It is number 122 in our series of enforcement decisions: Bovis Lend Lease Ltd vs Triangle Development Ltd. The really useful point is that His Honour Judge Thornton has drawn together a handful of past cases that were said by some to be at odds with one other. He explains that they are entirely consistent in their treatment of circumstances in which firms can deduct money from an adjudicator's award.
Bovis was the management contractor for the conversion of Victorian townhouses into swish apartments in London SW8. The JCT98 management form applied. There was a quarrel between Bovis and Paul Brookes Architects, Triangle's contract administrator, after it issued negative payment certificates. Bovis said that was not right, and called for the adjudicator. He agreed with Bovis, and ordered Triangle to pay £158,000. Meanwhile, Triangle terminated or purported to terminate Bovis' employment on the grounds that it was failing to proceed regularly and diligently with its work.
So, when the adjudicator's decision turned up telling Triangle to pay, there was a good head of steam in the dispute. "Shan't pay," said Triangle. "Blow this," said Bovis and went to court to make it pay. Triangle argued that it was entitled to hold on to the £158,000 despite the binding decision.
Now, let's get back to basics. Ordinarily, the decision of an adjudicator will require immediate payment without deduction, cross-claim, abatement or stay of execution. This is because the sum in question is due by virtue of the statutory and contractual provisions requiring compliance. The courts have repeatedly held that no deduction or withholding will ordinarily be allowed. Oh dear, watch out for that word "ordinarily": there are exceptions to the rule, which I will come to. Meanwhile, the rule is that defences or cross-claims not raised in the adjudication cannot be raised later in an enforcement hearing.
The courts have repeatedly held that no deduction or withholding will ordinarily be allowed. Oh dear, watch out for that word ‘ordinarily’ …
Common exceptions are errors of jurisdiction, procedural unfairness or bias on the part of the adjudicator, all of which I have talked about previously. There are at least three further exceptions, and these are more tricky. First, there is what I call the "axiomatic effect" of an adjudication; this happens when, say, the contractor is 10 weeks late and is awarded a six week extension by the adjudicator. The axiomatic effect is that the contractor is four weeks late. Therefore, the employer can set against any adjudication award four weeks worth of liquidated damages.
The second exception has a legalistic title: "The express preservation of equitable and common law rights of set-off." That fancy term is intended to defeat the impregnability of an adjudicator's award. Put simply it brings in by the back door the right to withhold money. In both of these exceptions it is necessary to serve a "withholding notice", or else the right to set-off is lost.
The third case is the one that allowed Triangle to hold on to the £158,000. It is what I call an "express event" clause.
Tony Bingham is a barrister and arbitrator specialising in construction. You can write to him at 3 Paper Buildings, Temple, London EC4 7EY, or email him on email@example.com.