Mann v Paterson Constructions Pty Ltd

Facts

The Manns engaged Paterson Constructions to build two townhouses under a domestic building contract governed by the Domestic Building Contracts Act 1995 (Vic). Disputes arose during construction and the Manns repudiated the contract, which Paterson accepted. Paterson then claimed a quantum meruit for work done on the second townhouse in an amount exceeding the contract price.

Issues

1. Whether a builder who has accepted the other party's repudiation of a contract may recover a quantum meruit for work done that exceeds the contract price. 2. Whether the law of unjust enrichment or restitution provides an independent basis for recovery beyond the contractual ceiling in such circumstances.

Holding

The High Court held, by majority, that where a valid and enforceable contract has been repudiated and the innocent party has elected to terminate, any quantum meruit claim for work done under the contract is capped at the contract rate or price; the innocent party cannot use restitution to escape the bargain and obtain more than the contract provided.

Ratio decidendi

Where work has been performed under a valid and subsisting contract that is subsequently terminated for repudiation, a quantum meruit claim by the innocent party for that work is limited by the contract price; an accrued contractual right to payment fixes the ceiling of recovery, and the law of unjust enrichment does not operate to award the innocent party a sum greater than that to which the contract entitled it.

Obiter dicta

The majority expressed significant reservations about recognising an independent Australian law of unjust enrichment as a distinct doctrinal category capable of overriding or supplementing contractual obligations; Gageler J and Gordon J each wrote separately to caution against uncritical reception of English unjust enrichment theory into Australian law. The plurality also noted that the position may differ where the contract is void, unenforceable, or does not address the particular work in question.

Significance

Mann v Paterson Constructions is the leading Australian authority on the relationship between restitutionary quantum meruit and subsisting contractual obligations, confirming that an enforceable contract caps any quantum meruit recovery and thereby restraining the expansion of unjust enrichment as an autonomous body of law in Australia.

Key authorities

• Pavey & Matthews Pty Ltd v Paul Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221considered
• Baltic Shipping Co v Dillon Baltic Shipping Co v Dillon (1993) 176 CLR 344considered
• Renard Constructions (ME) Pty Ltd v Minister for Public Works Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234considered
• Lumbers v W Cook Builders Pty Ltd (in liq) Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635applied
• Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq) Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq) (1978) 141 CLR 335considered
• Moses v Macferlan Moses v Macferlan (1760) 2 Burr 1005; 97 ER 676considered