Adjudication update

Over the summer of 2025, the construction legal landscape was marked by a series of interesting cases in relation to the enforcement of adjudication decisions. 

Here we examine the following issues considered by the Technology and Construction Court (“TCC”):

1. Can an application for payment request a payment “on account”? - 1st Formations Ltd (“Formations”) -v- Lapp Industries Ltd (“Lapp”) [2025] EWHC 1526 (TCC)

2. Who pays the Adjudicator’s fees if the Decision is incorrect? - RBH Building Contractors LTD (“RBH”) -v- Ashley James and Tracy James (“Jameses”) [2025] EWHC 2005 (TCC)

3. Can a party raise a “smash and grab” defence to a true value adjudication? - VMA Services Limited (“VMA”) -v- Project One London Limited (“POL”) [2025] EWHC 1815 (TCC)

4. Adjudicator’s application of “fair and reasonable rates” – a breach of natural justice? - Clegg Food Projects Ltd (“Clegg”) -v- Prestige Car Direct Properties Ltd (“Prestige”) [2025] 

1. Can an application for payment request a payment "on account"?

1st Formations Ltd -v- Lapp Industries Ltd [2025] EWHC 1526 (TCC)

The Facts

• Lapp issued an application for payment (the “AFP”) to Formations, which, “requested on account” the sum of £100,000 (exc VAT).

• Formations failed to issue a payment notice and/or pay less notice and did not pay the sum applied for.

• Lapp commenced adjudication proceedings, contending that in the absence of a payment notice and/or pay less notice, the AFP became a payee notice in default, and the notified sum of £100,000 (exc VAT) was therefore payable by Formations.

• The Adjudicator decided in Lapp’s favour, and directed that payment of the notified sum be made by Formations within 14 days. Formations did not pay.

• Lapp issued Part 7 enforcement proceedings (the “Part 7 Proceedings”) against Formations seeking summary judgment of the Adjudicator’s Decision.

• The Court rejected Formations’ defences as to natural justice and jurisdiction and in April 2025, granted summary judgment in favour of Lapp.

• On 27 January 2025 (before the hearing of the Part 7 Proceedings), Formations had issued Part 8 proceedings against Lapp, seeking a declaration that the AFP was not a valid application for payment (the “Part 8 Proceedings”). The Part 8 Proceedings therefore proceeded separately before the Court in June 2025.

Key issues

Formations submitted that the AFP was not a valid application for payment as:

1. Contrary to paragraph 2(1) of the Scheme (The Scheme for Construction Contracts (England and Wales) Regulations 1998), the amount applied for was not the difference between an amount determined in accordance with paragraph 2(2) of the Scheme and an amount determined in accordance with paragraph 2(3) of the Scheme – i.e. the amount applied for was not the value of the works carried out to date less any sums paid to date as is required by the Scheme.

2. The AFP was ambiguous and not in substance, form and intent an interim application for payment under the Scheme, specifically:

   1. The total amount claimed to be due was stated to be £341,854.32 (inc VAT), but the payment “requested on account” was £100,000 plus VAT;

   2. Payment was stated to be due, “within 14 days”, and not, “on the expiry of 7 days following the completion of the work to which the payment relates” or “the making of a claim by the payee” (as provided by the Scheme); and

   3. The sums in the AFP were stated to be provisional, “subject to any agreed adjustment following assessment”.

The judgment

In relation to point (1), the Court commented that Formations’ contention constituted an, “absurd reading of paragraph 2 of the Scheme”. Lapp had complied with the provisions of the Scheme, in setting out the difference between the amounts determined in accordance with paragraphs 2(2) and 2(3), but had requested a lesser sum than it was entitled to, “on account”, in the context of negotiations over the final account. The Court decided that this did not invalidate the AFP.

Similarly in relation to point (2)(a), Lapp’s claim for a lesser sum did not render the AFP ambiguous or not in substance form and intent, a valid application for payment.

As to point (2)(b), whilst the Court recognised that the due date for payment as stated in the AFP may have been erroneous, this did not invalidate the AFP.

As to point 2(c) and the reference to the sums claimed being “provisional”, the AFP included a detailed valuation, which, given that information was awaited from Lapp’s electrical contractor and in the context of final account negotiations, did not ultimately invalidate the AFP.

