Adjudication Case Law update for Summer 2025

As we move into the final quarter of 2025, the Technology and Construction Court (TCC) has delivered several pivotal rulings that clarify key aspects of adjudication enforcement. This inaugural bulletin analyses some of the most significant cases from the past season, offering insights for professionals navigating construction law, which reinforces the courts’ approach in enforcing adjudication decisions.

1st Formations Ltd v Lapp Industries Ltd [2025] EWHC 943 (TCC): Request for ‘on account’ payment in an application for payment

Brief background:

The dispute arose from a construction contract where Lapp Industries Ltd ("Lapp") was the contractor and 1st Formations Ltd ("Formations") was the employer. The relationship had become strained, and the parties were engaged in negotiations concerning the final account. Within this context, Lapp issued an Application for Payment (AFP). This AFP contained a detailed valuation breakdown, indicating a gross valuation of £341,854.32. However, in a covering email and within the application itself, Lapp explicitly stated it was "requesting on account" a reduced sum of £100,000 plus VAT, ostensibly to facilitate cash flow during the ongoing negotiations.

Formations failed to issue either a Payment Notice or a Pay Less Notice. Leveraging the default provisions of the Housing Grants, Construction and Regeneration Act 1996 (the "Act"), Lapp argued that the £100,000 became the "notified sum" payable. They successfully obtained an adjudicator's decision to that effect. When Formations refused to pay, Lapp commenced Part 7 proceedings to enforce the decision. Simultaneously, Formations initiated its own Part 8 proceedings, seeking a declaration that the AFP was invalid from the outset, thereby nullifying the adjudicator's decision.

Parties’ position:

• Formations' Position: Formations mounted a multi-pronged attack on the AFP's validity. Firstly, they argued it constituted a non-compliant application under the Scheme for Construction Contracts (the "Scheme"). Their contention was that Paragraph 2 of the Scheme required an application to state the sum due—defined as the difference between the total value of work and amounts previously paid—not a lesser, arbitrary sum "on account." Secondly, they claimed the document was ambiguous and not, in substance, a valid interim application. They pointed to: (a) the discrepancy between the total valuation (£341k) and the sum requested (£100k); (b) an incorrectly stated payment due date; and (c) a notation that the figures were "provisional... subject to any agreed adjustment."

• Lapp's Position: Lapp argued for a commercial and pragmatic reading. They contended that the AFP was unequivocally a claim for payment of £100,000. The detailed backup demonstrated the basis of their claim, and the "on account" language was merely descriptive of the fact that it was not a final account. The errors, they argued, were minor and did not obscure the fundamental purpose and demand of the document.

The Court's position:

The TCC dismissed Formations' claim, delivering a robust judgment that championed substance over form.

• On the core "on account" argument, the court rejected Formations' interpretation as "absurd." It held that the Scheme mandates how the value is to be calculated, but it does not prohibit a payee from seeking payment of a portion of that value. The court reasoned that it is a common and legitimate commercial practice for a contractor to apply for a specific sum to aid cash flow, especially during final account discussions.

• Addressing the alleged ambiguities, the court systematically found them to be inconsequential. The difference between the valuation and the sum requested was explained by the "on account" nature of the request. The misstated due date was an error that did not affect the calculable due date under the contract or Scheme. The "provisional" label, read in context, referred to the ongoing final account assessment and did not render the immediate payment claim for £100,000 invalid. The court reiterated established principles, warning against "nice points of textual analysis" and "artificial or contrived" arguments designed to invalidate payment notices.

What does this mean in practice?

This judgment reiterates the courts' aversion to technical arguments that seek to invalidate payment applications on artificial grounds. The focus remains on the substance and intent of the document. Parties challenging notices must demonstrate genuine ambiguity, not mere procedural infelicity. The Court’s approach to interpret AFP was a commercial one, to avoid textual analysis or arguments, concluding that the AFP was clear in seeking £100,000 plus VAT.

2. RBH Building Contractors Ltd v Jame [2025] EWHC 2005 (TCC): Jurisdiction, Fees, and the Residential Occupier

Brief Background:

RBH Building Contractors Ltd ("RBH") was engaged by Mr. and Mrs. James under an oral contract for significant demolition and reconstruction of their home. RBH submitted a substantial application for payment. The Jameses responded with a Pay Less Notice valuing the sum due at £0. RBH, disputing the validity of this notice, referred the matter to adjudication. The adjudicator found the Pay Less Notice invalid and awarded RBH the full applied-for sum, also directing that the Jameses were liable for his fees. The Jameses then challenged the enforcement of this decision.

