Westfields Construction Limited v Clive Lewis [2013] EWHC 376

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

summary

For the purposes of the residential exception in s.106 of the Housing Grants Construction and Regeneration Act 1996 (the “Act”), whilst the date of the formation of the contract is particularly important in any consideration of any alleged “intention to occupy”, “occupation” is an ongoing process and cannot be tested by reference to a single snapshot in time. Thus the evidence about the position at the date that the contract was made has to be considered in the context of all of the evidence of occupation and intention, both before and after the agreement of the contract. On the facts of this case the defendant had not demonstrated that the residential exception applied.

Technology and Construction Court, Mr Justice Coulson.

Background

In February 2012, Westfields Construction Ltd (“the claimant”) and Mr Lewis (“the defendant”) entered into a construction contract in respect of the refurbishment of the defendant’s property at 3 Cavendish Avenue, London, NW8 9JD. A dispute arose in respect of the defendant’s non-payment of a valuation, which was referred to adjudication on 7 September 2012. The defendant objected to the jurisdiction of the Adjudicator on the ground that he intended to occupy the property once the works were completed and therefore fell within section 106 of the Act. The Adjudicator concluded that the defendant was not a residential occupier and decided that the defendant should pay the claimant £17,393.91 plus interest within seven days. The defendant did not make the payment and in response to enforcement proceedings, again disputed the Adjudicator’s jurisdiction.

S.106 of the Act provides as follows:

“Provisions not applicable to contract with residential occupier.

(1) This Part does not apply –

(a) to a construction contract with a residential occupier…

(2) 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 resident.

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…”

The defendant argued he was protected by s.106 because, at the date when the contract was made, he and his family were resident at the property and he intended to occupy the property once the works were completed.

The claimant’s case was that the defendant had moved out of the property before the contract was made and that the defendant had at all times intended to rent out the property once the works had been completed.

Issues

The court was asked to address the following questions and their impact on the application of s.106 of the Act:

  • On what date was contract was made?
  • At what point should the Court assess whether or not the employer occupies or intends to occupy the property as his residence for the purposes of s.106 of the Act?
  • Did the defendant occupy or intend to occupy the property as his residence for the purposes of s.106?

Decision

The Court held that:

  • On the evidence, the contract was made on 21 February 2012.
  • Whilst the date of the formation of the contract is particularly important in any consideration of any alleged “intention to occupy”, “occupation” is an ongoing process and cannot be tested by reference to a single snapshot in time. “Occupies” must carry with it some reflection of the future: it indicates that the employer occupies and will remain at (or intends to return to) the property. Thus the evidence about the position at the date that the contract was made has to be considered in the context of all of the evidence of occupation and intention, both before and after the agreement of the contract. Above all, s.106 needs to be approached with commonsense: it ought to be plain, on a brief consideration of the facts, whether the employer is or is not a residential occupier within the terms of the exception.
  • The evidence relating to the defendant's intention not to occupy the property as his residence after the works was clear and consistent from a period before the contract was let, right the way through to the time when the relationship between the parties began to break down. That evidence showed that the defendant intended to let out the property when the works were completed.
  • That finding was fatal to the entirety of the defendant's case on s.106. As a matter of common sense, the residential occupier exception did not apply to the defendant because he was undertaking the works so he could rent the property out on a commercial basis. In other words, because occupation is not to be tested by a single snapshot in time, but instead requires ongoing occupation (including, if appropriate, an intention to occupy in the future), the defendant had not demonstrated that he occupied the property as his residence for the purposes of s.106. The defendant did not occupy the property as his residence after the contract was made, neither did he intend to occupy the property as his residence thereafter. Accordingly, s.106 did not apply.
  • Even if, contrary to the Court’s view, the “snapshot” test was the right approach to ascertaining occupation, on the evidence, the defendant had not demonstrated that he was occupying the property as his residence at the time that the contract was made on 21 February 2012.
  • For these reasons, the s.106 exception did not apply and the defendant was liable to the claimant in the sum of £17,393.91 plus interest.
  • The Court suggested that it was time for s.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.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

 

 

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