Beck Interiors Ltd v Classic Decorative Finishing Ltd [2012] EWHC 156 (TCC)  

CDF were engaged by Beck to carry out internal and external decoration works. Disputes arose and an adjudicator held that Beck was entitled to the sum of £36k plus VAT. CDF refused to pay arguing that the sum was not due as Beck owed CDF the sum of €60k relating to a projects in Dublin. Beck issued enforcement proceedings. CDF said that they were entitled to set-off against the adjudicator’s decision sums they claimed were due under a separate contract in Dublin. In the absence of a contractual right to set-off , did CDF have any equitable set-off rights? Mr Justice Coulson held that the matters raised by CDF were not an arguable defence to Beck’s claim for the following reasons:

  1. The general principle is that it is rare for the court to permit the unsuccessful party in an adjudication to set-off against the sum awarded by the adjudicator some other separate claim. That would defeat the purpose of the Housing Grants Act;
  2. There are two possible exceptions; fi rstly where there were express set-off provisions in the contract, and secondly where the adjudicator did not order immediate payment; instead giving a declaration as to the proper operation of the contract;
  3. Neither of those exceptions applied here. There was no express contractual set-off provision in the subcontract and the adjudicator had told CDF to pay Beck “without further ado”.
  4. There remained the question as to whether CDF had any right of equitable set-off . Reference was made to the case of Federal Commerce & Navigation Limited v Molena Alpha Inc [1978] 1 QB 927 where Lord Denning said:  

“It is not every cross-claim which can be deducted. It is only crossclaims that arise out of the same transaction or are closely connected with it. It is only cross-claims which go directly to impeach the plaintiff ’s demands, that is, so closely connected with his demands that it would be manifestly unjust to allow him to enforce payment without taking into account the cross-claim.”

  1. CDF’s cross claim concerned a contract in Dublin and did not arise out of the same transaction that lay behind the adjudicator’s decision. They were diff erent contracts, entirely diff erent projects, in two separate countries (and therefore two separate jurisdictions) and in two separate currencies. CDF did not therefore have any entitlement to equitable set-off .