The question for the court was whether the counterclaim operated as a set-off under clause 1.13 of the contract, and if so, whether that was sufficient to prevent summary judgment. The court had to consider the interrelationship between the two provisions. Previous case law established that there could be a set-off against an adjudication award and the existence of a potential set-off could be a defence warranting the court in declining summary judgment, but only in two sets of circumstances. First, where the effectof the relevant contract properly construed gave a right of set-off against an adjudication award. Second, where the matters sought to be set-off arose impliedly by virtue of the adjudicator's decision, such as where a decision indicated there is to be a payment but that the payment was to be subject to deductions in accordance with normal provisions of the contract. This latter potential defence was not relevant here. It was the first potential defence with which the court was concerned. Looking at the adjudicator's decision, there was nothing in it which gave rise to an entitlement to withhold sums from it. That brought the court back to the terms of the contract. In Squibb Coulson J said this: "The first possible exception to the general rule turns on the proper construction of the terms of the contract. There will be some cases, such as Parsons Plastics Ltd.…where the contractual right to set-off may trump the enforcement of an adjudicator's decision. However, such cases will be relatively rare and will depend upon the precise construction of the relevant set-off provision. Clear words permitting the set-off against a sum otherwise due will usually be required. The more common analysis is that set out by the Court of Appeal in Ferson Contractors Ltd v Levolux …where Mantell LJ said that the contract had to be construed so as to give effect
to the intention of Parliament, rather than to defeat it, and that if the set-off provision offended the requirement for immediate enforcement of the adjudicator's decision, it should be struck down. He distinguished Parsons on the basis that it was not concerned with section 108 of the 1996 Act and was instead concerned with a rather different ad hoc adjudication procedure." The court found that rationale equally applicable to a contractual provision for adjudication in this case, as to the statutory right governing the cases cited. Applying Squibb , and RWE Npower v Alstom Power Ltd [7], the court concluded that the operation of clause 1.13 of the contract, was subject to the operation of clause 9.2 and the provisions of the Scheme and the principle of "pay now, argue later”, and not the other way around. As it was, clause 9.2 set out to two exceptions to the provisions of the Scheme. As this was a contractual right of adjudication, the parties could have also included a further exception to provide a right to set-off against the award. They had chosen not to do so. Therefore, the existence of a counterclaim was not a defence to enforcement. That construction of the contract also precluded any possibility of an equitable set-off. Even if the counterclaim was "potentially meritorious", it was not unjust to allow summary judgment. For reasons similar to those given above, the court held it was inappropriate to stay execution as that would defeat the purpose of the Scheme which the parties had chosen to adopt. Equally there was no basis for ordering the judgment sum to be paid into court or into some other form of holding account pending trial of the counterclaim. That would also undermine the principle of “pay now argue later”. Judgment accordingly.
[7] [2009] EWHC 1192 (QB)
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