The claimant, Sharba Homes (CN) Ltd, engaged the defendant, Avaoncroft Construction Ltd, in September 2006 on the JCT 1998 Private Without Quantities contract. When a dispute arose and the matter was referred to adjudication, the adjudicator awarded the claimant £56,380. The defendant refused to pay and the claimant applied for summary judgement. The defendant resisted the application on the ground that it was entitled to set off LADs against the sum awarded.

The claimant argued that as the contract lacked a provision for sectional completion, and the defendant took partial possession, there was no underlying entitlement to LADs as the clause failed according to the principle in Bramall & Ogden v Sheffield City Council (1983) 29 BLR 73. The defendant disagreed that this principle applied as unusual circumstances arose when the claimant barricaded a show room and prevented access when payment was not received. It was submitted that partial possession was frustrated by the actions of the claimant. HHJ Kirkham was not persuaded by this and held that ‘it is a question of law whether, partial possession having been obtained, LADs are payable at all'.

On the question as to whether the defendant was entitled to set off its claim for LADs against the sum due pursuant to the decision of the adjudicator, HHJ Kirkham, at paragraph 9, referred to the guidance Jackson J gave in Balfour Beatty Construction Ltd v Serco Ltd [2004] EWHC 3336:653:

"(a) Where it follows logically from an adjudicator's decision that the employer is entitled to recover a specific sum by way of liquidated and ascertained damages, the employer may set off that sum against monies payable to the contractor pursuant to the adjudicator's decision...

(b) Where the entitlement to liquidated and ascertained damages has not been determined either expressly or impliedly by the adjudicator's decision, then the question whether the employer is entitled to set off ... will depend upon the terms of the contract and the circumstances of the case."

When applying Jackson J's guidelines, HHJ Kirkham held that the defendant was not entitled to set-off any LADs due. The adjudicator did not decide the question of entitlement to LADs, as it was not argued, and there was not an express provision in the contract entitling the defendant to deduct and withhold LADs.

HHJ Kirkham further considered, albeit obiter, the validity of a withholding notice. As the contract did not provide for service of a withholding notice against the decision of an adjudicator, she referred to s.111(3) of the HGCR Act 1996 and held that Part 2 of the Scheme would therefore apply. Accordingly, the notice had been served one day late. The defendant argued that it would have been impossible to serve the notice on time as the adjudicator's decision was released exactly seven days before payment was due. They argued that court should recognise this impossibility and an allowance should be made. She rejected this submission and upheld the general approach of the courts which is to strictly comply with the time limits provided by the Act.

HHJ Kirkham further rejected the application for a stay and the application for an order that the defendant pay the judgment sum into court. She was not persuaded by the defendant's argument that the claimant would probably be unable to repay the judgment sum and that there are special circumstances within the meaning of RSC Order 47 Rule 1. Equally, applying the decision in Interserve Industrial Services Ltd v Cleveland Bridge UK Ltd [2006] EWHC 741 (TCC), she rejected the defendant's application for a stay as they wished to await the outcome of a second adjudication which was due in two week's time.