Mon, 28th April 2008
AVONCROFT CONSTRUCTION LTD V SHARBA HOMES (CN) LTD
Technology and Construction Court
Her Honour Judge Frances Kirkham
28 April 2008
The contract incorporated JCT 98. The employer refused to pay the sum awarded by the adjudicator to the contractor on the ground that it was implicit from the decision that it had an entitlement to deduct liquidated damages which it could set off against that sum.
Judge Kirkham rejected the employer's contention and held that the employer was not entitled to set off its alleged entitlement to liquidated damages against the specified sum awarded by the adjudicator to the contractor even if it was so entitled. The basis for the judge's decision was that the employer was unable to establish that (i) it followed logically from the adjudicator's decision that the employer was entitled to recover a specific sum by way of liquidated damages or that (ii) the terms of JCT 98 conferred any such right of set off on the employer.
The judge referred in this connection to the guidance given by Jackson J in Balfour Beatty Construction v Serco (2004) as to whether an employer was entitled to deduct liquidated damages from a sum awarded by an adjudicator to the contractor. Jackson J stated that Where it followed logically from an adjudicator's decision that the employer was entitled to recover a specific sum by way of liquidated damages, the employer could set off that sum against monies payable to the contractor pursuant to the adjudicator's decision. He also stated that where the entitlement to liquidated damages had not been determined either expressly or impliedly by the adjudicator's decision, the question of whether the employer was entitled to set off liquidated damages against sums awarded by the adjudicator depended on the terms of the contract and the circumstances of the case.
The adjudicator in the instant case did not decide the question of the employer's entitlement to liquidated damages and instead decided whether the contractor was entitled to an extension of time. Also the terms of JCT 98 did not contain any express provision entitling the employer to deduct and withhold liquidated damages or conferring any right of set off in respect of liquidated damages against monies awarded to the contractor by the adjudicator. Indeed clause 41A.7.2 was clearly to the contrary in that under it the parties were obliged to comply with the decision of an adjudicator.
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