Construction Adjudication Part 3 of 2021

Construction Adjudication Part 3 of 2021

The Enforcement of Adjudicators’ Awards under the HousingGrants, Construction and Regeneration Act Adjudication Cases

1996: Part 3 of 2021 Kenneth T. Salmon Consultant Solicitor at Slater Heelis

Construction&Engineering

Contents

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1.. . .Introduction ..............................................................................................................................................

2. Adjudicator’s fees – whether payable on resignation.......................................................... Davies & Davies Associates Ltd v Steve Ward Services (UK) Ltd [2021] EWHC 1337 (TCC) Roger Ter Haar QC T 3. Decision – binding nature of earlier decision – serial adjudication................................ Prater Limited v John Sisk and Son (Holdings) Ltd [2021] EWHC 1113 (TCC) Veronique Buehrien QC

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4. Dispute – whether the same or substantially the same as previously decided......... Lewisham Homes Ltd v Breyer Group plc [2021] EWHC 1290 (TCC) Waksman J

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5. Jurisdiction – dispute arising under separate contracts.................................................... Delta Fabrication & Glazing Ltd v Watkins Jones & Son Ltd [2021] EWHC 1034 (TCC) HHJ Sarah Watson

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6. Jurisdiction – timing of service of adjudication notice........................................................ C Spencer Ltd v MW Tech Projects UK Ltd [2021] EWHC 1284 (TCC) Waksman J

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7. Set-off of LDs at enforcement stage – Indemnity costs....................................................... Faithdean Plc v Bedford House Ltd (No. 1) [2021] EWHC 961 (TCC) and Faithdean plc v Bedford House Ltd (No. 2) [2021] EWHC 962 (TCC) Alexander Nissen QC

Introduction The Enforcement of Adjudicators’ Awards under the Housing Grants, Construction and Regeneration Act 1996: Part 3 of 2021, by Kenneth T. Salmon, Consultant Solicitor, Slater Heelis.

Legislation The Act means the Housing Grants, Construction and Regeneration Act 1996, as amended by the Local Democracy, Economic Development and Construction Act 2009 Pt 8.

The ‘new’ provisions apply to contracts entered into on or after 1 October 2011. The Act applies to Northern Ireland.

The main regulations are contained in the Scheme for Construction Contracts (England & Wales) Regulations 1998 (the ‘Principal Regulations’)[1] They have been amended by the Scheme for Construction Contracts (England & Wales) (Amendment) (England) Regulations 2011[2] (the ‘new Regulations’). The new Regulations apply only to contracts for construction operations in England entered into on or after 1 October 2011. For earlier contracts the Principal Regulations apply. Northern Ireland has its own scheme: the Scheme for Construction Contracts in Northern Ireland 1999 as amended by the Scheme for Construction Contracts in Northern Ireland (Amendment) Regulations (Northern Ireland) 2012. The Northern Ireland Scheme is broadly similar to that in force in England and Wales. There are separate regulations for contracts for work in Scotland applicable to contracts made on or after 1 November 2011.[3] The new Regulations apply only to contracts for work in Scotland entered into on or after this date. For earlier contracts the Scheme for Construction Contracts (Scotland) Regulations 1998[4] applies. There are new separate regulations for Wales, applicable to contracts for construction operations in Wales entered into on or after 1 October 2011[5]. A reference to “the Scheme” is to the Principal Regulations for England and Wales, or the Scheme for Scotland, or Northern Ireland, as the context requires.

[1] Scheme for Construction Contracts (England & Wales) Regulations 1998 (SI 1998/649). [2] Scheme for Construction Contracts (England & Wales) (Amendment) (England) Regulations 2011 (SI 2011/2333). [3] Scheme for Construction Contracts (Scotland) Amendment Regulations 2011 (SI 2011/371). [4] Scheme for Construction Contracts (Scotland) Regulations 1998 (SI 1998/687) (S.34). [5] Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (Wales) Regulations 2011 (SI2011/1715) (W.194).

