Case update – Mann v Patterson Constructions
1. Introduction
In October, the High Court handed down its judgment in the case of Peter Mann & Anor v Paterson Constructions Pty Ltd [2019] HCA 32 (Paterson), clarifying principles and providing constraints in respect of a claim on the basis of quantum meruit.
In an earlier publication here we discussed the effect of the Victorian Supreme Court of Appeal decision in Paterson which held that a builder was entitled to compensation on a quantum meruit basis (i.e. for the fair value of the benefit conferred to the owner) even if the variation provisions of the Domestic Building Contracts Act 1995 (Vic) (Act) had not been complied with.
The enduring common law position has been that the restitutionary remedy of quantum meruit is available to a contractor following termination by a contractor for repudiation.
This position has been subject to criticism from some commentators for its potential to incentivise builders to underquote in order to attract work and subsequently induce repudiation by clients in order to claim amounts in excess of the contract price.
2. High Court decision
For a background summary of the critical facts of Paterson, please see our earlier article here.
Following an unsuccessful appeal by the owners to the Court of Appeal, the owners sought leave to appeal to the High Court.
The High Court overturned (by the barest majority) the decision of the Court of Appeal and determined that:
a) a quantum meruit claim is not available in circumstances where the builder has accrued a contractual right to payment (i.e. a progress claim in accordance with the contract);
b) Section 38 of the Act (governing variations) excludes claims for quantum meruit otherwise than in accordance with the Act; and
c) quantum meruit claims are available in circumstances where a builder has not accrued a contractual right to payment, but that claim is limited to the balance of the contract price.
3. Takeaways
The decision has substantially limited the scope of quantum meruit claims in construction contract claims, confining the quantum of those claims to the balance of the contract price. Builders can no longer rely on restitutionary claims to recover money for undocumented variations which exceed the balance of a fixed contract price.
Accordingly, parties to construction contracts will need to proceed with caution when relying on repudiation to terminate a contract in circumstances where variations have not been documented pursuant to section 38 of the Act.
For more information related to building and construction law or for general commercial disputes advice, please contact:
Ben Broadhead
Principal
T 03 5226 8549
E bbroadhead@ha.legal
Zac Griffiths
Principal Lawyer
T 5225 5229
E zgriffiths@ha.legal
