Squibb Group Ltd v Vertase FLI Ltd.

Construction adjudication decisions must generally be paid promptly and cannot ordinarily be defeated by a later withholding notice or cross-claim. A contractual set-off clause will permit such deduction only where clear words allow it and the clause is consistent with the statutory requirement for enforcement. The result may differ where the adjudicator has merely declared the sum to be inserted into contractual payment machinery, leaving a valid opportunity for a withholding notice. An extension of time does not automatically establish an entitlement to liquidated damages for the remaining delay. Unresolved or new cross-claims may be pursued separately, but they do not justify withholding the sum awarded by the adjudicator.

Squibb sought summary judgment under CPR Part 24 to enforce an adjudicator’s decision awarding it £167,531.05 for additional costs arising from delay to demolition and asbestos-removal works. The adjudicator granted a six-week extension of time, rejected Vertase’s liquidated-damages claim, and directed payment within 14 days.

After the adjudication, Vertase served withholding notices claiming liquidated damages and credits for allegedly defective or omitted work. The central issue was whether those notices and associated cross-claims could operate as a defence to enforcement.

1. Summary judgment granted. Vertase had no arguable defence to payment of the £167,531.05 awarded by the adjudicator.
2. The statutory construction adjudication scheme requires the courts to respect and enforce adjudicators’ decisions. An unsuccessful party generally cannot avoid payment by serving a withholding notice after the adjudication or by relying on unrelated cross-claims. The proper course is to pay and pursue any separate claim independently.
3. A contractual set-off clause may exceptionally permit deduction, but clear words are ordinarily required. Clause 10.3 referred to certified payments and did not authorise deduction from the adjudicator’s one-off payment. It could not override the effect of the adjudicator’s decision.
4. The adjudicator had ordered payment within 14 days. He had not declared a sum to be inserted into the contractual payment machinery. The case was therefore distinguishable from Shimizu Europe Ltd v LBJ Fabrications Ltd, Conor Engineering Ltd v Les Constructions Industrielles de la Mediterranee and R&C Electrical Engineers Ltd v Shaylor Construction Ltd, where the nature of the decisions left contractual withholding provisions potentially applicable.
5. The adjudicator’s six-week extension of time did not automatically establish Vertase’s entitlement to liquidated damages for the remaining period. The adjudicator had not determined a mirror delay claim, and his express conclusion that Squibb was not required to pay liquidated damages could not be defeated indirectly.
6. Vertase’s other claims were either contested matters not advanced in the adjudication in their present form or entirely new claims. They could be pursued in separate adjudication proceedings, but could not delay payment of the adjudicated sum. Questions of interest and costs were left over.