat her as having waived the right to do so
definitively.21

The burden of proof

Who has – or must take – the initiative to argue that the situation fits within
the exception? The judicial answer is straightforward: ‘the burden is on the
employer to demonstrate that the exclusion [section 106(2)] applies to them’.22
However, our widow may find an unexpected ally, now that the Court of
Appeal has made clear that the adjudicator’s fees will not be payable if the

18 HL Debs, vol 574 col 1336 (23 July 1996).

19 Stephen Furst QC points out in The Construction Act: Time for Review, note 2, page 61,
that because adjudicators’ decisions are only temporarily binding, few parties appeal
beyond the TCC on enforcement issues, so CA authorities in our field are rare.
20 Samuel Thomas Construction v Anon (Unreported, HH Judge Overend, 28 January
2000); Lovell Projects Ltd v Legg & Carver [2003] BLR 452 (TCC); Steve Domsalla (t/a
Domsalla Building Services) v Kenneth Dyason [2007] EWHC 1174 (TCC), 112 Con LR
95, [2007] BLR 348, [2007] TCLR 5; Edenbooth Ltd v Cre8 Developments Ltd [2008]
EWHC 570 (TCC); Shaw v Massey Foundation & Pilings Ltd [2009] EWHC 493
(TCC); and Westfields v Lewis: note 1. Westfields v Lewis triggered the essay on which
this paper is based.
21 Allied P&L Ltd v Paradigm Housing Group Ltd [2009] EWHC 2890 (TCC), [2010]
BLR 59, para [32] (Akenhead J).
22 Coulson J in Shaw v Massey, note 20, para [23]. Similarly, where a contract term is
challenged as unfair, a trader who claims that an individual is not a consumer must prove
it: CRA 2015 ss 2(4) and 76(3).

5
decision turns out to be unenforceable.23 Anecdotal evidence from
practitioners suggests that, as a result, adjudicators themselves now raise
points about the legal basis of the proceedings which the consumer might
otherwise have had to make – in our case, whether the contract falls within
section 106(2) and/or whether there is a clear alternative contractual basis for
the referral. If the adjudicator concludes early on that there is a real risk that
the eventual decision may be unenforceable, s/he may simply withdraw from
the case, leaving the referring party empty-handed.

Where the adjudication does continue all the way to a decision, the other party
to a construction contract with a residential employer being successful, the
consumer will come under what the courts call the ‘imperative’ of complying
with the decision.24 Failing to do so activates a strong presumption in favour
of court enforcement. So a consumer who wishes to argue that the decision is
invalid will have to make the running (more on this below).

Since section 106(2) is intended to protect the employer, the other party will
seldom have an interest in raising it. However, this party might wish to
challenge an adjudicator or judge who applies this provision in a way which is
arguably wrong in law, or erroneous in its interpretation of, or application to,
the facts. Doing so could require taking the initiative procedurally, though the
case law so far gives us no examples.

Other interpretation issues

The key terms in section 106(2) are ‘construction contract’, ‘operations’,
‘dwelling’ and ‘occupy as a residence’. Sections 104 and 105 already define
‘construction contract’ and ‘construction operations’ in generous detail, so the
extensive case law on the meaning of these phrases may be relevant.25
However, such issues feature in only one of the cases which also discuss the
exception.26

23 PC Harrington Contractors Ltd v Systech International Ltd [2012] EWCA Civ 1371,
[2012] WLR(D) 284, [2013] Bus LR 970.
24 See eg Chadwick LJ (giving the judgment of the Court) in Carillion Construction Ltd v
Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358, 104 Con LR 1, [2006] BLR 15,
para [87]: ‘… the proper course of the party who is unsuccessful in an adjudication …
must be to pay the amount which he has been ordered to pay by the adjudicator.’ Reg
23(2) of the Scheme, note 40, provides, for an adjudication to which the Scheme applies:
‘The decision of the adjudicator shall be binding on the parties, and they shall comply
with it until the dispute is finally determined…’. For court support for this approach, see
note 9; on the TCC’s procedures for hearing enforcement applications rapidly, see
Galliford Try Building Ltd v Estura Ltd [2015] EWHC 412 (TCC), para [37]ff (Edwards-
Stuart J).
25 Richard Wilmot-Smith QC, Wilmot-Smith on Construction Contracts (Oxford, OUP, 3rd
ed 2013), 21.06-21.29. Note that the Communications Act 2003 s 406(1) modifies part
of s 105(1)(b). For a review of the case law on ss 104-105, see Savoye and Savoye Ltd v
Spicers Ltd [2014] EWHC 4195 (TCC). On a collateral warranty as a construction
contract within s 104, see Parkwood Leisure Ltd v Laing O'Rourke Wales and West Ltd
[2013] EWHC 2665 (TCC); contrast with rights acquired under the Contracts (Rights of
Third Parties) Act 1999 in Hurley Palmer Flatt Ltd v Barclays Bank Plc [2014] EWHC
3042 (TCC).
26 Edenbooth v Cre8, note 20, paras [6]-[7] (Coulson J).

6
Section 106(2) is evidently designed to cover work not just on an existing
dwelling, but new-build or conversion as well: that is why occupation by the
employer may be either actual or intended. Coulson J suggests (obiter) in
Westfields v Lewis that no one can in fact be occupying more than one
dwelling as his residence at a time.27 However, it seems consistent with the
words of the sub-section for a consumer to occupy Dwelling A while having
the intention to occupy Dwelling B – the construction site – as a home, once
work there is complete; and for Dwelling B to be only a second home.28 It
also seems likely that only one or more individuals, acting as such, can
qualify, no legal entity being able to occupy ‘as his residence’.29 However,
such an entity could own or let the dwelling, as long as an individual – in a
personal capacity – was the construction employer and fulfilled the other tests
in the statute.

More problematic is the question of the relevant time at which the situation
should be tested. Is the key moment entering into the contract, or can the
conduct (or intention) of the employer during construction be relevant too?
This was a further issue in Westfields v Lewis, Coulson J taking the view –
more clearly than he had in Shaw v Massey30 – that where the employer is not
resident at any time once the contract is entered into (indeed, may never have
been resident at all), the time of entering into the contract and later may both
be relevant, as showing (or failing to show) the intention to occupy.31 In the
case itself, the construction employer Mr Lewis had, the judge found, always
intended to let the dwelling (his former home) once work on it was complete,
having told his builder so. Even if he had intended to live there again when he
made the contract with the builder, the judge thought that he would have lost
the protection of the exception if the evidence showed that he changed his
mind midway. As this illustrates, there are mixed questions of fact and law
which may need to be resolved, potentially with oral evidence in court, if
section 106(2) impacts on the outcome of a case.

