Construction law quarterly

Welcome to the first edition of Construction Law Quarterly for 2026. As we begin a new year, we extend our best wishes to all our readers and contributors. The year ahead promises continued developments across the construction and infrastructure sectors, accompanied by emerging regulatory frameworks and complex legal challenges. In this edition, we present a selection of articles that address some of the most significant and fast-moving areas of construction law practice, providing analysis intended to support informed decision making as the industry enters another period of considerable change.

The first paper examines one of the most rapidly developing frontiers for construction law: the space sector. As both state agencies and private operators pursue projects involving satellite constellations, space infrastructure, and emerging off-planet construction activity, the legal landscape is becoming increasingly international, technically specialised, and commercially sensitive. The authors analyse the types of disputes that arise throughout the project lifecycle, including procurement challenges, manufacturing defects, launch delays, and in-orbit damage. They also assess the suitability of international arbitration as the primary dispute resolution mechanism, highlighting its neutrality, enforceability, procedural flexibility, and capacity to accommodate public and private sector interests. The paper demonstrates that, as space construction moves from experimental activity to critical infrastructure, robust dispute resolution processes will play an essential role in providing legal certainty.

The second paper considers another sector currently experiencing significant renewal: nuclear development in Canada and the UK. Both jurisdictions are advancing major programmes involving large-scale refurbishment, new build, and the commercialisation of small modular reactors. The authors outline the key legal, regulatory, and financing structures underpinning these developments, including provincial and federal support in Canada, the UK’s centralised policy framework and the increasing use of innovative financing mechanisms such as the regulated asset base (RAB) model. The analysis provides valuable guidance for contractors, investors, and developers seeking to engage with the nuclear sector, particularly in relation to procurement processes, risk allocation, regulatory compliance, and the management of first-of-a-kind technologies.

The third paper addresses the recent decision of the Upper Tribunal in Almacantar Centre Point Nominee No. 1 Ltd v Penelope de Valk and Others, which represents a significant development in the interpretation of key provisions of the Building Safety Act 2022. The Tribunal adopted the widest interpretation to date of the terms ‘cladding’, ‘cladding remediation’, and ‘unsafe’ in Schedule 8 and held that leaseholder protections are not confined to the remediation of relevant defects. The article traces the Tribunal’s statutory interpretation and the practical implications of the decision for landlords, developers, and leaseholders. At a time when the remediation of unsafe cladding remains a prominent policy objective, the judgement provides important clarity and confirms the courts’ willingness to give full effect to Parliament’s intention that qualifying leaseholders should not be required to fund such works.

The fourth and final paper considers the Technology and Construction Court’s decision in RBH Building Contractors Ltd v James, which revisits the residential occupier exception under section 106 of the Housing Grants, Construction and Regeneration Act 1996 and the requirements for a valid payless notice. The judgement offers helpful guidance on how the intention to occupy is assessed at the time of contracting and confirms the courts’ consistent approach to construing payless notices in a broad and practical manner. The article also reiterates the limited grounds upon which the courts will interfere with an adjudicator’s determination on fees, reflecting the established principle that such determinations are generally treated as ancillary and not susceptible to review.

As ever, should you have a short article or legal update that you would be interested in submitting for inclusion in a future issue please contact the journal editor at journals@icepublishing.com.

The content and the opinions expressed have been provided for information purposes only. It should not be relied on as a substitute for specific legal advice on any particular topic.

NASA’s recent announcement of plans to build a nuclear reactor on the Moon by 2030 marks a turning point in the evolution of the space sector. This milestone signifies more than scientific progress – it underscores the emergence of space as a serious commercial frontier. Once dominated by state-led exploration, the industry is increasingly characterised by rapid commercialisation, multinational collaboration, and the construction of complex infrastructure projects both on Earth and beyond.

Construction in the space sector is uniquely complex. Projects often involve stakeholders across the globe, nascent technologies, a nexus of domestic and international laws and regulations, as well as high-value contracts. With this complexity comes an increased risk of disputes, ranging from procurement delays to in-orbit damage. Legal practitioners are increasingly called upon to work alongside key players, such as engineers, contractors and space agencies, to navigate these challenges.

This article explores the types of construction disputes commonly arising in the space sector and the role of arbitration in their effective resolution.