Adjudicator’s fees – whether payable on resignation: Davies & Davies Associates Ltd v Steve Ward Services (UK) Ltd [2021] EWHC 1337 (TCC) Roger Ter Haar QC Mr Davies was appointed adjudicator in two adjudications between the defendant (Ward) (as referring party) and a company called Bhavishya Investment Ltd ("BIL") (as responding party). Mr Davies’ terms of appointment provided that his fees were payable to the claimant company. Ward had carried out construction works at a restaurant owned by BIL. A contract had been prepared but never signed in which ‘the client’ was named as “Vaishali Patel” as owner and proprietor of the restaurant. Miss Patel was the majority shareholder and a director of BIL. In the first Adjudication between Ward and BIL, Mr Davies resigned following a challenge to his jurisdiction, and rendered a small invoice for his fees to Ward, which they paid. (The challenge there had been that Ward had applied to the ANB for the appointment of an adjudicator before serving the notice of adjudication on BIL.) It was the second adjudication, which gave rise to this claim. Ward sought payment for its works from BIL who denied any entitlement by reason of defects in the works. Mr Davies resigned following the service of the referral, a response and a reply. In pursuance of his duty to ascertain the facts and the law and to avoid unnecessary expense, Mr Davies had concluded that the parties to the contract were Ward and Miss Patel and not BIL and that he therefore had no jurisdiction to determine the monetary claim. Mr Davies did not raise the matter with the parties or invite any submission on the question.

Nor had BIL raised the point in its Response.

The claimant relied on both the Scheme and the express terms of the adjudicator’s appointment (to which neither the claimant nor the responding party in the adjudication had objected) as entitling them to payment of Mr Davies fees.

Ward objected to payment of the fees on 4 grounds which the judge dealt with as set out below.

1. That there was no threshold point of jurisdiction before the Adjudicator entitling to resign, so that his decision to do so, amounted to the abandonment of his appointment and a deliberate and impermissible refusal to provide a Decision. Ward relied on the court of appeal decision in P C Harrington[6]. I n that case the court of appeal held the adjudicator reached a conclusion in breach of his duty to comply with the rules of natural justice in that he failed to decide a relevant issue raised by way of defence because he took what was later held to have been an erroneous view as to jurisdiction. The consequence was that his three decisions were unenforceable. Ward argued that the preponderance of evidence showed that BIL not Mrs Patel was the contracting party. The court disagreed. At the very least the adjudicator was entitled to conclude that Mrs Patel was the contracting party. Next, Ward argued that by failing to raise the jurisdictional issue in its response, BIL had waived its right to object and therefore it was not open to the adjudicator to decline jurisdiction. The adjudicator's power to take the initiative to ascertain the facts and the law (Scheme Part I para 13) had obviously to be exercised in the context of the dispute he was empowered to decide. It was not a roving commission to identify, formulate and decide the reference on the basis of new and fundamental issues neither party raised nor adopted despite invitation. The court did not find this an easy point.

[6] PC Harrington Contractors Ltd v Systech International Ltd [2012] EWCA Civ 1371

2. That the claimants’ adjudication terms as to payment were not effective to entitle them to payment in circumstances where the adjudicator provided no decision or where he was not faithful to the bargain.