No case has yet had to grapple with ‘principally relates to’ – which obviously
allows a contract which includes ancillary work other than on the dwelling in
question (even on a flat which is not the central dwelling) to retain the
protection of section 106(2), if it otherwise qualifies. Nor has the distinction
between ‘dwelling’ and ‘flat’, or the ‘horizontal division’ point, yet surfaced
in court, though many other statutes use the word ‘dwelling’ or ‘residence’
(both terms usually left undefined), on which there is therefore copious case
law.32

27 Westfields v Lewis, note 1, para [9].

28 See the quotation from Lord Lucas linked to note 18.
29 Edenbooth v Cre8, note 20, para [9] (Coulson J). For Ireland and Malaysia, see note 96;
the Malaysian statute s 3 limits its exception to a ‘construction contract entered into by a
natural person for any construction work in respect of any building which is less than
four storeys high and which is wholly intended for his occupation’.
30 Shaw v Massey, note 20, para [26].
31 Westfields v Lewis, note 1, para [39].
32 Eg ‘a dwelling-house (which may be a house or part of a house) … let as a separate
dwelling’ under the Rent Act 1977 s 1 or ‘a dwelling-house … let as a separate dwelling’
under the Housing Act 1988 s 1: see eg Uratemp Ventures Ltd v Collins [2001] UKHL

7
Finally, note that it is only the (head) contract between employer and builder
(or other provider of construction services within the 1996 Act) which can
qualify under section 106(2). Excluding such a contract from the HGCRA
regime does not protect any other linked contract for the same project (notably
a subcontract ‘down the line’ or a collateral warranty given to a third party)
against having Part II of the Act apply to it, if this would otherwise be the
case.33

A broader issue
Where a court has to choose between possible meanings of section 106(2), the
alternatives being otherwise evenly balanced, should it lean against bringing
the situation within the clutches of the HGCRA – a statute which limits
parties’ traditional freedom of contract, affects their fundamental common law
right to bring disputes before the courts at any time and restricts a consumer’s
ability to challenge a contract term as unfair? 34 Or should the court be
inclined to limit the exception – since it is a ‘carve-out’ from the more general
industry-wide HGCRA regime, which implements a clear and widely accepted
policy objective?

In the early days of the 1996 Act, judges would probably have favoured the
first approach, interpreting section 106(2) as Parliament’s wish to protect our
widow against an adjudication launched by the other party (builder or
construction professional), who would often be a ‘repeat player’ and might be
canny enough to mount an ambush with copious documentation, to which she
would have difficulty in responding, above all within the tight standard
timescales. As Michael Bowsher eloquently put it, appearing for the
construction employer in Bryen & Langley v Boston in 2004, just over six
years into the Act’s operation:
‘The proceedings [adjudication] themselves place substantial and
unexpected demands upon the consumer. These are demands not only
of the cost of dealing with the proceedings, of having to retain persons
to assist in those proceedings, but also the need to maintain documentary

43, [2002] 1 AC 301, where several Law Lords suggested that the meaning of ‘dwelling’
should reflect the purpose of the legislation in which the term is used. In the context of
the Defective Premises Act 1972, see Rendlesham Estates plc v Barr Ltd [2014] EWHC
3968 (TCC), paras [33]-[54]. On ‘residence’, see eg the Representation of the People
Act 1983 s 5, as amended by the 2000 Act.
33 On collateral warranties and the HGCRA, see note 25. Where a jurisdiction defines its
residential exception in terms only of the project, not also its parties, like the Building
and Construction Industry Security of Payment Act 2004 (S/pore) s 4(2)(a), this protects
all contracts relating to that project; but this patricular exception appears to apply only to
small projects which do not involve structural or gross floor area changes.
34 On the common law right of access to court, see R v Lord Chancellor, ex parte Witham
[1998] QB 575 (Div Ct, QBD); also article 6(1) of the European Convention on the
Protection of Human Rights and Fundamental Freedoms and its copious case law. It
seems likely that neither statutory nor contractual adjudication can be attacked as
violating article 6(1): see Philip Britton, ‘Court Challenges to ADR in Construction:
European and English Law’, SCL (UK) Paper 152 (January 2009), pages 15-26, also
Andrew Bartlett QC, ‘The Limits of Adjudication: The Impact of the European
Convention on Human Rights’, SCL (UK) Paper D175 (December 2014):
<www.scl.org.uk>.

8
 records throughout a job in permanent readiness to deal with an
adjudication that may be launched with little or no prior notice when it
will not be possible to rely upon disclosure procedures to ensure that a
common documentary basis is established. A consumer that has failed
to take steps to ensure that he has all the requisite records and so forth
may be unable to defend him or herself when the adjudication is
commenced.’35

More than ten years further on, the judges’ broadly positive experience of
adjudication, largely from regularly deciding enforcement applications, could
easily lead to the opposite approach – as in the quotation from Coulson J at the
head of the paper. This new attitude may have been encouraged by the
legislative changes meanwhile, notably on parties’ costs within adjudications,
problematic though these may still be.36 It may also reflect judicial anxiety
about the impact on individual litigants of the TCC alternative: the Pre-Action
Protocol37 and post-Jackson procedural and costs changes.38

Effect of falling within the exception: the HGCRA

A residential construction contract might drop out of the Act’s scope on
several possible grounds. Our project in Ruislip Gardens, as we have
imagined it, would once have risked failing the original ‘agreement in writing’
test in section 107 of the HGCRA; but this has been repealed.39 Instead, our
focus here is solely on section 106(1)(a): ‘this Part [of the Act] does not apply
… to a construction contract with a residential occupier’.

So a contract within the exception does not need to comply with any aspect of
the 1996 Act regime – the payment rules (including withholding notices
replacing set-off), the right to suspend performance or the possibility of
adjudication. As a result, the provisions which support that regime, supplying
default rights and remedies where the parties’ own arrangements fail to
comply with the statutory ‘shopping-list’ in section 108, do not apply either, at
least as a matter of law – notably the relevant Scheme, in relation to both
adjudication and payment.40 Ahead of implementation of the 2013 EU

35 Bryen & Langley v Boston [2004] EWHC 2450 (TCC), [2005] BLR 28, para [41].
36 Part 8 of the LDEDCA 2009 filled the silence of both the original HGCRA and Scheme
on the adjudicator’s power to award costs – which had potentially allowed contractual
provisions to make the referring party responsible for both parties’ costs, whatever the
outcome. It inserted the elaborate ss 108A-C into the HGCRA. But see Dominic Helps,
‘Outlawing Tolent clauses and the LDEDC Act 2009: The Dénouement of s 108A’
(2011) 27 Const LJ 575, followed by ‘The New Construction Act: Life after Part 8 of the
LDECDA 2009’ (2012) 28 Const LJ 22.
37 Pre-Action Protocol for the Construction and Engineering Disputes (revised April 2014):
<www.justice.gov.uk/courts/procedure-rules/civil/protocol/prot_ced> and The
Technology and Construction Court Guide (2nd ed 2005, revised w.e.f. 3 March 2014).
Both are quoted and analysed in The White Book: Rt Hon Lord Justice Jackson (Editor-
in-Chief), Civil Procedure (London, Sweet & Maxwell, April 2014, with Autumn 2014
Fourth Cumulative Supplement).
38 See eg CPR rule 3.12(1) and Practice Direction 3E on costs management, quoted and
analysed in The White Book: note 37. See also John Denis-Smith, ‘Costs: The New
Landscape’, SCL (UK) Paper D174 (December 2014): <www.scl.org.uk>.
39 LDEDCA 2009 s 139, in force from 1 October 2011.
40 See note 8.

9
Directive on Consumer ADR, it is impossible to generalise about what a B2C
construction contract will contain, if it falls within the exception.41 However,
two scenarios illustrate what it may contain in relation to our central focus:
dispute resolution.

