The Housing Grants, Construction and Regeneration Act 1996 (the “HGCRA”) gives parties to most construction contracts the statutory right to refer disputes to adjudication. However, the HGCRA excludes contracts where one party is a “residential occupier”.

One way around the residential occupier exclusion is to provide for adjudication contractually. The JCT Home Owner Contract and the RIBA Domestic Building Contract are examples of standard forms of contract designed for use on residential projects that provide for adjudication.

The Sky’s the Limit Transformations Ltd v Mirza [2022] EWHC 29 (TCC) is a good example of why parties to residential construction contracts should consider using adjudication where available. This article sets out the details of the case and provides analysis on the decision.

Case Summary: The Sky's the Limit Transformations v Mirza

Dr Mirza engaged Sky’s the Limit Transformations Ltd (“STLT”) to carry out alterations to a residential property in Bolton.

The parties agreed terms based on the FMB Plain English Contract (the “Contract”), which provided for adjudication. The judge, HHJ Stephen Davies, noted that the Contract gave the parties “substantially the same suite of rights and obligations as provided for by the [HGCRA].” The Contract sum was around £170,000.

A dispute arose in relation to payment and STLT terminated the Contract. STLT then issued proceedings, claiming £25,319 for outstanding work plus £3,797 in damages for loss of profit.

In the course of the claim, each party instructed four experts, covering mechanical engineering, electrical engineering, quantity surveying and building surveying. The judge ordered mediation before trial, which did not result in a settlement. The trial itself lasted five days, due to the volume of factual and expert evidence required. It is likely that each party’s costs were somewhere between £80,000 and £120,000.

The judge decided that STLT’s termination was valid. However, he said that STLT’s claim was overstated and declined to award it any sum.

The judge suggested that he considered the case suitable for alternative dispute resolution instead of court proceedings. At the outset of his decision, he said that:

“It is a great shame that the parties have been unable to resolve their dispute out of court, given the amount of time, effort, stress and cost the whole process has taken for the individuals concerned.”

The judge also took the opportunity to propose alternative court directions for residential construction disputes, including limited disclosure, joint experts and a stay for mediation.

Legal Analysis: The Sky's the Limit Transformations v Mirza

As suggested by the judge, the dispute in Sky’s the Limit v Mirza appears to be one that was suitable for resolution by adjudication. Adjudication would have resulted in a quicker decision (the court proceedings took two years in total) and had less costs implications for the parties. Parties to residential building contracts are advised to at least consider adjudication where it is available by contractual provision.

Sky’s the Limit v Mirza also prompts consideration as to whether the residential occupier exclusion should be repealed, either entirely or subject to conditions.