VHE Construction PLC v RBSTB Trust Co Ltd [2000] EWHC Technology 181

This summary was provided by CMS Cameron McKenna LLP.

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Sums cannot be set off against adjudicator's decisions. If a valid notice of intention to withhold payment is served, and then overturned by an adjudicator's decision, payment should be made within 7 days of the decision.

HHJ Hicks QC, Technology & Construction Court

13 January 2000

V was the main contractor under a JCT. '81 contract with R. The payment provisions provided that V should submit a VAT invoice prior to payment of interim valuations. V served a notice of adjudication in respect of its interim application 4 for which it had served no VAT invoice and for which R had served no notice of intention to withhold. It sought full payment of that application which included sums for variations and loss and expense. The adjudicator made an award in favour of V holding that R could not pay less by relying on rights of abatement and a proper assessment under clause 30 of the contract. However R did not have to pay until it received a VAT invoice. The referral to the adjudicator was not wide enough to entitle him to review or revise the value of the application.

R initiated an adjudication seeking revision of the amount of the interim application and that the decision of the previous adjudicator be reduced to the revised sum or that V repay the excess sum that it had received. The adjudicator did reduce the amount of the application. R then wrote to V and said that it intended to deduct liquidated damages, and paid V the balance of the interim application after deducting these (in effect, making a set-off against the amount awarded by the adjudicator).

V then applied for summary judgment in respect of both decisions. R claimed that it could exercise its right of set-off in the absence of a notice to withhold payment under Section 111 of the Act. The court held that Section 111 was wide enough to prevent any set-off where a valid notice had not been served. Therefore, R was not entitled to make a deduction in respect of liquidated damages against the amount awarded. Further the effect of Section 111(4) was that after there has been a valid notice to withhold, and an adjudication challenging the validity of the grounds of the notice, payment cannot be enforced earlier than 7 days from the date of the decision.

Therefore the court held that R had no real prospect of successfully defending the claim and V was entitled to judgment.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

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