Scenario I: no general dispute resolution provisions

In a simple case, like our Ruislip Gardens example, the contract may have
been made almost entirely orally. If so, nothing may have been said – or can
later be proved to have been said – about dispute resolution. Even when some
aspects of the project are better documented, the parties’ arrangements may
still say nothing about this issue.42 However, the common law rules on
formation of contract do not make failure to address dispute resolution fatal:
traditional litigation is the default safety net, available unless a form of ADR
has been validly selected (or imposed), whether preceding or completely
replacing court action. The parties are free to adopt such an alternative if they
wish, provided they express their choice clearly. 43

Intermediate situations are possible: there may appear to be an adjudication

clause, but a judge later holds that this has not been incorporated into the
contract,44 or that it covers only contracts already within the scope of the
HGCRA.45

The consumer who is sure of her legal position can object to the purported
adjudication and otherwise take no part in it. She could even attempt to
undermine the process via court intervention.46 If the adjudication produces
an outcome which at least looks like a decision, this may benefit, in the courts’
eyes, from a presumption of validity – so may stand until successfully

41 The 2013 Directive: see note 106 and its linked main text.
42 As in Westfields v Lewis, note 1, and Khurana v Webster Construction Ltd [2015]
EWHC 758 (TCC).
43 In Khurana v Webster Construction, note 42, Judge Stephen Davies said, para [18]: ‘…
it is important that clear words should be used before parties effectively exclude the
unrestricted right which they would otherwise have to require a court to adjudicate all
disputes which may arise between them … [but] there is nothing intrinsically unusual in
parties seeking to achieve this result’.
44 As in Picardi v Cuniberti [2002] EWHC 2923 (TCC), [2003] BLR 487 and at first
instance in Bryen & Langley v Boston: note 35. The CA in Bryen & Langley v Boston
[2005] EWCA Civ 973, [2005] BLR 508 took the view that the JCT98 form – with its
adjudication provisions – had been incorporated into the contract. The residential
employers in Malcolm Charles Contracts Ltd v Crispin [2014] EWHC 3898 (TCC)
attempted to stop enforcement of a decision against them by arguing (unsuccessfully)
that the JCT Standard Form of Building Contract for a Home Owner/Occupier who has
appointed a Consultant to Oversee the Work (2005 edition), containing adjudication
provisions, had never been agreed.
45 Such an argument failed in Domsalla v Dyason, note 20, paras [17]-[20]; on what
constitutes submission to the jurisdiction of an adjudicator, see Clark Electrical Ltd v
JMD Developments (UK) Ltd [2012] EWHC 2627 (TCC), [2012] BLR 546.
46 On the TCC’s powers to grant declarations while an adjudication is under way, see WW
Gear Construction Ltd v McGee Group Ltd [2012] EWHC 1509 (TCC), [2012] BLR
355; for the procedural aspects, see The TCC Guide, note 37, para [9.4]. On post-
adjudication declarations, see MW High Tech Projects UK Ltd v Haase Environmental
Consulting GmbH [2015] EWHC 152 (TCC), para [35] (Coulson J).

10
challenged.47 When the other party asks the court to enforce this by summary
judgment under CPR Part 24, the consumer can argue against enforcement;48
if a judgment orders enforcement, she may appeal against this;49 or she may
even start separate legal proceedings against the other party.50

The outcome of enforcement proceedings may therefore hinge directly, as in

Westfields itself, on whether the facts fall within the section 106(2) exception
– though the consumer may have other grounds for impugning the decision.51
As we have seen, Coulson J in the end determined that the situation did not
satisfy the conditions in the statute, so ordered enforcement. He therefore did
not have to confirm – as we would argue – that if the contract falls within
section 106(2) and itself contains no adjudication provisions, and if the parties
have not separately agreed to adjudication later, a purported Scheme
adjudication (as seems to have occurred in Westfields, but the judgment does
not make this clear) is a nullity.

Scenario II: the parties ‘choose’ adjudication

Where the contract does not provide clearly for any form of ADR, the parties
may agree to adjudicate ad hoc once a dispute arises;52 and could go one step
further by agreeing that the decision of the adjudicator is ‘binding on a final
basis’.53 Alternatively, and more usually, at least for a larger residential
project, a published standard form may be used. If it is, the chances are that
this will be intentionally HGCRA-compliant, so will provide for
adjudication.54

47 See The Project Consultancy Group v The Trustees of the Gray Trust [1999] BLR 377
(TCC), where Dyson J said, para [9]: ‘… it is open to a defendant in enforcement
procedings to challenge the decision of an adjudicator on the ground that he was not
empowered by the [HGCRA] to make the decision’. The same should surely apply if the
adjudicator depends on contractual provisions to have power to make a decision, which
was the issue in Bryen & Langley v Boston: see note 44 and its linked main text.
48 Lovell Projects v Legg & Carver, Domsalla v Dyason and Edenbooth v Cre8: note 20;
also Westfields v Lewis: note 1.
49 Shaw v Massey: note 20.
50 However, as Coulson J said in Edenbooth v Cre8, note 20, para [19]: ‘… the defendant
was perfectly entitled to bring claims against the claimant, including a claim that the
claimant has been overpaid. None of that, however, affects the defendant’s obligation to
make payment now to the claimant in accordance with the adjudicator’s decision.’ On
making a payment in line with an adjudicator’s decision, then attempting in court to get
the money back, see Andrew Tweeddale, ‘Causes of Action: Recovering Monies Paid
Under an Adjudicator’s Decision’ (2014) 30 Const LJ 390; also Peter Land, ‘Undoing an
Adjudicator’s Doings’, TECBAR Review, Spring 2014: <www.tecbar.org>.
51 Eg breach of natural justice by the adjudicator, or fraud or dishonesty by the adjudicator
or by the other party: see Eurocom Ltd v Siemens Plc [2014] EWHC 3710 (TCC); on
apparent bias by the adjudicator, see Paice v MJ Harding [2015] EWHC 661 (TCC).
52 Such an argument succeeded in Domsalla v Dyason, note 20, paras [20]-[22].
53 In Khurana v Webster Construction, note 42, the parties’ pre-printed form of contract
contained no clear dispute resolution provisions. Had they, on opting ad hoc into the
Scheme, just used the word ‘binding’, this would have meant only ‘temporarily binding’,
as under the HGCRA; but adding ‘on a final basis’, Judge Stephen Davies held, excluded
re-litigation of the issues decided by the adjudicator.
54 Westfields v Lewis, note 1, para [3] (Coulson J). Conversely, a hybrid ‘construct-and
transfer’ contract, where a buyer commits to buy a new dwelling ‘off-plan’ from a

11
Examples abound: the all-purpose JCT Standard Building Contract with
Quantities 2011 and Design and Build Contract 2011, still widely used for
private sector projects within the UK, both take a short cut to compliance,
expressly incorporating the relevant statutory Scheme in their adjudication
provisions.55 The JCT Minor Works Building Contract 2011, perhaps more
often seen on small residential projects, does the same.56 Though all such
contracts refer to the 1996 Act and/or the Scheme, the parties cannot by their
own initiative extend the scope of the HGCRA to section 106(2) situations: in
such circumstances, the adjudication provisions in the standard form are
purely contractual in nature, though they may incorporate the Scheme’s
provisions by reference.57

It is very unlikely that an individual employer who becomes a party to one of

these forms will realise the significance of a reference to ‘the Scheme’; or will
understand that its adjudication provisions – amongst others – are included
only in order to address issues which the HGCRA requires to be addressed.
Furthermore, s/he may not realise that such provisions are not obligatory for a
project within section 106(2). The current JCT Minor Works contract, to its
credit, makes this clear in its linked Guidance Note 8: this points out that if the
parties adopt the contract unamended, the client will be committed
contractually to the form of adjudication which it provides.

