David McLean Housing Contractors Ltd v Swansea Housing Association Ltd

The contractor was not entitled to summary judgment in respect of the liquidated damages deducted by the employer from the sum certified by it in consequence of the adjudicator's decision
The contract incorporated JCT 81. The adjudicator made a decision which included the contractor's entitlement to an extension of time. The employer issued a payment certificate shortly after the publication of the decision reflecting the sums awarded in which it deducted by way of set-off from the full sum awarded the amount of liquidated damages which could be deduced from the decision as being due to the employer. The contractor brought court enforcement proceedings. Clause 24.2.1 of JCT 81 provided that if the employer had issued a notice under clause 24.1 and if it had informed the contractor that it might require payment of or might withhold or deduct liquidated damages before the final account and statement became conclusive, the employer could, no later than five days before the final date for payment of the debts due under clause 30.6, either require the contractor to pay liquidated damages or give notice that it would deduct liquidated damages. Judge LLoyd refused to enforce the full sum awarded because the employer had a realistic prospect of maintaining successfully at trial that it had given an effective notice of its intention to recover the liquidated damages it deducted (having already given what the contractor accepted as being a valid notice under clause 24.1). The liquidated damages deducted reflected the adjudicator's decision as to the extension of time to which the contractor was entitled. The contractor did not suggest that the notice did not comply section 111(2). Even if the employer's notice wrongly stated that the damages were to be "deducted" by it (rather than "paid" to it) with the result that it was not a valid notice under clause or .2, this did not matter insofar as a misapprehension as to the true position in fact or law should not stand in the way of the employer's clear intention. Lastly the employer's solicitors? subsequent letter in which they stated that the contractor was liable to pay liquidated damages satisfied the requirements of clause 24.2.1. Advice Note A defendant will be able to oppose enforcement of a decision for the payment of a specified sum where it can establish that the decision entitled it to make a set-off and that it had satisfied the contractual requirements for a valid set-off.