Balfour Beatty Construction v Serco Ltd.

An adjudicator’s award must be enforced in accordance with what the adjudicator decided. An employer may set off liquidated damages where the adjudicator’s decision expressly or impliedly determines a specific entitlement to them, provided any required notice has been given. Where the adjudicator leaves the total extension of time unresolved, no specific entitlement to liquidated damages follows logically from the award. The right to set off then depends on the contract and the circumstances. Contractual provisions requiring immediate compliance with an adjudicator’s decision may require payment of the award while extension-of-time and liquidated-damages issues remain open.

Balfour Beatty applied for summary judgment enforcing an adjudicator’s decision requiring Serco to pay £620,664 plus VAT. The adjudicator had granted an interim extension of time to 7 June 2004 and awarded loss and expense, while leaving open whether a further extension was due.

Serco refused payment and sought to set off liquidated and ascertained damages for the period after 7 June 2004. The central issue was whether the adjudicator’s decision had determined Serco’s entitlement to those damages, and, if not, whether the contract permitted the proposed set-off.

1. Nature of the adjudicator’s decision. The adjudicator had granted an interim extension of time to 7 June 2004 and awarded loss and expense for that period. He had not determined the total extension of time due, nor refused any further extension. The question of further extension and any resulting liquidated damages remained open.
2. Applicable principles. Where it follows logically from an adjudicator’s decision that the employer is entitled to recover a specific sum as liquidated and ascertained damages, the employer may set off that sum against money awarded by the adjudicator, provided proper notice has been given where required. Where the adjudicator has not determined the entitlement, expressly or impliedly, the availability of set-off depends on the contract and the circumstances.
3. Application. No specific entitlement to liquidated damages followed from the adjudicator’s decision. Paragraphs 10 and 13 of Appendix A to Schedule 23 required the parties to give effect forthwith to the decision and entitled Balfour Beatty to summary enforcement of the relief awarded. Those provisions were consistent with Part 2 of the Housing Grants Construction and Regeneration Act 1996 and its statutory policy.
4. Serco was therefore required to pay the adjudicator’s award and could not set off the liquidated damages it claimed. It was unnecessary to decide whether Serco’s letters constituted effective withholding notices under section 111. Balfour Beatty obtained summary judgment. Issues concerning any extension of time after 7 June 2004 and Serco’s entitlement to liquidated damages were left for determination later or by agreement. No stay was granted.