Squibb Group Ltd V Vertase Fli Ltd

The contractor was not entitled by its withholding notice to set off its claims for liquidated damages and for other items against the sum awarded by the adjudicator to the sub-contractor
Squibb Group Ltd V Vertase Fli Ltd
Technology and Construction Court
Coulson J
10 July 2012
The adjudicator decided that (i) The sub-contractor was entitled to an extension of time of six weeks and a specified sum by way of additional costs due to the delay, which sum was to be paid within 14 days of the date of the decision and (ii) The contractor had no entitlement to deduct liquidated damages from any amount due to be paid to the sub-contractor because the contractor failed to give any withholding notice in respect of any cross-claim for liquidated damages. The contractor did not pay the sum awarded and instead purported to serve a withholding notice for a larger sum in total than that awarded which was divided into two parts, namely (i) a claim for liquidated damages for the un-extended period of the sub-contract and (ii) a sum by way an assortment of other items, many of which the sub-contractor allegedly failed to carry out.
Coulson J held that the contractor was not entitled by its withholding notice to set off its claims against the sum awarded. The right to make such a set off had generally been excluded because anything else would be contrary to the Construction Act and the underlying purpose of construction adjudication. It would be contrary to the Act if the effect of a decision could be avoided altogether by the subsequent service of a withholding notice since it would allow the unsuccessful party a defence merely because the adjudicator gave that party time to pay the sum due rather than ordering payment forthwith. The adjudicator decided a one-off claim in a one-off way and intended the sum awarded to be paid by no later than 14 days after his decision.
The contractor submitted that the case came within the possible exception of the entitlement to liquidated damages not having been determined expressly or impliedly by the decision and the question of whether the employer was entitled to set off such damages therefore depending on the terms of the contract and the circumstances. Whilst the contractor’s submission was entirely realistic, it merely meant that consideration had to be given to (i) the terms of the sub-contract, which did not assist the contractor and (ii) the circumstances of the case, when the principal one was that a certain sum had to be paid within 14 days without deduction.