Iezzi Constructions Pty Ltd v Watkins Pacific

Iezzi Constructions Pty Ltd v Watkins Pacific - [1994] QCA 49 - QCA 1994 case summary — Zoe

[26]

"The second point is that the amount of the arbitrator's award (particularly when aggregated with payments already made under the contract whilst it was on foot) exceeds the amount payable to the contractor under the contract, which latter amount must provide a "ceiling" on any quantum meruit claim. This point should also, in my view, be rejected. In the first place, it is contrary to what authority exists on the question. The Court of Appeal in New Zealand, in Slowey v. Lodder (1901) 20 NZLR 321, held that an innocent party who terminates a contract by acceptance of the defaulting party's repudiation may sue on a quantum meruit for the value of work done before repudiation, and that the fact that a judgment on this basis exceeds the amount which would have been payable under the contract is irrelevant. That decision was affirmed on appeal to the Privy Council: see Lodder v. Slowey [1904] AC 442. In the United States, there is abundant authority to the same effect: see, eg. Boomer v. Maire 24 P 2d 570 (1933), United States v. Zara Contracting Co. 146 F 2d 606 (1944), Re Montgomery's Estate 6 NE (2d) 40 (1936) and Williston on Contracts (3rd ed) (1970) vol 12 s 1485 at 304. Certainly those United States authorities are tainted by the view that acceptance of a repudiation effects a rescission ab initio, a view regarded in Australian as heretical since McDonald v. Dennys Lascelles Ltd. [1933] HCA 25; (1933) 48 CLR 457 and now recognised as such by the House of Lords in Johnson v. Agnew [1980] AC 367; but the reasoning on this point still remains unimpaired. Of these cases, Boomer v. Maire is the most spectacular, because in that case a sub-contractor on a construction project was awarded the sum of $258,000 as the fair value of the work he had performed for the defendant, even though only $20,000 remained as an outstanding debt due by the defendant under the contract. In so far as it is relevant, the decision of the Court of Appeal in England in Rover International Ltd. v. Cannon Film Sales Ltd. [1989] 1 WLR 912; [1989] 3 All ER 423 - which has attracted the attention of Professor Birks in (1990) 2 Journal of Contract Law 227, Mr Beatson in (1989) 105 LQR 179 and Dr. Carter in Finn (ed) Essays on Restitution (1991) at 206 - is to the like effect. I say "in so far as it is relevant" because it is a case dealing with a contract which was void ab initio, not a case of a contract terminated by the acceptance of a repudiation.

[27]

The cases to which I refer have been received with somewhat lukewarm enthusiasm by certain academic writers (see Geoff and Jones The Law of Restitution, 2nd ed. 91978), at 379-380, Greig and Davis The Law of Contract, 1st ed (1987) , at 1286-1287) on the apparent ground that they are "anomalous". But to my mind this criticism of them is superficial. They are right in principle as well as justified by authority. The law is clear enough that an innocent party who accepts the defaulting party's repudiation of a contract has the option of either suing for damages for breach of contract or suing on a quantum meruit for work done. An election presupposes a choice between different remedies, which presumably may lead to different results. The nature of these different remedies renders it highly likely that the results will be different. If the former remedy is chosen the innocent party is entitled to damages amounting to the loss of profit which he would have made if the contract had been performed rather than repudiated; it has nothing to do with reasonableness. If the latter remedy is chosen, he is entitled to a verdict representing the reasonable cost of the work he has done and the money he has expended; the profit he might have made does not enter into that exercise. There is nothing anomalous in the notion that two different remedies, proceeding on entirely different principles, might yield different results. Nor is there anything anomalous in the fact that either remedy may yield a higher monetary figure than the other. Nor is there anything anomalous in the prospect that a figure arrived at on a quantum meruit might exceed, or even far exceed, the profit which would have been made if the contract had been fully performed. Such a result would only be anomalous if there were some rule of law that the remuneration arrived at contractually was the greatest possible remuneration available, or that it was a reasonable remuneration for all work requiring to be performed. There is no such rule of law. Nor can one say that as a matter of observable fact there is any such rule. The most one say is that the amount contractually agreed is evidence of the reasonableness of the remuneration claimed on a quantum meruit; strong evidence perhaps, but certainly not conclusive evidence. On the other hand, it would be extremely anomalous if the defaulting party when sued on a quantum meruit could invoke the contract which he has repudiated in order to impose a ceiling on amounts otherwise recoverable."