The AFP was a valid application for payment and the Part 8 Proceedings were dismissed.

Commentary

The Court adopted a “commercial” and “common sense” interpretation of the AFP, concluding that it was obvious that Lapp had made an application for payment in the sum of £100,000 plus VAT. Any other approach would, in the Court’s view, “would be to fall into the trap of “nice points of textual analysis or arguments which seek to condemn the notice on an artificial or contrived basis””.

It is interesting to note that the Court confirmed that errors in the AFP, such as referencing the due date incorrectly (which in our experience happens frequently in the industry), did not invalidate the essential validity of the document. 

This decision reinforces the Court’s approach in supporting the adjudication process, particularly when dealing with arguments which seek to invalidate applications for payment (or indeed notices) on technical grounds.

2. Who pays the Adjudicator's fees if the Decision is incorrect?

RBH Building Contractors Ltd -v- Ashley James and Tracy James [2025] EWHC 2005 (TCC)

The facts

• RBH was engaged by the Jameses in relation to the demolition and reconstruction of a residential home.

• RBH served an application for payment claiming the sum of £663,016.16 (the “AFP”). The Jameses served a pay less notice stating the amount due to RBH was £0.

• RBH issued adjudication proceedings, alleging that the pay less notice was invalid, and that the sum claimed in the AFP constituted the notified sum. The Adjudicator declared that the pay less notice was invalid and declared that RBH was entitled to be paid the full value of the AFP.

• RBH issued Part 7 enforcement proceedings (the “Part 7 Proceedings”) against Formations seeking summary judgment in relation to the Adjudicator’s Decision. The Jameses’ defence to the Part 7 Proceedings was, predictably, put on the basis that James was a residential occupier, and therefore the statutory provisions relating to adjudication were not incorporated into the contract, and the Adjudicator therefore had no jurisdiction (rendering the Decision void).

• Separately, and without prejudice to its defence to the Part 7 Proceedings, the Jameses issued Part 8 proceedings seeking a declaration that the pay less notice was valid (the “Part 8 Proceedings”). 

• Accordingly the Adjudicator’s Decision would only be enforced by the Court to the extent that RBH was successful in both the Part 7 and Part 8 Proceedings.

Key issues

The Court was required to consider three key issues;

1. Were the Jameses a residential occupier pursuant to s.106 of the Act (Housing Grants, Construction and Regeneration Act 1996)?

2. Was the pay less notice valid?

3. Who was liable to pay the Adjudicator’s fees?

The judgment

In relation to issue (1), section 106 of the Act provides that the statutory provisions of the Act relating to adjudication (both in respect of the right to refer a dispute to adjudication, and the statutory payment provisions), do not apply, where one of the parties to a contract occupies or intends to occupy the dwelling as their residence. This is commonly referred to as the “residential occupier exemption”. The exemption was intended to protect ordinary homeowners who are often not familiar with the statutory provisions, from the strict provisions of the Act.

Accordingly, if the exemption was engaged, the Adjudicator would not have had jurisdiction to determine the dispute and the Decision would be void.

Whilst the Jameses never occupied the house (and at the time of the judgment the house was marketed for sale), they contended it was their intention to occupy the house at the time they entered into the contract with RBH. The Court concluded that whilst it could not decide the question based on the evidence, the Jameses had a real prospect of establishing that the residential occupier exemption was engaged. 

On that basis, the Court declined to enforce the Adjudicator’s Decision and summary judgment in the Part 7 Proceedings was not granted.

In relation to issue (2) in the Part 8 Proceedings, the Court decided that James had indeed submitted a valid pay less notice. The notice set out by way of 11 bullet points what was being withheld and why, and the Court observed that these would have been understood by any reasonably objective reader who had knowledge of the works. 

In relation to issue (3), the Adjudicator in his Decision had directed that the Jameses pay his fees. The Court subsequently concluded that the Adjudication was wrongly decided and the Decision would not be enforced. The Jameses therefore submitted that the Court should reverse the Adjudicator’s Decision in respect of which party was liable to pay his fees. 

The Court declined to reverse the Adjudicator’s Decision in respect of fees and observed that it was a “settled position” that an adjudicator’s decision on fees cannot be challenged.

