Adjudication decision upheld: Court rejects jurisdictional and natural justice objections (LAPP Industries Ltd v 1ST Formations Limited [2025] EWHC 943 (TCC))
April 2025Factual background
In these proceedings the Claimant (“LAPP”) sought the enforcement of an Adjudicator’s Decision[1]. The Defendant (“Formations”) resisted this application on two main grounds, namely:
- lack of jurisdiction; and
- breach of natural justice.
The underlying adjudication related to a contract between LAPP and Formations under which LAPP was to carry out works relating to the refurbishment of the reception, business centre, and second and third floors of a building in London.
During the project, LAPP sent to Formations what they asserted to be an application for interim payment under the contract. Formations did not issue any valid Payment Notice or Pay Less Notice. LAPP contended that the total gross amount in the application for payment of £120,000 became the default Payment Notice, with the notified sum to be paid by Formations. This was not paid by Formations however, and so LAPP commenced an adjudication.
During the adjudication Formations raised a jurisdictional challenge on the basis that there were numerous contracts between the parties and not a single contract as alleged by LAPP. Instead, Formations asserted that many disputes under numerous contracts had purportedly been referred to the Adjudicator. The Adjudicator rejected this point following extensive submissions, concluding that the parties had entered into a construction contract and there was only one contract.
The next day Formations served their Response without prejudice to this jurisdictional objection. Their main position was that LAPP’s interim application was not a valid application for payment.
The Adjudicator found in LAPP’s favour. Formations did not pay the sums awarded nor the Adjudicator’s fees, and so LAPP brought proceedings seeking summary judgment.
Although accepting that adjudicators’ decisions are generally to be enforced, Formations raised two arguments in response in the enforcement proceedings:
- a repeat of the jurisdictional challenges (summarised above);
- that the Adjudicator acted in breach of the rules of natural justice by undertaking “a frolic of her own” and/or failing to consider two defences put forward by Formations.
Against that background the Judge dealt with the application on the headings used below.
Enforcement generally
The Judge referred to Carillion Construction Limited v Devonport Royal Dockyard Limited[2] for the principal that wherever possible the court will uphold and enforce an Adjudicator’s decision. The Judge also referred to Iluminesia Ltd (ta AlterEgo Facades) v RFL Facades Ltd[3] for the principal that it is not open to a party seeking to resist summary judgment to rely upon “surmise and micawberism“, i.e. that there may be a defence with a real prospect of success. Finally, the Judge noted that the Court needs to strike a balance between avoiding a mini-trial on the one hand and ensuring that points which can be determined summarily are so decided. This is as per the summary of principles formulated by Lewison J (as he then was) in Easyair Ltd v Opal Telecom Ltd[4] was approved by the Court of Appeal in AC Ward & Sons Ltd v Catlin (Five) Ltd[5].
The jurisdiction argument
Formations submitted that there was more than one contract between the parties and so LAPP had not referred a single dispute under a single construction contract, such that the Adjudicator did not have jurisdiction to decide the dispute.
Formations maintained this view because of the way the project was conducted. There was no written contract between the parties. Instead, quotations were given on numerous occasions for separate pieces of work on the same project. Formations also relied on the fact that there was no definitive specification as the specification was frequently altered both verbally and via written communication.
On consideration of the facts relating to how the project was conducted (which were largely undisputed) the Judge concluded that there was a single construction contract, as the Adjudicator had also previously decided.
The Judge applied the case of Investors Compensation Scheme v West Bromwich Building Society[6] and stated that the parties agreed, on an ad hoc basis, to expand the scope of the construction contract formed in June 2022 through a series of further accepted quotations. The Judge noted that even though the contract had been expanded significantly since June 2022, there was one contract.
The Judge reached this conclusion on the basis that all the work was completed on one site and both parties referred to the works as a “project” under a single ongoing engagement.
Further, the Judge observed that any “other analysis is contrived and unrealistic”. For example, there was no consideration that there was more than one contract prior to the adjudication and had only arisen in the context of a very technical argument on jurisdiction. Such a line of argument may be familiar to lawyers but not generally to those involved in commercial negotiations.
Formations also submitted that the single contract point was not pleaded by LAPP adequately or at all as they did not address that the quotations differed as to their terms and the workscope evolved in a manner inconsistent with a single overarching contract.
The Judge determined that although there may have been shortcomings in LAPP’s pleadings, the task in enforcement proceedings is to consider whether there is a real prospect of Formations showing that there were multiple contracts. The minor differences in the quotations were not sufficient to undermine the overall position of there being one contract and this made commercial sense overall.
The law relating to natural justice
The Judge recognised that Adjudicators have a difficult task in practice, resolving often complex disputes, with a deluge of information from the parties, on an interim binding basis and at speed. The Judge referred to what the Court of Appeal observed in Carillion[7], which discusses the fact that seeking to challenge an Adjudicator’s decision on the ground that they have exceeded their jurisdiction or breached the rules of natural justice is unlikely to succeed, save in the plainest cases. Such challenges are likely to lead to a waste of time and costs.
In addition to the points emphasised from case law, the Judge expressed that a natural justice challenge must show that the relevant failing by the adjudicator complained of “went to the heart of the dispute”. The Judge noted that even if an adjudicator has gone on a “frolic” or has failed, deliberately, to consider a defence that is of no moment unless such failure pertains to a critical part of the decision ultimately reached.
The “frolic” point
The Judge noted that before considering whether there had been “frolic” by the Adjudicator, it is important to remember that the authorities show that the “frolic” line of cases are intended to provide a safeguard for a losing party where the adjudicator has decided the dispute (or an important issue within the dispute) upon a basis as to which the parties have not had the opportunity to make submissions or put forward evidence.