Procurement: Procurement in the space sector is governed by an array of domestic regulations, international treaties, and bespoke contractual frameworks. Factors such as the highly specialised nature of components and the limited pool of qualified suppliers make procurement particularly vulnerable to disputes, including those arising from supply chain disruptions, export controls, and competitive tendering disputes.

Manufacturing and technical defects: Rigorous testing and quality assurance prior to launch are essential, but not foolproof. Similarly to other construction projects, defects can arise from design flaws, manufacturing errors or integration failures, leading to disputes.

Given the extreme conditions of space, however, construction defects have the potential for catastrophic consequences, particularly if they manifest post-launch. Unlike terrestrial projects, where defects can often be repaired on-site, remediation in space is far more complex and costly. Latent defects will typically only become apparent after launch, when options for correction may be limited or not feasible.

Delay: Construction delays on space projects may arise from various causes, such as:

• supply chain issues;

• defective works;

• force majeure events (e.g. pandemics, natural disasters, geopolitical conflict); and/or

• regulatory hurdles (e.g. launch or export licence delays).

Notably, the James Webb Space Telescope was delayed by over a decade for various reasons including technical issues and Covid-19, while a recent SpaceX Starship test was postponed pending regulatory approval.

Damage:

• Ground-based damage: Manufacturing and testing phases carry significant risk. Most immediately, launch failures or defective components can cause damage to ground infrastructure within the construction site or personal injury to personnel. Such liability may be contested between manufacturers, integrators, and launch providers. However, damage can also extend to third-party property or persons, affecting individuals or entities entirely unrelated to the project, and potentially located in other jurisdictions. For example, in June 2025, Mexico’s President considered legal action after SpaceX debris was found in Mexico. While third-party claimants may experience legal or procedural difficulties in establishing liability, these types of claims have the potential to be significant, given the scale of sums involved and the extent to which public liability insurance responds to third-party damage or injury claims.

• In-orbit damage: In-orbit collisions, such as the 2009 crash between Cosmos 2251 and Iridium 33, can generate debris and trigger complex liability claims. As explained in one of HSF Kramer’s earlier Inside Arbitration articles, ‘Disputes in Space – The Next Frontier?’, international treaties like the Outer Space Treaty and the Liability Convention govern state responsibility, but private contracts and insurance arrangements are equally important. Determining fault and proving causation can be exceptionally difficult, whether due to limited tracking of small debris, whose origin and trajectory are often impossible to reconstruct, or the lack of shared real-time manoeuvre data, which makes it difficult to assess whether a collision was unavoidable or attributable to operator error.

Yet, the financial impact of such damage can be significant. As orbital traffic increases so will the frequency and complexity of such disputes.

Although these disputes are varied in nature, they share key characteristics: they tend to involve international parties, highly technical issues and significant financial stakes. This makes arbitration particularly well-suited to their resolution.

Even the best-drafted construction contracts are not free from all risks. If or when disputes occur, the choice of forum for resolving disputes is critical. This is particularly the case in a sector that is characterised by the use of first-of-a-kind proprietary technologies, and multinational stakeholders. Arbitration can offer a confidential forum that is neutral and adaptable and provides binding and enforceable outcomes. While it is typically used by parties with a pre-existing contractual relationship, disputes can also be referred to arbitration by agreement after they have arisen.

Space activities were once the exclusive domain of states and state agencies, with disputes resolved through diplomacy or international treaties. But with the growing involvement of commercial actors in space, there is an increasing need for binding, reliable dispute resolution mechanisms.

Given the national importance of space-related infrastructure projects, contracts often still involve states or state-owned entities on one side, and private contractors on the other. Arbitration is well-suited to these relationships, offering a forum that accommodates both public and private interests.

Different mechanisms and institutions have evolved to respond to this shift. Notably, the Permanent Court of Arbitration developed Optional Rules for Arbitration of Disputes Relating to Outer Space Activities. Though not yet tested, these rules provide a framework for disputes involving both public and private entities. As public-private partnerships in space continue to grow, particularly in areas like lunar construction and satellite constellations, these rules – and similar instruments that might follow – are likely to become increasingly relevant. They offer procedural guidance for disputes involving state actors, international organisations, and commercial entities, and may help bridge the gap between diplomatic and commercial dispute resolution.

