Avoiding payment of an adjudicator’s decision Can the conflicting judgments in VHE Construction and McLeans be reconciled? asks Justin Mort * is the adjudicator’s decision susceptible to a set-off defence? * prosecution of a cross-claim * the consequences of McLeans One of the main purposes of the Housing Grants, Construction and Regeneration Act 1996 was to provide an immediate method of dispute resolution in construction contracts disputes, supported by enforcement in court. This was emphasised in Macob Civil engineering Ltd v Morrison Construction Ltd [1999] All ER (D) 143: “The intention of Parliament in enacting the Act was plain. It was to introduce a speedy mechanism for settling disputes in construction contracts on a provisional basis, and requiring the decisions of adjudicators to be enforced pending the final determination of disputes by arbitration, litigation or agreement.” Not surprisingly, the Technology and Construction Court (TCC) has been much occupied by attempts by the paying party, typically the employer, to resist the enforcement of adjudicator’s decisions. In the leading cases, employers have sought to attack the effectiveness or validity of the adjudication process and the adjudicator’s decision by reference to natural justice, adjudicator error or other jurisdiction grounds. In general these cases have been decided in a consistent manner, and much of the case law has been more or less anticipated since Macob. An alternative line of resistance, comparatively unexplored in the TCC, is to argue that payment of an adjudicator’s decision has been discharged in whole or in part by a corresponding indebtedness on the part of the successful party. Such an argument raises one of the more difficult questions of the legislation: can a party rely upon a set-off or other cross-claim in order to withhold money due under an adjudicator’s decision or otherwise avoid payment of the decision? The 1996 Act requires that a party must first serve notice if it wishes to withhold a payment otherwise due (s111). So can an employer serve a withholding notice in relation to, say, its entitlement to damages for delay against an adjudicator’s direction that an interim application be paid? In some cases the adjudicator will have decided – or will be taken to have decided the employer’s cross-claim(s) as part and parcel of the dispute referred to adjudication. Presumably, if a cross-claim has been rejected in the course of the adjudication it cannot be dusted off and trotted out a second time at the enforcement state. But in practice, it is the referring party who decides which issues are put before the adjudicator, and the referring party may be able to frame the notice of adjudication in such a way that the employer’s cross-claims, though legitimate, are excluded from consideration by the adjudicator. (Under some adjudication rules, and in adjudications under the Scheme for Construction Contracts (England and Wales) Regulations 1998, the adjudicator may extend the scope of the dispute but cannot be compelled to do so. In general adjudicators are reluctant to widen the dispute referred.) Can the party resisting enforcement in those circumstances throw in a last gasp set-off or cross-claim at the enforcement state, all other defences having been properly over-come in the course of the adjudication? This question has now been considered in two cases in the TCC – but with conflicting results. Justin Mort in “New Law Journal” 7th December 2001