Mann v Paterson Constructions Pty Ltd

HIGH COURT OF AUSTRALIA

KIEFEL CJ,
BELL, GAGELER, KEANE, NETTLE, GORDON AND EDELMAN JJ

PETER MANN & ANOR  APPELLANTS

AND

PATERSON CONSTRUCTIONS PTY LTD  RESPONDENT

Mann v Paterson Constructions Pty Ltd

[2019] HCA 32

9 October 2019

M197/2018

ORDER

1.Appeal allowed with costs.

2.Set aside orders 1 to 3 of the Court of Appeal of the Supreme Court of Victoria made on 12 September 2018 and, in their place, order that:

(a)the application for leave to appeal be granted;

(b)the appeal to the Court of Appeal of the Supreme Court of Victoria be allowed with costs; and

(c)orders 2 to 5 of the order made by Justice Cavanough of the Supreme Court of Victoria on 21 March 2018 be set aside and, in their place, it be ordered that:

(i)the appeal to the Supreme Court of Victoria be allowed with costs;

(ii)the orders of the Victorian Civil and Administrative Tribunal made on 12 December 2016 be set aside; and

(iii)the matter be remitted to the Victorian Civil and Administrative Tribunal for further determination according to law.

On appeal from the Supreme Court of Victoria

Representation

T J Margetts QC with G F Hellyer and A C Roe for the appellants (instructed by Telford Story & Associates)

J P Moore QC with A J Laird and J A G McComish for the respondent (instructed by Kalus Kenny Intelex)

Notice:  This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Mann v Paterson Constructions Pty Ltd

Restitution – Unjust enrichment – Work and labour done – Where land owners and builder entered into contract to which Domestic Building Contracts Act 1995 (Vic) applied – Where contract provided for progress payments at completion of stages – Where owners requested, and builder carried out, variations to plans and specifications in contract without giving written notice as required by s 38 of Act – Where owners repudiated contract after builder raised invoice claiming for variations – Where contract terminated by builder's acceptance of owners' repudiation – Whether s 38 of Act applied to limit amount recoverable by builder for variations – Whether builder entitled to recover in restitution as alternative to claim in damages for breach of contract – Whether contract price operated as ceiling on amount recoverable by way of restitution.

Words and phrases – "accrued rights", "alternative restitutionary remedy", "common counts", "completed stage", "contract price ceiling", "contractual incentives", "domestic building contract", "failure of basis", "failure of consideration", "limit on recovery", "measure of restitution", "notice", "primary and secondary obligations", "principle of legality", "protective provisions", "qualifying or vitiating factor", "quantum meruit", "quasi-contractual obligation", "repudiation", "restitution", "subjective devaluation", "unjust enrichment", "variations", "work and labour done".

Domestic Building Contracts Act 1995 (Vic), ss 1, 3, 4, 16, 27, 38, 39, 53, 132.

1. KIEFEL CJ, BELL AND KEANE JJ.   The appellants entered into a contract with the respondent for the construction by the respondent of two townhouses on land owned by the appellants.  The parties fell into dispute in relation to the works.  The respondent claimed that the appellants had repudiated the contract, and purported to terminate the contract by accepting that repudiation.  The respondent then claimed that it was entitled to recover payment for its work, including variations, upon a quantum meruit.  The respondent's claim was upheld by the Court of Appeal of the Supreme Court of Victoria[1].

   [1]Mann v Paterson Constructions Pty Ltd [2018] VSCA 231.

2. Pursuant to a grant of special leave to appeal, the appellants now challenge the decision of the Court of Appeal on the following grounds:

   "[1]The Court of Appeal erred in holding that the respondent builder, having terminated a major domestic building contract upon the repudiation of the contract by the [appellants], was entitled to sue on a quantum meruit for the works carried out by it.

   [2]Alternatively, if the respondent was entitled to sue on a quantum meruit, the Court of Appeal erred in finding that the price of the contract did not operate as a ceiling on the amount claimable under such a quantum meruit claim.

   [3]The Court of Appeal erred in allowing the respondent to recover on a quantum meruit basis for variations to the works carried out by the respondent, because it incorrectly found that s 38 of the Domestic Building Contracts Act 1995 (Vic) did not apply to a quantum meruit claim for variations to works under a domestic building contract."

3. The relevant terms of the contract between the parties, the relevant legislative provisions bearing upon the third ground of appeal, the course of proceedings in the courts below, and the circumstances giving rise to the appeal to this Court, are comprehensively summarised in the reasons of Nettle, Gordon and Edelman JJ.  We gratefully adopt their Honours' summary.

4. In our respectful opinion, the issue posed by the first ground of appeal should be resolved in the affirmative, in favour of the appellants.  As a result, it is unnecessary to address the second ground of appeal.  In relation to the issue raised by the third ground of appeal, we agree with the conclusion and reasons of Nettle, Gordon and Edelman JJ and have nothing useful to add.

   The rescission fallacy

5. The appellants' first ground of appeal raises for consideration the correctness of the proposition that a claim for quantum meruit – that is, for the reasonable value of work performed – may be made at the election of the innocent party to a contract as an alternative to a claim for damages in the wake of the termination of the contract for repudiation or breach.  That proposition was accepted by the Judicial Committee of the Privy Council in Lodder v Slowey[2].  It has since been applied by the intermediate appellate courts of Victoria[3], New South Wales[4], Queensland[5], and South Australia[6].

   [2][1904] AC 442.

   [3]Brooks Robinson Pty Ltd v Rothfield [1951] VLR 405; Sopov v Kane Constructions Pty Ltd [No 2] (2009) 24 VR 510.

   [4]Segur v Franklin (1934) 34 SR (NSW) 67; Horton v Jones [No 2] (1939) 39 SR (NSW) 305; Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234.

   [5]Iezzi Constructions Pty Ltd v Watkins Pacific (Qld) Pty Ltd [1995] 2 Qd R 350; McGowan v Commissioner of Stamp Duties [2002] 2 Qd R 499; Speakman v Evans [2002] QCA 293; Legal Services Commissionerv Baker [No 2] [2006] 2 Qd R 249.

