Equitable Set-off And Adjudication Enforcement

In the case of Beck Interiors Ltd v Classic Decorative Finishing Ltd, [2012] EWHC 156 (TCC) Mr Justice Coulson, enforced an adjudicator's decision, refusing to allow set-off of sums allegedly arising under an unrelated project in a different jurisdiction.

The Facts

On or around 7 February 2011, Classic Decorative Finishing Limited ("CDF") were engaged by Beck Interiors Ltd ("Beck") under a subcontract to carry out internal and external decoration works at 1 Cambridge Gate, London.

Disputes arose between the parties during the course of the works and Beck referred its claim to adjudication. The adjudicator issued his decision on 11 May 2012 finding that Beck was entitled to the sum of £35,901.45 plus VAT from CDF.

CDF refused to pay. In its defence CDF argued that the sum was not due as Beck owed CDF the sum of EUR 59,156.23 under a final account for works undertaken by CDF for Beck at Danesmoate House in Dublin.

Beck issued enforcement proceedings. CDF did not attend the hearing and cited failure of Beck to comply with TCC directions, noted by the court to be incorrect, and logistical difficulties as the reason for non attendance. The TCC determined that in the circumstances it was proper and appropriate to proceed to consider the merits of Beck's application for enforcement.

The Issue

Was CDF entitled to set-off against the adjudicator's decision sums they claimed were due under a separate contract in Dublin? In the absence of a contractual right to set-off, did CDF have any equitable set-off rights?

The Decision

Mr Justice Coulson held that the matters raised by CDF were not an arguable defence to Beck's claim. The Judge reached his conclusion for the following reasons:

The general principle is that it is rare for the court to permit the unsuccessful party in an adjudication to set-off against the sum awarded by the adjudicator some other separate claim. To permit set-off in such circumstances would defeat the purpose of the 1996 Housing Grants (Construction and Regeneration) Act. Reference was made to VHE Construction PLC v RBSTB Trust Co Ltd [2000], as endorsed by the Court of Appeal in Levolux AT v Ferson Contractors [2003]; There were two possible exceptions to this general principle, firstly where there were express set off provisions in the contract, and secondly wherethe adjudicator did not order immediate payment, instead giving a declaration as to the proper operation of the contract. Reference was made to Shmizu Europe Limited v...