The Highland Council v The Construction Centre Group Ltd
Scotland, Outer House, Court of Session
5 August 2003
An adjudication decision was made in the contractor’s favour for the payment by the employer of a specified sum. The employer refused to pay that sum. Subsequent to the adjudicator’s decision, the employer referred a further dispute to adjudication. The employer in its notice of adjudication in the second adjudication advanced a claim for liquidated damages and made reference to sums it had withheld. These included the amount of the award in the contractor’s favour in the first adjudication. Whilst the adjudicator held that the employer was entitled to the full amount of liquidated damages claimed, he also found that the contractor was only “liable to pay” the balance represented by the amount claimed less the sums purportedly withheld by the employer.
The employer brought a petition under Scottish court procedure to suspend a charge for the amount of the award to the contractor in the first adjudication previously served on the employer by the contractor and the contractor’s orders for service. The employer contended that the adjudicator in the second adjudication had “applied” the total sum of liquidated damages “so as to extinguish” the debt represented by the award in the contractor’s favour in the first adjudication.
Lord Carloway rejected the employer’s contention. The contractor held a court decree for the payment by the employer of the sum awarded in its favour in the first adjudication. Unless a creditor discharged the debt in some manner, that decree could only be satisfied by payment of the sum. The employer could not plead compensation or set off by virtue of another sum due under a decree in its favour or otherwise claimed by it. Whilst the contractor in the second adjudication had stated that the employer (on its own argument) was entitled to payment of the balance represented by the amount claimed less the sums purportedly withheld by the employer, the contractor could not be taken as having implied that it surrendered its right to payment under its decree in the event of the decision in the second adjudication being in the employer’s favour.
Lord Carloway emphasised that the whole process of adjudication procedure was to secure quick payment. The employer had wrongly withheld the sum awarded in the contractor’s favour in the first adjudication for over a year.