   [6]Independent Grocers Co-operative Ltd v Noble Lowndes Superannuation Consultants Ltd (1993) 60 SASR 525; Maxcon Constructions Pty Ltd v Vadasz [2016] SASCFC 119.

6. In Lodder v Slowey, the Board upheld the decision of the Court of Appeal of New Zealand in Slowey v Lodder[7].  On the basis of the theory that the relevant contract had been rescinded ab initio, the plaintiff was held entitled to recover a sum assessed as the reasonable value of the services rendered, even though the amount so assessed might substantially exceed the agreed price.  In the Court of Appeal, Williams J said[8]:

   "As the defendant has abandoned the special contract, and as the plaintiff has accepted that abandonment, what would have happened if the special contract had continued in existence is entirely irrelevant.  As by the consent of both parties the special contract has been set aside, neither can the plaintiff claim for any profit he might have made under it nor can the defendant set up that if the plaintiff had been allowed to complete his performance of the contract he would have made no profit or would have suffered a loss."

   [7](1901) 20 NZLR 321.

   [8]Slowey v Lodder (1901) 20 NZLR 321 at 358.

7. In the present case, the Court of Appeal followed[9] its previous decision in Sopov v Kane Constructions Pty Ltd [No 2][10].  In Sopov, Maxwell P, Kellam JA and Whelan A-JA held that a builder was entitled to advance a claim for quantum meruit in lieu of a claim for damages following its acceptance of the owner's repudiation and the consequent termination of the contract[11].  Their Honours reached that conclusion in deference to the course of judicial authority beginning with Lodder v Slowey despite weighty academic criticism[12] and even though their Honours considered that Lodder v Slowey and the decisions that followed it "can be seen to have been founded" on what their Honours termed the "rescission fallacy"[13].

   [9]Mann v Paterson Constructions Pty Ltd [2018] VSCA 231 at [92]‑[97].

   [10](2009) 24 VR 510.

   [11]Sopov v Kane Constructions Pty Ltd [No 2] (2009) 24 VR 510 at 514‑515 [9]‑[12].

   [12]See Sopov v Kane Constructions Pty Ltd [No 2] (2009) 24 VR 510 at 514 [9] fn 13. See also Kull, "Restitution as a Remedy for Breach of Contract" (1994) 67 Southern California Law Review 1465; Havelock, "A Taxonomic Approach to Quantum Meruit" (2016) 132 Law Quarterly Review 470.

   [13]Sopov v Kane Constructions Pty Ltd [No 2] (2009) 24 VR 510 at 514 [10].

8. The reference in Sopov to the "rescission fallacy" was apposite.  The theory that the contract between the parties becomes "entirely irrelevant"[14] upon discharge for repudiation or breach is indeed fallacious.  As Mason CJ said in Baltic Shipping Co v Dillon[15]:  "It is now clear that ... the discharge operates only prospectively, that is, it is not equivalent to rescission ab initio."

   [14]Slowey v Lodder (1901) 20 NZLR 321 at 358.

   [15](1993) 176 CLR 344 at 356; [1993] HCA 4. See also Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (1936) 54 CLR 361 at 379; [1936] HCA 6; Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 390; Federal Commissioner of Taxation v Reliance Carpet Co Pty Ltd (2008) 236 CLR 342 at 345‑346 [2]; [2008] HCA 22; Construction Forestry Mining and Energy Union v Mammoet Australia Pty Ltd (2013) 248 CLR 619 at 639 [69]; [2013] HCA 36; Southern Han Breakfast Point Pty Ltd (In liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340 at 365 [79]; [2016] HCA 52.

9. The notion that the termination of a contract for repudiation or breach has the effect of rescinding the contract ab initio was unequivocally rejected by this Court in McDonald v Dennys Lascelles Ltd[16].  In that case, Dixon J, with whom Rich and McTiernan JJ agreed, said[17]:

   "When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning.  Both parties are discharged from the further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired.  Rights and obligations which arise from the partial execution of the contract and causes of action which have accrued from its breach alike continue unaffected.  When a contract is rescinded because of matters which affect its formation, as in the case of fraud, the parties are to be rehabilitated and restored, so far as may be, to the position they occupied before the contract was made.  But when a contract, which is not void or voidable at law, or liable to be set aside in equity, is dissolved at the election of one party because the other has not observed an essential condition or has committed a breach going to its root, the contract is determined so far as it is executory only and the party in default is liable for damages for its breach."

   [16](1933) 48 CLR 457; [1933] HCA 25.

   [17]McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 476‑477.

10. In this classic statement of principle, Dixon J made two points.  The first was that upon the innocent party electing to treat the contract as no longer binding upon it, both parties are discharged from the further performance of the contract, while those rights that have accrued in accordance with the terms of the contract remain enforceable.  To say that the contract has come to an end "may in individual cases convey the truth with sufficient accuracy", but "the fuller expression that the injured party is thereby absolved from future performance of his obligations under the contract is a more exact description of the position"[18].  Accordingly, in the case of a building contract, an innocent builder is entitled to recover as a debt any amount that has become due under the terms of the contract, unless the contract provides to the contrary.  The contract in the present case did not provide to the contrary.

    [18]Heyman v Darwins Ltd [1942] AC 356 at 399.

11. The second point made by Dixon J was that when the contract is discharged at the election of the innocent party, the contract is "determined so far as it is executory only and the party in default is liable for damages for its breach".  His Honour's reference to "damages for its breach" was a reference to what are commonly referred to as "damages for loss of bargain"[19].  Such damages, which are to be distinguished from damages for prior breaches of contract[20], are a "substitute for performance"[21] of the executory obligations under the contract that the defaulting party is no longer required to perform in specie.  "[T]he liability in damages is substituted for the executory obligations to which acceptance of repudiation puts an end."[22]

    [19]See, eg, Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444; [1976] HCA 21; Shevill v Builders Licensing Board (1982) 149 CLR 620; [1982] HCA 47; Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; [1985] HCA 14; Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245; [1988] HCA 11; Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237; [2008] HCA 10.