Commentary

This case highlights the weight of the residential occupier exemption contained at section 106 of the Act, which, if engaged, can effectively challenge the enforcement of an adjudicator’s decision. The question is of course fact sensitive. Residential occupiers can expressly contract to the adjudication process, however in this case, given the contract between the parties was made orally, and there was no contractual provision for adjudication, the mandatory adjudication provisions of the Scheme could not be incorporated due to the residential occupier exemption being established.

The Court’s conclusion as to the validity of the pay less notice further demonstrates its approach to not apply an unnecessarily restrictive interpretation of such notices but instead to adopt a common-sense approach. 

The Court’s conclusion as to the matter of adjudicator’s fees is also interesting. Whilst it may seem unfair that a party who successfully challenges an adjudicator’s decision should remain required to pay the adjudicator’s fees (particularly so in the circumstances of this case, where RBH had no entitlement to refer a dispute to adjudication in light of the s.106 exemption), there may be sensible policy reasons for adopting such an approach. Not least as an adjudicator’s decision as to how his or her fees should be allocated between the parties may represent more than just the outcome of the decision (and also noting that not all of the arguments raised by parties in adjudication proceedings appear before the Court for final determination). The likely additional resource required of the Court to carry out a detailed assessment of the underlying adjudication proceedings and adjudicator’s allocation of costs, in addition to the substantive proceedings before it, may also be a factor in the Court’s ‘settled approach’.

3. Can a party raise a "smash and grab" defence to a true value adjudication?

VMA Services Limited Project One London Limited [2025] EWHC 1815 (TCC)

The facts

• VMA submitted its application for payment no.8 (“AFP8”) claiming the sum of £106,434.88. POL served no payment notice or pay less notice. 

• POL subsequently issued adjudication proceedings seeking a true valuation of AFP8, claiming that the true value was instead £85,093.59.

• The Adjudicator decided that VMA’s AFP8 was a valid application for payment, and that in the absence of a payment notice and/or pay less notice issued by POL, the sum claimed by VMA in AFP8 constituted the notified sum. Accordingly, the Adjudicator did not carry out a true valuation of the works and stated that POL was required to satisfy its immediate payment obligation to VMA.

• This amounted to a full defence to the claim made by POL.

• POL failed to pay to VMA the notified sum, and VMA issued Court proceedings.

Key issues

Before addressing the central issue in the case, it is worth stating that a referring party in an adjudication has various tactical advantages by virtue of the fact it is the party which refers the dispute. One eminent advantage is the ability to define the dispute (in as narrow or wide terms as the referring party so wishes). A responding party is not entitled to widen the scope of the adjudication by adding further disputes, without consent of the referring party.

However, in order to address this potential imbalance, the Courts permit a responding party to raise any defences it considers properly arguable to rebut the claim before it. In such a case, pursuant to the Supreme Court decision in Bresco (Bresco Electrical Services Ltd (in liq) -v- Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25, (2020) 190 ConLR 1), a responding party’s defence is permitted to include any cross-claim or set off advanced.

However, Bresco confirmed that whilst a set-off or cross-claim may be advanced by a responding party by way of a defence to the referring party’s claim, it cannot operate as an independent claim for a monetary award in favour of the responding party. Therefore, applying Bresco, an adjudicator does not generally have jurisdiction to award a monetary award in favour of a responding party’s set-off or cross-claims.

The Court in the present case was required to consider therefore whether the Adjudicator had jurisdiction to make a financial award in favour of VMA, POL having issued the adjudication proceedings, and VMA having advanced its notified sum claim in defence of the true value adjudication.

The judgment

The Court noted the general rule as per Bresco, however observed that whilst this approach will typically prevail, where there is a determination that a particular sum is immediately due to a responding party, different considerations apply.

In that regard the Court referred to the “principle of subjugation” with respect to notified sums and true value adjudications. In short, a party’s entitlement to commence a true value adjudication is subject to its obligation to satisfy its immediate payment obligation in respect of an outstanding notified sum. 

Therefore, as the Adjudicator decided that the notified sum claimed by way of AFP8 had not been paid by POL, the Adjudicator had jurisdiction to order payment from POL to VMA.

Commentary

This case serves as a useful reminder that the Court’s approach, in line with the Act, is very much, pay the notified sum before seeking a true value adjudication. The Court seemingly favours the robust and sometimes draconian implications of construction payment provisions as it does the adjudication process itself.

