Rob,

I am not sure that Gageler J’s judgment leads to the result you suggest.  He doesn’t simply treat  the contract price as “a cap” full stop, but instead says that restitution is “capped by reference” to the contract price (at [91]) and that “the amount cannot exceed the portion of the overall price set by the Contract that is attributable to the work” (at [105], my emphasis).  He also explains one of his justifying principles as being that “with the potential to recover more from termination than from completion comes the incentive to terminate”—and that this should be avoided (at [89]-[90]).

If, using your example, Gageler J’s analysis allows the builder to recover the full contract price after completing only half the contracted for work then this seems to me to be the very “problem of distorted contractual incentives” which Gageler J wants to avoid.  It also ignores the portion of the overall price set by the Contract that is attributable to the work: if it is a straight line, then the portion of the overall price attribute to half the work under the contract is … half the Contract price.  So, the applicable cap is $100,000. 

I don’t think there is a great deal of difference between Gageler J and Nettle, Gordon, and Edelman J in respect of this “capping” point—though one point of departure may be that Gageler J seems much more adamant that quantum meruit can never exceed the contract price, while Nettle, Gordon, and Edelman J seem to leave open the possibility that it might in exceptional cases.

On a slightly different topic, I think the disagreement emerging between what Kiefel CJ, Bell, and Keane JJ say at [31] and what Gageler J says at [87] about the contrasting difficulties in proving contractual damages and non-contractual quantum meruit is regrettable.  Based on my own limited experience, and upon discussion with my colleagues at the bar, the quantum meruit claim tends to be easier to prove, particularly with the benefit of expert quantum surveyor evidence (especially in VCAT and NCAT proceedings). 

Kind regards,

Eli Ball

Barrister at Law

(t) (02) 8224 3040

(m) 0433 542 255

(e) eli.ball@7thfloor.com.au

Another possible difference between Gageler J and Nettle, Gordon and Edelman JJ occurred to me as I walked my dog.

An example with some figures.

Builder agrees to construct a building on employer’s land for $200,000. This is well below the market rate for such work, which would be $500,000.

Builder does half the work, when the employer repudiates the deal and excludes him from land. Builder accepts repudiation.

Assuming (unrealistically) that the value of the work is a straight line, what is recoverable?

On the approach of Kiefel CJ, Bell and Keane JJ builder gets nothing. If the contract had been completed he would have been paid $200,000, but in order to earn that would have had to do work worth $250,000. Builder is better off following termination, assuming he could get other work. [I think this example illustrates what is wrong with their view.]

What is recoverable as a quantum meruit?

Nettle, Gordon and Edelman JJ would calculate the value of the work in accordance with the contract price ([215]). That gives the builder $100,000.

Is Gageler J differing from them when  he says “the measure of the value of the services rendered by the innocent party is capped by reference to the contractually agreed remuneration”? [91] In other words we use the market to assess the value of what has been done, but don’t allow the builder to recover more than the contract price, which operates as a limit. That gives the builder $200,000.

The problem with the Nettle et al view, is that where the building work is not complete, it is hard to understand how we calculate its value by reference to the contract price (save that it may provide some evidence of what the market price is). The parties just never bargained for half the work. We have no idea what value they would have put on that. Half the job may be worse than nothing (as with half a haircut), or conversely might have cost far more than half the price. It seems preferable to me to use the market value of the work done (as we usually do) and only depart from that where it would contradict the bargain made (the builder can hardly claim there has been a “failure of the basis on which I did this work” where he is paid the full contract price).

So, again, I tend to think Gageler J’s is the best judgment, which given it is a minority of one is unfortunate.

[In my previous email I of course meant Pavey & Matthews v Paul, not David Securities. I wrote before my first coffee.]

R