Adjudication—resisting enforcement using set-off or counterclaim
Adjudication—resisting enforcement using set-off or counterclaim

The following Construction guidance note provides comprehensive and up to date legal information covering:

  • Adjudication—resisting enforcement using set-off or counterclaim
  • Contractual right to set-off
  • Set-off based on the scope of the adjudicator's decision
  • Examples where set-off has not been allowed
  • Examples where set-off has been allowed

Produced in association with 4 Pump Court

The courts have repeatedly held (see eg Ferson Contractors v Levolux) that the policy behind the Housing Grants, Construction and Regeneration Act 1996 (HGCRA 1996) is that adjudication decisions should be enforced—to allow parties to resist enforcement by raising set-off arguments would frustrate that purpose. As such, a party who is ordered to pay money in an adjudicator’s decision must pay in full without deduction or set-off. Except in very limited circumstances, set out below, a separate contractual entitlement (such as to liquidated and ascertained damages (LADs)) cannot be used to resist enforcement of an adjudication decision.

Parties seeking to set-off against an adjudicator's decision therefore face an uphill struggle. The court in Thameside Construction v Stevens said that there were broadly two exceptions to the usual rule:

  1. there was a contractual right to set-off, or

  2. there was a declaratory type decision by the adjudicator (for instance in relation to an entitlement in principle to LADs) that left room within the decision itself for a set-off to be applied

This Practice Note considers each of those broad exceptions, as well as individual examples of situations where set-off has and has not been allowed. It should be noted that in the insolvency court the approach to set-off will be very different (see Practice Note: Adjudication—insolvency proceedings).