Reflecting this broader industry trend, states, intergovernmental organisations, as well as international private companies increasingly favour arbitration as their default dispute resolution mechanism. The European Space Agency, for example, routinely includes arbitration clauses in its standard contracts. These clauses should specify the seat of arbitration, governing law, and procedural rules, providing clarity and consistency across projects.

Construction disputes in the space sector typically involve numerous parties and it is not uncommon for contractors, launch providers, and satellite operators all to be from different jurisdictions. In this regard, selecting a neutral seat of arbitration that is free from any perceived biases of national courts, together with a reputable arbitral institution, can help to ensure fairness between the parties. Arbitral awards are also enforceable in over 170 countries under the New York Convention, providing a level of certainty and reliability that domestic judgements can often lack.

Construction disputes in the space sector often involve highly technical issues, ranging from aerospace engineering to orbital mechanics. Arbitration allows parties the freedom to appoint arbitrators of their choice with sector-specific expertise, ensuring that decisions are informed by a deep understanding of the subject matter.

Given the strategic and proprietary nature of space technologies, confidentiality is paramount. For example, disputes between satellite manufacturers and launch providers may involve evidence encompassing trade secrets, proprietary designs or national security-sensitive data. Unlike court proceedings, which are typically public, arbitration offers a private dispute resolution process. This protects sensitive commercial information and intellectual property that is critical in a sector where innovation is a competitive advantage.

Confidentiality is, of course, subject to the usual limitations. It may be affected when arbitration-related matters are brought before the court – typically through enforcement proceedings, challenges to the award, or appeals – in which case the resulting judgements are usually published. Courts do, however, have discretion to protect sensitive information, including through anonymisation or limited disclosure, where justified. In exercising this discretion, courts may consider factors such as the sensitivity of the subject matter, the public interest, and broader public policy considerations; and in the space sector, where disputes may involve novel technologies or defence-related issues, courts may be particularly receptive to confidentiality concerns.

Confidentiality also helps preserve commercial relationships which, in an industry with relatively limited players, tend to be formed on a long-term and collaborative basis.

Arbitration allows parties to tailor procedures to suit the specific requirements of construction disputes arising on space projects. This includes:

• fast-track options for urgent disputes;

• virtual hearings to accommodate global teams;

• customised document production protocols; and/or

• use of independent expert evidence or technical panels.

Such flexibility is invaluable in a sector where time-sensitive launches and international collaboration are the norm.

In addition, the procedural and party-driven flexibility of arbitration means that, compared to litigation, parties can more easily combine arbitration with alternative dispute resolution methods, such as mediation or expert determination, which could be particularly valuable in the context of construction disputes in the space sector where parties will be keen to preserve commercial relationships and the issues in dispute can be highly specialised and technical.

Arbitration’s adaptability makes it ideal in a sector where innovation often outpaces regulation. For example, parties may agree to arbitrate disputes arising from lunar construction, asteroid mining or satellite servicing – activities that are not yet fully regulated under international law. In the absence of an established body of laws, regulations and legal precedents, arbitral tribunals will pave the way in decision making. They are likely to do so by interpreting the parties’ contractual arrangements in light of the provisions of the governing law, alongside general principles of international law, commercial practice and, potentially, public policy. The novelty of these subject matters also means tribunals are likely to rely heavily on subject-matter experts to provide evidence on technical standards, industry-specific protocols, and emerging norms.

Construction disputes in the space sector are as complex and critical as the missions they support. Each phase – from procurement and integration to launch and in-orbit operations – presents distinct legal and technical challenges.

International arbitration provides a dispute resolution mechanism that is neutral, confidential, and enforceable across borders. It is uniquely equipped to support the space sector's continued growth by delivering greater flexibility and commercial certainty in an environment characterised by innovation and international collaboration.

As energy security and decarbonisation climb to the top of national agendas, nuclear power is entering a renaissance. For investors looking to deploy capital in long-term, stable, and strategic infrastructure, nuclear offers a compelling proposition, particularly in Canada and the UK.

These two markets are leading a new wave of nuclear development, through large-scale refurbishment, new build, and next-generation small modular reactors (SMRs). What makes them attractive is not only government support, but the legal and delivery frameworks enabling private sector participation. With major investment now flowing into nuclear projects, understanding how these are funded, procured, and delivered is key to staying competitive.