Standard forms intended specially for residential projects are rare, but the JCT
publishes a group, including the Building Contract and Consultancy
Agreement for a Home Owner/Occupier.58 This too provides for (contractual)
adjudication. In October 2014 the RIBA published a pair of new contracts,
both in plain English. Clause 13 of its new Domestic Building Contract offers

developer, is usually bespoke in nature and may include no dispute resolution provisions,
though the private sector Consumer Code for Home Builders includes an Independent
Dispute Resolution scheme: <www.consumercodeforhomebuilders.com>.
55 Joint Contracts Tribunal Ltd, Standard Building Contract with Quantities 2011 (SBC/Q
2011) and Design and Build Contract 2011 (DB 2011); cl 9·2 in both cases. On the
Scheme, see note 8. The earlier Private with Quantities form (JCT98) contained its own
HGCRA-compliant adjudication provisions, discussed in relation to residential projects
in Bryen & Langley v Boston, note 35, and in Speymill Contracts Ltd v Baskind [2010]
EWCA Civ 120, [2010] BLR 257, 129 Con LR 66 (fraud as a reason for not enforcing an
adjudicator’s decision).
56 Joint Contracts Tribunal Ltd, Minor Works Building Contract 2011 (MW 2011), cl 7·2;
the same clause is in the Minor Works Building Contract with contractor’s design 2011
(MWD 2011). The 1998 version of the MW form, with HGCRA-compliant adjudication
provisions in Article 6, Clause 8 and Supplemental Condition D, was used in Lovell
Projects v Legg & Carver, Domsalla v Dyason (agreed between the consumer’s insurer
and the builder) and Shaw v Massey Foundations: note 20. The JCT Prime Cost
Building Contract (PCC98, with Amendments 1 and 2) was used in a residential project
in Treasure & Son Ltd v Dawes [2007] EWHC 2420 (TCC), [2008] BLR 24.
57 Treasure & Son Ltd v Dawes, note 56, para [32] (Akenhead J); and Domsalla v Dyason,
note 19, para [99] (Judge Anthony Thornton QC). Clive Freedman points out in ‘Non-
Statutory Adjudication: Is it Expert Determination, or Something Different?’ (2011) 27
Const LJ 3 that a decision of an adjudicator in a situation properly within the 1996 Act is
equally the result of a contractual process, relying on Coulson J in AMEC Group Ltd v
Thames Water Utilities Ltd [2010] EWHC 419, para [24].
58 Joint Contracts Tribunal Ltd, Building Contract and Consultancy Agreement for a Home
Owner/Occupier (HO/C and HO/CA 2005, revised 2009).

12
an open choice between mediation, arbitration and adjudication.59 This last
choice is described as ‘interim and binding’, so appears intended to have the
same force as under the HGCRA;60 but the form goes further than most by
permitting the parties to make adjudication obligatory, properly making clear
that litigation will apply if no ADR option is selected. Its companion, the
Concise Building Contract 2014 – as likely to be used for a project subject to
the HGCRA as for one with a residential employer – pre-selects adjudication
in a tick-box in Item S of the Contract Details, but Clause 13 allows the parties
to select alternatives.61 The RIBA already published separate appointment
forms for architects, some specifically intended for use with individual
residential construction employers, eg its Domestic Project Agreement 2010
(2012 revision).62

Is adjudication unfair in law?

Few consumers are likely to realise that adjudication provisions would be
protected from challenge as unfair contract terms if the contract was under the
ordinary HGCRA regime; but are not so protected if the contract falls within
the section 106(2) exception. This perhaps surprising result comes from what
were until very recently the two separate – but overlapping – sources of unfair
contract terms law in England & Wales: the Unfair Terms in Consumer
Contracts Regulations 1999 (UTCCR) (secondary legislation) and the Unfair
Contract Terms Act 1977 (UCTA) (primary legislation).63 All the provisions
of the UTCCR have now been included within the new Consumer Rights Act
2015 (more on these changes below), so these rules have found a new home,
as well as acquiring an apparently higher legal status.64

59 RIBA, Domestic Building Contract 2014: www.ribabookshops.com.

60 Unlike the JCT forms, the new RIBA contract does not import the Scheme, instead in
Item P of the Contract Details allowing the parties to name an adjudicator and set of
rules, the default nominating body being the RIBA and the default rules the RIBA’s own
Adjudication Scheme for Consumer Contracts.
61 RIBA, Concise Building Contract 2014: <www.ribabookshops.com>.
62 The RIBA Domestic Project Agreement 2010 (2012 revision): Architect claims to avoid
conflict with unfair contract terms law, notably by encouraging the architect to negotiate
each term of the contract with the client individually, including dispute resolution. The
RIBA also publishes a generic Agreement for appointment of a consultant, but this does
not exist in a specifically domestic version.
63 No consumer in any cases discussed here attempted to rely on the pre-CRA text of
UCTA, which almost wholly concerns contractual provisions and notices seeking to limit
or exclude liability (in contract and/or tort), or to achieve an equivalent effect. UCTA
does not make ADR choices specially vulnerable to attack, though its definition of an
exemption clause in s 13(1) includes one making the enforcement of a liability ‘subject
to onerous or restrictive conditions’; ‘restricting any right or remedy in respect of the
liability’; or ‘excluding or restricting any rules of evidence or procedure’. A term fitting
within any of these definitions is putatively unfair and unenforceable, unless rescued by
the party seeking to rely on it showing that it is reasonable, by reference to guidelines in
the Act’s Schedule 2. For a case where both UCTA and the UTCCR were in issue in
relation to a net contribution clause in a contract between a married couple and an
architect for a residential project, see West v Ian Finlay Associates [2014] EWCA Civ
316, [2014] BLR 324, 153 ConLR 1.
64 Only ‘apparently’: domestic rules implementing a Directive, whatever form they take,
fall to be interpreted ‘autonomously’ in the light of EU law, including any relevant case
law from Luxembourg; see eg Oceano Groupo Editorial SA v Rocio Murciano Quintero

13
The 1993 Directive in English law
The UTCCR 1999 transposed the 1993 EC Directive on Unfair Terms in
Consumer Contracts into domestic law, largely by ‘copying out’ the
Directive’s text.65 This measure instituted a shared minimum floor of
protection among all Member States; it includes an Annex containing a ‘non-
indicative’ so-called ‘Grey List’ of potentially unfair terms, one item expressly
mentioning restrictions on a consumer’s access to court.66

However, the Directive does not apply to ‘contractual terms which reflect
mandatory statutory or regulatory provisions’.67 Although the position is not
clear, we continue to hold our earlier view that this protects parties’ own
contractual arrangements on adjudication (and on any other aspect of the
HGCRA regime) from challenge on this basis, insofar as the terms which the
parties adopt match any of the eight requirements in the section 108
‘shopping-list’ in the 1996 Act, provided also that these requirements do in
fact apply to the particular contract.68 This would cover adjudication
arrangements which the parties make in order to avoid the Scheme’s default
provisions applying, though the JCT forms mentioned above take the opposite
approach. Logically, the provisions of the Scheme itself, as default
contractual terms, as well as adjudications undertaken under the Scheme, must
enjoy the same immunity from challenge.69