The adjudicator believed that taking the initiative was consistent with his duty under paragraph 12 of the Scheme to avoid unnecessary expense. It would have been wiser for the adjudicator not only to inquire as to the parties' position as to who were the contracting parties, but also to inquire in terms as to whether both parties accepted that he had jurisdiction. The effect of what the adjudicator did was to deprive the parties of an answer to their differences as to what sumwas payable (either by Ms Patel or by BIL) in respect of the project. The court’s conclusion was that the route which the adjudicator took was outside the ambit of paragraph 13 of the Scheme: that paragraph entitled the adjudicator to investigate matters "necessary to determine the dispute", which necessarily involved the question: what is the dispute? At the time when the adjudicator resigned, there was no dispute either as to the identity of the contracting parties or as to his jurisdiction. Accordingly, the decision to resign was erroneous. But that was not an end of the matter. Ward submitted that the adjudicator's decision to resign "represented abandonment of his appointment and a deliberate and impermissible refusal to provide a Decision." The judge did not agree. Far from "abandoning his appointment", the adjudicator acted in accordance with what he regarded as being his duty. Further, resignation by an adjudicator was not of itself a breach of the terms of the adjudicator's engagement since paragraph 9(1) of the Scheme permitted the adjudicator to resign at any time on giving notice to the parties. The question here was whether upon resigning the adjudicator was still entitled to his fees. That turned upon the true construction of the adjudicator's terms and conditions.

Clause 1 provided:

"The Parties agree jointly and severally to pay the Adjudicator's fees and expenses as set out in this Schedule. Save for any act of bad faith by the Adjudicator, the Adjudicator shall also be entitled to payment of his fees and expenses in the event that the Decision is not delivered and/or proves unenforceable." Ward said that, at one and the same time, the adjudicator had managed to abdicate his responsibility, exceed his jurisdiction and failed to exhaust it; so that Clause 1 did not apply. The judge disagreed. Clause 1 meant that in addition to being paid for producing a Decision (which was the normal event upon the occurrence of which an adjudicator was entitled to payment) the adjudicator was entitled to be paid his fees for work done unless there has been an act of bad faith on the adjudicator's part. Ward argued that Mr Davies had not been faithful to his bargain. In construing Clause 1, it was sufficient to say that where an adjudicator acting with diligence and honesty came to the conclusion that the proper course was for him to exercise his right under Paragraph 9(1) of the Scheme to resign, that was not a situation within the expression "bad faith".

Subject to the next point, the terms entitled the claimant to its fees for the work done by Mr Davies.

Decision – binding nature of earlier decision – serial adjudication: Prater Limited v John Sisk and Son (Holdings) Ltd [2021] EWHC 1113 (TCC) Veronique Buehrien QC Sisk engaged Prater in connection with the design, supply, delivery and installation of envelope façade (cladding and roofing) works to a new Boeing Fleet aircraft maintenance hangar, office and plant room at Gatwick Airport. The contract was the NEC3 Conditions of Subcontract, option A (2013) (as amended by the Parties). Option W2 contained provisions for adjudication. At the time of the application before the court there had been four adjudications resulting in decisions and a fifth was pending. Prater applied to enforce Decision 4, made in its favour by the adjudicator Mr Molloy. Decision 4 was (in part) based on the findings made by Mr Molloy in his Decision 2. It was opposed by Sisk on the basis that Decision 2 was unenforceable having been made without jurisdiction, which, it said, brought down with it Decision 4. In Adjudication 4, Prater sought payment of £2,253,731.65 plus VAT following Decisions 1 – 3. Mr Molloy awarded them £1.75m. Sisk's case Mr Molloy had no jurisdiction to reach the decision he did in Adjudication 2 because Prater's referral included multiple disputes rather than a single dispute. As a result, Decision 2 was unenforceable, not binding and a nullity.

3 . The terms were void under s. 3(2) (b) of the Unfair Contract Terms Act 1977 (‘UCTA’).

The judge had considerable doubt whether Clause 1 was caught by Section 3 of UCTA. Clause 1 was simply concerned with payment of the adjudicator's fees. It said nothing about what contractual performance the adjudicator was expected to perform. In any event, paragraph 9(1) of the Statutory Scheme gave the adjudicator an unfettered right to resign which was relevant to the contractual performance that the adjudicator was expected to perform. If the court was wrong as to the application of section 3, the judge had no hesitation in holding that Clause 1 satisfied the requirement of reasonableness in UCTA: (a) It was drafted with the judgment of Davis L.J. in Harrington in mind and therefore in accordance with terms which the Court of Appeal regarded as being capable of being commercially acceptable – though ultimately what is acceptable would be a matter for the contracting parties.

