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The employer should be permitted to set off the liquidated damages to which the adjudicator in the second adjudication decided it was entitled against the amount of the advance payment which the contractor was awarded in the first adjudication
 
 

Technology and Construction Court
Coulson J
28 September 2009
 

The employer should be permitted to set off the liquidated damages to which the adjudicator in the second adjudication decided it was entitled against the amount of the advance payment which the contractor was awarded in the first adjudication
 
There were two separate adjudications. The contractor successfully claimed the advance payment which the employer was obliged to make in the first adjudication. The dispute as to delay and liquidated damages was referred by the employer to a second adjudication. The adjudicator that the contractor was not entitled to a full extension of time, that the employer was therefore entitled to liquidated damages in a specified sum and that the employer’s case that it had served a valid withholding notice in relation to liquidated damages should be rejected with the result that it had no right to withhold or deduct such damages. The contractor brought proceedings to enforce the decision in the first adjudication. The employer brought (separate) proceedings in which it sought a declaration that the decision in the second adjudication that it was entitled to liquidated damages was enforceable, thus entitling it to set off those damages against the amount of the advance payment. The contractor submitted that the adjudicator in the second adjudication had merely decided that the employer was entitled to claim the specified amount of liquidated damages, which decision was very different from one that such a sum was due and owing, with the result that it was entitled to defend the proceedings brought by the employer to enforce the decision by raising its claim for a full entitlement to an extension of time. The contractor further submitted that the employer could not set off the sum to which the adjudicator in the second adjudicator decided it was entitled by way of liquidated damages on the ground that the adjudicator also found that it was not entitled to deduct or to withhold those damages.
 
Coulson J rejected the contractor’s submissions. The employer should be permitted to set off the liquidated damages to which the adjudicator decided it was entitled against the amount of the advance payment. The principle set out by Jackson J in Balfour Beatty Construction v Serco (2004) should be applied, namely that where it followed logically from an adjudicator's decision that an employer was entitled to recover a specific sum by way of liquidated and ascertained damages, it could set off that sum against monies payable to the contractor pursuant to the adjudicator's decision.
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