(Joined Cases C240/98 to 244/98) [2000] ECR I-4941 (ECJ). The UTCCR have now
been revoked: CRA 2015, Schedule 4.
65 Council Directive 93/13/EEC of 5 April 1993 on Unfair Terms in Consumer Contracts,
OJ 1993 L 95/29 (21 April 1993), first implemented for the United Kingdom by UTCCR
1994 (SI 1994/3159), but replaced by UTCCR 1999 (SI 1999/2083, as amended), and
now by aspects of Part 2 of the CRA 2015. On greater protection than under the
Directive, see note 93.
66 Para 1(q): ‘Excluding or hindering the consumer’s right to take legal action, or exercise
any other legal remedy, particularly by requiring the consumer to take disputes
exclusively to arbitration …’. Formerly also in Schedule 2 of the UTCCR, this is now
the CRA 2015, Schedule 2, Part 1, para 20.
67 The 1993 Directive, note 65, article 1(2); also the UTCCR 1999, note 65, Reg 4(2)(a)
and now the CRA 2015, note 88, s 73. Recital 13 of the Directive explains this
limitation: ‘… provisions of the Member States which directly or indirectly determine
the terms of consumer contracts are presumed not to contain unfair terms … ; … the
wording ‘mandatory statutory or regulatory provisions’ in article 1(2) also covers rules
which, according to the law, shall apply between the contracting parties provided that no
other arrangements have been established’. This appears to apply precisely to the
HGCRA s 108(5): ‘If the contract does not comply with the requirements of subsections
(1) to (4), the adjudication provisions of the Scheme for Construction Contracts apply’;
reinforced by s 114(4): ‘Where any provisions of the Scheme… apply in default of
contractual provision agreed by the parties, they have effect as implied terms of the
contract concerned’. On the contractual mechanisms giving effect to the HGCRA, see
also note 57. UCTA similarly has no application to terms responding to the HGCRA’s
requirements: these are ‘authorised or required by the express terms or necessary
implication of an enactment’ (s 29(1)(a)).
68 Britton, note 34, pages 9-13.
69 On the responding party’s difficulty, in relation to an adjudication under the HGCRA, in
arguing that the timescales are too short, see CSK Electrical Contractors Ltd v Kingwood
Electrical Services Ltd [2015] EWHC 667 (TCC), para [14]ff (Coulson J).

14
By contrast, a consumer can in principle attack a contractual term which
provides for adjudication as unfair, within the meaning of the Directive.70 The
term challenged must be:
(a) Within a B2C contract (where one party deals as seller/supplier and
the other as an individual – not corporate – consumer);
(b) In a construction contract falling within section 106(2), thus
avoiding all external compulsion for this form of ADR;71 and
(c) [Until the arrival of the CRA 2015] Not individually negotiated (eg
drafted by one party in advance).72

Success for the consumer makes a term then labelled as unfair unenforceable,
though the rest of the contract will usually survive.73 If the other party to the
contract triggers an adjudication in reliance on a term which the consumer
considers unfair, in our view the consumer has the same tactical possibilities
as in Scenario I above – also those available to a party to an adjudication
which unambiguously does fit within Part II of the HGCRA.74

Challenging ADR in construction

Whether adjudication provisions are of themselves unfair may therefore
determine the outcome in court, as in Lovell v Legg & Carver, a project for
refurbishment of the employers’ house in Maida Vale.75 Judge Moseley QC
had to decide whether an adjudicator’s decision should be enforced. He
started from the builder’s concessions that requirements (a)-(c) above were all
met. But he held that the parties’ contractual adjudication provisions, from the
JCT 98 Minor Works form, did not satisfy the substantive tests of unfairness in
the Directive and UTCCR: they were not shown to cause ‘a significant
imbalance in the parties’ rights and obligations, to the detriment of the

70 ‘Unfair’ under the Directive means in all the circumstances of the contract, assessed by
reference to the time it was entered into. If a term is written, it may also fail the test of
fairness unless it is in ‘plain, intelligible’ language – if not, it will be construed against
the party relying on it. These principles have now become the CRA 2015 ss 62 and 68-
69: note 88.
71 The ECJ in Oceano Groupo, note 64, suggests that national courts have a duty to raise
fairness issues of their own motion in relation to consumers, as Judge Stephen Davies
did in Khurana v Webster Construction, note 42, para [5]; this idea is now statutory in
the CRA 2015 s 71: note 88.
72 Giving effect to a proposal from the Law Commissions, note 84, requirement (c) has not
been carried forward into the CRA 2015: note 88. Where it applied, the trader had to
show that the term attacked was individually negotiated; success meant that the
consumer’s challenge to the fairness of the term failed, as in Khurana v Webster
Construction, note 42, paras [50]-[52] (Judge Stephen Davies).
73 CRA 2015 s 67, in substance identical to the UTCCR 1999 Reg 8(2).
74 Coulson J in Amec Group v Thames Water Utilities, note 57, para [24]: ‘There is … no
difference in principle in the status of a decision provided by an adjudicator pursuant to
the 1996 Act, and a decision provided pursuant to a contractual mechanism’. Freedman,
note 57, pages 5 and 13-14, argues that a ‘non-statutory’ adjudication – in our case, one
to which s 106(2) applies – need not be assimilated to one to which the HGCRA applies,
and that Coulson J did not intend to so decide; but adjudicators’ decisions which derive
from the parties’ adoption by contract of the Scheme surely should be so assimilated.
75 Lovell Projects v Legg & Carver: note 20.

15
consumer’, nor were they ‘contrary to the requirement of good faith’.76 This
conclusion drew its main support from the fact that HGCRA-style adjudication
is open to both parties and its outcome only provisional. It did not, the judge
thought, hinder the consumer’s access to court;77 and the contractual
arrangements providing for it were open and clear:
‘… the contractor did not either deliberately or unconsciously take
advantage of the consumers’ necessity, indigence, lack of experience,
unfamiliarity with the subject matter of the contract, weak bargaining
position or any other factor listed in [the ‘Grey List’].’78

An additional, perhaps decisive, factor was that the form containing the
contested provisions, was imposed on the builder by a construction
professional (here an architect as contract administrator) who had been
appointed by the consumers and was acting on their behalf.79

This reasoning has been followed in four later residential construction cases,
one at Court of Appeal level.80 The pattern suggests that few consumers of
construction services will ever successfully challenge contractually agreed
ADR on unfairness grounds alone, especially where the provisions copy
statutory adjudication and/or come from a published and widely used standard
form (an unconvincing piece of reasoning).81 But the cases are not all one
way. In Mylcrist v Buck, about an arbitration clause in a non-negotiated
contract between a builder and a residential consumer, Ramsey J considered
that the wording failed the ‘fair and open dealing’ test deriving from the