This article explores key investment considerations for construction stakeholders and capital providers active in, or entering, the UK and Canadian nuclear sectors.

In Canada, the nuclear sector is uniquely shaped by strong provincial leadership, especially in Ontario, and an increasingly supportive federal investment framework:

• Ontario is home to 18 of the 19 nuclear reactors currently in operation in Canada. Ontario sources about half of its electricity from nuclear power and is leading the charge on both large-scale refurbishments and next-generation SMRs.

• The Darlington SMR, currently under development, is expected to be the first grid-connected SMR in North America by 2029 and is being delivered using a modular construction approach intended to shorten timelines and reduce on-site risk.

At the federal level, Canada is bolstering nuclear through favourable investment mechanisms and support has increased significantly.

• The passing of Bill C-5 in 2025 extended clean technology tax credits to nuclear for the first time.

• The issuance of CAD $4 billion in green bonds eligible for nuclear projects in 2024, has attracted investor interest and made the financial framework for nuclear projects more competitive with renewables.

• Additional federal loans and grants are also playing a role in funding the development of nuclear projects.

The funding mix is diverse; provincial backing, federal incentives and growing private investment including pension funds and infrastructure investors. Ontario Power Generation, a Crown corporation, is the main project owner for many of the province’s nuclear builds, with private sector firms and equipment suppliers increasingly active as partners, particularly in SMR development.

Canada combines strong public support with growing financial innovation. In particular, the SMR space offers scalable opportunities.

The UK’s nuclear sector is more centrally driven, with significant public-private partnerships and unique financing mechanisms.

• The £38 billion Sizewell C nuclear plant is backed by £14.2 billion in public investment and is structured under the RAB model, which allows developers to recover costs during construction.

• Sizewell C’s backers include the British government and private investors like EDF, Centrica, La Caisse and Amber Infrastructure. Canadian investor CDPQ (an institutional investor that manages public and para-public pension plans and insurance programs in the Canadian province of Quebec) holds a stake in the project, demonstrating international confidence in the UK market.

• The UK’s SMR programme is funded through a combination of direct government grants and private-sector capital, with Rolls-Royce leading commercialisation efforts.

Opportunities for transatlantic collaboration are growing:

• Cross-border collaboration on SMRs and fusion is unlocking bilateral opportunities. Regulators and supply chains in both countries are increasingly aligned, particularly around SMRs and nuclear fusion.

• Both countries are investing in modular build approaches, attracting EPC firms, digital integrators, and construction investors.

For contractors, developers, and suppliers, the path ahead is full of potential but not without complexity. From regulatory approvals to procurement models and risk allocation, success in this new nuclear era will require deep legal insight and strategic foresight.

For companies entering or expanding in these markets, the following are key:

• Procurement models and delivery structures: Nuclear procurement is not standard. Delivery models vary and often involve lengthy pre-construction phases, complex partner roles, and staged risk transfer.

• Structuring of joint ventures and risk allocation: The risk allocation in EPC and O&M contracts directly affects investment security. Nuclear delivery is complex, and poorly drafted contracts can expose investors to cost overruns, liability, or delays. Standard infrastructure contracts may not adequately address nuclear-specific risks without bespoke amendments.

• Licensing and regulatory compliance: In nuclear, regulatory compliance is not just the owner’s responsibility. Contractors must also meet regulatory requirements for design, construction, safety, and reporting.

• Technology and IP risk (for SMRs and fusion): SMRs and fusion technologies involve proprietary IP and untested designs. Investment in first-of-a-kind projects carries higher risk but also potential for early-mover returns.

The Upper Tribunal has dismissed an appeal bought by the landlord applicant, Almacantar, ruling in favour of the leaseholders. It has given the widest interpretation to the meaning of ‘cladding’, ‘cladding remediation’ and provided guidance on what is meant by an unsafe cladding system under the Building Safety Act 2022 (‘the BSA’). This decision involves the iconic Centre Point House in Tottenham Court Road. The judgement cements the Upper Tribunal’s desire to uphold Michael Gove’s pledge that no leaseholder living in their home will pay the cost of remediating unsafe cladding.

