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May 11, 2018

Unjust Enrichment and Quantum Meruit

Contact: Maurice Falcetta

Unjust enrichment is a broad concept, which provides that where someone has received something, when objectively it has a commercial value, that person is said to have benefited unfairly and is required to compensate the other person.

For example, a contract between a builder and developer where the contract describes the wrong developer entity and therefore the developer says I am not required to pay you. What happens in this situation where the Builder has done work? Does that mean that builder is not entitled to payment at all?

The law would hopefully step in and would say that it would be unfair or unjust for the developer to have received the work, and not had paid for it.

 In order for the law to remedy the unjust enrichment, it must be established that there was:

How does the law calculate the compensation?

The law does this through the concept of “Quantum meruit”, which means “what one has earned” or “as much as deserved”. The philosophy behind the action of quantum meruit is fair fees for work done. It provides a person the opportunity to claim the reasonable value for services they have rendered even though there is no legally enforceable contract. Interestingly, it can often lead to unusual results. For example, the evidence might show that the reasonable value for the work was actually more than the price of the quasi contract or unenforceable contract.

The principles in a building context were once again explored in the decision of A & A Martins Pty Limited v Liu [2018] ACTSC 102. The Defendants claimed there was a defect in the contract and there was no entitlement to A&A Martins Pty Ltd as the agreement was signed by a different corporate entity (Maples) and therefore there was no payment owing. Putting aside claims of defective work, A & A Martins claimed compensation on a quantum meruit basis saying that the homeowner was unjustly enriched. At first instance in the Supreme Court, her Honour agreed saying ‘the defendants have received a benefit, being the goods delivered and used in the construction of the dwelling…it was an arm’s length commercial dealing between the parties and there could be no suggestion that the plaintiff was purchasing materials, such as bricks and window…for the defendants at no charge’.

However, this decision was later appealed successfully in the Court of appeal in 2019. In summary, the Court held:

  1. there was lack of knowledge by homeowner that A&A Martins were the actual entity carrying out the work;
  2. any enrichment of the appellants by accepting the work and the benefit of monies paid by the respondent did not, in a legal sense, come at the expense of the respondent (as opposed to Maples) because of the lack of knowledge; and
  3. as result, the retention of that benefit by the appellants is not unconscionable.

Ultimately, it is perhaps a harsh decision, however, it reinforces that when having complex legal structures or there is some change in that structure, it is essential to ensure that the underlying documents reflect these changes. For example, the position of Martins may have well been different if there had been a Deed of Assignment of the interest in the building contract drafted.

Conclusion

While it is always better to have an enforceable contract, this does not mean that there is a barrier to compensation.

 


The information in this document represents general information, and should not be relied for your specific circumstances. If you require legal advice and assistance on the matters contained or associated in this document you should contact Trinity Law. Subject to the limits of the law, Trinity Law disclaims any liability on persons relying on this document.

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