Thameside Construction Company Ltd v Stevens & Anor

Whether a party may set off against an adjudicator’s award depends primarily on construing the adjudicator’s decision in its contractual and procedural context. A decision directing payment of a specified sum within a stated period will generally be enforced without set-off or withholding. Limited exceptions may arise where the contract clearly permits set-off without undermining the statutory requirement for immediate enforcement, where the adjudicator merely declares an amount for later certification or payment, or where the decision itself permits a further set-off. The court must distinguish the operative award and essential findings forming its basis from explanatory reasoning. An adjudicator’s provisional or obiter observations do not alter an unequivocal direction to pay.

Thameside obtained an adjudicator’s decision directing Mr and Mrs Stevens to pay £88,606.22 plus VAT within 14 days. The adjudicator treated the matter as equivalent to an interim certificate for valuation purposes, but left issues concerning practical completion, extensions of time and liquidated damages for another day. He allowed no sum for liquidated damages and recorded that the Stevens were entitled to set off only sums allowed in his calculations.

The Stevens served a withholding notice for £40,000 in alleged liquidated damages and paid the balance. Thameside claimed the withheld sum. The central issue was whether the adjudicator’s decision was declaratory or instead directed immediate payment, permitting subsequent set-off.

1. Construction of the decision. The court must construe the adjudicator’s decision primarily by reference to its own terms, while considering the referred dispute, the adjudication documents and the underlying contract. The operative and directive parts must be read together with findings forming an essential component or basis of the award.
2. General rule. A decision directing one party to pay a specified sum should ordinarily be honoured without set-off or withholding. The statutory purpose of adjudication requires prompt enforcement and prevents a losing party from avoiding payment through a later cross-claim.
3. Exceptions. A contractual right of set-off may apply where its terms are sufficiently clear and do not offend the statutory requirement for immediate enforcement. A set-off may also be available where the adjudicator merely declares an amount for later certification or payment, rather than directing payment, or where the decision itself permits a further set-off.
4. Application. The adjudicator expressly directed payment of £88,606.22 plus VAT within 14 days. His reference to an equivalent interim certificate explained why immediate payment was ordered; it did not convert the decision into an interim certificate under the contract. The statement that liquidated damages were left for another day, and the footnote expressing doubt about their recoverability, could not qualify the operative order. The liquidated damages issue was within the adjudication’s scope, but the Stevens did not pursue a jurisdictional challenge.
5. Neither principal exception applied. The Stevens could pursue the liquidated damages claim separately, but could not withhold the adjudicated sum. Judgment was entered for Thameside for £40,000 plus VAT and £328.76 interest, with costs summarily assessed at £11,000.