Ledwood Mechanical Engineering Ltd V Whessoe Oil And Gas Ltd

The adjudicator's decision that the contractor had wrongly withheld various amounts from the sum otherwise due to the sub-contractor in respect of an interim payment application should be enforced by requiring the contractor to pay to the sub-contractor the total sum withheld

Technology and Construction Court
Ramsey J
20 November 2007
The contractor made deductions from an interim payment application by the sub-contractor. The sub-contractor contended that the contractor was not entitled to make the deductions and referred the dispute in this connection to adjudication. The adjudicator decided that the contractor had wrongly withheld the sums in question. Whilst the contractor agreed that the adjudicator's decision should be enforced, it did not make payment of the sum held by the adjudicator to have been wrongly deducted. The contractor instead issued a revision to a payment notice in respect of a subsequent interim payment application in which it stated that the sum due to the sub-contractor was a negative sum with the result that it made no further payment. The sub-contractor brought court enforcement proceedings and applied for summary judgment in respect of the sum withheld.
The sub-contract provided for the application of a "risk/reward" mechanism to all interim payments. The contractor contended that the application of that mechanism in the light of the adjudicator's findings resulted in a greater deduction from the sum otherwise due than the sum the adjudicator decided it had wrongly withheld with the result that it should be permitted to set off that deduction against the sum otherwise due. The contractor also contended that the adjudicator's finding that the sub-contractor was entitled to be paid for a specified number of hours expended meant that a risk/reward adjustment under the sub-contract should be made in respect of the interim payment application by deducting from the sum otherwise payable. The contractor contended that such a risk/reward adjustment was based on the logical corollary of the adjudicator's decision and was similar to a case where the consequences of a decision was that an employer was entitled to deduct liquidated damages;
Ramsey J rejected the contractor's contention and held that the decision should be enforced. He did so on the basis that the adjudicator intended that the sum withheld should be paid, that the contractor should not be permitted to take account of subsequent events and other rights of set off which it did not at the time seek to deduct from the sum otherwise due and that it was in any event disputed whether the application of the mechanism resulted in a deduction of the magnitude contended for by the contractor.