A builder whose contract is found to be unenforceable may nevertheless be able to recover payment under the legal doctrine of 'quantum meruit' (often translated as 'the reasonable value of services'). However, the builder cannot simply rely on the contract sum under the unenforceable contract, but must prove the fair value of the work performed.
The New South Wales Civil and Administrative Tribunal Appeals Panel (Appeals Panel) was prepared to remit a matter for re-hearing because the New South Wales Civil and Administrative Tribunal (Tribunal) at first instance failed to require an unlicensed residential builder to appropriately prove its claim for a quantum meruit. The decision confirms that while a builder whose contract is found to be unenforceable under the Home Building Act 1989 (NSW) (HBA) may be entitled to payment for the value of the work performed, this requires the builder to establish how much benefit the work has actually provided.
Facts and decision at first instance
- Mr and Mrs Bradshaw (homeowners) engaged CCC Civil (builder) to perform pavement works on their residential property. The homeowners alleged the works were defective and withheld partial payment. The homeowners then applied to the Tribunal for damages to be paid by the builder and the builder claimed separately for full payment from the homeowners.
- The Tribunal made various findings including:
- the work performed by the builder was 'residential building work' under the HBA;
- the contract between the homeowners and the builder was not compliant with section 7 of the HBA as it was not in writing, nor dated nor signed by both parties;
- section 10 of the HBA, therefore, prevented the builder from enforcing the contract;
- the builder had repudiated the contract, but could make a quantum meruit claim; and
- the homeowners had lawfully terminated the contract and were entitled to damages.
- In assessing the homeowners' damages claim and the builder's opposing quantum meruit claim, the Tribunal accepted the contract price as the valuation of the builder's quantum meruit claim.
- The homeowners appealed the Tribunal's decision. The thrust of their objection was, put simply, the alleged failure of the Tribunal to appropriately consider the homeowners' evidence and the Tribunal's acceptance of the contract price as reflecting the value of the builder's work, without due scrutiny.
Appeal allowed – the Tribunal did not come to grips with valuation
The Appeals Panel allowed the appeal on the basis that the Tribunal had made an error of law and remitted the matter back to the Tribunal for re-determination of the value of the quantum meruit claim.
Applying common law principles, the Appeals Panel stated that the builder had to establish three things for its claim to succeed:
- that the builder's work had 'enriched' or benefitted the homeowners;
- that this benefit was at the builder's expense; and
- that it would be 'unjust' in the circumstances to allow the homeowners to retain that benefit without paying for it.
However, the Tribunal had:
- used the contract price as a starting point for the quantum meruit valuation, assuming that the contract price reflected fair market value (and so the benefit to the homeowners) without enquiring as to whether that assumption was appropriate;
- not required the builder to tender invoices and receipts to demonstrate the cost to the builder; and
- failed to consider evidence from the homeowners which suggested that the material used by the builder was not that anticipated by the contract, potentially reducing the benefit to the homeowners and rendering the contract price irrelevant.
The Appeals Panel added that the Tribunal's failure to require the builder to establish more than the contract price for the works permitted the builder to enforce the terms of the otherwise unenforceable contract, which was an unsatisfactory result having regard to the provisions of the HBA.