    [20]See Dominion Coal Co Ltd v Dominion Iron and Steel Co Ltd [1909] AC 293 at 311; Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 at 849‑850; Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 48; Lombard North Central Plc v Butterworth [1987] QB 527 at 535; Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 at 273; Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 356.

    [21]One Step (Support) Ltd v Morris‑Garner [2019] AC 649 at 673 [35].

    [22]Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 48.

12. The right to damages for loss of bargain that arises in such a case is, in this respect, no less a creature of the contract than the right to recover sums that become due before its termination.  In Lep Air Services Ltd v Rolloswin Investments Ltd[23], in a passage subsequently approved by Brennan J in Progressive Mailing House Pty Ltd v Tabali Pty Ltd[24], Lord Diplock said:

    "Generally speaking, the rescission of the contract puts an end to the primary obligations of the party not in default to perform any of his contractual promises which he has not already performed by the time of rescission ...  The primary obligations of the party in default to perform any of the promises made by him and remaining unperformed likewise come to an end as does his right to continue to perform them.  But for his primary obligations there is substituted by operation of law a secondary obligation to pay to the other party a sum of money to compensate him for the loss he has sustained as a result of the failure to perform the primary obligations.  This secondary obligation is just as much an obligation arising from the contract as are the primary obligations that it replaces".

    [23][1973] AC 331 at 350. See also Raja's Commercial College v Gian Singh & Co Ltd [1977] AC 312 at 319; Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 at 848‑849; Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Aust) Pty Ltd ("The New York Star") (1980) 144 CLR 300 at 306; [1981] 1 WLR 138 at 145; [1980] 3 All ER 257 at 262; Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana ("The Scaptrade") [1983] 2 AC 694 at 702; Litster v Forth Dry Dock & Engineering Co Ltd [1990] 1 AC 546 at 568; One Step (Support) Ltd v Morris‑Garner [2019] AC 649 at 672 [34].

    [24](1985) 157 CLR 17 at 48. See also Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 at 254, 273; Re Dingjan; Ex parte Wagner (1995) 183 CLR 323 at 341; [1995] HCA 16.

13. Lord Diplock's analysis serves to focus attention upon the point that the terms of the contract govern the amount of compensation payable by way of damages for loss of bargain[25].  Even though the innocent party is no longer entitled to performance of the executory terms of the contract, the terms of the terminated contract inform the quantum of damages recoverable[26]:  "The damages are assessed by reference to the old obligations but the old obligations no longer exist as obligations."[27]  As will become clear, in such a case a restitutionary claim unconstrained by the bargain made by the parties would impermissibly cut across the parties' contract.

    [25]cf Robophone Facilities Ltd v Blank [1966] 1 WLR 1428 at 1446; [1966] 3 All ER 128 at 141-142.

    [26]Re Dingjan; Ex parte Wagner (1995) 183 CLR 323 at 341.

    [27]Lep Air Services Ltd v Rolloswin Investments Ltd [1973] AC 331 at 345.

    Contract and the subsidiarity of restitutionary claims

14. Restitutionary claims must respect contractual regimes and the allocations of risk made under those regimes[28].  In Pavey & Matthews Pty Ltd v Paul[29], in a passage cited with approval by French CJ, Crennan and Kiefel JJ in Equuscorp Pty Ltd v Haxton[30], Deane J said:

    "The quasi-contractual obligation to pay fair and just compensation for a benefit which has been accepted will only arise in a case where there is no applicable genuine agreement or where such an agreement is frustrated, avoided or unenforceable.  In such a case, it is the very fact that there is no genuine agreement or that the genuine agreement is frustrated, avoided or unenforceable that provides the occasion for (and part of the circumstances giving rise to) the imposition by the law of the obligation to make restitution."

    [28]See Steele v Tardiani (1946) 72 CLR 386 at 402; [1946] HCA 21; Lumbers v W Cook Builders Pty Ltd (In liq) (2008) 232 CLR 635 at 654-655 [45]‑[48], 662‑663 [77]‑[79], 671 [111], 673 [122], 674 [126]; [2008] HCA 27; Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498 at 514 [26]; [2012] HCA 7. See also Pan Ocean Shipping Co Ltd v Creditcorp Ltd [1994] 1 WLR 161 at 164‑166; [1994] 1 All ER 470 at 473-475.

    [29](1987) 162 CLR 221 at 256; [1987] HCA 5.

    [30](2012) 246 CLR 498 at 529 [64].

15. In Pan Ocean Shipping Co Ltd v Creditcorp Ltd ("The Trident Beauty")[31], Lord Goff of Chieveley spoke to similar effect:

    "[A]s a general rule, the law of restitution has no part to play in the matter; the existence of the agreed regime renders the imposition by the law of a remedy in restitution both unnecessary and inappropriate."

    [31][1994] 1 WLR 161 at 164; [1994] 1 All ER 470 at 473-474.

16. In Lumbers v W Cook Builders Pty Ltd (In liq)[32], Gleeson CJ noted that the contractual arrangements in that case "effected a certain allocation of risk" and that there was "no occasion to disturb or interfere with that allocation" and "every reason to respect it"[33].  Gummow, Hayne, Crennan and Kiefel JJ spoke of taking "proper account" of the contractual rights and obligations that existed[34], and said[35]:

    "[A]s is well apparent from this Court's decision in Steele v Tardiani[36], an essential step in considering a claim in quantum meruit (or money paid) is to ask whether and how that claim fits with any particular contract the parties have made."

    [32](2008) 232 CLR 635.

    [33]Lumbers v W Cook Builders Pty Ltd (In liq) (2008) 232 CLR 635 at 654 [46].

    [34]Lumbers v W Cook Builders Pty Ltd (In liq) (2008) 232 CLR 635 at 662 [77].