The effect of the decision is cladding remediation can extend to cladding installed more than 30 years ago.

Centre Point House was constructed between 1963 and 1966. It is accepted by the landlord, Almacantar, that the façade requires remediation. However the question before the First Tier Tribunal (Property Chamber) (‘the FTT’) and subsequently the Upper Tribunal was whether the costs of the proposed remediation works (‘the Scheme’) could be recovered as a service charge from the leaseholders pursuant to their leases or whether the leaseholder protections introduced by Part 5 and Schedule 8 of the BSA afforded them protections against those costs.

The FTT decided the façade at Centre Point House was an unsafe cladding system within the meaning of Paragraph 8 of Schedule 8 of the BSA meaning ‘qualifying leaseholders’ did not have to contribute towards the cost of the Scheme. This was on the basis that pursuant to Paragraph 13 (2) of Schedule 8 of the BSA the leaseholders were presumed to hold qualifying leases.

The landlord appealed the FTT’s decision on the following five grounds, with permission to appeal being granted on grounds 1–4 by the FTT and the Upper Tribunal giving permission to appeal on ground 5:

Ground 1 – the FTT erred in finding that Paragraph 8 of Schedule 8 of the BSA applied to the Scheme.

Ground 1A – the FTT was wrong to find Paragraph 8 of Schedule 8 of the BSA applied to the Scheme because the Scheme did not relate to the remediation of ‘relevant defects’.

Ground 2 – the FTT erred in finding every part of the Scheme fell within Paragraph 8 of Schedule 8.

Ground 3 – the FTT was wrong to find the façade at Centre Point House was a cladding system which forms the outer wall of an external wall system which is unsafe (as required by Paragraph 8 of Schedule 8).

Ground 4 – given its finding (as per ground 3) the FTT was wrong to find the façade at Centre Point House was unsafe and therefore wrong to find no service charges were recoverable in respect of the Scheme from the leaseholders who hold qualifying leases.

Ground 5 – The FTT was wrong to determine that the leaseholders benefited from the presumption that they held qualifying leases. The landlord asserted this point on the basis that it said the FTT had made an unqualified finding of fact.

No. The Upper Tribunal decided Paragraph 8 of Schedule 8 was not confined to remedying relevant defects.

Paragraph 8 of Schedule 8 states:

1. No service charge is payable under a qualifying lease in respect of cladding remediation.

2. In this paragraph ‘cladding remediation’ means the removal or replacement of any part of a cladding system that – (a) forms the outer wall of an external wall system, and (b) is unsafe.

A relevant defect is a defect which causes a building safety risk and arises as a result of or in connection with relevant works. Relevant works are works undertaken in the 30 years prior to 28 June 2022 or any works undertaken after this date to remedy a relevant defect. The landlord argued that the Scheme did not involve remedying relevant defects and therefore Paragraph 8 of Schedule 8 did not apply. It therefore argued that the qualifying leaseholders did not benefit from the leaseholder protections under the BSA. The landlord sought to argue that the entirety of Part 5 and Schedule 8 of the BSA only applied to relevant defects and Paragraph 8 of Schedule 8 should not be excluded from that regime.

The Upper Tribunal disagreed. Paragraph 8 of Schedule 8 does not use the words ‘relevant defects’ and no words to that effect should be implied into its interpretation. The legislators were intentional in excluding this term and further, the words used in Paragraph 8 of Schedule 8 of the BSA were clear and unambiguous. Arcade Food Hall on New Oxford Street/High Holborn, London, England, United Kingdom, Great Britain, Europe – February 11, 2024: New Oxford Street close to the High Holborn Street In Holborn And Farringdon Without, A40 Route. Arcade Food Hall is located next to the Iconic Centre Point Building, Skyscraper, Tottenham Court Road.

Paragraph 8 of Schedule 8 is triggered where there is a cladding system that forms the outer wall of an external wall system which is unsafe.

No expert evidence was put before the Upper Tribunal. However, the FTT heard substantial expert evidence before it decided there was cladding at Centre Point House. This was a key issue raised before the FTT and the Upper Tribunal because the BSA does not define what is meant by cladding. Both the FTT and Upper Tribunal were keen to highlight that there are many forms of cladding (and cladding systems), and each case will turn on its own facts, requiring detailed expert evidence.

