Smash and grab adjudications: residential occupiers and pay less notices

May 2026

James Vernon and Jaynish Patel

It is somewhat rare for an adjudication enforcement decision to reach the Court of Appeal. RBH Building Contractors Limited v. Ashley and Tracy James [2026] EWCA Civ 511 concerned an application to enforce a smash and grab adjudication, which was resisted under the grounds of: (i) the residential occupier exemption (“the Exemption”); and (ii) the validity of a pay less notice.

On considering both grounds, the Court of Appeal was satisfied that the Technology and Construction Court (“TCC”) was correct in determining that as the Exemption may apply and so there was no jurisdiction on the Adjudicator to determine the dispute, it was not appropriate to award summary judgment to RBH. In addition, the pay less notice was considered valid as it was “tolerably clear”, providing a defence to the smash and grab adjudication. RBH’s appeal was dismissed.

Factual background

RBH Building Contractors Limited (“RBH”) was employed by Mr and Mrs James (“the Respondents”) to provide site and project management services for the construction of a residential dwelling under an oral contract.

The works began in January 2022, but RBH ceased work in April 2024 due to payment disputes. In November 2024, RBH served an application for payment on the Respondents for £633,016.16. The Respondents issued a “Notice of intention to withhold payment” disputing the entirety of the sum claimed, stating that £0 was payable, providing 11 reasons.

RBH referred the dispute to adjudication claiming the letter was an invalid pay less notice and absent any valid notices the full amount applied for fell due (i.e. a smash and grab adjudication). The Respondents defended the adjudication on two main grounds. The first ground was that the Exemption under s.106 of the Construction Act applied[1], meaning that the Adjudicator did not have jurisdiction to determine the claim as there was no entitlement to adjudicate under the Act. The second ground was that the pay less notice was valid.

The Adjudicator disagreed with the Respondents on both grounds, and awarded the sum claimed plus interest to RBH. He decided that the Respondents should pay and his fees and expenses.

The Respondents did not pay the award and RBH commenced court proceedings seeking summary enforcement of the Adjudicator’s award. However, the TCC determined that the Respondents pay less notice was valid and the Exemption might be engaged[2]. As such, the Judge declined to grant summary judgment, which RBH appealed. The Court of Appeal considered the two key issues in turn.

Ground 1 – The residential occupier exemption

The Respondents’ position was that they intended to occupy the property as a residential dwelling when the contract was agreed with RBH in 2022. During the works, the Respondents encountered financial issues and were proposing to rent out the property on AirBnB for 25% of the year.

RBH contended that the Respondents’ position was contrary to the development loan contract undertaking which stated the Respondents did not “have any intention to reside at the property”. Therefore, RBH argued the Exemption could not apply.

In considering Sections 106(1) and (2)[3] of the Construction Act, the Court of Appeal set out the following key points at paragraph [52] of the judgment:

The burden of proof must always be on the party seeking to trigger the statutory exception under s.106, the Respondents in this case and the determination must be based on the existence of the intention to occupy at the time that the contract was made.
The determination of the necessary intention to occupy is a matter of fact but it may be determined on a summary basis if the threshold is not high.
There is a two-element test under Gregson[4]. The first element is whether there is a bona fide intention to occupy in the future which is a matter of subjective intent and is fact dependent. The second element is whether the person who wishes to occupy has a realistic prospect of bringing that occupation about.
The timing of the intention to occupy triggering s.106 must be considered. It would be insufficient for the employer to intend to occupy the property after letting it out for 20 years.

The Court of Appeal applied these principles and considered “that a dwelling that the owner intended to occupy, save for renting it out for one quarter of the year, is within the exception in s.106.” Coulson LJ confirmed that whether the Respondents were residential occupiers or not would need to be determined at full trial, and so there were grounds not to award RBH summary judgment.

