should be entitled to a quantum meruit for at least the part completed portion of the next stage. Group 1 disagreed and said normal contractual principles should apply.
Paterson’s legal team then said that the repudiation of the contract by Mann was of such a nature that Mann should not be allowed to benefit by relying on one term of the contract as to the price while disregarding the rest of the contract terms.
Group 1 said there is nothing wrong with a defaulting party enjoying the protection of the contract’s ceiling on the amounts recoverable by way of damages.
However, Group 1 concluded by qualifying their decision with the following statement: “It may be that in some cases justice will not be done without a restitutionary claim.”
Group 2: The total failure of contract
The three Justices comprising Group 2 said that where a contract remains open, there is no room for quantum meruit. However, they disagreed with Group 1 and said where the contract is closed, such as this type of terminated contract, a claim in quantum meruit remains an option, although they agreed with Group 1 that the contract is not rescinded as from the beginning.
Group 2 said that it would be necessary for there to be a total failure of the contract to give rise to an obligation on the part of an enriched party to make restitution. They spoke of such a failure occurring by way of a total failure of consideration, in other words, a total failure to deliver the purpose of, or motivation for, the contract. A total failure of consideration had not occurred in relation to the divisible progress claim stages that had been completed before the termination. The contractor had rights to keep its payment for the stages completed and Mann had received some of the completed work.
However, they said there had been a total failure of consideration in respect of the progress claim stages that have not been completed. The contractor’s right to complete the performance and earn the rest of the contract price had failed. In relation to those uncompleted stages, the contractor had a claim for restitution in quantum meruit in respect of the work and labour done towards part completion of the uncompleted stages as an alternative to damages for breach of contract.
So how much can be claimed?
However, their Honours considered that the general rule should be that the amount that could be claimed by way of a restitutionary quantum meruit claim, should be calculated by reference to the contract sum. They felt that the parties had, by their contract, reached an agreement as to the price at which the services were to be provided.
They were not persuaded by the concept that the conduct of the Mann’s in repudiating the contract, should give rise to an immediate rejection of the price aspect of the bargain. They felt that the contract price remained important in evaluating the amount due in quantum meruit.
Gageler J. What rescission fallacy?
Gageler J agreed there was no entitlement to a quantum meruit for the completed stages of the contract. However, in relation to the partly completed work for which no milestone stage had been reached, His Honour found a quantum meruit is available. In effect he agreed with Group 2, although for different reasons.
His Honour referred to a 1934 judgment of Jordan CJ, in which His Honour had left open a claim in quantum meruit where a wrongful repudiation had the effect of preventing a party from becoming entitled to receive payment for services already rendered.
His Honour noted that Jordan CJ did not rely on the rescission fallacy and said, somewhat pointedly, “The [rescission fallacy] notion had been discarded then, as it remains discarded now.”
BuildLaw | Apr 2020
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