There is also no definition of cladding system but the Upper Tribunal rejected the landlord’s argument that a cladding system required two parts – a cladding system and an external wall system. The Upper Tribunal was not prepared to narrow the interpretation of cladding system in this way. Again, it focused on the words used in Paragraph 8 of Schedule 8 which did not require two systems, merely, that the cladding system forms part of the outer wall of any external wall system. The Upper Tribunal decided the wording used is clear.

When deciding what was meant by ‘unsafe’ the landlord sought to argue this would only include something which amounted to a fire risk. Following the theme of interpretation as outlined above, the Upper Tribunal found there was no need to narrow the interpretation in this way and the wording was clear. The ordinary meaning of unsafe should be applied when deciding whether the cladding system fell within the ambit of Schedule 8 of Paragraph 8. Before the FTT it was agreed between experts that the façade at Centre Point House needed remediation. In the past, parts of the system had fallen to the ground. The Upper Tribunal therefore agreed with the FTT in finding the system was unsafe.

The starting point is all leases are presumed to be qualifying pursuant to Paragraph 13 of Schedule 8 of the BSA if they meet the test in Section 119 (2). Those holding qualifying leases are afforded protections by many of the provisions within Schedule 8, including but not limited to Paragraph 8 of Schedule 8.

The presumption applies unless the landlord under the lease has taken all reasonable and prescribed steps to obtain a leaseholder deed of certificate and no such certificate is provided to the landlord.

At the date on which the FTT heard the matter the landlord had not taken any steps to obtain the leaseholder deed of certificate and it therefore found that the presumption in Paragraph 13 of Schedule 8 applied.

The landlord appealed this decision on the basis that the FTT was wrong to decide that the presumption meant none of the participating leaseholders would have to contribute, as a service charge, the cost of the Scheme. This was because it had not heard any factual evidence from each of the leaseholders to decide if they met the test in Section 119(2) of the BSA.

The Upper Tribunal was not persuaded by this argument and dismissed the appeal. It said the FTT had not made any finding of fact but it had simply applied the presumption absent the landlord taking any steps to obtain the leaseholder deed of certificate.

Note: The landlord has been granted permission to appeal the decision of the Upper Tribunal to the Court of Appeal. That appeal is expected to be heard in 2026.

The case is important as it looks at key concepts of what was meant by ‘cladding’, ‘cladding remediation’, and ‘unsafe’. It provides much needed guidance on how the leaseholder protections operate when a building has an unsafe cladding system which requires remediation. It reiterates that cladding remediation will be treated differently to remedying relevant defects which will be time limited to the 30-year limitation period.

As a matter of statutory interpretation this decision provides a helpful reminder that it is important to look at the precise wording used in statute to decide what was intended by the draftsman. If the words are clear and unambiguous there is no need to import words or seek guidance from external aids.

It cannot be clearer, given this decision and recent Court of Appeal decisions, that the Court and Tribunal will do their utmost to uphold Parliament’s intentions to protect leaseholders from costs of remediation of dangerous cladding and poor workmanship which they had no part of.

Both leaseholders, landlord and developers will benefit from the decision since it provides much needed clarity on the extent of remediation and protection from costs.

NB: The landlord has been granted permission to appeal the decision of the Upper Tribunal to the Court of Appeal. That appeal is expected to be heard in 2026.

In the recent case of RBH Building Contractors Ltd (‘RBH’) v Ashley James & Anor, the Court:

• grappled with the meaning of a residential occupier and the application of the section 106 exception in the Housing Grants, Construction and Regeneration Act 1996 (the Construction Act);

• applied a broad interpretation of the requirements for a payless notice; and

• confirmed the position on the Court’s willingness to interfere with the adjudicator’s decision in relation to fees.

The case raises some interesting points around the exemption and provides some useful guidance to practitioners on an area infrequently considered by the Courts.

The case concerns a construction dispute between RBH, a building contractor, and Mr and Mrs James, who engaged RBH to manage and supervise the construction of a luxury house in Devon. The contract was made orally in early 2022, and the relationship broke down in 2024, with RBH ceasing work and submitting a final payment application – which the James’ disputed.

