FK Construction Ltd v ISG Retail Ltd [2023]

In FK Construction Ltd v ISG Retail Ltd [2023], the Court declined to exercise its discretion to permit set-offs arising from other adjudication decisions between the same parties.

 The Background to the Case

ISG engaged FK under two bespoke sub-contracts, to undertake works on two construction projects, the Barberry and Triathlon projects.

There were seven adjudications in total between the parties, four relating to project Barberry and three relating to project Triathlon.

The Wood Decision

Pursuant to the project Barberry sub-contract, FK issued its AFP 16 for the sum of £1.7m. ISG failed to issue a payment notice in respect of AFP 16 but submitted a purported pay less notice.

A dispute arose as to the validity of ISG’s pay less notice. The adjudicator, Mr Wood, determined that ISG’s PLN was out of time and thus invalid and awarded FK the full value of its AFP 16 plus VAT and interest. Following ISG’s failure to comply with the Wood Decision, FK applied to the TCC for summary judgment to enforce the Wood Decision.

ISG resisted the enforcement proceedings arguing that the Court’s had discretion to order a set off against the adjudicator’s award by reason of other adjudication decisions affecting the same parties, including those relating to the separate project Triathlon.

What Did the Court Decide?

The Court rejected ISG’s set off arguments and enforced the Wood Decision in full.

The Judge reiterated the Court’s robust approach to adjudication enforcement and held that ISG had not complied with the four-stage test set out in HS Works Ltd v Enterprise Managed Services Ltd [2009], thus rendering it inappropriate to order a set off.

The Conclusion to the Case

This case highlights that enforcement of adjudication awards continues to be strongly supported by the courts, with the options potentially available to respondent parties being extremely limited.

While in principle set-off remains one such option where there are competing awards between two parties, any party inviting the court to exercise its discretion to permit  set-off must be astute to ensure it has first complied fully with all preliminary stages of the test set out in HS Works. Such cases will be rare indeed.

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For more information contact:

David Spires 

Partner

E-mail: DSpires@hklegal.co.uk

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.

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