(b) The adjudicator's terms were terms commonly found;

(c) There was no inequality of bargaining power;

(d) Ward could have rejected the terms (and sought a different adjudicator), but instead accepted them not once but twice, and each time it was represented by solicitors with enormous experience and expertise in respect of adjudications. 4 . The number of hours claimed for (13 hours) was unreasonable. The court did not find the time spent excessive.

(c) any challenge to the jurisdiction of Mr Molloy in Adjudication 4 had to be based on the dispute referred to him in that Adjudication and not his jurisdiction in respect of Adjudication 2. The challenge was not in respect of Adjudication 4. (d) If Decision 2 was relevant, it did not comprise multiple disputes. It was a single dispute arising out of Sisk's "assessment" of Prater's account and subsequent Payment Certificate and the referral simply included a number of issues arising out of that disputed certificate. So several issues but only one dispute.

Accordingly, in turn, Mr Molloy had no jurisdiction to reach the decision he did in Adjudication 4.

Sisk identified 3 disputes as having been referred for determination in Adjudication 2.

(a) as to the correct Subcontract completion date in connection with Prater's claimed entitlement to an extension of time. (b) as to whether the Subcontract included provisional sums – an issue of contract interpretation. (c) as to Sisk's entitlement to deduct certain indirect losses from sums due to Prater (although no payment was claimed). Applying the test set out by Akenhead J at paragraph 38 of his judgment in Witney Town Council v Beam Construction (Cheltenham) Ltd[7] as to what will constitute a single dispute, the issues raised by Prater in Adjudication 2 constituted 3 separate disputes which could have been decided independently.

The Judgment

The judge described Sisk’s argument as novel and lacking authority. Clause W2.3(11) provided that the adjudicator’s decision (in this case Decision 2) was binding on the parties unless and until revised by the tribunal. Further, clause W2.4(2) required a party to serve a notice of dissatisfaction to refer the matter to the tribunal. Although Sisk had served such notice, it had not referred the matter to the tribunal (court): “If Sisk objected to Decision 2 it was up to Sisk to bring and make good that challenge before the Court.” Therefore and in the meantime, the decision remained binding on the parties as a matter of contract. Furthermore, an adjudicator could not re-open matters decided by an earlier adjudicator. Thus Mr Molloy was bound by the findings he made in Decision 2 and could not revisit them in Adjudication 4. Although not necessary in light of those findings, the judge went on to consider and decide that the several issues decided in Decision 4, comprised a single dispute.

Prater’s response

(a) It was not open to Sisk to challenge Decision 2 in the context of Adjudication 4. Decision 2 was binding and enforceable as a matter of principle as well as contractual obligation unless and until revised by the Court pursuant to clause W2.3(11) of the Subcontract. (b) Sisk’s argument did not give a right to impugn Decision 4 for lack of jurisdiction of the Adjudicator, fraud or breach of the rules of natural justice – these being the only bases on which enforcement of Decision 4 could be challenged. Even if correct, the complaint was that Mr Molloy based Decision 4 on a mistake of law by treating Decision 2 as binding or as recording matters that could not be revisited.

[7] [2011] EWHC 2332 (TCC)

Dispute – whether the same or substantially the same as previously decided: Lewisham Homes Ltd v Breyer Group plc [2021] EWHC 1290 (TCC) Waksman J Serial adjudication again. The issue in this case was whether the dispute decided by the adjudicator in what was the sixth adjudication between the parties, was the same or substantially the same as had been decided in the second adjudication. These adjudications arose out of a Term Maintenance Contract (TMC) for the replenishment of the claimant employer’s housing stock, including the installation of 7,000 door sets in blocks of flats, to meet fire safety requirements. In adjudication 2, the adjudicator had decided that if the defendant contractor was liable to replace the defective doors, the claimant could not claim a payment on account under the TMC. In due course in adjudication 6, the adjudicator found the claimant was entitled to £3.24m. The defendant contended before the court, as it had before the adjudicator, that he was being asked to decide the same or substantially the same dispute as in adjudication 2. Both the Scheme and the CIC model adjudication rules (which applied), provided that if that were the case then the adjudicator must resign.

