LAPP Industries Ltd v 1st Formations Limited

Adjudicators’ decisions should generally be enforced unless it is plain that the adjudicator decided a question outside the reference or acted obviously unfairly. On summary judgment, a resisting party must show a defence with a real prospect of success; speculation is insufficient.

Whether successive quotations formed variations of one construction contract or separate contracts is determined objectively, in context. Where that question forms part of the substantive dispute, it may also fall within the adjudicator’s jurisdiction.

A natural justice challenge requires material unfairness going to the heart of the dispute. An adjudicator may decide an issue on a basis neither party advanced if the relevant material and issues were fairly before the adjudicator. An inadvertent failure to address one issue ordinarily does not make a decision unenforceable.

LAPP sought summary judgment to enforce an adjudicator’s decision awarding £120,000 and interest for an unpaid notified sum. Formations challenged enforcement on jurisdictional and natural justice grounds.

The parties had initially agreed works at premises in London and subsequently expanded the works through a series of accepted quotations. Formations argued that the quotations created multiple contracts, so the adjudicator lacked jurisdiction. It also alleged that the adjudicator had relied on an undisclosed reasoning process and had failed to address two defences concerning the validity and withdrawal of the payment application.

The court considered whether there was a real prospect of success on those objections and whether any alleged procedural failure was sufficiently material to justify refusing enforcement.

1. Summary judgment and enforcement. Under CPR Part 24.3, the court could decide the matter summarily because Formations had no real prospect of establishing a defence and there was no compelling reason for trial. Adjudicators’ decisions should be enforced except in plain cases of excess of jurisdiction or obvious unfairness. Speculation or hope that further evidence might emerge was insufficient (paras [12]-[16]).
2. Single contract and jurisdiction. The successive quotations were construed objectively against the commercial background. The works were performed at one site, treated by both parties as one project, paid for through overlapping invoices and advance payments, and expanded progressively. They therefore formed one construction contract, enlarged by agreement, rather than numerous contracts (paras [20]-[26]).
3. The question whether the quotations varied the original contract or created separate contracts overlapped with the substantive question whether the payment application was valid. The adjudicator therefore had jurisdiction to decide it, and any error within that jurisdiction would not invalidate the decision (paras [27]-[30]).
4. Natural justice. A frolic occurs where an adjudicator decides an important issue on a factual or legal basis which the parties had no opportunity to address. The adjudicator may, however, reach a conclusion not advanced by either party where the relevant material was before her and the resulting issues were fairly canvassed. The course-of-dealing point came from material supplied by Formations and was, in any event, only a supporting factor (paras [33], [36]-[42]).
5. A failure to address a defence must be deliberate and material, with an effect potentially significant to the result and going to the heart of the dispute. The adjudicator had addressed the substance of the validity and withdrawal arguments, and any omission was neither deliberate nor material. Her general statement that she had considered all material was not merely boilerplate in the circumstances (paras [43]-[54]).
6. Summary judgment was entered for LAPP for the adjudicated sum, the adjudicator’s fees and interest. A separate Part 8 claim by Formations concerning validity of the application was held to be inappropriate for Part 8 procedure and was to be pursued, if maintained, under Part 7 (paras [55]-[58]).

First-instance enforcement proceedings. No appellate history was stated in the judgment.