In this regard and making allowances for the ‘rough and ready’ and speedy nature of adjudication, the Court will only intervene where this failure is obvious, and the Adjudicator’s actions have caused unfairness to the losing party. The Judge did not find that this was the case here and held that the Adjudicator considered exactly what was referred in relation to the dispute on the interim application for payment.
In addition, the material that Formations stated evidenced a frolic was in fact part of their exhibit to the Response placed before the Adjudicator. Although reference to that material was not central to the Adjudicator’s reasoning the Judge decided that even if it was, the material had been put before her by Formations who could not now complain of the Adjudicator considering the same.
The defences allegedly not dealt with
Formations contended that two defences it put forward were ignored by the Adjudicator, and these defences were central to Formations’ case. The first defence was that the document relied on by LAPP did not comply with the requirements of Part II of the Scheme for Construction Contracts (Scheme) and was incapable of amounting to a valid application for payment. The second was that the purported application for payment was withdrawn and so could not be relied on as the basis of the adjudication referred by LAPP. The reason for the second defence limb was that LAPP had issued a further invoice, dated 27 April 2023, which requested the sum of £426,854 (expressly stated to include the sum of £100,000 plus VAT in dispute here).
On the first point, for an application for payment to be valid and serve as a default Payment Notice, it must clearly set out the sum which is due and the basis on which the sum is calculated. However, it does not need to be perfectly drafted and so whether a notice is valid or not is a question of fact and degree using a common sense and practical view. The Judge considered that the Adjudicator had addressed this defence and agreed with the conclusion that the application for payment was valid based on the parties’ submissions.
On the second point, the argument around the further invoice was one of implied withdrawal/estoppel/waiver. Formations submitted that the Adjudicator in her decision mentioned only estoppel and waiver and did not address withdrawal, meaning that the decision was inadequate. The Judge did not agree. The Adjudicator had identified the defence point raised and, treating the elements as a composite, addressed them together. The Adjudicator had not been persuaded by Formations – there was no breach of natural justice.
The Judge went onto discuss some more general points for rejecting Formations’ complaints under this challenge.
Firstly, the Judge noted that an Adjudicator’s failure must be deliberate. There was nothing in this case to suggest that is what happened. The defence was also referred to in the Decision.
Secondly, any failure on the part of the Adjudicator (and in the Judge’s view there was not one) must be material to the outcome.
Thirdly, a statement in the decision stating “I have considered all material that was submitted by both Parties. Any omission to refer to any material in this Decision should not be taken as a failure to have taken such material into account and given it all due and proper weight.” was not merely a “boilerplate” clause as raised by Formations. In addition, the Adjudicator did not have to deal expressly with every point argued.
It is notable that on these points and the “frolic” complaint, the Judge observed that this appeared to be “a classic case of a losing party seeking “to comb through the adjudicator’s reasons and identify points upon which to present a challenge”… That is a long way away from a remotely convincing natural justice challenge”.
Conclusions
The Judge rejected all of the defences put forward by Formations to resist enforcement. LAPP was awarded summary judgment for the full sum awarded in the Adjudicator’s Decision together with reimbursement of the Adjudicator’s fees and interest.
The Judge also noted that Formations issued proceedings under CPR Part 8 seeking a declaration that the interim application for payment was invalid in accordance with the Scheme. The Judge had previously concluded that this was not an appropriate use of the Part 8 procedure. The Judge therefore invited Counsel for Formations to consider how Formations wished to pursue this claim under Part 7 and make proposals for directions at a consequential hearing unless otherwise agreed.
Takeaways
This decision is another example of the difficulties a losing party faces in subsequently resisting enforcement of an Adjudicator’s decision. In short, there is a line of case law authority confirming that courts will generally seek to enforce adjudication decisions as a point of principle in line with the parties’ ability to refer disputes at any time and to aid cash flow on projects (i.e. pay now, argue later).
The judgment reaffirms the understood legal principle of what constitutes a valid interim application for payment. An interim payment application may become the default Payment Notice, identifying the notified sum, if no Payment Notice or Pay Less Notice is issued by the paying party. This will mean that the notified sum will become due and payable and could ultimately result in a ‘smash and grab’ adjudication if payment is not made accordingly. It is therefore prudent to understand and follow the agreed contractual mechanisms for payment and ensure that all notices are clear and timely.
The judgment also supports the position that an Adjudicator does not have to separately identify every point raised by a party during adjudication submissions. As is often the case, an Adjudicator will confirm that all submissions have been read and from those submissions key issues fundamental to deciding the dispute referred are identified and addressed in detail, relying on both parties’ positions. Where appropriate, issues raised separately can be dealt with together and such an action does not necessarily mean those issues have not been considered. Further, it is difficult to establish any frolic by an Adjudicator’s enquiry of those issues and the material provided in support to decide the dispute referred.
If you have any questions in relation to this case or require support in respect of how the findings apply to your contracts, projects or disputes, please contact James Vernon. Please continue to keep your eyes peeled for future content in respect of adjudication and adjudication enforcement too.
[1] LAPP Industries Ltd v 1ST Formations Limited [2025] EWHC 943 (TCC)
[2] [2006] BLR 15
[3] [2023] EWHC 3122 (TCC) paras 84-87
[4] [2009] EWHC 339 (Ch) at [15]
[5] [2009] EWCA Civ 1098 at [24]
[6] [1998] 1 WLR 896 at 912
[7] Carillion Construction Limited v Devonport Royal Dockyard Limited [2006] BLR 15, see paragraphs 86 and 87
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