The residential occupier exemption and pay less notices

The very recent Court of Appeal case RBH Building Contractors Ltd vs Mr & Mrs Ashley James [2026] usefully discusses those occasions when building work on a house can’t be squeezed into adjudication, and also tests for whether a pay less notice is effective. 

Mr & Mrs James bought a house in Ferndown, north Devon. It was ideal for knocking down and starting again. They engaged a builder, RBH Building Contractors Ltd (RBH) to get things moving – and then two years into the works they fell out. The new house was incomplete. By then RBH had been paid £1.31m. By then too, Mr & Mrs James appear to have overstretched themselves financially. RBH quit. That was in April 2024.

Six months later, RBH engaged a consultant to cast an eye over the account. He reckoned that the builder was owed and underpaid about £663,000. Without more ado, the RBH consultant launched an adjudication. There is an aside in the Court of Appeal judgment, which rang a little alarm bell, for me at least. It said that this claim was made “without warning”. To do that is a tad off. The consultant ought to have coaxed his client to issue a chapter-and-verse final account and given fair time for the customer to lift the lid and raise questions. An account of that size is a hostage to fortune when a claim comes out of the blue.

mediately met with a protest from the respondent. Mr & Mrs James argued that RBH couldn’t plug into adjudication, because the building work was on a dwelling or future dwelling, which was to be their family home. This is known as the residential occupiers exception under the Construction Act. 

Mr & Mrs James argued that rbh couldn’t plug into adjudication, because the building work was on a dwelling … This is known as the residential occupiers exception

Go further: within a week of receiving the final account claim for £663,000, Mr & Mrs James issued a pay less notice knocking out the entire sum; it said zero was owed. 

The adjudicator’s agenda was set: Was this project within the exception for residential occupiers? Was the pay less notice effective to zero the account? And was the £663,000 claimed payable?

 The adjudicator eventually decided that the project did not come within the residential occupiers exception, so he had jurisdiction. He also decided that Mr & Mrs James’s pay less notice was not good enough to qualify as a pay less notice. He finally decided that this adjudication was a “smash and grab” claim and there was no defence available to the demand for the £663,000, whether that was a true value or not. His award ordered Mr & Mrs James to pay up – and to pay the adjudicator’s fees on top.

But they didn’t. So both parties came to the High Court, and the single judge there reversed the adjudicator’s decision. Mr & Mrs James were to be residential occupiers; moreover, their pay less notice was not defective. That’s a 100% knock-down. Doubtless upset, the builder took the judgment up to the three judges in the Court of Appeal. It remained a 100% knock-down of the adjudicator’s decision. 

But wait – there was no criticism of the adjudicator. The hint as to why is in what the senior judge in the Court of Appeal pointed out: that both the first judge in the High Court and then those in the Court of Appeal had the benefit of much greater argument than was put to the adjudicator. I pause here. 

Sometimes, though not always, there is a problem of representation at adjudicator level. The business of arguing a case is tricky. Sometimes – but, I repeat, not always – there are angles to be put to the adjudicator or court which are very subtle. So much so that they are overlooked – with the result that the adjudicator is deprived of argument and the outcome is simply wrong. And, if the adjudicator adopts the policy of deciding a case on the materials put, and, if those materials put are short on what I have called “angles”, then there is a real chance of a wrong result. That’s the nudge in this Court of Appeal commentary, when we are told that the adjudicator was not provided with all that should have been put. 

I confess that if I, as adjudicator, suspect that the advocacy has, shall we say, “gaps”, then I will speak up. But some representatives get uppity about this. I don’t care. But a lot, yes lots of adjudicators will not speak up, not take the initiative. Or, worse, they do not realise there are angles not being advanced.

As to those two judgments – the first instance ruling and the Court of Appeal decision – they are both well worth reading. They will help fathom the questions to be asked about whether a project is a residential occupier case and also whether a document qualifies as a pay less notice. As a bonus, the first judge also dealt with the topic of whether a reversed adjudicator’s decision, as to fee allocation, is also reversed? The answer is no. 

Tony Bingham is a barrister and arbitrator at 3 Paper Buildings, Temple