Mr and Mrs Stevens employed Thameside to carry out a major construction contract at their home. Claiming that they had failed to pay amounts due, totalling £190,000, Thameside served a notice of adjudication. The Stevens asserted that a final certificate could not be issued due to quality and other issues and raised a counterclaim: £88,000 for defects and £60,000 for liquidated damages.
The Adjudicator awarded Thameside £88,000. Mr and Mrs Stevens withheld payment of £40,000 in relation to liquidated damages and paid the balance.
In the enforcement proceedings, Mr Justice Akenhead set out his views on setting-off against or withholding sums, which an adjudicator has said are to be paid. He described a process in which the first exercise should be to interpret what the adjudicator has decided. You then distinguish between the decisive and directive parts of the decision. The general position is that (subject to limited exceptions) decisions which are directive are to be honoured and so no withholding against payment should be permitted.
The adjudicator directed that payment should be made within 14 days, made it clear that he had allowed nothing for liquidated damages and that there should be no set-off. However some confusion arose because he decided that issues including the date of practical completion and liquidated damages should be left over ‘to another day’. The Judge ruled this to be an error and said that the issue of liquidated damages was part of the dispute because it was raised as a defence by the Stevens. However, the Stevens had paid out over half of what the adjudicator ordered and in that sense they had accepted that he had jurisdiction. They therefore argued that the adjudicator was treating his decision as if it were an interim certificate and therefore there could be a later set-off or withholding against his decision.
The Judge disagreed: there was no good reason to assume that the adjudicator meant anything other than that the specified sum would be paid within 14 days. But he noted that Mr and Mrs Stevens could themselves proceed to adjudication in respect of the liquidated damages claim. However, they did have to pay the £40,000 plus costs first of all.