Parties' Position:

• The Jameses' Position: Their primary defence was a jurisdictional one: they claimed to be "residential occupiers" under s.106 of the Act. This provision exempts contracts with a party who "intends to occupy" the dwelling as their residence from the statutory adjudication regime. They argued that as they had always intended to live in the property, the Act did not apply, the adjudicator lacked jurisdiction, and his decision was void. Regarding fees, they argued it would be unjust to enforce the adjudicator's fees order when the underlying decision was a nullity.

• RBH's Position: RBH sought to enforce the adjudicator's decision, arguing that the residential occupier exemption was not engaged or was waived.

Court's Position:

Three issues were considered in this case:

• Whether the Jameses were a residential occupier pursuant to s.106 of the Act (Housing Grants, Construction and Regeneration Act 1996)

• Whether the pay less notice was valid

• Who was liable to pay the Adjudicator’s fees

Regarding the first issue, the "residential occupier exemption" under section 106 of the Act was central to the case. This provision suspends the statutory adjudication and payment rules when one of the contracting parties is, or intends to be, a resident of the dwelling. The purpose of this exemption is to shield homeowners, who are typically unfamiliar with such formalities, from the rigorous requirements of the Act. The application of this exemption was critical, as it would have rendered the Adjudicator without jurisdiction, making their Decision unenforceable. Although the Jameses had never lived in the property and had put it on the market, they successfully argued that their original intention at the time of contracting was to reside there. The Court found that, while the evidence was not conclusive, the Jameses had a realistic chance of proving the exemption applied. Consequently, the Court refused to enforce the Adjudicator's Decision and denied summary judgment in the Part 7 Proceedings.

On the second issue, concerning the Part 8 Proceedings, the Court ruled that James had in fact served a valid pay less notice. It determined that the notice, which detailed the withheld sums and reasons across 11 bullet points, was sufficiently clear for someone with knowledge of the project to understand.

Finally, on the third issue regarding the Adjudicator's fees, the Court was asked to overturn the Adjudicator's direction for the Jameses to pay them, given that the underlying Decision was now unenforced. The Court declined to do so, upholding the established principle that an adjudicator's allocation of their own fees is final and cannot be challenged.

What does this mean in practice?

In contrast to this case, consider ICCT v Pinto [2019] EWHC 2134 (TCC), a case I successfully represented for ICCT, which demonstrated that a residential homeowner can forfeit their exemption from adjudication by fully engaging in the process without raising jurisdictional objections, even in the absence of an explicit contract clause. The Technology and Construction Court (TCC) upheld an adjudicator's decision favoring ICCT, determining that Mr. Pinto had consented to an "ad hoc" adjudication by participating until the decision was rendered. Thus, it is crucial for residential occupiers/homeowners to raise jurisdictional challenges from the outset. However, the RBH case highlights the risk that, even if residential occupiers succeed in proving an adjudicator's lack of jurisdiction, they might still be responsible for the entire adjudication costs.

3. VMA Services Ltd v Project One London Ltd [2025] EWHC 1815 (TCC): The "Smash and Grab" Defence as a Sword

Brief Background:

VMA Services Ltd ("VMA") submitted its Application for Payment No. 8. Project One London Ltd ("POL"), the employer, failed to serve any Payment or Pay Less Notices. This failure created an immediate payment obligation for the full sum in the application (the "notified sum"). Instead of paying, POL initiated an adjudication, seeking a declaration of the "true value" of the works, which it argued was significantly lower. In its response, VMA did not merely defend the valuation; it asserted that POL's entire adjudication was premature and impermissible because the notified sum remained unpaid.

Parties' Position:

• POL's Position: They relied on the principle from Bresco that a responding party cannot normally obtain a monetary award in its favour via a cross-claim. They argued the adjudicator therefore had no jurisdiction to order POL to pay VMA; he could only dismiss POL's true value claim.

• VMA's Position: VMA argued that the principle of "subjugation" applied. Based on earlier authorities like S&T(UK) Ltd v Grove Developments Ltd, the right to seek a true value is conditional upon first complying with the immediate obligation to pay the notified sum. By failing to pay, POL had forfeited its right to a true value assessment at that time.

