In Mann v Paterson Constructions Pty Ltd [2019] HCA 32, (Mann v Paterson), the respondent builder claimed against the owner an entitlement to recover payments for its work, including variations, upon a quantum meruit (literally, a reasonable sum of money to be paid for services rendered). The respondent’s claim was upheld at first instance and on appeal. The appellant challenged the decision in the High Court and the High Court allowed the appeal.

What is (or was) quantum meruit? This principle provided that an innocent party could, on repudiation by the other party, sue for the reasonable value of work performed as an alternative to damages for breach (i.e. as an alternative to damages calculated in accordance with the contract). This principle meant that, for example, if a builder did work under a contract that entitled the builder to (say) $50,000.00, but the contract was wrongfully terminated by the owner, then the builder could sue instead (on the builder’s election) for the actual value of the work performed instead, in substitute for damages under the contract. The actual value of the work might instead be, for example (say) $100,000.00. This meant in effect that the builder could obtain a windfall gain.

In Mann v Paterson the High Court determined that, for the most part, in circumstances where a contract is repudiated (for example, by a building owner), the amount recoverable by the injured party (for example, a builder) is limited to that which has accrued under the contract. However, if part of the works done by the builder comprised works (not being variations) undertaken toward a stage of the works that had not yet been completed at the time of termination, (so that no contract entitlement has crystallised), then the respondent builder is entitled to damages for breach of contract, or restitution, but the amount payable will ordinarily be limited to the amount payable under the contract.

That is to say, quantum meruit, as an alternative remedy to damages calculated pursuant to the terms of the contract on termination, is, essentially, no longer ordinarily available. In this sense quantum meruit is dead. However, while the minority of the High Court took a pragmatic approach and was prepared to, for the most part, confine quantum meruit to the ash heap of history, the majority took a more principled approach so that the remedy of quantum meruit is still available, albeit its reach and importance is now significantly reduced.

The High Court has now clarified, and limited, this alternative quantum meruit remedy. The majority said at [110]:

For the reasons which follow, insofar as the work and labour done was work and labour done in response to a requested variation within the meaning of s 38 of the Domestic Building Contracts Act 1995 (Vic) (“the DBC Act”), any amount of remuneration must be determined in accordance with ss 38 and 39 of the DBC Act. Insofar as the work and labour done, not being variations, comprised completed stages of the contract as defined in the contract, the amount of remuneration payable is essentially that which is prescribed by the contract for those stages, and any damages for breach of contract are to be calculated accordingly. Insofar, however, as any of the work and labour done, not being variations, comprised part of a stage of the contract that had not been completed at the time of termination, the respondent is entitled, at its option, to damages for breach of contract or restitution, but the amount of restitution should be limited in accordance with the rates prescribed by the contract.

What the decision means is that quantum meruit is now ordinarily available as a remedy only in circumstances where work has been completed under a contract, (not being work for variations, which would be valued in accordance with the contract), but an entitlement to payment for that work has not yet crystallised under the contract at the time of termination. Only in those circumstances will recovery on a quantum meruit basis be available. And furthermore, ordinarily, recovery on a quantum meruit basis will be calculated on the basis of the contract in any event.

This decision is not unexpected and brings this area of the law into line with the usual position that, on termination, accrued rights remain enforceable whereas the parties are absolved from future performance; except that the party in breach will be liable to pay the other party for its loss of the bargain. Quantum meruit will, post Mann v Paterson, only have work to do where the wronged party has undertaken work under the contract but that party’s right to damages has not yet accrued. Apart from those circumstances, the wronged party’s remedy will be limited to damages for breach of contract.

Adam Rollnik

MTECC welcomes new and returning members

MTECC is pleased to announce the addition of three new members for 2019:

• Jeremy Twigg QC. Jeremy comes to MTECC as one of Victoria’s leading senior counsel for construction litigation.
• Geraldine Gray. Geraldine brings with her a wealth of experience acting for both principals and contractors, as well as in insurance matters.
• William Thomas. Will joins MTECC with a diverse practice in commercial, construction, insurance and maritime law. Will has appeared in a number of high profile cases, including the Lacrosse fire litigation, handed down earlier this year.

More information on each of our new members, as well as other MTECC barristers, can be found here.

MTECC end of year function

We are pleased to invite all of our mail subscribers to MTECC’s annual end of year function, featuring an address by the Honourable Justice Riordan, Principal Judge of the Victorian Supreme Court’s Commercial List.

Date: Wednesday 13 November 2019

Location: Melbourne Bowls Club, Flagstaff Gardens, West Melbourne

Time: 6:00PM-8:30PM

Please RSVP by email to miriam@chancery.com.au by 30 October 2019 for catering purposes.

MTECC appointees recognised

MTECC has recently updated its website to recognise former members who have been appointed to Australian Courts and Tribunals. Profiles on each MTECC appointee can be accessed here or at the links below:

• The Honourable Justice John Dixon
• The Honourable Justice John Digby
• Mr Andrew Kincaid
• The Honourable Justice Robert Harper
• Judge Caroline Kirton
• Lord Chief Justice Michael Whitten

MTECC once again congratulates its former members on their respective appointments.

MTECC member Michael Sharkey presenting ICU Legal Seminar on 22 November 2019

MTECC member Michael Sharkey is presenting on “Ethical Issues in Engaging Expert Witnesses” on 22 November 2019. More information can be found here.