Although Prater did not bring all its disputes in one single adjudication but instead chose, because of the complexity of the matters, to pursue several adjudications that was not the same as splitting a single dispute comprising several issues. It would have been impractical to deal with those issues in separate adjudications. The final issue was whether, as a matter of contract, it would have been open to Prater to bring more than one dispute forward in the same adjudication. The clear effect of W2 was to give effect to s 108 of the Act. Accordingly like section 108(1) of the 1996 Act on proper interpretation clause W2.1(1) of the Subcontract contemplated a single dispute being referred to the adjudicator at any time and not multiple disputes.

Judgment for the claimant.

The sixth adjudicator had rejected the challenge.

In reaching the same conclusion, HHJ Waksman held to the following principles.

Jurisdiction – dispute arising under separate contracts: Delta Fabrication & Glazing Ltd v Watkins Jones & Son Ltd [2021] EWHC 1034 (TCC) HHJ Sarah Watson It was common ground that Delta entered into two subcontracts with Watkin Jones: one for cladding and one for roofing works, in each case in respect of Watkins Jones works under a main contract for Student Accommodation in Walthamstow. Each of the subcontracts had its own order number and detailed documentation. From February 2020, payment under the two subcontracts was administered together. Subsequently a final account sumwas agreed for both subcontracts together. A dispute arose over the final account which Delta referred to adjudication. Watkin Jones challenged the adjudicator’s jurisdiction contending that as the dispute arose under two separate contracts it could not be referred to adjudication under the Act. They did not give the adjudicator power to decide his own jurisdiction but they put forward reasons why he should resign. The adjudicator made a non-binding decision and proceeded with the adjudication. He was persuaded that by reason of there being an agreement to a single final account figure for both subcontracts, the parties had agreed to treat them as one. Delta’s application to enforce the award in its favour, rested on three alternative arguments each of which was resisted by Watkins Jones.

A dispute or difference could encompass a wide range of factual and legal issues but there did not have to be a complete identity of those issues, otherwise paragraph 9(2) of the Scheme would have no purpose. Whether one dispute was the same or substantially the same as another dispute, was a question of fact and degree. It was important to look at the dispute as set out in the notice of adjudication and what the adjudicator actually decided. This would determine how much or how little remained for the second adjudicator to consider. This again would be a question of fact and degree and the enquiry should focus on the key elements of the dispute before the first adjudicator and that decision. It may be the underlying subject matter of the two disputes was the same. That was not the test. However the second dispute could not just be an improved version of the first.

One relevant factor was whether the point could have been taken before.

In making the comparison what was required was a realistic and common-sense approach.

Finally, significant weight should be accorded to the second adjudicator’s decision to reject any challenge, since s/he was the decision-maker and well placed to undertake the factual analysis.

The sixth dispute was not the same as the second.

(1) There was an agreement to vary or amalgamate the contracts. This rested not on an express agreement but one implied from conduct in the treatment of payment applications, payment notices and the final account. The Judge dismissed the argument on the basis that agreeing to combine payments was not the same as amalgamating the two subcontracts. Clear evidence of amalgamation would be required and there was none. The parties’ conduct was inconsistent with amalgamation. Payment applications and the final account were each structured so as to show the sums due under each of the two subcontracts and their build up albeit added together to reach a final total. (2) Delta’s counsel raised a novel argument: that it was possible for parties to agree to treat two separate contracts as one for the purposes of the Act and therefore adjudication, where, as here, they had combined payments claimed and due in applications and the final account. The judge found the argument was without authority and where the contracts had not been amalgamated at common law they could not become a single “construction contract” under the Act. (3) Finally Delta said that by its conduct, Watkins Jones was ‘estopped’ from denying the subcontracts should be treated as one. The judge found that the elements of estoppel were not present; there was no evidence of reliance by Delta or of detriment to them.