76 UTCCR, Reg 5(1); now the CRA 2015 s 62(4). On these tests, see Director General of
Fair Trading v National Bank plc [2001] UKHL 52, [2002] 1 AC 481.
77 Lovell Projects v Legg & Carver, note 20, para [27]: a view hard to reconcile with the
Oceano Groupo case in the ECJ: note 64. Even if the clause came within the ‘Grey
List’, the judge thought that it still had to meet the Directive’s substantive tests of
unfairness.
78 Lovell Projects v Legg & Carver, note 20, para [29].
79 Echoed by Rimer J in Bryen & Langley Ltd v Boston, note 44, para [46]: ‘… in light of
the fact that it was Mr Boston [the consumer], by his agent, who imposed these terms on
B & L [the building contractors], I regard the suggestion that there was any lack of good
faith or fair dealing by B & L with regard to the ultimate incorporation of these terms
into the contract as repugnant to common sense’. Clarke and Pill LJJ gave concurring
judgments. The conflict may of course be between the employer(s) and their architect,
as in Picardi v Cuniberti, note 44 – especially if their builder has by then become
insolvent, as in West v Ian Finlay Associates: note 62.
80 Judge Anthony Thornton QC in Westminster Building v Beckingham [2004] EWHC 138
(TCC), [2004] BLR 163; Judge Richard Seymour QC in Bryen & Langley Ltd v Boston,
note 35, on this point followed by the CA, note 79; Judge Thornton again in Domsalla v
Dyason: note 35; and Judge Stephen Davies in Khurana v Webster Construction: note
42. In Domsalla, enforcement was refused because aspects of the withholding notice
procedure (but not adjudication itself) were unfair. In the first two cases there was an
issue about the contractual status of the adjudication provisions, but in none was there a
dispute about the relevance of s 106(2).
81 In West v Ian Finlay Associates, note 63, the CA judgment made the point, para [59],
that net contribution clauses (the type of clause here attacked as unfair) are common in
RIBA standard forms, as well as in commercial contracts generally. This was a factor,
the court thought, against regarding such a clause as unfair under the UTCCR, even
though, unlike an adjudication clause, the clause was one-sided – affecting only the
consumers’ position, and entirely negatively.

16
Directive.82 The consumer had no professional adviser in her relations with
the builder, who did not adequately explain the implications of the key
clause.83

Rethinking unfair contract terms law

In 2005 Great Britain’s Law Commissions together published their final
report, Unfair Terms in Contracts.84 This recommended detailed reform of the
principles, but above all a new statute, to combine UCTA and UTCCR into a
more coherent and accessible single set of rules. No immediate moves
towards implementation followed, but the EU meanwhile reviewed its
‘consumer acquis’, in 2011 adopting a Consumer Rights Directive (CRD).85
Its main impact is to require Member States to impose new minimum
information requirements in specific categories of B2C transactions –
contracts made on-premises, at a distance or off-premises (as in Ruislip
Gardens) – in many cases also giving the consumer a ‘cooling-off’ period,
with linked right to cancel. This measure has now been transposed into UK
law.86 The new CRD-derived rights do not apply to new-build or large scale
conversions; but they do apply to our widow’s extension and to works of
internal reorganisation, repair, improvement and refurbishment of buildings,
as well as to contracts under which a consumer is given professional advice,
design and project management services.87 The effect may be to avoid some
of the factual disputes about contract terms which feature so often in B2C
construction cases, but there is much to do in informing consumers of their
new rights, as well as providers of services of their new duties. After all, if

82 Mylcrist Builders Ltd v Buck [2008] EWHC 2172 (TCC), [2008] BLR 611, [2009] 2 All
ER (Comm) 259. It could be argued that an arbitration clause has a more serious impact
than an adjudication clause, excluding court intervention more completely; but HGCRA-
type adjudication is likely to require the losing party to pay more quickly.
83 For earlier cases where a challenge to contractually agreed ADR was successful on
fairness grounds, see Zealander & Zealander v Laing Homes Ltd (2000) 2 TCLR 725
(TCC) and Picardi v Cuniberti: note 44. In Lovell Projects v Legg & Carver, note 48,
Judge Moseley accepted the correctness of both these decisions, but in para [30]
distinguished them from his own case.
84 Law Com No 292/Scots Law Com No 199, Unfair Terms in Contracts (Cm 6464, 2005):
<www.lawcommission.justice.gov.uk>. While the Consumer Rights Bill was under
development, BIS then asked the two Law Commissions for further advice, published as
Unfair Terms in Consumer Contracts (2013).
85 Directive 2011/83/EU of the European Parliament and of the Council of 25 October
2011 on consumer rights, amending Council Directive 93/13/EEC and Directive
1999/44/EC of the European Parliament and of the Council and repealing Council
Directive 85/577/EC and Directive 97/7/EC of the European Parliament and the Council,
OJ L 304/64 (22 November 2011).
86 See the Consumer Rights (Payment Surcharges) Regulations 2012 (SI 2012/3110), the
Consumer Contracts (Information, Cancellation and Additional Charges) Regulations
2013 (SI 2013/3134) and the CRA 2015 ss 11-12, 36-37 and 50.
87 The 2013 Regulations, note 86, apply to contracts entered into on or after the date fixed
by the CRD, 13 June 2014; they largely ‘copy out’ the Directive’s text, thus not applying
to a contract to the extent that it is for the creation of immovable property or of rights in
immovable property; for rental of accommodation for residential purposes; for the
construction of new buildings; or for the construction of substantially new buildings by
the conversion of existing buildings (Reg 6(1)). Low value off-premises repair and
maintenance contracts have only limited information requirements (Reg 11(1)).

17
neither party is aware of these rules, there is little chance the trader will
comply with them, or suffer any negative effects from failing to do so.

In parallel, the Department for Business, Innovation and Skills was preparing
a weighty Consumer Rights Bill.88 Released for consultation in 2013, this
became law in March 2015, most of the Act applying to the whole of the UK
and some of it taking immediate effect.89 Part 1 of the CRA 2015 significantly
augments consumers’ rights and remedies in relation to goods and services
(including digital content) – too varied to summarise here, but too significant
to ignore.

More directly relevant to our topic, Part 2 of the Act restates the law on unfair
contract terms, though only for B2C contracts, at last knitting together the
substance of the UTCCR with the consumer protection aspects of UCTA.90
However, it is more than a consolidation. The CRA has to repeat – as a
minimum – the ‘fairness tests’ from the 1993 Directive, the ‘Grey List’
reappearing as Part 1 of Schedule 2; but the list is now reorganised and
slightly extended.91 The CRA also maintains the principle from the Directive
that some ‘core terms’ are protected against challenge: those which define the
main subject matter of the contract, or concern the appropriateness of the price
for the other party’s offering.92 But to retain this exemption, such a term must
be ‘transparent and prominent’ (a new test), which in turn requires that a
‘reasonably well-informed, observant and circumspect consumer’ would be
aware of it.93 Equally significantly, the ‘not individually negotiated’
requirement, which a term had to meet for a consumer to be able to challenge
it as unfair under the Directive, has now disappeared, potentially widening the
scope of this area of law.94

Possible ways forward

Is it time to paint out the ‘residential construction employer’ – our own
equivalent of van Eyck’s little dog – altogether? How universally true is the
claimed imbalance between residential employer and ‘builder’, which it seems

88 For further background, see the Explanatory Notes to the 2015 Act, paras 3-21.
89 The outgoing Government planned those aspects of the new Act which did not come into
force immediately to do so no later than 1 October 2015: Department for BIS,
Implementing the Consumer Rights Bill (October 2014):
<www.gov.uk/government/publications/consumer-rights-bill-implementing-the-
measures>. Guidance on Part 2 of the CRA will come from the new Competition and
Markets Authority (CMA).
90 As a result, Part 2 of the 2015 Act takes up much less space than the Law Commissions’
more comprehensive draft Bill from 2005: note 84. Many of the CRA provisions on
unfair contract terms apply also to ‘consumer notices’ (as defined), just as UCTA did.
91 See paras 1, 5 and 12, implementing Law Commissions’ recommendations.
92 See Office of Fair Trading v Abbey National plc [2009] UKSC 6, [2010] 1 AC 696,
[2010] 1 All ER 667.
93 CRA 2015 s 64. Article 8 of the 1993 Directive, note 65, already permitted Member
States to adopt a higher level of protection for consumers against unfair contract terms
than the Directive’s own minimum. Article 32 of the 2011 Directive, note 85, inserts
article 8a into the 1993 text, imposing reporting requirements back to Brussels for any
Member State choosing to extend protection against unfair terms beyond the scope of the
earlier Directive.
94 See note 72 and its linked main text.