Court's Position:

The TCC enforced the adjudicator's decision, providing a sophisticated analysis of the relationship between payment and valuation. The court drew a clear distinction. The Bresco principle prevents a responding party from turning a defence into an independent, affirmative monetary claim in that same adjudication. However, what VMA was doing was different. It was invoking a jurisdictional bar to POL's entire claim. The court affirmed that the obligation to pay the notified sum is immediate and self-contained. A party in POL's position cannot leapfrog this obligation to ask an adjudicator "what is the true value?" without first asking "have I paid what is currently due?"

Because POL had not discharged the notified sum, it was not entitled to commence the true value adjudication. The adjudicator was therefore correct to dismiss POL's claim. Once the true value claim was dismissed, the only live issue was the existence of the unpaid notified sum debt, which the adjudicator was fully entitled to order.

What does this mean in practice?

This case underscores a critical procedural hierarchy: the obligation to pay a notified sum takes precedence over the right to determine the true value. The courts rigorously enforce this principle, affirming their commitment to both the adjudication process and the sometimes harsh finality of its payment rules.

Practically, this provides a powerful tactic for respondents, who can now leverage an unpaid sum both as a shield and a sword. This serves as a vital warning for referring parties to thoroughly investigate any potential unpaid notified sums prior to commencing a true value adjudication.

4. Clegg Food Projects Ltd v Prestige Car Direct Properties Ltd: Adjudicator's Discretion and Natural Justice

Brief Backgroung:

The parties were in dispute over a final account, with significant differences in the valuation of several variation claims. In the adjudication, both Clegg and Prestige presented their own expert evidence and argued for specific rates for these variations. The adjudicator, in an 88-page decision, rejected both parties' figures for five key variations. Instead of splitting the difference, he applied what he determined to be "fair and reasonable rates," which did not correspond directly to either party's submitted case.

Parties' Position:

• Prestige's Position: Prestige alleged a serious breach of natural justice. They argued the adjudicator decided the case on a basis not argued by either party—his own "fair and reasonable" methodology, without giving them an opportunity to comment. This, they claimed, was a "classic case" of a adjudicator "going on a frolic of his own." They also contended his reasons for selecting the rates were inadequate.

• Clegg's Position: Clegg argued that the adjudicator was acting within his wide discretion. The dispute referred was simply "what is the value of the payment application?" and both parties had asked for "such other sum as the Adjudicator sees fit." This granted him a broad mandate to determine the correct valuation.

Court's Position:

The TCC enforced the decision, providing crucial guidance on the limits of natural justice challenges.

• On Natural Justice: The court emphasised that the critical question was the scope of the dispute referred. The dispute was not narrowly defined as "choose between Party A's rate or Party B's rate." It was a broad valuation exercise. In such a context, an adjudicator is expected to use his own experience and expertise to determine a fair value. The phrase "such other sum as he sees fit" was pivotal, as it constituted an express invitation for the adjudicator to use his own judgment. The court also found no material prejudice, as the adjudicator's figures for most variations were actually more favourable to Prestige than either party's proposed figures would have been.

• On Adequacy of Reasons: The court reaffirmed that adjudicators are not required to provide the level of detail expected of a judge. The standard is that the reasons must be sufficient to allow the parties to understand the basis of the decision. The 88-page document, even with "broad brush" reasoning on the specific rates, comfortably met this threshold. The challenge was an attempt to conduct a prohibited merits-based appeal.

What does this mean in Practice?

The courts will typically enforce an adjudicator's decision via summary judgment, a process that can only be resisted by proving a limited set of specific defences, such as a material breach of natural justice, a significant jurisdictional error, or a substantive procedural flaw.

Successfully arguing a breach of natural justice requires a party to demonstrate not only that a breach occurred, but that it was substantial and resulted in genuine prejudice to their case.

A key aspect of this judgment was its recognition of the adjudicator's broad mandate to assess the global value of the account. When the scope of the referred dispute grants an adjudicator wide discretion, they are entitled to form their own valuation based on the evidence submitted, even if their conclusions on individual items differ from the figures advanced by either party.

Furthermore, the case highlights the high threshold for challenging an adjudicator's decision on the grounds of inadequate reasoning. The courts will only entertain such a challenge if the reasoning provided is fundamentally incoherent to the point where a reasonable reader cannot discern its meaning, a standard cited from Gillies Ramsay Diamond v PJW Enterprises Ltd [2003] BLR 48.

How can we help?

Have you received a Notice of Adjudication? Are you planning to issue one? Contact our team at Shemmings Hathaway LLP for assistance with adjudication. We specialise in handling construction law disputes to safeguard your interests and deliver the best outcomes for you or your business. Call us today for a free consultation.

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