Identifying owner occupiers

Section 106 of the Construction Act provides that the mandatory adjudication provisions do not apply to contracts relating to operations connected to a dwelling where one of the parties occupies or intends to occupy it as its residence. In the case of Westfields Construction Ltd vs Clive Lewis, Mr Justice Coulson gave guidance as to what is meant by “occupies or intends to occupy”.

In pre-contract and post-contract negotiations between Westfields and Lewis for the refurbishment of a house, Lewis expressed an intention to let the house when the works were completed. The evidence that existed included post-contract emails from Lewis to Westfields contending that any delay in the work would delay the letting of the house and reference to a claim against Westfields for losses Lewis may suffer as a result of his inability to let the house.

Lewis was unable to satisfy to the court that he occupied the house after the contract was made and intended to occupy the house as a residence thereafter

A dispute arose between the parties relating to non-payment by Lewis. Westfields suspended work. Westfields threatened adjudication and Lewis maintained that exception set out at Section 106 of the Act applied because he intended to return to the house when the works were completed. Westfields commenced an adjudication and Lewis objected to the adjudicator’s jurisdiction. The adjudicator determined that Lewis intended to let the house and was not a residential occupier and should pay Westfields. Lewis did not comply with the adjudicator’s decision and enforcement proceedings were commenced.

In evidence in those proceedings Lewis maintained that he intended to return and occupy the house and so the adjudicator had no jurisdiction. Less than two days before the hearing, Lewis introduced a new line of argument, namely that at the time the contract was made he was in occupation of the house. Mr Justice Akenhead noted the lateness of the new position adopted by Lewis and, unusually, adjourned the application for summary judgment and gave directions for trial (including disclosure and exchange of witness statements).

By the time the matter came before the court again, there were seven witness statements in total, four of which were from Lewis himself. Mr Justice Coulson took over the case from Mr Justice Akenhead at the trial stage.

Two issues were to be decided by the court: the first being whether Lewis intended to occupy the house as his residence. In the light of the evidence of pre-contract negotiations and post-contract communications, objectively ascertained, Lewis could not show that he intended to occupy the house as his residence and therefore the relevant element of the Section 106 exception had not been made out. The judgment made reference to the uncompromising evidence relating to the emails threatening Westfields with delay damages. When giving oral evidence Lewis stated that the contents of those emails were untrue and were sent to put pressure on Westfields to complete the works.

Determining that Lewis did not intend to occupy the house as his residence was fatal to the entirety of his case. If a party does not intend to occupy a dwelling as a residential occupier, then Section 106 will simply not engage. Helpfully, as the second issue, the judge went on to consider what is meant by “occupies” as set out in Section 106. The judge concluded that “occupation” is an ongoing process and cannot be tested by reference to a single snapshot in time. The word “occupies” must carry with it some reflection of the future. It indicates that an employer occupies and will remain (or intends to return to) at the house. In essence, occupation has to be ongoing. Lewis was unable to satisfy to the court that he occupied the house after the contract was made and intended to occupy the house as a residence thereafter. Accordingly, Section 106 did not apply.

The effect of this decision is to narrow the scope of Section 106. If an intention to occupy the house as a residence when work is complete cannot be shown, Section 106 cannot be relied on. In the following paragraph taken from the judgment, Mr Justice Coulson summarises circumstances in which Section 106 is applicable:
“Section 106 excluded adjudication in respect of construction works carried out for those who occupied and would continue to occupy as their home the property that was the subject of the works (even if they had to move out when the works were carried out), or who had bought the property and intended to live there when the construction works were completed.”

Nik Haria is a partner at SGH Martineau and acted for Westfields Construction in this case