Articles

High Court to determine whether an awarded sum under a quantum meruit claim can exceed the contract price

The Manns (‘the Owners’) entered into a domestic building contract with Paterson Constructions Ltd Pty (‘the Builder’) for the construction of two double-storey townhouses for the sum of $916,779.00 (including GST).

The Builder completed the construction of the first unit approximately four months after the date of practical completion. The owners sought to terminate the contract based on the builder’s alleged delay and refused the builder access to return to the property.  The builder asserted that the Owners’ purported termination and refusal to allow the Builder on site was a repudiation of the contract, which the Builder accepted.

The builder made an application to the Victorian Civil Administrative Tribunal (’VCAT’) seeking relief on a quantum meruit basis in the amount of $944,898.00 or in the alternative the sum due under the contract in the amount of $518,597.97.

VCAT awarded some $660,000.00 which took into account reductions for defects and sums already paid. The Owners appealed to the Supreme Court, the appeal was dismissed. The Owners appealed to the Court of Appeal, that appeal was also dismissed.

In the spotlight… Again!

The matter will now be considered by the High Court after the High Court granted the Owners leave to appeal. The substantial issue to be determined that of whether the utilisation of a quantum meruit basis to value contract works is firstly, a reasonable method to value the works, secondly whether that method is available where the party seeking the method repudiated the contract and thirdly, if the quantum meruit method is available, is it capped by the price in the contract.

Quantum meruit is a claim for the recovery of a reasonable sum of money for work done or services rendered when the amount due is not specified or enforceable within a contract. Quantum meruit claims arise in two situations; the first occurs when a price in an enforceable contract is not agreed upon.

In this scenario, a quantum meruit claim allows for the reasonable remuneration of goods or services provided; commonly occurring in cost-plus contracts. Secondly, if there is no enforceable contract, quantum meruit is a restitutionary claim for the unjust enrichment by the Owners.

The issue in this case is that the quantum meruit value far exceeds the contractual value and the works are not complete.

Take Away

The availability of quantum meruit highlights the necessity of understanding your building contract and how to validly terminate it. Furthermore, Mann v Paterson highlights the ramifications of wrongful repudiation and need to seek legal advice where necessary.

Disclaimer: This publication by Morrissey Law & Advisory is for general information and commentary only and should not be considered or relied upon as legal advice. Formal legal advice should be sought in relation to any matters or transactions that may arise in relation with communication.