Setting off against an adjudicator's decision
Tuesday 19th January 2010
Readers may be interested in the recent case of JPA Design and Build Ltd v Sentosa (UK) Limited. This High Court case concerned a contract to construct a medical centre in Brentford. Under this contract, JPA were entitled to an advance payment of £300,000, due to be repaid to Sentosa in the final account calculation.
JPA valued their start-up costs at £252,000 and this was the sum paid to JPA as the advance payment. The advance payment to JPA was not factored into the final account but was instead deducted from sums due to JPA in an interim valuation. JPA raised no complaint at this time, but when relations later soured JPA demanded the full £300,000. Sentosa refused this demand and the matter proceeded to adjudication where it was decided that JPA were entitled to the full £300,000.
Six weeks later, Sentosa obtained an adjudicator's decision that they were entitled to liquidated damages of £180,000. However, the adjudicator said that as a valid withholding notice had not been served, Sentosa could not withhold the £180,000 from JPA and would instead have to bring separate court proceedings.
At the High Court hearing, Sentosa argued that they could set off their award of £180,000 against JPA's award of £300,000. The Court agreed, saying that the lack of a valid withholding notice from Sentosa should not prevent the set off as it logically followed from the second adjudicator's decision that Sentosa was entitled to the £180,000 damages.
This means that whilst a lack of a valid withholding notice may prevent withholding monies under a contract, where there is an adjudicator's decision supporting the basis of withholding the monies, the employer will not be prevented from withholding such money.
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Ashfords LLP is regulated by the Solicitors Regulation Authority. The information in this note is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances.
