William Verry Ltd v London Borough of Camden

The local authority was not entitled to deduct monies from the sum awarded by the adjudicator in respect of an interim certificate on the grounds that the sum was inconsistent with the final certificate and that the local authority had a defects counterclaim

Technology and Construction Court
Ramsey J
20 March 2006
An adjudication took place in respect of the dispute as to the true value of the works as reflected in the interim certificate issued immediately after practical completion had been achieved. The adjudicator decided that: (1) at practical completion the contractor was entitled to a specified extension of time (2) the local authority was entitled to deduct the amount of liquidated damages from the interim payment accordingly and (3) the liquidated damages to which the adjudicator found the employer was entitled should be deducted from the gross valuation found by him on the interim certificate. The local authority refused to make payment of the sum awarded on the basis that it was entitled to deduct monies from that sum to take into account that (1) the sum awarded was inconsistent with sums certified in the subsequent final certificate and (2) it had a counterclaim for unliquidated damages for breach of contract in respect of defects that was the subject of a subsequent and ongoing adjudication.
Ramsey J rejected these grounds. The binding nature of the adjudicator's decision and the parties' agreement to comply with that decision meant prima facie that the adjudicator's decision should be enforced. The effect of the statutory scheme for adjudication was generally to exclude a right of set off from an adjudicator's decision. Parliament's intention and the purpose of adjudication would be defeated if a decision on the sum due on an interim certificate was subject to a subsequent certificate or was subject to a set off in respect of a disputed counterclaim for unliquidated damages. The issue of whether liquidated damages could be deducted when the adjudicator's decision dealt with extensions of time but did not deal with the consequential effect on an undisputed or indisputable claim for liquidated damages (1) raised a distinct question of the manner and extent of compliance with the adjudicator's decision but (2) did not raise a question as to the ability to set off sums generally against an adjudicator's decision. The local authority's failure to raise issues of defects in the adjudication meant that it could not be in a better position by setting off a disputed and unliquidated counterclaim against the adjudicator's decision