When a contractor finds itself in a situation where there is no contractual right to payment for the work it has performed, a claim for quantum meruit may result. The recent decision of Progressive Pod revisits this tricky area of the law and reinforces that the entitlement to relief will only arise in very limited circumstances.
Progressive Pod Properties Pty Ltd v A & M Green Investments Pty Ltd (Progressive Pod)
There are two primary situations in the construction industry where a claim for quantum meruit (meaning ‘what one has earned’) may arise:
- Where work has been performed under a contract between the parties, but the contract has been terminated because of repudiation by one of the contracting parties.
- A claim for restitution where there has been ‘unjust enrichment’.
The concept of ‘unjust enrichment’ is an equitable principle that will arise in situations where work has been performed by one party at the request another and that other party has unjustly gained a benefit. In such cases, a right to restitutionary relief may arise.
Resitutionary quantum meruit
To establish a claim in restitutionary quantum meruit, the claimant must establish four things:
- There is not (was but is no longer) a valid contract in existence.
- Work has been performed at the request of another party.
- There was a promise to pay.
- The benefit has been accepted by the other party at the expense of the claimant.
The NSW Court of Appeal decision, Progressive Pod, demonstrates the difficulties in making a claim of this kind. The decision highlights the importance of not only there being a request for the performance of the work (whether implied or express) but that the request was actually relied upon.
Progressive Pod Properties Pty Ltd (Progressive) and A & M Green Investments Pty Ltd (Green) owned undeveloped parcels of land opposite one another on Old Sydney Road, Thurgoona, NSW.
Progressive and Green obtained developmental consent from the Council on the condition that a roundabout be built to facilitate the entry to both of the properties. The Council would design and construct the roundabout and the parties would then be required to reimburse the Council.
Green’s engineers, CPG, approached the managers of Progressive’s intended development, TUP, and said that the construction of the roundabout would take ages if it was to be done by Council, and that it was likely that the parties would have to do it themselves. Progressive’s engineers, SJE, sent an email to CPG saying that a four way intersection would be more expensive than a roundabout and that they would be better off with a roundabout and that they would leave it to CPG to check the costings further.
A copy of the construction drawings were emailed by CPG and the Council which “accepted in principle” the preliminary drawings.
The Council then approved a modification sought by Progressive and confirmed that approval had been given subject to the entry to the property being by way of a roundabout with the costs of constructing the roundabout shared between Progressive and Green.
Discussions ensued between SJE and CPG culminating in Green proceeding to engage a contractor to construct the roundabout. Progressive then informed Green that it would be selling its parcel of land, but that the cost of the roundabout would be factored into the sale price and that Progressive ‘were not going anywhere’. Progressive subsequently sold most of its property to Glenfield Development Pty Ltd (Glenfield). Green sought to recover half of the cost of the roundabout from Progressive and Progressive refused to pay.
Decision at first instance
Green argued its case on a number of grounds, but succeeded in its claim for ‘unjust enrichment’ on the basis that there had been an implied request by Progressive for Green to construct the roundabout. The Primary Judge said that in the absence of a request for the work to be performed, a claim for restitution would not be justified. At first instance, the Primary Judge found that there was an implied request and that this was sufficient to entitle Green to judgment.
The Primary Judge found that implied consent can be drawn from:
- The fact that the Council was not going to construct the roundabout.
- Progressive knew that Green, through CPG, was going to design the roundabout and that Progressive would contribute towards the costs of such work.
- Amendments to the roundabout were discussed between the parties.
He also held that Progressive’s concession that the roundabout solution was reasonable and that the applicant should pay half of the costs, supported the finding of implied request.
Court of Appeal decision
Progressive appealed to the NSW Court of Appeal.
Young AJA at  said, “A person who provides a benefit to himself and the defendant, must show that it was not just a case of the defendant gaining a side benefit from an act done in the actor’s own interests, but the act was done at the request of the defendant”.
The Court of Appeal held that none of the matters relied on by the Primary Judge gave rise to an implied request. The Court held Progressive did not request Green to construct the roundabout, and that there was no evidence that Progressive was in a hurry to have the roundabout constructed. The Court held that while Progressive would have benefited from a higher sale price, it was Green who wanted to proceed with the construction of the roundabout so that it could expedite its development.
The Court of Appeal said that to constitute an implied request, Progressive’s conduct would have had to be “explicable only upon the basis that it was requesting Green to construct the roundabout, with Progressive contributing half the cost”.
The Court of Appeal also said that there was no evidence of reliance. Even if there had been an implied request by Progressive for Green to construct the roundabout, there was no evidence that the request had any impact on Green’s decision to construct the roundabout when it did, and therefore Green’s restitution claim must fail.
The Court of Appeal said that the establishment of a claim based on a request to do work requires proof that the request was acted upon.
What can we learn?
When work is performed without a contract or outside of the contract, it will not always be the case that the builder will get paid. To succeed in a claim for restitutionary quantum meruit, the builder needs to show, that there has been a specific request, whether express or implied, for the works to be done and that there has been reliance on that request. To safe guard an entitlement to be paid for the work performed, it is recommended that a contract always be agreed before the works commence, so that both parties are clear about the entitlements that exist.