Ground 2 – The pay less notice

RBH contended that the letter was invalid as it failed to set out the sum that the Respondents considered to be due and why the sum payable should be £0. Further, some of the 11 reasons listed did not contain information on which sums were accepted by the Respondent and the figures totalled circa £295,000, less than half the sum claimed.

Coulson LJ rejected these arguments, concluding that the letter was a valid pay less notice because it made “tolerably clear” which payments were being withheld and why. The Court of Appeal considered s.111 of the Construction Act[5] in arriving at this conclusion and did not accept that the notice had to set out “an arithmetical calculation”to be valid, setting out the following points:

The key question is how a reasonable recipient would have understood the notice and not how the recipient of the notice in fact understood it.
The notice must be construed in context and it must comply with the contractual requirements or statute.
Whilst there is no principled reason for adopting a different approach to differing payment notices merely because some have more draconian consequences than others, “the particularly adverse consequents for an employer, that follow from a contractor’s unanswered payment notice are relevant to the test of the reasonable recipient“.
There is no requirement for a valid notice to have a particular title, or to make specific reference to a relevant contract clause or term, because the question is whether, viewed objectively, the notice had the requisite intention to fulfil that function.
One way to test the validity is to see whether the notice provided an adequate agenda for adjudication as to the value of the works. It will be insufficient for the notice to merely identify a figure and state, without more, that that is the relevant amount of the notice.

The Court stated pay less notices should be considered in a common-sense way which is a simple question of whether the notice explains what is due and why, in a “tolerably clear” way. As the Court considered the pay less notice was valid, there was no entitlement to summary judgment.

Concluding observations

The Court of Appeal dismissed RBH’s appeal having considered both the Exemption, which was left to be determined at full trial, and upholding the validity of a pay less notice.

For the Exemption, the re-statement of the principles underpinning s.106 of the Construction Act is a useful reminder to those seeking to rely on the same, including the evidence required to satisfy any Adjudicator (or Judge) seeking to determine whether the Employer has contracted for works to their current or near-future main residence. This will be fact sensitive.

As ever, where parties have entered into an oral construction contract for construction operations, they must be aware of what can and cannot be implied into that contract by way of the Construction Act. Oral contracts generally increase the risk of unclear or conflicting terms or can lead to future disagreement or dispute between the parties should an issue occur or relationships change. It is therefore important to document agreed terms and requirements on projects such as this.

The Court’s commentary on the pay less notice, and the emphasis of the same being “tolerably clear” in order to be valid is likely to be the yardstick for future determinations of the same question. In particular, for those preparing such notices from a non-Quantity Surveyor background, it is essential the key aspects are stated that amount to the figure assessed or to be deducted so that the recipient can understand it and so it can form the basis of an adjudication.

The decision also serves as a warning to experienced Contractors seeking to use the inexperience of Employers (whether residential or not) who perform contract roles to contend payment or pay less notices are invalid. Specifically, the Court considered it very important that payment and pay less notices do not become a “technical battleground”, i.e. where one party seeks a potentially unfair advantage by relying on the applicable short time periods to recover or withhold sums that could not ultimately be justified upon detailed analysis.

If you have any questions or wish to discuss how the above principles apply to your construction contracts/projects or disputes, please contact James Vernon.

This article includes additional commentary from Kayleigh Rhodes.

[1] S106(1)(a) of the Construction Act – “This Part does not apply to “to a construction contract with a residential occupier”

[2] RBH Building Contractors Ltd v James & Anor [2025] EWHC 2005 (TCC)

[3] S106(2) of the Construction Act provides that: “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 residence”

[4] Gregson & Anr v Cyril Lord Limited [1963] 1WLR 41

[5] Section 111(3) of the Construction Act provides that: “The payer…[may] give to the payee a notice of the payer’s intention to pay less than the notified sum”. Section 111(4) sets out the requirements for a valid payless notice: “A notice under subsection (3) must specify: (a) The sum that the payer considers to be due on the date the notice is served; and (b) The basis on which that sum is calculated.”

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