Sentosa engaged JPA to carry out the design and construction of a new medical centre pursuant to a 2005 JCT Design and Build Contract, 2007 revision. JPA sought to enforce an adjudicator’s decision for £300,000 plus interest. Pursuant to a separate claim, Sentosa sought to set-off £180,000 awarded to Sentosa in a subsequent adjudication. Sentosa also argued that whichever sum was due to JPA, enforcement should be stayed due to JPA’s contractual obligation to repay £300,000.

The contract provided that Sentosa would make an advance payment of £300,000 to JPA for its start-up costs, which would be reimbursed to Sentosa once the final account was agreed. No final account claim had yet been submitted, despite the contract having ended 6 months prior. However Sentosa had prepared a final account concluding that JPA owed Sentosa £200,000.

At the outset of the project JPA provided a breakdown of its start-up costs, which came to £252,000. Sentosa paid the sum as soon as it was invoiced but then deducted it from JPA’s Interim Valuation 2.

JPA made no complaint about this deduction until November 2008 when it claimed the full £300,000 in accordance with the contract. Sentosa did not pay JPA the amount claimed and so JPA referred the matter to adjudication. The adjudicator found that the £300,000 was due to JPA, together with interest.

By a separate adjudication, Sentosa sought money in respect of LADs. However, the referral notice did not seek payment of any sum found due. JPA defended on the basis that it was entitled to an EOT. JPA was awarded an EOT and Sentosa was awarded £180,000 for LADs. The adjudicator, rejecting Sentosa’s case that it had issued a valid withholding notice in respect of the LADs, specified that though Sentosa was entitled to claim the money from JPA, it could not deduct the sum from JPA.

The Judge found that there was no reason why the decisions in the two adjudications could not be set off against one another. The adjudicator had found that sums in respect of LADs were due, and contrary to JPA’s assertions that as Sentosa could not withhold or deduct sums due that it could not set them off either, the Judge found that there was nothing in the adjudicator’s decision precluding this.

The Judge also considered whether the payment from Sentosa to JPA should be stayed because of the inability of JPA to repay the £300,000 when the final account was finalised. He found that a stay should be granted for the following reasons:

1. The state of JPA’s finances was substantially worse than they were when JPA entered into the contract. This deterioration was not substantially as a result of Sentosa’s failure to pay the £300,000, particularly given that JPA had waited so long to request the money. Therefore, on the facts none of the exceptions had been triggered to the general rule that a claimant in a perilous financial position will not be entitled to judgment on the enforcement of an adjudicator’s decision.
2. Even if the Judge was wrong to permit Sentosa to set off the £180,000, the decision of the second adjudication would itself justify a stay of execution, at least up to that amount, irrespective of JPA’s financial position.
3. The final account should have been completed and this sum was contractually due to be repaid once the final account had been resolved. This was not a claim for a sum which may or may not succeed at some point in the future; it was Sentosa’s contractual right to be reimbursed this money and this payment was overdue.
4. Given JPA’s poor financial state it would be unjust and inequitable for Sentosa to pay JPA with the very real risk that Sentosa will not be reimbursed.