Challenges to Adjudication Enforcement

The benefit of commencing adjudication proceedings is that it is a swift and fairly cost effective form of dispute resolution. However, what happens when a party does not comply with an adjudicator’s decision and raises various jurisdictional challenges at Court in an attempt to avoid enforcement of the Decision?

This was considered in the case of Lapp Industries Ltd (LAPP) v 1^st Formations Ltd (Formations) [16.04.25].

Facts

In 2022, LAPP was engaged by Formations under a contract to carry out works relating to the refurbishment of the reception, business centre, and second and third floors at 71 – 75 Shelton Street, London WC2H 9JQ.

LAPP issued an interim application for payment to Formations for the value of £120,000 (inclusive of VAT) (“the Application”). LAPP then brought adjudication proceedings against LAPP claiming the sum stated in the Application.

In response, Formations raised various jurisdictional challenges arguing that:

• there were numerous contracts between the parties and not a single contract as alleged
• the Application was not a valid application for payment
• the adjudicator lacked jurisdiction because many disputes under numerous contracts had purportedly been referred, rather than a single dispute or difference permitted by s108 of the Housing Grants Construction and Regeneration Act 1998.

The adjudicator rejected Formations’ jurisdictional challenges, concluding that the parties had entered into a construction contract and that there was only one contract in dispute.  As such, the Application was valid and LAPP were consequently successful in the adjudication proceedings.

Formations’ did not pay the Decision sum and LAPP issued summary judgement enforcement proceedings for payment of such sum.  

Formations’ repeated its challenges in the adjudication proceedings (that there were multiple contracts and there was no valid application for payment). It also raised an argument 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 them.

Judgment

The Court rejected Formations’ arguments and granted summary judgment in favour of LAPP as follows:

Single Contract and Jurisdiction

The parties had agreed to expand the scope of the construction contract through a series of further accepted quotations. There was a single contract and single dispute, even though the contract had grown in scope compared to the initial engagement. Relevant factors included that: the parties were businesses who were not concerned with artificially carving up a single ongoing engagement; the work was all at a single site; both parties referred to a singular "project"; there were at least 14 quotations and it would be surprising to have 14 separate contracts between two parties at a single site; the scenario of an initial limited engagement which was gradually expanded was not unfamiliar in the construction industry.

The adjudicator had to decide whether the application was a valid payment application; if there were multiple contracts, then a single application would not have been valid. The adjudicator’s decision on the substantive point necessarily contained within it a binding decision on jurisdiction. The jurisdiction arguments were rejected.

Point not put to Adjudicator

The adjudicator had to consider whether the Application was a proper application within the contract, which the adjudicator had done. The adjudicator’s decision flowed from the material before her, including material from Formations. The adjudicator’s reference to the parties' previous course of dealing, on which Formations relied, did not go to the heart of the dispute and was not central to her reasoning.

Defences dealt with

The adjudicator had carefully noted Formations’ argument that the Application did not comply with requirements, but reached an overall conclusion about its validity, taking into account both parties' contentions. There was no breach of natural justice. The adjudicator had also clearly considered an argument about an implied withdrawal/estoppel/waiver as a composite issue. Moreover, the adjudicator had not deliberately failed to deal with any defence, and an inadvertent failure would only render a decision unenforceable in exceptional cases. Finally, the two arguments mentioned were not material to the outcome

Comment

This is an important judgment which reviews all legal authorities on the arguments above.

A party seeking to avoid adjudication enforcement proceedings where there are multiple quotations may seek to argue that these quotations relate to separate construction contracts. However, on the facts of this case, this argument was rejected.

This case also highlights the difficulties with raising natural justice arguments in adjudication proceedings and the court’s approach to such arguments.

The courts understand the importance that is put on adjudicators to make a decision in a swift and high pressure environment so some leeway is given before a court is willing to interfere with and reverse an adjudicator’s decision.