Avoncroft Construction Ltd v Sharba Homes (CN) Ltd

Where an employer takes partial possession of works and the contract contains no provision for sectional completion, the principle in Bramall & Ogden v Sheffield City Council may prevent recovery of liquidated and ascertained damages. The defence is contractual, not equitable, so it does not depend on the contractor being blameless.

An adjudicator’s decision may be set off only where entitlement to the relevant damages follows logically from the decision, or where the contract and circumstances otherwise permit set-off. A withholding notice against a sum payable under an adjudicator’s decision must comply strictly with the applicable statutory period. Financial concerns and a pending second adjudication do not ordinarily justify a stay of execution.

The claimant obtained an adjudicator’s award of £56,380 under a building contract. The defendant refused payment and opposed summary judgment, asserting an entitlement to liquidated and ascertained damages, a right to set off those damages, and alternatively a stay of execution or payment into court pending a second adjudication.

The contract had terminated after partial possession of parts of the works. The central issues were whether liquidated damages were recoverable, whether they could be set off against the adjudicator’s award, whether the defendant’s withholding notice was timely, and whether the circumstances justified a stay.

1. Liquidated damages. The contract contained no provision for sectional completion, and the defendant had taken partial possession of some of the works. Accordingly, the principle in Bramall & Ogden v Sheffield City Council applied. Liquidated damages were not recoverable after partial possession. The claimant’s alleged conduct in barricading a show home did not alter the analysis. The defence was a contractual defence, not an equitable one.
2. Set-off against the adjudicator’s award. The guidance in Balfour Beatty Construction Ltd v Serco Ltd was applied. The adjudicator had decided an extension-of-time issue, not entitlement to liquidated damages. His reference to liquidated damages was only a statement of the remedy normally available for delay. The adjudicator’s decision was not to be construed as closely as a court judgment.
3. The contract contained no express right to deduct or withhold liquidated damages from sums payable under an adjudicator’s decision. Clause 41A.7.2 required compliance with the decision. The defendant therefore could not set off liquidated damages even if it had been entitled to recover them.
4. Withholding notice. The adjudicator’s award was a sum due under the contract, but it did not arise under the contractual interim or final certificate payment mechanisms. Section 111 of the 1996 Act therefore required the applicable contractual or statutory notice machinery. Under paragraph 10 of Part 2 of the Scheme for Construction Contracts Regulations 1998, notice had to be served no later than seven days before the final date for payment. The notice, served six days before payment was due, was out of time. Strict compliance was required.
5. Stay or payment into court. The claimant’s financial evidence did not establish probable inability to repay the judgment sum, particularly in light of the parent company guarantee. Following Interserve Industrial Services Ltd v Cleveland Bridge UK Ltd, the pending second adjudication did not justify a stay. The principles summarised in Wimbledon Construction Co 2000 Ltd v Derek Vago did not lead to a different result.
6. The defendant had no real prospect of success. Summary judgment was entered for the claimant for £56,380. The applications for a stay and payment into court were refused.

First-instance judgment. No prior appellate decision is stated in the judgment.