September 26, 2018

The recent decision of the Victorian Court of Appeal in Mann v Paterson Constructions Pty Ltd [2018] VSCA 231 considered the question of whether a quantum meruit was available to a builder who accepts an owner’s repudiation of the contract, and the relevant legal principles when valuing work on a quantum meruit basis.

We have previously prepared an update regarding the first instance decision of Cavanough J in the Supreme Court of Victoria, in which his Honour held that the proper course of action for a party arguing a quantum meruit claim is to demonstrate that a valuation is ‘fair and reasonable’ in the circumstances, which may involve reference to the contract price as well as costs actually incurred. A copy of that update is available here.

Following Cavanough J’s decision, the Manns sought leave to appeal against the trial judge’s decision on several proposed grounds of appeal, including that the trial judge had erred in holding that:

  •   consequent upon termination of the contract following repudiation, the Respondent was entitled at law to sue on a quantum meruit basis for the work carried out, and his Honour should have found that the remedy was unavailable. In this respect, the Manns submitted that the proceeding afforded a ‘particularly good opportunity’ for the Court to reconsider the correctness of long-established principle; and
  •   VCAT had applied the correct legal principles in valuing the works on a quantum meruit basis, in circumstances where the Manns alleged that VCAT had (among other things) failed to take into account the actual costs incurred and the discrepancy between the contract price agreed and the quantum meruit assessment.

The Court dismissed the appeal on all grounds. In upholding the decision of Cavanough J, the Court unanimously held (among other things) that:

  •   Nothing has transpired in the nine years since Sopov v Kane Constructions Pty Ltd (No 2) (2009) 24 VR 510 that lessens the force of the observations made in that case. In Sopov, the Court observed that the right of a builder to sue on a quantum meruit basis following a repudiation of the contract has been part of the common law of Australia for more than a century, and has been supported by numerous intermediate courts of appeal across Australia. If that remedy is to be declared to be unavailable as a matter of law, that is a step which the High Court alone can take.
  •   The authorities make clear that a builder seeking a quantum meruit amount following acceptance of an owner’s repudiation of a building contract is entitled to recover the ‘fair and reasonable’ value of the benefit conferred on the owner by the work that the builder performed.
  •   In determining the ‘fair and reasonable’ value of the benefit conferred, it is necessary to have regard to all evidence put forward by the parties, which in this case includes evidence of the contract price and actual costs. The weight to be given to particular items or categories of evidence will depend on the circumstances of each case.
  •   As a matter of law, in a quantum meruit claim, the actual costs incurred are not determinative and do not impose a ceiling on the amount that can be recovered.
  •   In some cases, the actual work performed is so radically different from the scope of work in the contract that little, if any, weight can be accorded to the contract price.
  •   VCAT was entitled to accept the evidence that it found was more reliable, and its reasons demonstrated that it had taken into account the discrepancies in the contract price, the quantum meruit assessment and actual costs, and therefore it had not made any error of law.

This decision provides some further practical guidance on the valuation of quantum meruit claims, and confirms that, when assessing a quantum meruit claim, the focus is on the benefit that is conferred and whether the valuation of that benefit is ‘fair and reasonable’ in the circumstances, based on the evidence provided.

The full decision can be found here.

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