“Pay now, argue later” is a cornerstone of construction adjudication. The Court will strive to enforce adjudication decisions unless it is plain that the Adjudicator lacked jurisdiction or the process materially breached the laws of natural justice. In the overwhelming majority of cases, the proper course for an unsuccessful party is to pay the amount ordered by the Adjudicator—and challenge the decision later.

But what if there are several adjudications in relation to the same contract, and both parties are in receipt of favourable decisions? Should the Court allow one decision to be set off against the other, instead of requiring sequential payment?

This was the question before the Court in the case of CNO Plant Hire Ltd v Caldwell Construction Ltd [2024].

What happened?

The case involved a sub-contract for the provision of earthworks at a site in Liverpool. Payment disputes led to successive adjudications between the parties. In default of any payment or pay less notice, the first was a smash-and-grab adjudication referred by the subcontractor, CNO Plant Hire Ltd (“CNO” ) in relation to its December 2023 payment application.

Instead of paying the first adjudication award, Caldwell Construction Ltd (“Caldwell”) referred an earlier payment application from September 2023 for true-value adjudication. Notably, the September and December payment applications were for the same valuation of the same work. The December application was simply a final account.  CNO’s submissions that the dispute was the same as substantially the same as that which it had referred in the first adjudication were however dismissed by the second adjudicator, who went on to find in Caldwell’s favour.

When the first Adjudicator’s award was not paid, CNO applied to enforce it. But Caldwell, for whatever reason, did not do likewise in relation to the second adjudication decision.

Rather, Caldwell sought to resist enforcement of the first adjudication decision simply by asking the Court to set off the two decisions.

What did the Court decide?

• While the power to set off two competing decisions exists, it is only available where the Court can be satisfied both decisions are valid and enforceable. The Court in this instance was not in a position to consider the merits of the jurisdictional challenge that had been raised by CNO before the second adjudicator.
• Even if it were appropriate for the judge to consider a set-off, the Court would have declined to do so on the facts of this case since the two applications clearly related to the same payment cycle.
• From a policy perspective, allowing a set off would seriously undermine the principle of swift enforcement of Adjudicator’s decisions.

What can contractors learn from this?

Don’t bank on set-off as offering a way to delay or resist the payment of an adjudication award. The Courts have shown time and again that they are willing to enforce adjudication decisions summarily and swiftly. The general position is that a decision which directs one party to pay money to the other must be honoured regardless of any other adjudication awards that exist between the parties—pay now, argue later.  The exceptions are very limited.

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This article contains information of general interest about current legal issues, but does not provide legal advice. It is prepared for the general information of our clients and other interested parties. This article should not be relied upon in any specific situation without appropriate legal advice. If you require legal advice on any of the issues raised in this article, please contact one of our specialist construction lawyers.

© Hawkswell Kilvington Limited 2024