1. Is taking the parties’ previous course of conduct into account a “frolic” of the adjudicator’s own?

Lapp Industries Ltd v 1^st Formations Ltd [2025] EWHC 943 (TCC) [Lapp Industries Ltd v 1st Formations Ltd [2025] EWHC 943 (TCC) (16 April 2025)]

Factual Background

In 2022, Lapp Industries Ltd (“Lapp“) was engaged by Formations Ltd (“Formations“) under a contract to carry out the refurbishment of the reception, business centre and second and third floors of a property.

In April 2023, Lapp sent an application for interim payment to Formations (the “Application“). Formations failed to issue a valid Payment Notice or Pay Less Notice and therefore Lapp claimed that the Application became the Default Payment Notice and Lapp was entitled to the sum stated in the Application of £120,000.00. Formations did not pay.

Lapp referred this dispute to adjudication.   Formations raised a jurisdictional challenge, that there was more than one contract between the parties and therefore that Lapp’s notice of adjudication referred more than one dispute under more than one contract. This argument was rejected, and the adjudicator concluded that the parties had entered into a single construction contract.

Formation then argued that the Application was not a valid application for payment. The adjudicator concluded that the Application was valid, the notified sum was £120,000.00 and Formations was to pay within 14 days. Formations did not pay and Lapp issued court proceedings to enforce the adjudicator’s Decision via summary judgment.

Formations repeated its more than one contract jurisdictional challenge raised in the adjudication and also raised a new argument that the adjudicator had breached the rules of natural justice by undertaking a “frolic of her own” and/or failing to consider two of Formations’ defences.

Judgment

CPR Part 24.3 provides that the Court may give summary judgment if it considers that the party has no real prospects of succeeding in the claim, defence or issue and there is no other compelling reason why the case or issue should be disposed of at trial. It is well known that the Court will strive to uphold and enforce an adjudicator’s decision [1] and the defendant has to put material before the judge to show that there is a defence with a real prospect of success [2].

With regards to Formations’ more than one contract argument, the Court applied principles of contractual interpretation and found that the parties agreed to expand the scope of the initial construction contract through a series of further accepted quotations and concluded that the parties had a single contract that grew in scope rather than multiple separate contracts. The Court held that this situation whereby parties engage on an initial limited basis and gradually expand the scope of works is common in the construction industry. The Court also considers that Formations’ argument for multiple contracts was unrealistic as the parties treated the works as a single project at a single site and references to a single final account supported the single contract argument.

The Court noted that breach of natural justice challenges should only succeed in the plainest cases and that adjudicators are often tasked with resolving complex disputes in a short time frame.

In respect of the “frolic” complaint, the Court referred to Roe v Wates [3] which held that an adjudicator must not decide on a factual or legal point that has not been argued in the submissions. Formations argued that the adjudicator here relied on the parties’ course of dealing regarding previous advance payments, an issue which Formations said had not been raised by either party. The Court found this argument to be unconvincing as the adjudicator had to decide on the validity of the Application and this required consideration of the parties’ previous course of dealings. The observation made by the adjudicator on the parties’ course of dealings directly flowed from material put forward to the adjudicator by Formations and therefore the adjudicator was able to take this into account in reaching her decision.

With regards to Formations’ argument that the adjudicator did not consider all of Formations’ defences, the Court concluded that the adjudicator did consider all arguments and even if there were failures by the adjudicator these were deemed not deliberate or material to the outcome.

Accordingly, the Court granted summary judgment in favour of Lapp.

Takeaway points

An evolving scope of works on a single project is likely to be treated as a single construction contract and so it is key to expressly state if a particular package of works is intended to be carried out under a new contract.

This adjudication was a “smash and grab” claim and is therefore a  reminder that paying parties will open themselves up to automatic liability if they fail to serve a valid payment notice or pay less notice.

This judgment reenforces the Court’s commitment to enforcing an adjudicator’s decision and that the threshold to successfully raising a jurisdictional or breach of natural justice defence remains high. In particular, natural justice challenges must demonstrate material failure by the adjudicator that goes to the very core of the dispute.

[1] Carillion Construction Limited v Devonport Royal Dockyard Limited [2006] BLR 15

[2] Iluminesia Ltd (ta AlterEgo Facades) v RFL Facades Ltd [2023] EWHC 3122 (TCC)

[3] Roe Brickwork Ltd v Wates Construction Ltd [2013] EWHC 3417 (TCC)

2. How will the Court assess the level of security required to enforce an adjudicator’s decision where one party is insolvent?