    [35]Lumbers v W Cook Builders Pty Ltd (In liq) (2008) 232 CLR 635 at 663 [79].

    [36](1946) 72 CLR 386.

17. Their Honours noted that it is essential to consider how the claim fits with contracts the parties have made because, as Lord Goff "rightly warned" in The Trident Beauty[37], "serious difficulties arise if the law seeks to expand the law of restitution to redistribute risks for which provision has been made under an applicable contract"[38].

    [37][1994] 1 WLR 161 at 166; [1994] 1 All ER 470 at 475.

    [38]Lumbers v W Cook Builders Pty Ltd (In liq) (2008) 232 CLR 635 at 663 [79]. Gleeson CJ also quoted the relevant passage of Lord Goff's speech in The Trident Beauty with approval: see at 655 [47].

18. In MacDonald Dickens & Macklin (a firm) v Costello[39] in the Court of Appeal of England and Wales, Etherton LJ, with whom Pill and Patten LJJ agreed, in rejecting a restitutionary claim, said:

    "The general rule should be to uphold contractual arrangements by which parties have defined and allocated and, to that extent, restricted their mutual obligations, and, in so doing, have similarly allocated and circumscribed the consequences of non‑performance.  That general rule reflects a sound legal policy which acknowledges the parties' autonomy to configure the legal relations between them and provides certainty, and so limits disputes and litigation."

    [39][2012] QB 244 at 251 [23].

    Accrued contractual rights

19. In circumstances where the respondent has enforceable contractual rights to money that has become due under the contract, there is no room for a right in the respondent to elect to claim a reasonable remuneration unconstrained by the contract between the parties.  As Deane J explained in Pavey & Matthews, in such a case there is a "valid and enforceable agreement governing the [respondent's] right to compensation", and there is therefore "neither occasion nor legal justification for the law to superimpose or impute an obligation or promise to pay a reasonable remuneration"[40].  To allow a restitutionary claim in these circumstances would be to subvert the contractual allocation of risk.  As Beatson has said[41]:

    "[W]here P confers a benefit on D pursuant to a contract, the valuation of that work is a matter of contract, which ... respects the parties' valuation.  Valuation is in a sense part of risk allocation:  P is taking the risk of market rises and D of falls in the market.  To allow P to recover anything other than the contract value – such as the objective value, the market value, or a reasonable value – would be to reallocate that risk."

    [40](1987) 162 CLR 221 at 256.

    [41]Beatson, "The Temptation of Elegance:  Concurrence of Restitutionary and Contractual Claims", in Swadling and Jones (eds), The Search for Principle:  Essays in Honour of Lord Goff of Chieveley (1999) 143 at 151‑152.

    Damages for loss of bargain

20. The same may be said where, as in the present case, the innocent party has an enforceable contractual right to damages for loss of bargain.  The extent of the obligation to pay damages for loss of bargain, governed as it is by the terms of the terminated contract, reflects the parties' allocation of risk and rights as between each other under the contract.  To allow a restitutionary remedy by way of a claim for the reasonable value of work performed unconstrained by the terms of the applicable contract would undermine the parties' bargain as to the allocation of risks and quantification of liabilities, and so undermine the abiding values of individual autonomy and freedom of contract.  As Jaffey has said[42]:

    "The remedial contractual regime is continuous with the contract, giving effect to the contractual allocation of risk, but the unjust enrichment regime creates a striking discontinuity.  It gives effect to a different allocation of risk altogether ...  It seems that the contract, which was drafted to allocate risk, fails to do so.  On this analysis, the availability of the restitutionary remedies undermines the freedom of the parties to determine the terms of their exchange".

    [42]Jaffey, "Restitutionary Remedies in the Contractual Context" (2013) 76 Modern Law Review 429 at 438‑439 (footnote omitted).

21. To put it another way, where "[a] contract is not performed as agreed, this allocation of risk is enforced only if the remedial regime properly reflects the primary relation"[43].  Allowing recovery of remuneration for services rendered in the amount ordered by the courts below in this case would be to allow a windfall to the respondent that is distinctly inconsistent with the respect due to the contract made by the parties as the charter whereby their commercial risks were allocated between them and their liabilities limited[44].  To allow a restitutionary claim would be to "subvert the default remedial regime of contract law, to which the parties, by contracting, have submitted"[45], and accordingly to subvert the contractual allocation of risk.

    [43]Jaffey, "Restitutionary Remedies in the Contractual Context" (2013) 76 Modern Law Review 429 at 437.

    [44]Compare Lumbers v W Cook Builders Pty Ltd (In liq) (2008) 232 CLR 635 at 663 [79].

    [45]Havelock, "A Taxonomic Approach to Quantum Meruit" (2016) 132 Law Quarterly Review 470 at 481.

22. To allow a restitutionary claim for quantum meruit to displace the operation of the compensatory principle where the measure of compensation reflects contractual expectations would be inconsistent with what Gummow J described as the "gap‑filling and auxiliary role of restitutionary remedies"[46].  Similarly, from an American perspective, it has been said that "the noncontractual remedy was originally allowed as a way to fill important gaps in contract remedies, providing compensation in damages that contract law now affords directly"[47].  Further, the restitutionary claim for quantum meruit cannot be supported on the basis that it is needed to prevent the defaulting party from being unjustly enriched because "a party who is liable in damages is not unjustly enriched by a breach of contract and indeed is not enriched at all"[48].

    [46]Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 at 545 [75]; [2001] HCA 68.

    [47]Kull, "Restitution as a Remedy for Breach of Contract" (1994) 67 Southern California Law Review 1465 at 1468.

    [48]Kull, "Restitution as a Remedy for Breach of Contract" (1994) 67 Southern California Law Review 1465 at 1467 (emphasis omitted).

