@Per @Kev - Can you please check that you have dnsmasq installed, by running 
the following command:
$ dpkg -l dnsmasq

This package is needed to be able to create Adhoc networks. The ability to 
share an internet connection is not built into the distribution. See the 
Documentation:
https://help.ubuntu.com/community/WifiDocs/Adhoc

There is also a Brainstorm request to have Adhoc networks work out of the box:
Idea #15663: Facilitate "Internet Sharing" within Network Manager
http://brainstorm.ubuntu.com/idea/15663/

Can both of you also run the following command to update the bug with apport 
logs:
$ apport-collect 322902

** Changed in: network-manager (Ubuntu)
       Status: Confirmed => Incomplete

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incorrect encryption detected when logging on to WPA ad-hoc wireless network
https://bugs.launchpad.net/bugs/322902
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