RBH commenced a ‘smash and grab’ adjudication, seeking payment on the basis that no valid payless notice had been served, and the adjudicator found in RBH’s favour. The James’ did not pay the sum awarded to RBH, so RBH sought summary judgement to enforce the decision.

The James’ resisted enforcement on the basis that the adjudicator lacked jurisdiction and retaliated with their own Part 8 proceedings, seeking declarations that the James’ payless notice was indeed valid. The Court heard both simultaneously.

Under section 106 of the Construction Act, the statutory right to adjudicate does not apply to a construction contract with a residential occupier, which the Act simply describes as ‘a dwelling which one of the parties to the contract occupies or intends to occupy as his residence’.

On the facts, it was accepted that the James’ had never occupied the house, at the time of the trial had no intention of occupying it and were in the process of trying to sell it. However, the James’ argued that, at the time the contract was entered into (a key point which we will turn to later), it was their intention to occupy the house and that they subsequently changed their minds. The James’ brought evidence of their previous homes’ sale, stamp duty paid, a statement from the architect around the house being designed for their personal use cases, and other factors such as registration on the electoral roll and with local GPs to try to show their intention to occupy the house.

However, RBH pointed to a commercial loan including declarations that the James’ did not intend to use the property as a residence, and planning documents which indicated the property was for investment purposes – a much more commercial intent. They also highlighted the James’ intention to let the property ‘Airbnb style’ for some 13 weeks of the year as the property was situated in a popular spot for holidaymakers.

Referring back to the (limited) previous authorities on the point, the Court found that the key factor was the James’ intention at the time the contract was entered into. The fact that they had since changed their mind was immaterial. It was therefore a question of considering the competing evidence.

Here, the fact that this was an application for summary judgement, as opposed to a full trial, appears to have been a decisive factor. This meant that the James’ needed only to show that they had a real prospect of success with their residential occupier argument. While the Court did find that the commercial loan documents required explanation, it considered that the James’ did, on balance, likely intend to occupy the home, at least enough to satisfy the test of a ‘real prospect of success’. As such, RBH failed in its attempts to enforce the decision.

Unlike the relatively novel arguments over what constitutes a residential occupier, the James’ Part 8 claim covered some well-trodden ground; namely, whether the notice issued in response to RBH’s payment application was a valid pay less notice for the purposes of the Construction Act.

The notice from the James’ included the wording ‘[we] intend to withhold payment of £663,016.16 and accordingly intend to make payment of £0’, followed by a list of reasons which outlined where they considered each head of claim from RBH to be lacking in evidence or unpaid by RBH and therefore not falling due under their contract.

The Court found this to be sufficient: any reasonably objective reader with knowledge of the works would have understood the points raised and reasons given; a full calculation was not necessarily required. The payless notice was found to be valid and no sums were due to RBH. The Part 8 claim succeeded in full. The Courts have given a very clear indication that they will not take an overly restrictive view of what constitutes a valid payless notice, not least because of the potentially draconian impact on the paying party. It is therefore unsurprising, to say the least, that the Court found for the James’ on this point.

This is not a new or novel position, and it is difficult to see why the adjudication found otherwise.

The adjudicator had determined that the James’ were responsible for his fees and expenses in the sum of £9,638 plus VAT. The Court was not persuaded by the James’ arguments to reverse the adjudicator’s decision on fees, despite succeeding on the above issues.

This case also reiterates the position that the Court will not change an adjudicator’s decision on fees, being regarded as an ancillary decision not affected by the adjudicator’s jurisdiction in the actual subject of the dispute. The bottom line is that their fees are not subject to review, no matter the surrounding context, according to the limited number of decisions on this point and how the Scheme for Construction Contracts (which was applicable in this case) treats the adjudicator’s entitlement to payment of fees.

The main interest in this case, and the legal development, is in relation to the exemption from the adjudication regime. Parties should be aware that the intention to occupy a property as a residence at the time of contracting can exclude the statutory adjudication regime, even if that intention changes during the course of the works. To avoid the potential fact-intensive inquiry, parties would be well advised to ensure that their intentions are clearly documented at the outset.

The case also serves as an ever-helpful reminder that the Court will apply a broad interpretation of what a payless notice requires: overly technical challenges to such notices are unlikely to succeed if the notice is reasonably clear.