    Roxborough

23. Cases like the present one, concerned with the enforcement of a claim for remuneration for work performed under a contract upon the termination of the contract for repudiation or breach, stand in marked contrast with cases of restitution such as Roxborough v Rothmans of Pall Mall Australia Ltd[49].  In that case, payments of money were held to be recoverable because of the failure of the basis on which the payments had been made by the payers.  Roxborough was not concerned with a claim for remuneration under a contract for work and labour.  More importantly, it was not a case of breach of contract on the part of the defendant where the compensatory principle of the law of contract was engaged.  The restitutionary claim did not cut across the contractual charter of the parties' rights and obligations. 

    [49](2001) 208 CLR 516.

24. In Roxborough, consistently with the view later taken in Lumbers, Gummow J explained that restitutionary claims, such as an action to recover moneys paid on the basis of a failure of consideration, "do not let matters lie where they would fall if the carriage of risk between the parties were left entirely within the limits of their contract"[50].  His Honour was at pains to explain that where a plaintiff already has "a remedy in damages ... governed by principles of compensation under which the plaintiff may recover no more than the loss sustained", allowing the plaintiff to claim "restitution in respect of any breach ... would cut across the compensatory principle" of the law of contract[51].

    [50]Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 at 545 [75].

    [51]Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 at 557 [105].

    Total failure of consideration?

25. The respondent argued that the appellants' repudiation prevented it from performing its obligations under the contract and from being remunerated accordingly.  On that basis it was argued that there was a total failure of consideration which entitled the respondent to advance a restitutionary claim for quantum meruit.  The respondent submitted that whether its obligation under the contract was entire or severable is immaterial, but argued that, if it mattered, the contract in question imposed an entire obligation on the respondent, so that its entitlement to progress payments was conditional upon the performance of the entire obligation.

26. The respondent's argument, in the terms in which it was put, fails because its obligation under the contract was not an entire obligation.  The contract between the parties did not impose one entire obligation on the respondent to complete the whole of the contract works in order to become entitled to the payment of an indivisible contract price.  The contract provided for the making of staged payments as the work was performed.  Nothing in the contract was apt to suggest that these payments were only provisional, and subject to a final taking of accounts.  The respondent's obligations are properly construed as severable rather than entire. 

27. It is eloquent of the artificiality of the respondent's argument that it strains unreasonably to characterise the contract as one which would deny to the respondent any entitlement to unconditional payment unless and until the whole of the contract works were completed.  The appellants' repudiation did not prevent the respondent from performing the totality of its obligations under the contract.  The respondent's rights to be paid some instalments of the contract price had accrued before the contract was terminated.  The respondent was entitled to be paid those instalments for that work; it was not entitled to claim greater payments by way of a restitutionary claim for quantum meruit.  The respondent's rights to the bulk of progress payments had accrued at the date of the repudiation, and there could be no failure of consideration in respect of the work the subject of those accrued rights. 

28. It was suggested in the course of argument that some work was done by the respondent before the contract was terminated but for which a right to payment had not yet accrued under the contract, and that there was a total failure of consideration in respect of such work which could support a restitutionary claim for quantum meruit.  Some support for this may be found in Horton v Jones [No 2][52], where Jordan CJ said:

    "If one party to an express contract renders to the other some but not all the services which have to be performed in order that he may be entitled to receive the remuneration stipulated for by the contract, and the other by his wrongful repudiation of the contract prevents him from earning the stipulated remuneration, the former may treat the contract as at an end and then sue for a quantum meruit for the services actually rendered:  Segur v Franklin[53]."

    [52](1939) 39 SR (NSW) 305 at 319.

    [53](1934) 34 SR (NSW) 67 at 72.

29. It is evident that Jordan CJ did not advert to the tension between the rescission fallacy which informed Lodder v Slowey and the approach in McDonald.  Much less was Jordan CJ offering a reconciliation of these competing approaches.  It is not at all apparent that Jordan CJ accepted that the entitlement to sue for a quantum meruit "for the services actually rendered" did not apply to work for which an entitlement to payment under the contract had accrued before the contract was brought to an end.  Indeed, in Segur v Franklin[54], Jordan CJ expressly recognised the entitlement to sue for the services "rendered under the contract before it came to an end", evidently referring to all such services.  That approach is inconsistent with the basal understanding in McDonald that accrued rights to payment under the contract are neither displaced nor enhanced by termination in future.  And in any event, for present purposes, it is to be noted that Jordan CJ did not distinguish between an entitlement to a quantum meruit for all the work performed and an entitlement to payment for work performed before termination, but in respect of which a right to payment had not yet accrued under the contract.

    [54](1934) 34 SR (NSW) 67 at 72.

30. To allow a restitutionary claim for quantum meruit in respect of work done before termination, but in respect of which a right to payment has not yet accrued, on the basis of a total failure of consideration is to apply the rescission fallacy under another guise because it treats the contract as if it were unenforceable as having been avoided ab initio.  If it be accepted that the better course is now to acknowledge that to allow an unconditional entitlement to payments for stages of work completed by a builder to be divested at its election in order to clear the way for the recovery of a reasonable sum for that work is so clearly inconsistent with the principle stated in McDonald that it should no longer be maintained, then the law should not allow a right of election on the part of the builder to claim a reasonable payment for work done under the contract in respect of which an unconditional entitlement to payment has not yet accrued.  To recognise such rights would necessarily introduce a degree of novelty for no reason other than to preserve the vestigial operation of what is, ex hypothesi, now recognised as a fallacy.  In addition, to recognise such rights would give rise to complex questions of proof and evaluation necessitated by the multi‑partite analysis required as a result.  It is no part of the duty of the courts to complicate litigation in this way for the parties.

31. The present case affords an example of what experience shows, that proof of an entitlement to a quantum meruit may often involve more complex questions of evidence and evaluation than an assessment of damages for loss of profit upon termination for breach.  To require an evaluation of an entitlement to a quantum meruit in respect of that portion of the work performed before termination, but for which a contractual right to payment has not accrued, subject to a qualification that this entitlement should not exceed a fair value calculated in accordance with the contract price or the appropriate part of the contract price, is to commit the parties, and the tribunal obliged to make the necessary assessment, to an exercise involving an unprecedented level of uncertainty and complexity.

