"Set off" in the Enforcement of an Adjudicator's Decision

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On Friday, 5 May 2023, the Technology and Construction Court ("TCC") handed down its Judgment in the case of FK Construction Ltd v ISG Retail Ltd.

The Judgment acts as a reminder of the few situations in which set off may arise in proceedings to enforce an adjudicator's decision.


ISG Retail Limited ("ISG") was engaged as the main contractor on a project in Bristol, referred to as Project Barberry.

ISG entered into a bespoke sub-contract with FK Construction Ltd ("FK") on or around 28 September 2021 in respect of roofing and cladding works ("sub-contract").

In accordance with the sub-contract, FK issued Application for Payment 16 (PA16) on 27 September 2022, requesting payment of £1,691,679.94.

ISG failed to submit a Payment Notice and submitted a Pay Less Notice ("PLN") on 28 October 2022. ISG did not make payment to FK in relation to PA16.

The terms of the sub-contract entitle the parties to refer any dispute or difference to adjudication in accordance with the Scheme for Construction Contracts (England and Wales) Regulations 1998.

The sub-contract also provides that the adjudicator's decision will be binding until legal proceedings determine the dispute or difference.

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Set off in the Enforcement of an Adjudicators Decision

Adjudicator's Decision – 27 February 2023

Accordingly, FK referred the dispute concerning the validity of ISG's PLN to adjudication.

Mr Allan Wood was appointed adjudicator and concluded that ISG's PLN was invalid.

Subsequently, FK was entitled to be paid a sum of £1,691,679.94 plus interest by ISG (the "Wood Decision").

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Adjudicators Decision 27 February 2023

Previous Adjudications

In addition to Project Barberry, ISG had also engaged FK on Project Triathlon ("Project Triathlon"), which related to work for a new logistics and distribution facility in Essex.

There had been three other adjudications relating to Project Barberry (excluding the Wood Decision) and three adjudications on Project Triathlon, and the parties had failed to comply with any of the adjudicator's decisions.

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Previous Adjudications

FK's Enforcement Application

ISG did not comply with the Wood Decision, and FK, therefore, issued enforcement proceedings.

ISG did not contest the enforcement of the Wood Decision on the basis of typical arguments such as natural justice or jurisdiction but instead sought to contend that it had a valid "set off" that the Court should consider.

ISG's case primarily focused on an adjudication decided by Mr Matthew Molloy on 14 April 2023 concerning Project Barberry ("Molloy Decision").

Specifically, ISG invited the Court to exercise its discretion in ordering a set off of:

  • The gross valuation of FK's works identified in the recent Molloy Decision, which suggested an entitlement of £906,738.20 due to FK taking into account previous payments; and
  • The net sum of £66,620.68 is due from FK to ISG pursuant to the Triathlon Decisions against the sum arrived at in the Wood Decision.

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FKs Enforcement Application

The Judgment

Joanna Smith J emphasised the fact that there are only limited circumstances in which the Court will refuse an application for summary judgment, one of which may be where it is within the Court's discretion to permit a set-off.

By reference to various authorities, she summarised the general position relating to set off as follows:

  • Unless there is a valid jurisdictional or natural justice ground which renders enforcement inappropriate, the adjudicator's decisions regarding direct payments of money should be enforced "summarily" and "expeditiously".
  • Where the parties have engaged in numerous successive adjudications, in the absence of special circumstances, the losing party cannot withhold payment on the ground of anticipated recovery in a future adjudication based upon different issues.
  • There are three limited exceptions to the general position.

The exception that ISG sought to rely on was where there were two valid, enforceable adjudication decisions involving the same parties and one party sought to set off one adjudicator's decision against the other.

Joanna Smith J referred to Akenhead J's Judgment in HS Works Ltd v Enterprise Managed Services Ltd ("HS Works").

In applying Akenhead J's four steps set out in HS Works, the TCC concluded that ISG was not permitted to resist enforcement of the Wood Decision.

Joanna Smith J applied the steps set out in HS Works as follows:

  • Validity – The Court confirmed that ISG fell at the first hurdle of validity, as the Court was unable to declare the validity of the Molly Decision on enforcement proceedings relating specifically to the Wood decision.
  • Enforceability/Effect – the TCC concluded that it was unable to give effect to the Molloy decision as it had not yet been declared enforceable.
  • Separate Proceedings – The Court noted that separate proceedings had not been issued in respect of the Molloy Decision.
  • Discretion – the TCC denied the suggestion that they had any discretion to permit a set-off or withholding as the facts of the case were not within the territory of the exception that was envisaged by HS Works, as referred to above.

In relation to the Project Triathlon adjudication decisions, the TCC summarised the position briefly as their financial impact was relatively small.

Joanna Smith J rejected the submission that it would be appropriate to apply the net result of the decision on Project Triathlon to the Wood Decision by way of set-off as the steps set out in HS Works were once again not satisfied.

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The Judgment


This case serves as a reminder to parties that the Courts take a robust approach when it comes to enforcing adjudicator's decisions and that there are only very few situations whereby a Court will refuse to grant the application.

It appears that the only time that the Court will exercise its discretion to permit a set-off between adjudication decisions is where the Court is dealing with the enforcement of both decisions simultaneously so that questions of validity and enforceability can be properly addressed, leaving the Court to exercise its discretion as to how best to proceed with the outcome.

The case makes it clear that even where there is a contractual right to set off, this will not be enforceable if it offends the statutory requirement for the immediate enforcement of an adjudicator's decision.

However, the TCC also noted that the suggestion that an adjudication decision concerning one construction project can be set off against an adjudication decision in relation to another construction project remains open to be determined.

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