Postscript

Delta asked the court to order Watkins Jones to bring the amount awarded by the adjudicator into court, as a condition having leave to defend. They pointed out that the finding as to jurisdiction did not disturb the adjudicator’s decision on the merits which was binding until overturned. If it turned out he had jurisdiction then the money awarded would be due. The court refused to impose such a condition for two reasons. First the strength of Watkins Jones prospects of showing the decision was without jurisdiction and therefore not binding. Second, Watkins Jones denied the adjudicator had reached the right conclusion on the merits in any event.

The court concluded that Watkins Jones had not only a real, but a strong prospect of success at trial, and refused the application for summary judgment.

Jurisdiction – timing of service of adjudication notice: C Spencer Ltd v MW Tech Projects UK Ltd [2021] EWHC 1284 (TCC) Waksman J CSL applied for summary judgment to enforce an award in its favour for £3,397,029.03 dated 14 January 2021 in respect of adjudication no. 4. The application was opposed on three grounds all of which it was said went to the jurisdiction of the adjudicator.

"Where an adjudicator is not appointed under 4.1 or 4.2, the party issuing the notice may request ICHEME to nominate an adjudicator. Such request shall be in writing..." On what the court called “the timing point” it held there was nothing in the words of clause 3.1 or 4.3 that required the sequential issuing of the two types of document. MW relied on the fact that clause 3.1 came before clause 4.1. The court rejected that as a very weak argument. It was then said that in previous adjudications between the parties, the notice of adjudication had been sent earlier. In the absence of some form of estoppel argument, which had not been raised, this was irrelevant. There was no previous authority dealing with these provisions which mandated such an approach. Cases dealing with the service of notices under the Scheme were not helpful in construing the provisions of the sub-contract. No logical or practical reason has been put forward in support of the timing point. The proof of the pudding was in the eating. On receipt of the email, MW acted immediately. In the 4th edition of Coulson on Adjudication (2018), 18.16 it was recommended that both notices were sent at the same time. That militated against any idea of unfairness or impracticality where notices were sent simultaneously. There was, in truth, nothing in the timing point and it was rejected. MW took a further point, as to the mode of service. They said that copying MW in on an email where the addressee was ICHEME, albeit with all the correct documents, could not amount to the "giving of notice" as required by clause 3.1 of the Grey Book.

Defence 1

The first ground involved a variation on a settled theme. Under the Scheme, and in accordance with s 108(2) of the Act, it has been held that a notice of adjudication has to be given before the referring party applies for the appointment of an adjudicator. In this case CSL send an email to ICHEME (the ANB), enclosing a copy of the notice of adjudication and at the same time copied the email to the responding party, MW. The latter objected that the notice had not been served before the application to the ANB to appoint the adjudicator and thus was ineffective. The adjudicator made a non-binding decision that the notice had been effectively given and he had jurisdiction. The court looked at the parties’ sub-contract which was based on the IChemE Grey Book clause 3.1 of which provided as follows: "The party wishing to refer to arbitration any dispute arising or in connection with a contract may give a notice at any time to that effect to the other party".

Clause 4.3 was applicable here and provided:

Comment

As a matter of principle the court could not see why not. Clause 3.1 did not provide for formal "service", rather the simple giving of notice. Nor did clause 3.1 make any stipulation about the mode of giving notice.