32. Given the clear contemporary understanding of the effect of termination, considerations of coherence, certainty and commercial convenience provide ample reason to move on from adherence to the vestiges of what is now seen to be an unprincipled right to remuneration for work done, unconstrained by the terms of the contract.  The question which must now be addressed is whether Lodder v Slowey should continue to be applied notwithstanding its reliance on the rescission fallacy.

    Should Lodder v Slowey continue to be applied?

    Considerations of principle

33. The respondent sought to sustain the judgment in its favour on the basis that repudiation is a distinctive kind of breach of contract, which has distinctive remedial consequences.  It was said that the appellants did not merely depart from the terms of the contract but manifested an intention no longer to be bound by the contract, and that they could not now approbate and reprobate by insisting on adherence to the very contract they repudiated.  It was said that where a builder accepts a repudiation by the owners and terminates the contract, it is by definition no longer possible for the builder to complete the promised contractual performance, nor to receive from the owners the contractual performance promised by them.  It was said that the law has rightly recognised the availability of a restitutionary claim for quantum meruit in such circumstances.

34. These submissions echo the observations of Meagher JA in Renard Constructions (ME) Pty Ltd v Minister for Public Works[55] that it would be anomalous:

    "that a figure arrived at on a quantum meruit might exceed, or even far exceed, the profit which would have been made if the contract had been fully performed ... only ... if there were some rule of law that the remuneration arrived at contractually was the greatest possible remuneration available, or that it was a reasonable remuneration for all work requiring to be performed".

    [55](1992) 26 NSWLR 234 at 277‑278.

35. Meagher JA, after observing that there is no such rule, went on to say that[56]:

    "it would be extremely anomalous if the defaulting party when sued on a quantum meruit could invoke the contract which he has repudiated in order to impose a ceiling on amounts otherwise recoverable".

    [56]Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 278.

36. With respect, the observations of Meagher JA, while avowedly of a piece with the rescission fallacy itself[57], do not afford a satisfactory justification in point of principle for continuing to adhere to it.  These observations, and the view urged by the respondent, fail to acknowledge that it is precisely because the parties have agreed upon the contract price for the performance of work that it is to be regarded as "the greatest possible remuneration" for the work agreed to be performed.

    [57]Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 277.

37. Absent adherence to the rescission fallacy, there is nothing "anomalous" in a defaulting party enjoying the protection of the contract's ceiling on the amounts recoverable by way of damages.  That each party is freed from further performance of its primary obligations is no reason why the innocent party should be entitled to enforce a remedy which has no relationship to the expectations embodied in those primary obligations.  It is a matter of public policy that under the law of contract a defaulting party is not to be punished for its breach[58].  As Lord Hoffmann said in Co‑operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd[59]:  "[T]he purpose of the law of contract is not to punish wrongdoing but to satisfy the expectations of the party entitled to performance."  And that is so even if the breach was deliberate or self‑interested.  In Butler v Fairclough[60], in a passage later adopted by Gleeson CJ, McHugh, Gummow and Hayne JJ in Gray v Motor Accident Commission[61], Griffith CJ said:

    "The motive or state of mind of a person who is guilty of a breach of contract is not relevant to the question of damages for the breach, although if the contract itself were fraudulent the question of fraud might be material.  A breach of contract may be innocent, even accidental or unconscious.  Or it may arise from a wrong view of the obligations created by the contract.  Or it may be wilful, and even malicious and committed with the express intention of injuring the other party.  But the measure of damages is not affected by any such considerations."

    [58]See, eg, Paciocco v Australia & New Zealand Banking Group Ltd (2016) 258 CLR 525 at 544‑545 [21]‑[22], 577‑578 [155]‑[156], 605‑607 [253]‑[256]; [2016] HCA 28. See also Addis v Gramophone Co Ltd [1909] AC 488 at 494; Johnson v Unisys Ltd [2003] 1 AC 518 at 530 [15]; Priebe & Sons Inc v United States (1947) 332 US 407 at 417‑418.

    [59][1998] AC 1 at 15.

    [60](1917) 23 CLR 78 at 89; [1917] HCA 9 (citation omitted).

    [61](1998) 196 CLR 1 at 6‑7 [13]; [1998] HCA 70.

38. In One Step (Support) Ltd v Morris‑Garner[62], Lord Reed, with whom Baroness Hale of Richmond, Lord Wilson and Lord Carnwath agreed, said:

    "The courts will not prevent self‑interested breaches of contract where the interests of the innocent party can be adequately protected by an award of damages.  Nor will the courts award damages designed to deprive the contract breaker of any profit he may have made as a consequence of his failure in performance.  Their function is confined to enforcing either the primary obligation to perform, or the contract breaker's secondary obligation to pay damages as a substitute for performance ...  The damages awarded cannot therefore be affected by whether the breach was deliberate or self‑interested."

    [62][2019] AC 649 at 673 [35].

39. Finally, it is a rhetorical distraction to argue that the defaulting party may not "approbate and reprobate" the contract.  The principle in McDonald does not permit a defaulting party to approbate as well as reprobate the contract.  Rather, the principle states the consequences for the parties where the innocent party elects to terminate the contract in response to the conduct of the defaulting party.  That those consequences do not include an enhancement of the innocent party's rights or punishment of the defaulting party does not mean that the defaulting party may repudiate the contract while also claiming its benefit.  Rather, it means that termination for repudiation or breach is not an occasion for obtaining a windfall or inflicting a punishment.

    The older authorities

40. The respondent submitted that the historical roots of its claim are very deep.  It called in aid Planché v Colburn[63], De Bernardy v Harding[64] and Prickett v Badger[65] as support for the decision in Lodder v Slowey.

    [63](1831) 8 Bing 14 [131 ER 305].

