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Adjudication and consumers revisited

Some years ago Tony Bingham wrote about the Society of Construction Law (SCL) in his column in Building Magazine:

“…let me coax you to join the SCL. It’s the best ‘something’ I’ve ever joined. It does nothing, except get folk to give a talk, a paper, express a view, mull over construction law. Yes, there are lots of lawyers but also architects, engineers, surveyors, contractors, developers, arbitrators, adjudicators and mediators. Real people. It’s £100 a year and no exams, no politics, no silly rules, no bullying, no disciplinary tosh, no royal charter to be poked in the eye with. Great.”

I wholeheartedly agree with Tony on this point, and I would urge those of you who are not members to join. The object of the SCL is not an endless trawl of dinners and social events (although there are a few!), it is to further our knowledge of construction law. This object is probably best epitomised by its annual essay competition, the SCL Hudson Prize. This year there were joint winners:

Both papers are excellent and Michael and Philip are worthy winners of the prize. However, it is Philip’s topic I want to discuss, as I was fortunate enough to hear him talk about it at a recent SCL meeting in London.

Residential occupiers

The inspiration for Philip’s paper appears to have stemmed from Coulson J’s comment at paragraph 61 of his judgment in Westfields Construction Ltd v Lewis that:

“Adjudication in construction contracts is generally thought to have worked well, and it has certainly reduced costs. Is it not 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?”

I considered this comment in my blog at the time, and concluded that my preference was for the status quo when it comes to the residential occupier exception (but not the other exceptions). I was concerned that residential occupiers and small builders could be exposed to disproportionate costs arising from adjudications, and considered that such parties often don’t want an adversarial process such as adjudication. They don’t want the adjudicator to decide the case on the basis of the evidence in front of him. What they actually want is a form of expert determination.

Philip goes into great detail. He considers the decided cases, the relevant consumer law and possible ways forward such as abolishing or narrowing the exception. I’m not going to review the entire paper, but just want to focus on a couple of points.

Philip sets a scenario for his residential occupier at the beginning of his paper:-

“As a situation to which section 106(2) was clearly intended to apply, we imagine a widow who had no experience in construction and who wants to add a modest extension to her between-the wars semi-detached home in Ruislip Gardens. She and a local builder meet over mugs of tea in her kitchen; they agree the main features of the project and its cost, no other professionals (and no paperwork other than an ‘estimate’) being involved.”

The Doorstep Regulations

This reminded me of an interesting issue that cropped-up for me recently, and concerned a piece of legislation that applies to contracts between businesses and consumers entered into before 13 June 2014, the Cancellation of Contracts made in a Consumer’s Home or Place of Work etc. Regulations 2008 (better known as the Doorstep Regulations).

My interesting issue

The project was on somewhat of a larger scale than Philip’s example, and involved the expenditure of hundreds of thousands of pounds on the refurbishment of a rather nice property in West London. The parties fell out and the builder started an adjudication to recover the outstanding sums it said it was owed.

The employer raised a jurisdictional challenge, saying that the builder had no right to adjudicate. The employer argued that the contract, a JCT minor works form, had been made in a similar situation to Philip’s scenario, that is, over a cup of tea in the kitchen. As a result, the Doorstep Regulations applied (regulation 5(a) states that the Doorstep Regulations apply if the contract is made “during a visit by the trader to the consumer’s home or place of work”).

The employer said that because the builder had not given him notice of his right to cancel the contract at the time the contract was made, under regulation 7(6) the contract, including the contractual adjudication provisions, were not enforceable against the employer. As the contractual adjudication provisions did not apply, the employer said that he fell within the residential occupier exception in section 106.

Most of the adjudications I deal with don’t involve consumers, and I confess that I hadn’t come across this piece of legislation before. The outcome of not giving a consumer notice of their right to cancel the contract could be argued to be a little harsh, but the outcome is nevertheless clearly stated in the Doorstep Regulations for all to see. No notice of cancellation equals no right to enforce the contract.

In my case I wasn’t persuaded that the contract had been made at the kitchen table, rather it had been made away from the consumer’s home and so the Doorstep Regulations didn’t apply.

But what if the contract had been made at the kitchen table? Would a court find that the Doorstep Regulations applied even when it was the employer himself that proposed the form of contract?

This question will probably never come before the courts because the Doorstep Regulations were replaced by the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 for contracts entered into on or after 13 June 2014 (the Consumer Contracts Regulations 2013).

The Consumer Contracts Regulations 2013 don’t deal with the failure to give notice of a right of cancellation in the same way. However, while such a failure might not deprive a builder of a right to rely on a contractual adjudication clause, it will still have serious consequences. It is now a criminal offence with a fine of up to £5,000 (and you thought the doorstep regulations were harsh!).

Consumer Rights Act 2015

Another area that Philip’s paper covers is the implications of the Consumer Rights Act 2015 (CRA 2015), most of which will come into force on 1 October 2015. I admit that what with all the excitement of the 2015 general election, the introduction of this Act had rather passed me by.

The CRA 2015 will replace the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR). Over the years, many of the adjudication cases involving consumers have involved challenges that adjudication provisions are unfair under the UTCCR. The vast majority of such cases have been unsuccessful. For example, in Lovell Projects v Legg & Carver [2003] BLR 452, the court decided that contractual adjudication provisions in the consumer’s contract were not unfair under the UTCCR because they did not cause a significant imbalance in the parties’ rights and obligations to the detriment of the consumer, and nor were they contrary to the requirements of good faith; adjudication is open to both parties and is only temporarily binding. Another relevant factor in Lovell (and other decided cases) was that the consumer’s professional adviser has proposed the contract, rather than the builder.

I’ll leave you to read Philip’s thoughts on the CRA 2015, and we’ll have to wait and see whether the principles established in cases such as Lovell will differ under the CRA 2015. Personally, I doubt they will.

Do you want to work with a consumer?

Given the plethora of primary and secondary legislation that applies when working with consumers, one wonders why anybody would chose to do so.

I’m obviously being flippant, as I appreciate that residential building work is one of the mainstays of the construction industry. My advice to any builder or consumer considering entering into a building contract would be to use one of the various standard forms of contract aimed at home owners, such as the Domestic Building Contract 2014 (published by RIBA) or the Building Contract for a Home Owner/Occupier (published by the JCT). They include an optional right to refer disputes to adjudication under a consumer adjudication scheme where the adjudicator’s fees are often capped.

MCMS Ltd Jonathan Cope

2 thoughts on “Adjudication and consumers revisited

  1. Delighted to read this piece; I actually didn’t know the detail about the 2008 Regulations, or about the adjudication you describe, so I learnt something new. Thanks for the extra exposure for the Hudson paper: hope your encouragement to join the SCL will work. I hope to write more about the new consumer protection law and its application to residential construction projects as my next project.

  2. The Consumer Rights Act 2015 (CRA 2015) came into force on 1 October, as Jonathan discusses. It includes new statutory remedies where services are not carried out with reasonable care and skill, or as agreed with the consumer. For details about our coverage, see the Consumer Rights Act 2015 toolkit. For specific information on contracts for services, see Practice note, Consumer Rights Act 2015: services.

    In addition, Checklist, Issues to consider in a domestic building project, addresses a number of the issues that arise when acting for a homeowner embarking on domestic building works.

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