In 1st Formations Ltd v LAPP Industries Ltd [2025] EWHC 1526 (TCC), the Court confirmed its common sense, commercial approach to payment applications. As long as an interim payment application is sufficiently clear in its form, substance and intent, it will be upheld as valid – even if not technically perfect.

What happened?

This case marks the second legal skirmish in quick succession between Formations and LAPP. The dispute arose after LAPP submitted an interim payment application for £100,000 plus VAT “on account” of a larger sum stated to be due on the face of the same application.

Formations failed to serve a payment or pay less notice, but argued the underlying application was unclear and invalid. LAPP persuaded an Adjudicator otherwise and was awarded the £100k; a Decision which it successfully enforced in the Technology and Construction Court.

Formations remained dissatisfied and commenced short-form Part 8 proceedings, in effect asking the Court to reverse the position on substantive grounds.

What did the Court decide?

• LAPP’s payment application was sufficiently clear and unambiguous; to a reasonable recipient “it was obvious” that LAPP was requesting payment of £100,000 plus VAT payable within 14 days.
• The fact that LAPP sought less than the full amount stated as due, or that the sum was said to be based on a provisional valuation and might be subject to any agreed adjustment did not undermine the validity of the payment application.
• The Court will take a common sense, commercial view of payment applications and will not condemn then on artificial or contrived grounds.
• The Judge dismissed each of Formations’ arguments and upheld LAPP’s interim payment application as valid.

What can we learn from this?

The statutory payment regime prioritises clarity and cash flow over technicalities. Applications for payment do not require ‘magic words’ or absolute precision; what matters is that a reasonable recipient can understand what is being claimed and why. The Courts will take a commonsense, practical view of the contents of a payee’s notice and will not adopt an unnecessarily restrictive approach.

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This article contains information of general interest about current legal issues, but does not provide legal advice. It is prepared for the general information of our clients and other interested parties. This article should not be relied upon in any specific situation without appropriate legal advice. If you require legal advice on any of the issues raised in this article, please contact one of our specialist construction lawyers.

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