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
  • Introduction
  • Contractual right to set-off
  • Set-off based on the scope of the adjudicator's decision
  • Situations where set-off has not been allowed
  • Situations where set-off has been allowed

Produced in association with 4 Pump Court

Introduction

The courts have repeatedly held (see eg Ferson Contractors) 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. Akenhead J in Thameside Construction said that there were broadly two exceptions to the usual rule:

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

  2. where 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-offs will be very different.

Contractual right to