18
to be the function of section 106(2) to offset, or at least not to perpetuate?
Other countries’ approaches offer little help. In the paper based on his 2013
prize-winning Hudson essay, Matthew Bell notes that thirteen common law
jurisdictions have followed the UK’s lead and adopted security of payment
legislation.95 As already noted, nine also have a ‘residential exception’,
including the newest arrivals, Malaysia and Ireland.96 Understandably, he
cannot explain why some jurisdictions fail to put the residential construction
consumer in a special position, despite their similarity to others which do.
Nor, with an eye to the desirable goal of international harmonisation of
security of payment legislation, can he offer any rationalisation for the
kaleidoscopic variety of ways in which those legal systems which do treat the
consumer as special actually achieve this.

Abolish the exception?97

Our widow has no track record in construction work and is contracting with a
‘repeat player’, which does suggest inequality of bargaining power, or its more
recent Australian judicial equivalent: ‘vulnerability’.98 She certainly knows
nothing about forms of ADR or about the TCC, and has not considered with
her builder what will happen if they fall out, so is at risk in the ways described
above by Michael Bowsher.99 We would be equally anxious if hers were a
larger project and she went along with a standard form offered by the builder –
or appointed an architect, accepting his or her standard terms of engagement –
unless she clearly understood the terms each was offering.

However, an individual employer’s vulnerability is less obvious where s/he

has followed professional advice about the form of construction contract
which was to be (or should be) adopted; or where the standard form used, like
the JCT forms or new RIBA forms, calls for the appointment of an architect or
contract administrator. So the HGCRA exception protects many construction
employers who arguably deserve no special treatment, in the process depriving
those with whom they contract of the safety net provided by the 1996 Act.
After all, a provider of construction services to an individual may be no more
able to survive without being paid what is due than its counterpart on bigger

95 Matthew Bell, ‘Beyond the Nutcracker Suite: International Harmonisation of

Construction Industry Payment Legislation’, SCL (UK) Paper 188 (July 2014):
<www.scl.org.uk>. For the position in Australasia, see note 116 and its linked main text.
96 Construction Industry Payment and Adjudication Act 2012 (Act 746) (M/sia) s 3: note
29; and Construction Contracts Act 2013 (No 34/2013) (Ireland) – not yet in force – s
2(1)(b).
97 Wilmot-Smith, note 25, argues in para 21.36 for outright abolition and commends the
use on residential projects of the standard forms which provide for adjudication; see also
note 17.
98 This concept is one of the hard-to-establish ‘salient factors’ which may lead a court in
Australia to find, exceptionally, that an original construction party owes a duty of care in
tort to the current owner of a building in relation to ‘pure economic loss’ deriving from
building defects attributable to that original party: see Brookfield Multiplex Ltd v Owners
Corporation Strata Plan 61288 [2014] HCA 36 and Matthew Bell, Wayne Jocic and
Rami Marginean, ‘Mind the Gaps! High Court confirms negligence will not protect
economic interests where contractual protection is available’:
<www.blogs.unimelb.edu.au/opinionsonhigh/2014/12/17/bell-jocic-marginean-
brookfield/>.
99 See the main text linked to note 35.

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commercial and infrastructure projects – often less so.100 To impose
adjudication – or, as under the present law, to refuse a challenge to the fairness
of adjudication – in such situations does not seem unreasonable. It is arguably
the ‘least worst’ of those dispute resolution mechanisms which lead rapidly to
enforceable outcomes. The current alternative – to expose our widow and her
builder to traditional litigation in the TCC or equivalent, if they fail to make
any ADR arrangements of their own – is not obviously the ideal outcome for
either of them.

Simply abolishing the exception would not just make adjudication available; it
would bring in the rest of the HGCRA package – stage payments, work
suspensions, withholding notices and all. To avoid what would for many
smaller projects be unnecessary complications, contracts within section 106(2)
could have their own new Scheme-Lite: adjudication in its present HGCRA
form, with a longer minimum timescale than 28 days, but without the rest of
Part II of the Act. As now, parties could adopt their own adjudication
provisions, as long as these were compliant with the basics in (or under) the
statute. To impose adjudication – with no other changes – would prevent a
residential construction employer from challenging this as an unfair contract
term;101 but we could extend to adjudication the rule which makes an
arbitration clause statutorily unfair in a B2C contract if a small amount is
claimed.102 However, this would need primary legislation.

Narrow the exception?

If outright abolition is too risky, or legislative change too unrealistic, could we
instead narrow the exception’s scope? A simple approach would introduce a
project value threshold (say £15,000), under which no aspect of Part II of the
HGCRA would be engaged.103 Here we would be copying the new Irish
security of payment regime, though its threshold is much lower at €10,000.104
Alternatively, we could apply a financial threshold only to contracts which
would otherwise fall within section 106(2). Either change could be achieved
by the Secretary of State exercising the existing power to modify key sections
of the 1996 Act.105 But without more, any situation newly outside the
exception would expose both parties to litigation, which we have already
suggested may not be the ideal outcome.

100 In Khurana v Webster Construction, note 42, Judge Stephen Davies noted, para [53], that
the consumers were dentists owning a substantial property and that the builder was a
one-man company; both were legally represented once the dispute had arisen.
101 See note 67 and its linked main text.
102 Arbitration Act 1996 s 91(1) and the Unfair Arbitration Agreements (Specified Amount)
Order 1999 (SI 1999/2167), which fixes £5000 at present (arguably too low).
103 The editorial note in BLR to Westfields v Lewis, note 1, points out that the sum in issue
in the TCC was under £18,000. Exceptionally, such low value cases can reach this
formation of the High Court, in the interests of building up a consistent body of
adjudication case law; see also note 19.
104 Construction Contracts Act 2013 (No 34/2013) (Ireland) s 2(1)(a). As part of the
HGCRA review process, note 17, the RICS suggested a minimum financial threshold for
adjudication, if s 106(2) were abolished.
105 To limit the definition of ‘construction contract’ in s 104, or the scope of s 106(2).

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ADR in all construction contracts with consumers?
The 2013 EU Directive on Consumer ADR radically changes the landscape.106
It applies to disputes arising out of B2C sales or service contracts in almost all
economic sectors; neither construction in general, nor the selling or leasing of
new-build or converted dwellings, is excluded. It requires Member States to
ensure that – in our case – a consumer who wishes to make a claim against a
supplier of services can submit this dispute to a publicly listed ‘ADR entity’
(one or more persons, or an organisation). But the Directive does not apply to
procedures initiated by a trader against a consumer, eg for payment, which
raises difficult issues in a construction context about withholding notices,
counterclaims, set-off and so on.107

Such a provider must comply with the Directive’s requirements (expertise,

impartiality and independence), as well as with the basic procedural standards
laid down. The fee to a consumer for using ADR must be no more than
nominal; and the process could take place online. Taking our law about B2C
arbitration agreements one step further, the Directive prevents contract terms
providing for ADR from binding the consumer if this agreement precedes the
dispute arising and deprives the consumer of ‘the right of access to the judicial
system’.108

