The employers were Mr Legg and Ms Carver, the owners of a house at 188a Sutherland Avenue, Maida Vale, London. An architect prepared drawings and a specification for the proposed refurbishment works to the property. The employers were residential occupiers for the purposes of the Housing Grants, Construction and Regeneration Act 1996. Nonetheless, they entered into a contract by signing the JCT Agreement for Minor Building Works, 1998 Edition, incorporating amendments MW1 – 11, which included supplemental condition D in respect of adjudication. During the course of the work Mr Legg dispensed with the architect's services, and appointed a contract administrator. The contract administrator "informally certified" valuation 10 and 11 by signing the valuation submitted by the contractor. On 20 December 2002 Mr Legg made it clear that he did not intend to pay any further sums to the builder. The builder then suspended work, and served a Notice of Dispute seeking an 11-week extension of time and payment of outstanding sums. The RIBA appointed an adjudicator, who decided that the employers should pay the contractor £85,873.59.

Case details 4 July 2003, TCC, Cardiff District Registry, HHJ Moseley QC
The employers sought to undermine the adjudicator's decision by claiming that the dispute resolution clause referring matters to adjudication within the Minor Works Contract was unfair because it caused a significant imbalance in the terms between the parties to the detriment of the employer pursuant to the Unfair Terms in Consumer Contract Regulations 1999. They also contended that there was no dispute capable of being referred to adjudication, and that the notice attempted to refer three disputes and was therefore void. Set-off was sought against the decision in respect of direct payments to a joiner, and finally they sought a stay because of the financial state of the contractor.

Reference

His Honour Judge Moseley QC considered the Unfair Terms in Consumer Contracts Regulations 1999, and came to the conclusion that it did not assist the employer. He said that the clause in question did not produce a significant imbalance between the parties. The clause was equally balanced between the parties as either party could, pursuant to the clause, refer a dispute to adjudication. In this regard it was not to the detriment of the employer, but arguably to the employer's benefit in that they could refer a dispute to adjudication that would be resolved more economically and more quickly than in the litigation or arbitration. He also held that there was clearly a dispute at the time that the matter was referred, because the employers had refused to pay any money, and were refusing to allow the contractor back on to the site. The single Notice to Refer contained several matters that constituted one dispute and following the case of Ferson vs Levolux no set-off was available. The reason for the contractor's financial state was as a result of the non-payment by the employers, and so he ordered that the full amount of the adjudicator's decision be paid.

For further information, call Tony Francis or Nicholas Gould on 0207 956 9354

www.fenwick-elliott.co.uk

Postscript

This case is interesting in two respects. First, it demonstrates that while adjudication under the Act may not apply to residential occupiers, if a residential occupier signs a contract containing an adjudication dispute resolution procedure, then they will be bound by it. There is, perhaps nothing surprising in that finding. It is after all quite simply a matter of contract. If you sign a document then you are bound by it. Second, the case demonstrates that the Unfair Terms in Consumer Contracts Regulations 1999 will not release a residential occupier from the contractual adjudication provisions. The regulations only apply when one of the parties is a consumer, and the clause in question produces a significant imbalance between the parties to the detriment of the consumer. The judge in this case quite simply considered that an adjudication procedure was evenly handed, because both parties could refer the disputes to an adjudicator. Further, the contractual adjudication provision could be said to be beneficial to the consumer in that it provided a mechanism for quickly and economically resolving disputes. Many thanks to Martin King of Castons for supplying a copy of the judgment.