The case also provides a useful mechanism for a responding party in the right circumstances, who can not only rely upon an unpaid notified sum to defend a true value adjudication, but may be able to seek payment of that unpaid sum in its favour. Referring Parties should therefore carefully examine whether there are any (or any alleged) unpaid notified sums before commencing a true valuation adjudication. 

4. Adjudicator's application of "fair and reasonable rates" - a breach of natural justice?

Clegg Food Projects Ltd -v- Prestige Car Direct Properties Ltd [2025] EWHC 2173 (TCC) 

The facts

• Clegg issued its application for payment no.37 (“AFP37”) in August 2024. Prestige subsequently issued a payment notice.

• The issues between the parties related to the valuation of eight variations (the “Changes”) and the parties’ respective claims for extensions of time / the levy of liquidated damages. 

• Clegg issued adjudication proceedings against Prestige seeking a declaration as to the value of AFP37, which included a valuation of the Changes. The parties were some c£700,000 apart in their respective valuations of the Changes.

• In his Decision, the Adjudicator valued five of the eight Changes using a, “fair and reasonable rate”, which was not contended for by either party. In respect of these 5 Changes, the parties were some c£400,000 apart.

• Prestige alleged that the Adjudicator had breached the rules of natural justice in using new rates and measurements in assessing the value of the Changes which he did not give the parties an opportunity to comment on before rendering the Decision. Prestige also alleged that the Adjudicator had failed to provide sufficient reasons in relation to the rate applied.

Key issues

The Court was required to determine:

1. Whether the Adjudicator had breached the rules of natural justice by failing to give the parties an opportunity to comment when he applied the “fair and reasonable rate” in respect of the Changes;

2. Whether the Adjudicator provided sufficient reasons in his Decision, specifically to explain the rate applied; and 

3. In the event of such a breach, whether parts of the Decision were severable (i.e. not capable of enforcement).

The judgment

In respect of point (1) the Court did not consider there was a breach of natural justice. The Adjudicator was asked by both parties to award the amounts pleaded by either party or “such other sums as [he] sees fit”. It was relevant that the Adjudicator was required to assess not just the value of the Changes or rates, but the overall valuation of AFP37, and therefore he was entitled to come to a different view than those contended for by the parties.

In arriving at the “fair and reasonable” rate, the Adjudicator was not required to seek further submissions from the parties, nor was he required to set out the details of the methodology used to arrive at his Decision.

Further, the Court did not consider that any alleged breach was material and of considerable importance, nor that Prestige suffered substantial prejudice. Notably, in relation to 6 of the 8 Changes, the Adjudicator’s assessment was more advantageous to Prestige than if the Adjudicator had adopted either of the rates relied on by Clegg and Prestige, or indeed had the Adjudicator crudely split the difference between those rates, all of which both parties agreed he could have done without inviting further submissions. 

In respect of point (2), the Court decided that there was sufficient detail in the 88-page Decision to enable the parties to understand how he arrived at it. Whilst the Adjudicator’s reasons were described as, “broad brush” and that fuller reasons could have been set out, it was not the case that the reasons were inadequate.

On that basis, the Court did not consider whether parts of the Decision were severable and the Decision was enforced.

Commentary

The Court will grant summary judgment to a claimant unless the defendant is able to establish one of the few defences to enforcement, e.g. a breach a natural justice, procedural errors or jurisdictional matters.

If a party is to allege a breach of natural justice, it must not only establish that the breach occurred, but that the breach is a material one and one which has caused it substantial prejudice.

It is notable that the scope of the Adjudicator’s task (i.e. to assess the global value of AFP37), was relevant in the Court’s determination. Where an adjudicator is afforded wide discretion by virtue of the dispute referred, it must be correct that the adjudicator is entitled to make an assessment based on the documents before them, notwithstanding certain individual valuations comprising such an assessment may be different than those pleaded by the parties.

The case also underscores the difficulty in resisting in enforcement on the basis of alleged insufficient reasons. The Court are unlikely to be convinced by such an argument unless the reasons provided by the Adjudicator are, “so incoherent that it makes it impossible for the reasonable reader to make sense of them” (the Court citing Clerk LJ in Gillies Ramsay Diamond).