[2025] EWHC 943 (TCC)

A factor which may be relevant to the court's consideration of this

It will be noted that an inadvertent failure to consider one of a number of issues will “ordinarily” not render the decision unenforceable. This qualification admits the possibility that an inadvertent failure may in an extraordinary case bring the principle into play. No clear guidance is available about when an inadvertent failure will render the decision unenforceable. Since the essence of the adjudication process is that the real dispute between the parties should be resolved, it seems to me that the touchstone should be whether the inadvertent failure means that the adjudicator has not effectively addressed the major issues raised on either side. Clearly, as [22.4] of Pilon makes clear, the failure must be material in the sense of having had a potentially significant effect on the overall result of the adjudication.”

In addition to the points I have emphasised above in the authorities, it is necessary, in my judgment, that a natural justice challenge shows that the relevant failing by the adjudicator “went to the heart of the dispute”: see Pilon Limited v Breyer Group PLC [2010] EWHC 837 para 43. Even if an adjudicator has gone on a “frolic” or has failed, deliberately, to consider a defence that is of no moment unless such failure pertains to a critical part of the decision ultimately reached.

Formations’ criticism of the adjudicator in its skeleton argument is that:

“37.

She went off on a frolic of her own in determining that the interim application was valid for reasons not raised by or argued by the parties and on which they were not given the opportunity to comment….

38.

In the adjudication, the adjudicator decided that the purported application for payment was a valid application. One point that was central, in 1st Formations’ submission, to that decision was her reliance on what she stated to be “the Parties’ course of dealing” in respect of previous requests for advance payment (see paragraphs 38, 39, 42 and 43 of the Decision”.

Before considering this complaint, it is important to remember that the authorities show that the “frolic” line of cases is intended to provide a safeguard for a losing party where the adjudicator has decided the dispute (or an important issue within the dispute) upon a basis as to which the parties have not had the opportunity to make submissions or put forward evidence. The touchstone is that the court, making every allowance for the inherently rough and ready and speedy nature of adjudication, will nonetheless intervene where unfairness has occurred.

That is not this case. I say that for the following reasons.

First of all, 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, as set out at paragraphs 37 to 48 of the Decision. She was driven by a number of factors set out in those paragraphs to conclude that the Application was indeed valid.

Secondly, her observation at paragraph 38 of the Decision that there had been previous requests for advance (i.e. on account) payments flowed from the material which Formations had put before her as an exhibit to the Response. This is simply not a case of an adjudicator seeking to determine an issue wholly or partly on the basis of material that has not been put before her by the parties.

Thirdly, it is apparent that the reference in the Decision to “course of dealing” was very far from going “to the heart of the dispute”. At most it was a further factor which supported her overall view that the Application was valid: see paragraphs 38, 39 and 42 of the Decision. When the Adjudicator came to summarise her views at paragraph 48, the course of dealing point is not even mentioned.

In short, the Adjudicator was satisfied, for a number of reasons, that the Application was valid. The “course of dealing” was not central to her reasoning. And even if it was, the material had been put before her by Formations, who cannot now complain of the same.

Essentially two points are said to have been ignored by the Adjudicator. This is put as follows in Formations’ skeleton argument:

“42.

The Adjudicator also failed to consider two of the defences put forward by 1st Formations and in doing so committed a material breach of natural justice because these defences were central to the defence advanced by 1st Formations and/or provide a complete defence to the claim: see paragraphs 35 to 47 of GWM2 [HB/(C.2)1/73-76].

43.Firstly, she failed to consider the defence that “the document relied on did not comply with the requirements of Part II of the [Scheme]” (Response, para 14(9) [HB/(E.3)4/210] and “the Referring Party is not entitled to any payment because: … (1) The documents relied upon as giving rise to an entitlement did not comply with the requirements of Part II of the [Scheme] and are incapable of amounting to a valid application for payment for the reasons set out above” (Response para 19(1) [HB/(E.3)4/213].

44.In the relevant section of her Decision on the issue of the validity of the application at paragraphs headed ‘Discussion’, no mention is made of this defence or a rejection of it.

45.Similarly, the Adjudicator fails to deal with the defence that the purported application was withdrawn and so cannot be relied on, because LAPP issued a further invoice dated 27 April 2023 which requested the sum of £426,854.52 expressly stated to include the sum of £100,000 plus VAT claimed on 14 April 2023: see paragraphs 19(2)-(4) of 1st Formations’ Response.”

I will take these points in turn.

As regards the Scheme Defence, the Adjudicator carefully noted the points made at paragraphs 6 and 33 of the Decision. Her overall conclusion on the validity of the Application was set out at paragraph 48 of the Decision as follows:

“It is not necessary for a payment notice to be perfectly drafted. Whilst it must clearly set out the sum which is due and/or to be deducted and the basis on which the sum is calculated; beyond that, the question of whether a notice is a valid notice is a question of fact and degree. Taking a commonsense, practical view of the contents, I am of the view that the Application for Payment makes clear what is being held and why and therefore, I am reluctant to intervene to find reasons that would render the Application for Payment invalid or ineffective which I find to be a valid notice."

It is apparent from this passage that the Adjudicator reached an overall view on the validity of the Application, taking into account all the contentions urged on each side. There was no breach of the rules of natural justice. Formations may not agree with her reasoning, but that is nothing to the point.

In relation to the withdrawal issue, the Adjudicator again carefully noted the points made at paragraphs 6 and 57 of the Decision. It is apparent from these paragraphs that she regarded there as being an issue of implied withdrawal/estoppel/waiver arising out of the further invoice. She rejected Formations’ case on this at paragraph 65 of the Decision.

It was submitted on behalf of Formations that paragraph 65 was an inadequate response to this part of its case, because the adjudicator referred to estoppel and waiver but did not mention withdrawal. I do not agree. As I have explained, she regarded this as a composite issue and she was not persuaded by it. There is no breach of natural justice.

Leaving aside the two individual issues, I would add the following general reasons for rejecting Formations’ complaints under this heading.