Midas Construction Ltd (In Administration) v Harmsworth Pension Funds Trustees Ltd [2025] EWHC 1122 (TCC) [https://www.bailii.org/ew/cases/EWHC/TCC/2025/1122.html]

Factual Background

Harmsworth Pension Funds Trustees Ltd (“Harmsworth“) engaged Midas Construction Limited (“Midas“) as Sub-Contractor under an amended JCT Design and Build Sub-Contract 2011 for works at a development at Unity Street, Bristol (the “Contract“). Midas was in Administration at the time of issuing these proceedings against Harmsworth.

Clause 8.7.4 of the Contract contains a termination mechanism in the event of Contractor insolvency. Harmsworth terminated and proceeded to engage third parties to complete the Works. The Contract contains a final account valuation exercise to be calculated after completion of the Works by Harmsworth which required Harmsworth to prepare a statement setting out:

1. The amount of expenses properly incurred by Harmsworth and any direct loss and/or damage caused to Harmsworth and for which Midas is liable, whether arising as a result of the termination or otherwise;
2. The amount of payments made to Midas; and
3. The total amount which would have been payable for the works in accordance with the Contract

Clause 8.7.5 of the Contract confirmed that if the sum of items 1 and 2 above exceeded the sum at item 3 above then the difference shall be a debt payable by Midas to Harmsworth or if that sum is less, by Harmsworth to Midas.

The statement issued by Harmsworth calculated that the sums under items 1 and 2 were the same as the sum under item 3. As such, Midas had been paid in full, and no further sums were due to either party.

Midas disputed the sum that Harmsworth said had been paid to Midas to date (item 2 of the calculation) and argued that it was owed money.

Midas referred this dispute to an adjudication (the “First Adjudication“). The adjudicator decided in favour of Midas and ordered Harmsworth to pay the sum claimed to Midas.

Harmsworth did not pay. Harmsworth argued that no payment was due because it was owed money by Midas under a separate Building Contract.

So Midas then brought a second adjudication (the “Second Adjudication“) requesting a declaration that no sums were owed to Harmsworth under the separate Building Contract. This adjudicator found in favour of Midas.

Midas therefore had two adjudicator’s decisions in its favour stating that Midas was owed money from Harmsworth.

Harmsworth still did not pay so Midas sought enforcement of the First Adjudication and the Second Adjudication in the Court by way of summary judgment.

Harmsworth defended the enforcement on the following grounds:

1. There was inadequate security for the cost of final proceedings that Harmsworth may bring following enforcement; and/or
2. The enforcement claim was champertous (an arrangement where someone, who is not a party to the proceedings, provides funding in exchange for a share of any potential proceeds from the case).

Judgment

Harmsworth’s champerty argument was not pursued by Harmsworth with any force at the hearing and the Court dismissed this argument entirely. The Court then turned to the issue of security.

When assessing the amount of security required to enable an enforcement where one party is insolvent, the Court must look at the actual issues to be determined in final proceedings. The Court will also give credit for work already done in the adjudication and elsewhere and how this reduces the future costs that will be required. The aim of assessing the security required is that the level of security must place the paying party in a similar position to if the company was solvent [4].

Midas argued that security should be assessed in stages with Midas providing sufficient security to cover final determination of the issues in the First Adjudication only with security for final determination of the Second Adjudication to be provided at a later date. The Judge considered that it would be unfair on Harmsworth to stage any security when this would prejudice Harmsworth. Harmsworth argued that the best way to advance its arguments would be to seek final determination of issues in the Second Adjudication first or to run both final determination claims at the same time as a single action.

Accordingly, the Judge considered that the correct approach was to assess the level of security required for Harmsworth to seek final determination of all issues in a single action.

Harmsworth sought security of £568,616 for final determination of the First Adjudication and £767,105 for final determination of the Second Adjudication. Midas argued for much smaller figures of £55,000 and £258,000 respectively.

It was held that security would be set at the amount of £150,000 and £400,000 respectively. In arriving at these sums the Court considered that the parties would need to go back through both adjudications and there may be a requirement for multiple witnesses’ evidence to be produced on a range of issues such as timing and quantum.

Takeaway points

This case confirms that insolvent parties will need to provide significant security to secure enforcement of an adjudicator’s decision. This leaves Insolvency Practitioners with the question of whether referring a dispute to adjudication will achieve any practical utility.

It is also important to note that the paying party does have the right to come back to Court to obtain further security if the original estimates were not sufficient.