    [64](1853) 8 Exch 822 [155 ER 1586].

    [65](1856) 1 CB (NS) 296 [140 ER 123].

41. The older cases referred to by the respondent do not afford strong support for Lodder v Slowey.  In Planché, the Court upheld an award of damages by the jury.  The reasoning upon which the Court proceeded is not pellucidly clear and may depend upon a "nineteenth century distinction between 'discharged' and 'rescinded' contracts [that] no longer forms part of the law governing breach of contract"[66].  What is clear is that nothing in the decision in Planché offers support for the notion that a plaintiff may elect between damages for loss of bargain under the contract and a restitutionary claim for quantum meruit[67].

    [66]Mitchell and Mitchell, "Planché v Colburn (1831)", in Mitchell and Mitchell (eds), Landmark Cases in the Law of Restitution (2006) 65 at 91.

    [67]See Havelock, "A Taxonomic Approach to Quantum Meruit" (2016) 132 Law Quarterly Review 470 at 480.

42. In De Bernardy, in the judgment of Alderson B, one finds what may be an early statement of the rescission fallacy.  His Lordship said[68]:

    "Where one party has absolutely refused to perform, or has rendered himself incapable of performing, his part of the contract, he puts it in the power of the other party either to sue for a breach of it, or to rescind the contract and sue on a quantum meruit for the work actually done."

    [68]De Bernardy v Harding (1853) 8 Exch 822 at 824 [155 ER 1586 at 1587].

43. Pollock CB took the somewhat different view that[69]:

    "It was a question for the jury, whether, under the circumstances, the original contract was not abandoned, and whether there was not an implied understanding between the parties that the plaintiff should be paid for the work actually done as upon a quantum meruit."

    [69]De Bernardy v Harding (1853) 8 Exch 822 at 824 [155 ER 1586 at 1587].

44. It may be that Pollock CB is to be understood on the basis that the original contract was "closed" by abandonment and the making of a new contract entirely to replace the old.  Unhelpfully, Platt B "concurred", apparently with both Pollock CB and Alderson B[70].

    [70]De Bernardy v Harding (1853) 8 Exch 822 at 824 [155 ER 1586 at 1587].

45. In Prickett, Williams and Crowder JJ each purported to follow Planché and De Bernardy.  Willes J said[71]:

    "The plaintiff would have been entitled to receive the commission agreed on, if the defendant's conduct had not prevented his earning it.  I must confess I do not see why the jury should not have given him the full amount."

    [71]Prickett v Badger (1856) 1 CB (NS) 296 at 308 [140 ER 123 at 128].

46. It would appear that Willes J concluded that the plaintiff had done all that was required under the contract to earn the commission provided by the contract. 

47. These older authorities are not so clear or consistent as to afford compelling support for the original adoption of the rescission fallacy.  Much less do they support its continued application in the light of the contemporary appreciation of its inconsistency with basal principle.

    An "open" contract

48. The respondent also argued that the critical point in cases of termination for repudiation is that a claim for quantum meruit is available because there is no longer an "open" contract between the parties.  This argument proceeds on a misunderstanding of what is meant by an "open" contract.  The reference in the authorities to an "open contract" is a reference to a contract that has not been rescinded ab initio and so remains enforceable.  In this regard, the reference to an "open" contract in argument in Prickett[72] was to a contract that was "unperformed", as distinct from what was described by Deane J in Pavey & Matthews[73] as "a case where there is no applicable genuine agreement or where such an agreement is frustrated, avoided or unenforceable".

    [72](1856) 1 CB (NS) 296 at 302 [140 ER 123 at 125].

    [73](1987) 162 CLR 221 at 256.

49. When, in Steele v Tardiani[74], Dixon J, with whom McTiernan J agreed, said that the fact of a contract being "open and, to that extent, unperformed, excludes any implied obligation ... to pay a fair and reasonable remuneration for the work done", his Honour was referring to a contract which, though unperformed, remains enforceable.  The author of the classic passage in McDonald, when speaking of an "open" contract in Steele v Tardiani, could only have been referring to a contract that was enforceable, whether by an action for damages or otherwise[75].

    [74](1946) 72 CLR 386 at 402.

    [75]See, eg, Boston Deep Sea Fishing and Ice Co v Ansell (1888) 39 Ch D 339 at 364‑365, part of which was cited by Dixon J in McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 477.

    Summary

50. Lodder v Slowey should no longer be applied.

51. When this Court in McDonald rejected the notion that termination of a contract upon acceptance of a repudiation has the effect of rescinding the contract ab initio, it removed the "reason" or "foundation"[76] of the holding in Lodder v Slowey.  Subsequent decisions have "disclosed weakness in the reasoning"[77] of Lodder v Slowey, and that decision is "no longer really consistent with the course of judicial decision"[78] in this country.  It having become evident "that an error of principle has occurred by judicial decision", and in circumstances where it is not necessary to overrule any past decision of this Court to do so, "the error should be corrected judicially"[79].  Lodder v Slowey has come to be recognised as "no more than a legal fiction"; as such it is "not to be maintained"[80].  Especially in a context such as the present, "it is of great importance that these principles should be correctly defined, for, if not, there is a danger that the error may spread in other directions, and a portion of our law be erected on a false foundation"[81].

    [76]PGA v The Queen (2012) 245 CLR 355 at 373 [30]; [2012] HCA 21. See also Lissenden v C A V Bosch Ltd [1940] AC 412 at 426.

    [77]West Ham Union v Edmonton Union [1908] AC 1 at 5, adopted in Oceanic Crest Shipping Co v Pilbara Harbour Services Pty Ltd (1986) 160 CLR 626 at 677‑678; [1986] HCA 34.

    [78]PGA v The Queen (2012) 245 CLR 355 at 371 [24].

    [79]Dillingham Constructions Pty Ltd v Steel Mains Pty Ltd (1975) 132 CLR 323 at 334; [1975] HCA 23. See also West Ham Union v Edmonton Union [1908] AC 1 at 5; Bourne v Keane [1919] AC 815 at 830.

