Workspace Management Ltd v YJL London Ltd

An adjudicator’s decision may establish a debt by necessary and inevitable inference, even where the adjudicator did not expressly order payment. The court must determine jurisdiction afresh by reference to the Notice of Adjudication and the dispute referred. Where a valuation necessarily requires account to be taken of earlier payments, the resulting balance may fall within the adjudicator’s jurisdiction.

A binding adjudication decision establishing a debt may be set off against an arbitral award where both debts arise from the same transaction or closely connected disputes, and it would be manifestly unjust to enforce the award without taking the cross-claim into account. The temporary nature of an adjudication decision does not automatically give a provisional arbitral award priority.

The claimant sought enforcement of an interim and provisional arbitration award for £85,000 in respect of costs. The defendant had paid part of the award and sought to set off the balance against an earlier adjudication decision concerning the valuation of a construction certificate.

The adjudicator had concluded that the claimant was not entitled to further repayment because earlier payments exceeded the correctly valued amount. The adjudicator later stated that he lacked jurisdiction to order repayment of the resulting overpayment. The issues were whether the adjudicator had decided that the sum was due, whether he had jurisdiction, whether the sum could be set off against the arbitral award, and whether enforcement should be stayed.

1. The adjudication decision. The adjudicator’s valuation established that the defendant had overpaid the claimant by £56,143.35. That conclusion was either express or followed inexorably from the valuation and comparison with sums already paid. The absence of an order for repayment did not prevent the finding from forming part of the decision (paras [14]-[19]).
2. Jurisdiction. Jurisdiction was determined by the Notice of Adjudication, which referred the proper valuation of Certificate 27. Completing that valuation necessarily required the adjudicator to take account of the earlier payment and determine the balance of the account. He did not exceed his jurisdiction by finding that the claimant had been overpaid. The court had to consider jurisdiction afresh, notwithstanding the adjudicator’s own contrary view. The claimant had to accept the necessary consequences of its own reference (paras [20]-[27]).
3. Set-off. The defendant’s claim was not merely a prima facie counterclaim. It was based on a binding adjudication decision establishing a debt. The adjudication decision and the provisional interim arbitration award were both presently binding and neither had superior status. The mutual debts arose from the same building contract and underlying delay disputes. It would be manifestly unjust to enforce the award without taking the adjudication debt into account, so the requirements for equitable set-off were satisfied (paras [28]-[39]).
4. Disposition. Enforcement of the arbitration award was declined. The issue of a stay did not arise. The judge nevertheless stated that, had judgment been entered, execution would have been stayed pending the arbitration because enforcement would have been inequitable and the parties’ overall accounting position was likely to change shortly (paras [40]-[44]).

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