The Scheme expressly provides for the giving of notice of intention to commence adjudication proceedings before the referring party applies for the appointment of an adjudicator. Where the contract provisions does not comply with the Act, it provides that the adjudication provisions of the Scheme shall apply. In this case the IChemE provisions on adjudication complied with the Act and therefore the Scheme provisions did not come into play. Had the Scheme provisions applied, the notice of adjudication would have had to have been given before the application for the appointment of an adjudicator. It should also be remembered that where any of the provisions of the Act as to adjudication are missing or do not comply with the Act, then all of the provisions of the contract as to adjudication are replaced by the adjudication provisions of the Scheme.

Defence 2 – hybrid contracts

As this was a hybrid contract where some of the works were governed by the Act, and some were not, MW argued that the adjudicator should have taken into account the value of its counterclaim said to be worth £4.3m, though they also said he was not entitled to value it as it arose from the excluded operations. This approach, described by the judge as “look but don’t touch”, appeared to be a tactical manoeuvre. The adjudicator had included a ‘nil’ value in his decision, thus taking the counterclaim out of the adjudication altogether. He was not valuing something he had no jurisdiction to deal with. In any event as there was no payless notice, the adjudicator was not obliged to take the counterclaim into account.

Defence 3 – retention

In adjudication number 3, the parties had agreed that all the payment milestones under the contract had been met which meant there was power to deal with the retention. The adjudicator in adjudication number 4 was bound by that position. MW could not resile from that position in adjudication number 4; they could not approbate and reprobate.The adjudicator was then entitled to decide when takeover had occurred which led him to award the release of half of the retention.

b. Where the entitlement to liquidated and ascertained damages has not been determined either expressly or impliedly by the adjudicator's decision, then the question whether the employer is entitled to set off liquidated and ascertained damages against sums awarded by the adjudicator will depend upon the terms of the contract and the circumstances of the case.” Here the right was said to arise not from the decision the subject of the enforcement but from the earlier decision of an adjudicator in another dispute between the parties. Surprisingly the decision relied on was not produced before the court. Neither did Bedford House provide any evidence that it had given proper notice of its intention to exercise the right to set-off (as required by clause 1.2.29.2 of the parties’ JCT DB Contact 2011). In those circumstances the court rejected Bedford’s submission and enforced the adjudicator’s decision in full. The court awarded Faithdean its costs on the indemnity basis. There was no defence to the application yet Bedford House had caused Faithdean to incur the costs of preparing for a contested hearing in completing the The court awarded Faithdean its costs on the indemnity basis. There was no defence to the application yet Bedford House had caused Faithdean to incur the costs of preparing for a contested hearing in completing the acknowledgement of service disputing the whole claim, yet offering no evidence when it came to it. Its behaviour was unreasonable and warranted indemnity costs.

Set-off of LDs at enforcement stage – Indemnity costs: Faithdean Plc v Bedford House Ltd (No. 1) [2021] EWHC 961 (TCC) and Faithdean plc v Bedford House Ltd (No. 2) [2021] EWHC 962 (TCC) Alexander Nissen QC Judgment not available at the time of this digest. The defendant, Bedford House, sought to exercise a right of set-off against the decision of an adjudicator in favour of the claimant, Faithdean. It is now a universal principle, that the only grounds on which an adjudicator’s decision can be challenged upon enforcement is for material breach of the rules of natural justice or lack of jurisdiction. In this case, Bedford made no such challenge but wished to rely on an exception namely the right to deduct liquidated damages arising as a consequence of the decision of an adjudicator, in this case in the sum of £30,000. In Balfour Beatty v Serco [8], Jackson J as he then was said:

“I derive two principles of law from the authorities, which are relevant for present purposes.

a. Where it follows logically from an adjudicator's decision that the employer is entitled to recover a specific sum by way of liquidated and ascertained damages, then the employer may set off that sum against monies payable to the contractor pursuant to the adjudicator's decision, provided that the employer has given proper notice (insofar as required).

[8] [2004] EWHC 3336 (TCC) December 2004

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