Hart (t/a D W Hart & Son) v Smith & Anor

Adjudication enforcement proceedings are confined to enforcing what the adjudicator decided. A declaration that an employer is entitled to certificates of non-completion does not, without more, determine an entitlement to liquidated damages or make a particular sum enforceable. A court must not undertake contractual issues on which the adjudicator made no affirmative finding in an enforcement application. In successive adjudications, each decision should remain separately enforceable, and a party cannot withhold payment based on an anticipated recovery in another adjudication. Set-off against an adjudicator’s award is generally excluded unless the contractual or adjudicated entitlement to the cross-claim is sufficiently established.

The claimant contractor and the defendants, the employers, entered into a JCT Standard Building Contract for the conversion of agricultural barns into dwelling houses. In the first adjudication, the adjudicator ordered payment to the contractor of £79,900.43 in respect of interim certificates 21 and 24. In a second adjudication, he ordered repayment of specified sums to the employers and declared that they were entitled to certificates of non-completion for three barns.

After the contract administrator issued the certificates, the employers claimed £71,314.29 in liquidated damages and sought to set that sum off against the first adjudication award. The central issue was whether the liquidated damages claim followed logically from the second adjudicator’s decision and could be enforced or set off in the present proceedings.

1. Enforcement jurisdiction. The court’s jurisdiction under section 108(3) of the Housing Grants Construction and Regeneration Act 1996 was to enforce the adjudicator’s decision. Adjudication provides a prompt, interim mechanism pending final determination by litigation, arbitration or agreement. Enforcement proceedings should not become a determination of the underlying contractual merits.
2. Liquidated damages. The second adjudicator decided that the employers were entitled to certificates of non-completion. He did not decide that the contractor was liable to pay £71,314.29, or any particular sum. The claimed sum therefore did not follow logically from the adjudicator’s decision. Establishing liability would require consideration of contractual provisions on which the adjudicator had made no affirmative finding, including matters concerning completion dates and extensions of time.
3. Set-off and successive adjudications. The principles in Balfour Beatty Construction v Serco Ltd [2004] EWHC 3336 had to be read with the principles in Interserve Industrial Services Ltd v Cleveland Bridge (UK) Ltd [2006] EWHC (TCC) 741 and H S Works v Enterprise Managed Services [2009] EWHC 729 (TCC). Each adjudication decision must be capable of separate enforcement. A claim not referred to, or decided by, an adjudicator cannot be enforced under the Act and cannot found a right of set-off against an adjudicator’s award.
4. The employers’ claim for £71,314.29 was refused. The contractor accepted set-off of the sums actually awarded against him in the second adjudication. Judgment was entered for the contractor in the agreed sum of £70,895.86. The court observed that a separate summary judgment application or further adjudication might determine the liquidated damages claim, but it was outside the present enforcement jurisdiction.