This EU measure distinguishes between two kinds of ADR procedures: those

(a) leading to a non-binding solution proposed by the ADR entity (without
prejudice to later court proceedings, the limitation period not expiring while
ADR procedures are under way);109 and (b) where the outcome binds the
consumer.110 In case (b), the consumer must be informed of its binding nature
in advance and have specifically accepted this.111 This is precisely the hurdle
at which the builder fell in Mylcrist v Buck.112

Implementation of the Directive within each Member State – due by 9 July

2015 – looks like a complex bureaucratic exercise, even in our own narrow
field.113 The UK also needs to be ready for the coming into force six months
later of the EU Regulation on Online Dispute Resolution (ODR).114 In

106 Directive 2013/11/EU of the European Parliament and of the Council of 21 May 2013 on
alternative dispute resolution for consumer disputes and amending Regulation (EC) No
2006/2004 and Directive 2009/22/EC, JO L 165/63 (18 June 2013).
107 Article 2(2)(g).
108 Articles 1 and 10.
109 Articles 9(2)(b) and 12.
110 Article 11, which seems to leave no scope for arguing that decisions of adjudicators are
only temporarily binding. Article 2(4) makes clear that Member States may decide
whether any of their own ADR systems should have power to impose a solution.
111 Article 10(2).
112 Mylcrist v Buck: note 82 and its linked main text.
113 Exceptionally, sales contracts from those developers who are signed up to the Consumer
Code for Home Builders already include ADR machinery in relation to breaches of the
Code; home warranty policies, as insurance products, are under the jurisdiction of the
Financial Ombudsman Service.
114 Regulation (EU) 524/2013 of the European Parliament and of the Council of 21 May
2013 on online dispute resolution for consumer disputes and amending Regulation (EC)
No 2006/2004 and Directive 2009/22/EC (Regulation on consumer ODR), OJ L 165/1
(18 June 2013). See Department for BIS, Alternative Dispute Resolution for Consumers:

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February 2015 Lord Dyson MR added extra encouragement in this direction,
presenting a Civil Justice Council report which advocates a new state-
supported ODR service for civil claims up to £25,000.115

Conclusions
The UK’s ‘residential occupier exception’ remains a crude and uneasy
compromise, mainly because it applies to so many different kinds of project,
consumer and supplier of construction services. As we have seen, parties to
contracts which, so far as the statute is concerned, escape from the HGCRA
via section 106(2) often ‘opt back in’ to adjudication via contractual
provisions in standard forms, the consumer not necessarily understanding the
implications. Against this process the present law only exceptionally (and
unpredictably) protects our widow and those like her, via our unfair contract
terms rules, though procedural safeguards newly applying to B2C contracts
also make a contribution, which may before long even include a guaranteed
ADR safety-net for construction consumers’ disputes with traders.

We have suggested ways in which the exception could be rethought; all would
require changes to the primary legislation, some easier to achieve than others.
However, none of these reforms would get close to the kind of comprehensive
statutory regulation of residential construction contracts which exists – with
great variations of detail – in every jurisdiction in Australasia.116

There, most regimes control what terms may, must, or must not be included in
such a contract, with compulsory licensing or registration of most of those
supplying construction services and (in many cases) requiring insurance-based
protection against non-completion and against the cost of rectifying significant
categories of defect. Some of these regimes exist in multiple forms, a ‘lighter
touch’ version applying to domestic building contracts below a monetary
threshold. Each contains its own payment and dispute resolution provisions,
some starting with a publicly financed service of qualified inspectors who can
impose a presumptively enforceable solution on the parties, backed by a
specialised and interventionist tribunal. The tribunal is part of the ordinary
State-run machinery of justice, but its range of remedies may go beyond what

Implementing the Alternative Dispute Resolution Directive and the Online Dispute
Resolution Regulation (BIS/14/575, March 2014), with its sequel Government response
to the consultation on implementing the Alternative Dispute Resolution Directive and the
Online Dispute Resolution Regulation (BIS/14/1122, November 2014):
<www.gov.uk/government/consultations/alternative-dispute-resolution-for-consumers>.
115 Civil Justice Council (ODR Advisory Group), Online Dispute Resolution for Low Value
Civil Claims (February 2015): <www.judiciary.gov.uk/reviews/online-dispute-
resolution>. Para 9.7 of the report discusses the impact of EU initiatives.
116 For a full description, by State and Territory, see Julian Bailey, Construction Law
(London, Informa, 2011), ch 19. In some Australian jurisdictions, a corporate entity,
such as a statutory ‘strata title’ corporation, may be able to benefit from the special
residential regime, either as an original party to a qualifying construction contract or as a
successor-in-title to the dwelling or (in the case of a multi-unit development) to only its
structure and ‘common parts’: see Owners Corporation Strata Plan 72535 (‘Star of the
Sea’) v Brookfield Multiplex Ltd [2012] NSWSC 712.

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would be usual in an English court applying the common law.117 Where an
Australasian jurisdiction exempts residential projects from those statutory
security of payment and adjudication systems which apply to construction
generally, it is aiming to preserve the coherence and special features of its
distinct residential regime.

In English law, no such positive consequences await a consumer whose

construction contract falls within the section 106(2) exception, though she
may of course have a right of action against the other party in relation to
defective design and/or construction. Beyond that original contractual nexus,
all becomes uncertain; and the Defective Premises Act 1972, though it has a
specifically residential focus and can impose liability on a construction party
never linked in contract to the present claimant, looks to a narrow range of
serious defects only.118 Additionally, in an English multi-unit residential
context, the commonly used bespoke lease structures normally give neither
long leaseholders nor the residents’ management company any rights of action
against the current landlord (or anyone else) for original construction defects.

Our widow might become envious if we tell her how things are done Down
Under. Realistically, however, we would have to discourage her from
imagining that anything comparable is likely to be introduced in the UK: the
well established relationships between successive Governments, the residential
construction industry, mortgage funders and the largest third-party warranty
providers form a significant obstacle to improving the legal position of
residential construction consumers in general. However, in our view the new
extra protections and rights which the CRA 2015 gives all consumers should
be welcomed; and if finally we bring our focus back to dispute resolution in
construction, there are further steps forward which are worth considering –
perhaps even achievable.

Philip Britton LLB BCL is a Visiting Professor and former Director,

Centre of Construction Law & Dispute Resolution, The Dickson Poon School
of Law, King’s College London; a Visiting Scholar, Law School, University
of Melbourne; and consultant to the law firm of Fairweather Stephenson & Co
Ltd, Aldeburgh, Suffolk: e-mail philip.britton@marshwinds.co.uk.

© Philip Britton and the Society of Construction Law 2015

The views expressed by the author in this paper are his alone, and do not
necessarily represent the views of the Society of Construction Law or the
editors. Neither the author, the Society, nor the editors can accept any
liability in respect of any use to which this paper or any information or views
expressed in it may be put, whether arising through negligence or otherwise.

117 See Philip Britton, ‘‘Make the Developer Get the Job Right’: Remedies for Defects in
Residential Construction’, SCL (UK) Paper D154 (March 2013): <www.scl.org.uk>. An
updated version of this paper is available from the author.
118 See the section ‘Hamlin v Invercargill revisited’ in Philip Britton, ‘The State, the
Building Code and the Courts: Prevention or Cure?’, SCL (UK) Paper D152A
(December 2013): <www.scl.org.uk>; also Philip Britton, ‘Professional Consultants’
Certificates: The View from the Courts’ (2014) 30 Const LJ 337. An updated version of
each is available from the author.

23
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