[4] Meadowside Building Developments Ltd (in liquidation) and 12-18 Hill Street Management Company Ltd [2019] EWHC 2651 (TCC)

3. Can WhatsApp messages form a binding construction contract?

Jaevee Homes Limited v Mr Steve Fincham (trading as Fincham Demolition) [2025] EWHC 942 (TCC)

[Jaevee Homes Ltd v Fincham (t/a Fincham Demolition) [2025] EWHC 942 (TCC) (16 April 2025) ]

Factual Background

In 2023, Steve Fincham, trading as Fincham Demolition, was engaged by Jaevee Homes Limited (“Jaevee“) to carry out demolition works of a former nightclub in Norwich. Regular communications between the parties occurred throughout the months of April and May, where a series of emails and WhatsApp messages set out what was expected of Mr Fincham and on which Mr Fincham set out his quotation. It was during this early communication where a price of £248,000 was agreed.

Mr Fincham was given the news that he had been awarded the tender on 17 May 2023 through the following correspondence:

[17/05/2023, 17:43:15] Steve Fincham: Ben Are we saying it’s my job mate so I can start getting organised mate

[17/05/2023, 20:06:42] Ben James: Yes

A subsequent short form subcontract and purchase order were then sent to Mr Fincham for review just over a week later on 26 May, although neither document was acknowledged or signed. From 9 June to 27 July 2023, Mr Fincham sent 4 invoices to Jaevee which Jaevee did not pay on the basis that they were invalid.

Mr Fincham referred the non payment to adjudication and the adjudicator ordered Jaevee to pay the sums claimed  alongside interest and late payment compensation.

With a view to avoiding payment Jaevee then brought a Part 8 claim to the Court seeking a determination on the terms of the agreement between the two parties.

Judgment

A key issue to be decided was whether the terms of the agreement between the parties were to be taken from the email and WhatsApp exchanges, or conversely, whether these terms should be taken from the later sent purchase order and short form subcontract. Jaevee argued for the latter, on the basis that the earlier correspondence lacked certainty both in duration and purchasing terms.

The adjudicator had found that the contract terms were in the email and WhatsApp exchanges. The Judge agreed. The absence of duration and purchasing terms in the email and WhatsApp exchanges was not sufficient to prevent a binding contract from being formed.  Implied terms exist under both case law and statute. Without a specified duration, the Court will imply a term that obligations must be complied with within a reasonable time [5]. Furthermore, under the Scheme for Construction Contract (England and Wales) Regulations 1998 (as amended) (“the Scheme“), payment terms are implied into contracts in the absence of express terms.

The Judge therefore found that a binding contract was entered into on 17 May 2023. The WhatsApp messages sent on that day constituted the essential elements of the contract e.g. price, scope of works and payment terms (28-30 days from date of invoice as stated in the messages). Accordingly, the subcontract and purchase order were invalid attempts to constitute an agreement which had already been concluded. The Court held that invoices were to be issued monthly, with Mr Fincham making an application for payment on this basis. The invoice would then be paid within 28-30 days of the application. The WhatsApp messages did not specify how monthly instalments were to be calculated, therefore the Scheme stepped in to provide for this.

The second issue to be decided was whether the invoices sent by Mr Fincham constituted valid applications for payment. The Court summarised the effect of both the Scheme and the Housing Grants, Construction and Regeneration Act 1996 (as amended) (the “Construction Act 1996“), stating that valid applications for payment must clearly outline the basis on which the sum is calculated. The Court found several factors which were relevant in determining the validity of the invoices, referring to the guidance given by the Court in Advance JV v ENISCA [6]:

• The Court confirmed it is necessary to consider how a reasonable recipient acting objectively would interpret the invoice/notice.
• The purpose of the notice is of relevance to its construction and validity.
• There is no requirement for a notice to have the title of a pay less notice, or payment notice, in order to be valid.
• Beyond this, the Court clarified that validity would be a “question of fact and degree” and one of the party’s intention.

Based on this guidance, the Court held that all of the four invoices were in principle valid applications for payment under section 110B(4) of the Construction Act 1996, where Jaevee had failed to issue payment notices. However only three of those invoices were ultimately payable, as Mr Fincham was only entitled to make one application for payment per month, and 2 of the invoices were sent in the same month.

Takeaway points

Informal communications in social media applications such as WhatsApp can create legally binding contracts. Implied terms in case law and statute, especially those contained within the Scheme, are capable of “fill[ing] the gaps” [7] in the absence of express terms.

As such parties should take care in early correspondence to make clear that its communications are not intended to be a binding contract by including the wording “subject to contract” at all times and making clear that the agreement will need to be confirmed in a separate written document.

[5] Sutliff v Thirkell [2001] All ER (D) 65 (Jun)

[6] Advance JV v ENISCA Ltd [2022] EWHC 1152 (TCC)

[7] Jaevee Homes Limited v Mr Steve Fincham (trading as Fincham Demolition) at [89]

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