Creditors owed money are sometimes concerned that they cannot recover the amount owed because there is no contract between themselves and the debtor. The initial conversation with their lawyer usually involves the following “it was not agreed in writing – we just did the work – how do I get my money?”
While there are benefits to enforcing a contract, suing for monies owing pursuant to a contract is not the only method of recovering money owing to you.
In circumstances where no enforceable contract exists, a creditor may commence proceedings in “quantum meruit” being a claim for the reasonable value of the services rendered or the goods supplied.
An early modern example of a quantum meruit case is the High Court’s decision of Pavey & Matthews Pty Ltd v Paul 162 CLR 221 (Pavey).
In Pavey, a builder was not entitled to claim monies owing pursuant to a building contract as the building contract was only an oral contract and the relevant statute said that building contracts must be in writing in order to be enforceable.
While the building contract was not enforceable, the High Court held that the builder was still entitled to be paid for the fair and reasonable value of the building work as the builder had provided valuable services to the home owner at the home owner’s request.
In particular, the High Court held that the builder’s entitlement to payment was not based on the contract but was instead based on the need to ensure that the owner was not “unjustly enriched” at the expense of the builder.
In Queensland, a more recent decision relating to quantum meruit is SunWater Limited v Drake Coal Pty Ltd & Anor  QCA 255 (Sunwater).
In Sunwater, the plaintiff was a state government organisation which supplied water for commercial purposes. The defendants were two companies which required large amounts of water as part of their commercial operations.
While not mentioned in the contract, as part of the works undertaken by the plaintiff, the plaintiff constructed a water pipeline beyond the scope of the contractual requirements.
Before the other works could be completed, a dispute arose between the parties and the contract between the plaintiff and the defendants was terminated.
After termination, the plaintiff sought the cost of constructing the pipeline from the defendants.
The court held that while the construction of the pipeline was not part of the contract, the plaintiff was permitted to seek from the defendants “the fair and reasonable value” of the work performed by the plaintiff in constructing the pipeline if the plaintiff could show that the work was undertaken for the benefit of the defendants at their implied request.
Importantly, the court held that:
- in order to make out a claim for quantum meruit, the plaintiff only had to establish that the plaintiff has performed work and at the request of the defendant. If the plaintiff could do that, the plaintiff had a right to be paid a reasonable price for the work; and
- if the plaintiff could establish the work was done at the request of the defendant, there was no need to consider whether any other circumstances existed which would excuse the defendants of their obligation to pay the plaintiff (in this regard, the defendants originally argued that it was inequitable for them to be required to pay the plaintiff for the construction of the pipeline); and
- a request to provide services could be implied and the plaintiff did not need to establish that an express request to provide the services was made.
Lastly, it is necessary to bear in mind that related contracts may affect the amount that the plaintiff can claim in quantum meruit.
This is evident from the recent High Court decision of Mann v Paterson Constructions Pty Ltd  HCA 32 (Mann).
In Mann, a builder sued the owners of the property in quantum meruit in circumstances where a building contract existed. Importantly:
- the building contract had an agreed price for the work undertaken by the builder; and
- the builder sought from the owners a higher amount in quantum meruit than was agreed in the contract.
The High Court determined that seeking a higher amount in these circumstances was not permissible and that while quantum meruit was not a contractual claim, the builder could not obtain “a better result by way of restitution than under the contract”.
In summary, any contracts in existence may still be relevant with respect to the amount claimable by a plaintiff in quantum meruit.
The fact that a contract does not exist does not prohibit a creditor from claiming from the debtor the reasonable value of the services rendered or the goods supplied.
Instead, if you can establish that you performed work or provided goods at the request of the debtor, you have a right to be paid a reasonable price for the work or the goods.
Should you wish to discuss any potential claims you have for unpaid work or the supply of goods, please do not hesitate to contact Rose Litigation Lawyers.