Parsons Plastics (Research and Development) Ltd v Purac Ltd

A contractual adjudication decision may be subject to set-off and counterclaim where the contract expressly preserves equitable and common-law rights of set-off. A detailed withholding-notice procedure does not necessarily exclude that preserved right where the relevant clauses are expressly made subject to it. An adjudicator’s decision cannot be re-litigated, but it may be adjusted by an otherwise available contractual set-off. A clause making adjudication final and binding can prevent a later arbitration clause from operating where the contractual condition for arbitration has not been met. Summary judgment is available where the evidence shows no real prospect of successfully defending the claim.

The appellants were subcontractors engaged by the respondents on a sewage-treatment-works project. Following a dispute about milestone payments, an adjudicator ordered payment to the appellants. The respondents then sought to withhold and set off the cost of completing the works and a payment made to a supplier.

The Technology and Construction Court granted summary judgment on the respondents’ claims, made an interim payment order, refused enforcement of the adjudicator’s decision without set-off, and refused a stay of the respondents’ Part 20 claim to arbitration. The issues concerned the interaction between the contractual withholding procedure and preserved set-off rights, the effect of the adjudication clause, and the summary judgment threshold.

1. Appeal dismissed. Clauses 17f and 17g had to be read together. Clause 17g provided a mechanism for withholding sums under clause 17f, but both provisions were subject to clause 31. The express preservation of equitable and common-law rights of set-off meant that failure to serve a clause 17g notice was not fatal to the respondents’ right to set off.
2. The adjudicator’s final and binding decision could not be re-litigated. However, under the subcontract, it could be made subject to an otherwise available set-off or counterclaim. The court left open whether the respondents’ notice of 23 May 2001 complied with clause 17g and whether the adjudicated sum was a sum due under the subcontract for clause 17h purposes.
3. The stay of arbitration was rightly refused. Clause 27h(i) had not been deleted and applied by clause 27h(iii). Clause 28a required arbitration only where clause 27h(i) did not apply. The later determination that the works were not a construction operation did not permit clause 27 to be ignored.
4. The judge applied the correct summary judgment test. Her reference to deciding the issue “on balance” did not invalidate the decision because she had referred to Swain v Hillman [2001] 1 All ER 91 and had considered the evidence. The appellants’ material disclosed substantial breaches, and the respondents had no real prospect of failing on their completion-cost claim. Summary judgment and the £12,000 interim payment were within the judge’s discretion.
5. The appeal was dismissed. The appellants were ordered to pay the respondents’ appeal costs, and the stay of execution was lifted.

• Court of Appeal (Civil Division) — Appeal from judgments of the Technology and Construction Court dated 13 and 21 August 2001. The appeal was dismissed: Parsons Plastics (Research and Development) Ltd v Purac Ltd [2002] EWCA Civ 459.