Parsons Plastics (Research and Development) Ltd v Purac Ltd (Part I)

The adjudicator's decision in favour of the sub-contractor should not be enforced where the adjudication was not subject to the Construction Act where the contractor exercised a right of set off against the decision in accordance with the sub-contract
 
PARSONS PLASTICS (RESEARCH AND DEVELOPMENT) LTD v PURAC LTD

Technology and Construction Court
Her Honour Judge Frances Kirkham
13 August 2001
 

The sub-contractor applied for a series of payments which became due under the sub-contract when certain milestones had been reached. The contractor refused to make any payment on the ground that the sub-contract works had not reached those milestones. The sub-contractor referred the dispute as to its entitlement under its payment application to adjudication. The contractor submitted to the adjudicator’s jurisdiction notwithstanding its contention that the relevant work was not a “construction operation” within the meaning of the Construction Act 1996. The adjudicator determined that the work was not a “construction operation” with the result that it was common ground that the Act did not apply to the adjudication.

 

The adjudicator made a decision in favour of the sub-contractor. About a week after the issue of the decision, the contractor served a contractual notice of its intention to withhold payment of the sum awarded. The sub-contractor began court proceedings to enforce the adjudicator’s decision and applied for summary judgment.

 

Judge Kirkham accepted that the Act did not apply to the adjudication on the basis that what the contractor had agreed to submit to jurisdiction on the terms of the adjudication provisions in the sub-contract. The result was that the approach to the enforcement of decisions in adjudications subject to the Act did not apply. Instead it was necessary to give effect to what the parties had agreed in the sub-contract. Clause 17f permitted the contractor to withhold money or defer payment if the sub-contractor was in breach. Clause 17f allowed the contractor to withhold money or defer payment if the sub-contractor was in breach. Clause 17 g required the sub-contractor to give a notice of intention to withhold payment. Clause 20 allowed the contractor to take work out of the sub-contractor’s hands if it was in breach. Clause 27g provided that the adjudicator’s decision was final and binding but clause 31 allowed the contractor to exercise a right of set off and clause 17f was expressed to be subject to 31. The contractor exercised a right of set off against the decision and was entitled to do so. The sub-contractor should therefore not have a summary judgment.

 

Advice Note

The Court of Appeal upheld Judge Kirkham’s decision.
 

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