The adjudicator has made a huge mistake in his decision. The result is that the employer is ordered to pay £500 000 for work that was never carried out. The contractor accepts the mistake. He is, however, anxious to get to court as quickly as possible to enrich himself.
The solicitor considers his position. On the face of it, what his client wishes to do appears to be a misuse of the process of the court. In legal language, the contractor has failed to give contractual consideration for the money payable. The contractor will be enriched by a mistake within the contractual process of adjudication. That seems to be unjust enrichment.
Any cross-claim made by the employer for unjust enrichment may be defeated on the grounds that public policy requires the enforcement of the adjudicator's decision. Nevertheless, both parties to the court proceedings and the judge will know that the decision is mistaken and if the decision is enforced, an unfair enrichment of the contractor will have occurred.
A quick review of the recent case law reassures the solicitor that he can win even if his client admits that the adjudicator made a mistake. This is shameful.
Section 108(3) of the Construction Act states: "The contract shall provide that the decision of the adjudicator is binding until the dispute is finally determined." This means that the court, or an arbitrator, cannot review an adjudicator's decision on a temporary or interim basis (even to remove obvious mistakes) before finally making a decision on the matters referred to adjudication.
What is urgently needed is a redrafting of Section 108(3) and Paragraph 23(2) of the Scheme for Construction Contracts, which says more or less the same thing.
Preventing firms claiming unjustly can be done with a minor change in the act and the scheme Alternatively, a judge making a summary judgment has several ways to prevent an injustice
The wording needs to allow the rapid review by the courts or arbitrators of adjudicators' decisions, pending any final decision.
It must be recognised that many adjudicators' decisions are irreversible. An adjudicator may declare, for example, the extent of necessary remedial works and order compensation accordingly. If he makes an error in declaring work to be out of tolerance, the other party may be happy to remove large sections of work and rebuild them and gain some betterment by doing so. The successful party may even terminate the contract on the strength of the adjudicator's decision.
Given that mistaken decisions are legally binding, what can a fair-minded judge do, bearing in mind the need to be fair to the individuals who come to the court? One practical solution is for judges to give summary judgment to enforce the defective decision but at the same time allow a cross-application from the defendant for an accelerated trial. Another option is to grant summary judgment but not to enforce it before an accelerated trial or arbitration. A further course of action may be to simply refuse to give summary judgment, given the extent of the injustice to the defendant.
Finally, where there is no arbitration clause in the contract, a brave judge might grant summary judgment in relation to the adjudicator's decision on the one hand but immediately after that hear and grant the defendant's application for repayment of the moneys adjudged payable under the adjudicator's decision.
However, several obstacles lie in the way of counterclaiming for unjust enrichment and immediate repayment. First, both parties agreed to adjudicate and therefore voluntarily conferred the benefit of adjudication on the other. Even so, it is still possible to succeed in an application for unjust enrichment even though you voluntarily confer a benefit on the other party.
Second, as stated earlier, public policy may defeat a claim for unjust enrichment. In a series of cases the court has upheld adjudicators' decisions on grounds of policy even though the result in the specific case is unfair.
Philip Harris is a partner with Merricks Solicitors in Birmingham and is joint convenor for the Adjudication Society in the Midlands.