[34]

"The tendency in some past cases to see the rationale of the right to recover remuneration for a benefit provided and accepted under an unenforceable contract as contract or promise rather than restitution has tended to distract attention from the importance of identifying the basis upon which the quantum of the amount recoverable should be ascertained. What the concept of monetary restitution involves is the payment of an amount which constitutes, in all the relevant circumstances, fair and just compensation for the benefit or "enrichment" actually or constructively accepted. Ordinarily, that will correspond to the fair value of the benefit provided (e.g. remuneration calculated at a reasonable rate for work actually done or the fair market value of materials supplied). In some categories of case, however, it would be to affront rather than satisfy the requirements of good conscience and justice which inspire the concept or principle of restitution or unjust enrichment to determine what constitutes fair and just compensation for a benefit accepted by reference only to what would represent a fair remuneration for the work involved or a fair market value of materials supplied. One such category of case is that in which unsolicited but subsequently accepted work is done in improving property in circumstances where remuneration for the unsolicited but subsequently accepted work is calculated at what was a reasonable rate would far exceed the enhanced value of the property. More relevant for present purposes is the special category of case where restitution is sought by one party for work which he has executed under a contract which has become unenforceable by reason of his failure to comply with the requirements of a statutory provision which was enacted to protect the other party. In that category of case, it would be contrary to the general notions of restitution or unjust enrichment if what constituted fair and just compensation for the benefit accepted by the other party were to be ascertained without regard to any identifiable real detriment sustained by that other party by reason of the failure of the first party to ensure that the requirements of the statutory provisions were satisfied."

[119]

"The law is clear enough that an innocent party who accepts the defaulting party's repudiation of a contract has the option of either suing for damages for breach of contract or suing on a quantum meruit for work done. An election presupposes a choice between different remedies, which presumably may lead to different results. The nature of these different remedies renders it highly likely that the results will be different. If the former remedy is chosen the innocent party is entitled to damages amounting to the loss of profit which he would have made if the contract had been performed rather than repudiated; it has nothing to do with reasonableness. If the latter remedy is chosen, he is entitled to a verdict representing the reasonable cost of the work he has done and the money he has expended; the profit he might have made does not enter into that exercise. There is nothing anomalous in the notion that two different remedies, proceeding on entirely different principles, might yield different results. Nor is there anything anomalous in the fact that either remedy may yield a higher monetary figure than the other. Nor is there anything anomalous in the prospect that a figure arrived at on a quantum meruit might exceed, or even far exceed, the profit which would have been made if the contract had been fully performed. Such a result would only be anomalous if there were some rule of law that the remuneration arrived at contractually was the greatest possible remuneration available, or that it was a reasonable remuneration for all work requiring to be performed. There is no such rule of law. Nor can one say that as a matter of observable fact there is any such rule. The most one can say is that the amount contractually agreed is evidence of the reasonableness of the remuneration claimed on a quantum meruit; strong evidence perhaps, but certainly not conclusive evidence. On the other hand, it would be extremely anomalous if the defaulting party when sued on a quantum meruit could invoke the contract which he has repudiated in order to impose a ceiling on amounts otherwise recoverable."

At a glance

Court

Decision date

Before

Source

Judgment (123 paragraphs)

Iezzi Constructions Pty Ltd v Watkins Pacific (Qld) Pty Ltd [1994] QCA 49 (21 March 1994)

Parties

Cases Cited (4)