The Contractor, the Construction Centre Group Limited, contracted with the employer for the design, construction and maintenance of phase 1 of the Small Isles and Inverie Ferry Scheme. This was subject to the ICE Conditions of Contract 5th Edition 1973 (revised in January 1979) but subject to amendments agreed between the parties. The contractor submitted interim application no. 21 in April 2003, seeking certification of a sum in excess of £5.5 million. On 2nd May 2002 the engineer responded stating that in his opinion no sum was due to be certified by him in respect of application no. 21. A dispute arose in respect of that matter which was then referred to adjudication. On 28th June 2002 the Adjudicator decided that the contractor should be paid the sum of £245,469.24 within 7 days of his decision.

The employer did not pay and so the contractor commenced a commercial action for payment. The employer contended that the sum of £420,000 was due from the contractor to the employer in respect of liquidated damages for delay to completion.

The amount of the liquidated damages owed by the contractor to the employer was considered a liquid debt, although there was some debate about a distinction between a plea of retention and a plea of compensation. Some reference was made to the English cases, but the Court held that the English concepts of set-off were not identical to the equivalent concept in Scotts Law.

The Court held that the Adjudicator's decision was intended to have immediate and enforceable effect. It was therefore unnecessary to decide whether the defence of liquidated damages should be classified as retention or as compensation. As the employer had not relied upon that defence during the adjudication the employer could not now raise it in order to defeat the Adjudicator's decision. The Court therefore refused the Employer's motion to remit.