WORKSPACE MANAGEMENT LTD V YJL LONDON LTD

The contractor was entitled to set off the overpayment which the adjudicator found that it had made to the employer from the sum which the contractor was ordered to pay by the arbitrator as an interim payment in respect of the costs for which it was liable to the employer in the arbitration
 
 

Technology and Construction Court
Coulson J
28 July 2009
 

 
The contractor was entitled to set off the overpayment which the adjudicator found that it had made to the employer from the sum which the contractor was ordered to pay by the arbitrator as an interim payment in respect of the costs for which it was liable to the employer in the arbitration
 
The adjudicator decided in the second adjudication that the contractor was to pay the employer specified sums by way of liquidated damages and repay loss and expense previously paid by the employer. The contractor paid the sums, commenced an arbitration in response to the adjudicator's decision and raised an estoppel issue. The arbitrator decided the estoppel issue in the employer’s favour, made a provisional award in respect of the costs of the issue and ordered the contractor to make an interim payment in respect of those costs. The architect issued an interim certificate in a negative sum. The contractor began the third adjudication contesting the interim certificate after the arbitrator had made his provisional costs award. The adjudicator decided that the employer was not entitled to the repayment by the contractor of the sums certified by the architect on the basis that there was no balance due to the employer and that the contractor had in effect made an overpayment to the employer. The contractor took the overpayment into account in purporting to discharge its liability in respect of the provisional costs award by deducting the overpayment from the sum in respect of costs award.
 
Coulson J held that the contractor was entitled to set off the overpayment which the adjudicator found that it had made to the employer from the sum which the contractor was ordered to pay by the arbitrator in respect of costs. The adjudicator expressly decided that the contractor’s overpayment was due to it from the employer or, alternatively, such a decision was reasonably to be inferred from the inevitable and logical consequences of his valuation of the architect’s interim certificate. The adjudicator had the necessary jurisdiction to decide as a result of his valuation that the contractor had overpaid the employer and was entitled to be paid in return the amount of the overpayment and could therefore have ordered that the overpayment be paid by the employer to the contractor. It would have been manifestly unjust to allow the employer to enforce payment of the balance of the costs award without taking into account by way of equitable set off the contractor’s cross claim based on the overpayment found by the adjudicator in the third adjudication.
 
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