A London-based contractor has won its court battle over the payment of a £120,000 invoice on the refurbishment of a Covent Garden property.
LAPP Industries Ltd took 1st Formations Ltd to an adjudicator under the Scheme for Construction Contracts Regulations 1998, after it failed to pay an invoice for interim payment.
Formations then disputed the decision, claiming the adjudicator had “no jurisdiction” and there was a breach of natural justice by her undertaking “a frolic of her own”.
However, having heard the evidence at London’s High Court, deputy district Judge Adrian Williamson KC ruled in LAPP’s favour and praised the “difficult” job faced by adjudicators.
Formations engaged LAPP in 2022 to carry out works relating to the refurbishment of the reception, business centre, and second and third floors at 71-75 Shelton Street, London.
In its defence, Formations claimed it had “numerous contracts” with LAPP but “not a single contract as alleged by LAPP”, London’s High Court heard.
“On 14 April 2023, LAPP sent to Formations what it asserted to be an application for interim payment under the contract. Formations did not issue any valid Payment Notice or Pay Less Notice,” Judge Williamson KC said.
“LAPP’s case is that the application therefore became the Default Payment Notice. LAPP says that it was entitled to the notified sum of £120,000 (inclusive of VAT). This was not paid by Formations.”
LAPP commenced adjudication proceedings at the High Court last year under the Scheme for Construction Contracts Regulations 1998. The scheme allows disputes arising under a contract to go to adjudication and gives the adjudicator the power to open up review and revise any decision or certificate under the contract.
Formations challenged the application on the grounds that “the adjudicator lacked jurisdiction because many disputes under numerous contracts had purportedly been referred to her”, the court heard.
Adjudicator Grace Cheng ruled in LAPP’s favour and ordered Formations to pay £120,000 within 14 days.
“On 12 December 2024, following extensive submissions, the adjudicator rejected Formations’ jurisdictional challenge, concluding that the parties had entered into a construction contract and that there was only one contract,” Judge Williamson KC said.
However, Formations sought summary judgement of the decision on the grounds that the court had no jurisdiction and there was a breach of natural justice by the adjudicator undertaking “a frolic of her own” – a “frolic” complaint refers to a situation where an adjudicator has decided the dispute on a point not put before them.
After hearing the case, Judge Williamson KC threw out Formations’ appeal.
“I do not accept that the adjudicator undertook any form of frolic. She had to consider whether the application, which was headed ‘Application for interim payment’ and sought an ‘on account’ payment of £100,000 plus VAT, was a proper application in accordance with the contract between the parties and the scheme. That is exactly what she did do,” Judge Williamson KC said.
“I reject all of the defences put forward by Formations. There will be summary judgement in favour of LAPP in the sum awarded in the decision, together with the fees of the adjudicator and interest.”
Judge Williamson praised the work of adjudicators and said they have a “difficult task”.
“They have to resolve often complex disputes at breakneck speed,” he said.
“They are deluged with submissions from all concerned, which are, equally, prepared in great haste. It has to be borne in mind, also, that adjudicators are required only to provide a temporarily binding solution to a dispute.
“Their decisions are not to be compared with those of the Supreme Court or Commercial Court, drafted and redrafted over a long period following extensive submissions from the finest advocates available.”