    [80]PGA v The Queen (2012) 245 CLR 355 at 373 [30].

    [81]Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32 at 45.

52. In any given case, there may be considerations that militate against exercising the power to overrule a longstanding decision.  It is "impossible to lay down precise rules according to which this power will be exercised"[82].  In Ross Smith v Ross Smith[83], Lord Reid acknowledged that it would have been a compelling consideration that it "could reasonably be supposed that anyone has regulated his affairs in reliance on its validity, but it would be fantastic to suppose that anyone has ... entered into any kind of transaction, on the faith of" the longstanding decision.  The same may be said in relation to Lodder v Slowey, the fallacious reasoning of which may give rise to serious mischief.  It may be that some builders actually set the prices at which they bid for work on the expectation that they will be astute to take advantage of an opportunity to elect for a more generous level of remuneration in due course.  If that is the case, any such expectation is distinctly not to be encouraged.  Honesty and efficiency in trade and commerce are not promoted by a rule that allows the recovery of a windfall by a party who has extracted itself from a losing contract, from which, acting rationally, it would pay to be released.  In GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd[84], Finn J observed that:

    "It ... has long been recognised that 'it is difficult to see why breach, which saves the plaintiff further loss, should be grounds for recovery of a greater sum [than the contract price]':  Dobbs, Law of Remedies, vol 3, §12.7(5) ...  As is said in Mason and Carter, Restitution Law in Australia at [1430]: 'There is ... little to be said in principle or policy for a rule which provides a clear incentive to manufacture or snatch at repudiation as a means of escaping a bad bargain.'"

    [82]Admiralty Commissioners v Valverda (Owners) [1938] AC 173 at 194.

    [83][1963] AC 280 at 303. See also Bourne v Keane [1919] AC 815 at 874.

    [84](2003) 128 FCR 1 at 157‑158 [662].

    Conclusion and orders

53. It may be that in some cases justice will not be done without a restitutionary claim.  Different considerations may apply in cases where advance payments are sought to be recovered by restitutionary claims for money paid, although it may be that the law of contract adequately provides for such cases[85].  "There will generally be no need to have recourse to a remedy in restitution" where a claim in contract is available[86].  In the present case, there is no good reason to consider that damages for breach of contract would fail to meet the justice of the case such that a restitutionary claim for quantum meruit should be available.  It is not necessary to consider the position in other contexts or with respect to other restitutionary claims as the present case is concerned only with a claim for remuneration for work and labour done under a contract terminated for repudiation or breach.

    [85]See McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 477‑478.

    [86]Goss v Chilcott [1996] AC 788 at 797.

54. The appeal should be allowed.  Orders 1, 2 and 3 of the Court of Appeal should be set aside.  In their place, it should be ordered that the application for leave to appeal be granted; the appeal to the Court of Appeal be allowed with costs; orders 2 to 5 of the primary judge be set aside and, in their place, it be ordered that the appeal to the primary judge be allowed with costs; the decision of the Victorian Civil and Administrative Tribunal be set aside; and the matter be remitted to the Tribunal for further determination according to law.

55. The respondent should pay the appellants' costs of and incidental to the appeal to this Court.

56. GAGELER J.   Nettle, Gordon and Edelman JJ describe the nature and history of this long-running dispute between the appellant Owners and the respondent Builder.  I adopt their abbreviations. 

57. As their Honours explain, the Builder's claim to recover by way of restitution a sum of money representing the value of work done by the Builder for the benefit of the Owners before the Contract was terminated upon the Builder's acceptance of the Owners' repudiation covered work within three distinct categories: 

    (1)work done by the Builder in respect of variations to the plans and specifications set out in the Contract which were asked for by the Owners;

    (2)work done by the Builder in respect of the plans and specifications set out in the Contract for which the Builder had accrued a contractual right to payment under the Contract at the time of its termination; and

    (3)work done by the Builder in respect of the plans and specifications set out in the Contract for which the Builder had not yet accrued any contractual right to payment under the Contract at the time of its termination.

58. Section 38 of the DBC Act governs recovery by the Builder for work done within category (1). I agree with the construction of s 38 arrived at by Nettle, Gordon and Edelman JJ and I agree with the substance of their Honours' reasons for arriving at that construction.

59. Construed within the context of the DBC Act as a whole, the limited statutory entitlement conferred by that section exhibits a sufficient legislative intention to exclude recovery at common law[87]. The intention is manifest in the express terms of s 38(6), if the conditions in s 38(6) are not met, and appears by necessary implication from the measure of the entitlement set out in s 38(7), if the conditions in s 38(6) are met. The combined effect is that recovery at common law is in all circumstances excluded and that the Builder is limited to recovery under s 38(7) if, but only if, the conditions in s 38(6) are met.

    [87]cf Comptroller-General of Customs v Kawasaki Motors Pty Ltd [No 2] (1991) 32 FCR 243 at 258; Chippendale Printing Co Pty Ltd v Commissioner of Taxation (1996) 62 FCR 347 at 366-369.

60. The common law governs recovery by the Builder for work done within categories (2) and (3).  Recovery for work done within each of these categories is limited by the common law principles that govern imposition of an obligation to pay by way of restitution a sum of money representing the value of work, enforceable by an action that can be described following Pavey & Matthews Pty Ltd v Paul[88] as a non-contractual quantum meruit.

    [88](1987) 162 CLR 221 at 256-257; [1987] HCA 5.

61. The correct outcome in relation to work done within category (2) is that a non-contractual quantum meruit is not available to the Builder.  In my opinion, the preferable outcome in relation to work done within category (3) is that a non‑contractual quantum meruit is available to the Builder.  Although those conclusions accord with the conclusions reached by Nettle, Gordon and Edelman JJ, I reach them by a narrower path of reasoning. 

    Category (2):  work for which the Builder has accrued a contractual right to payment

62. There can be no doubt about the outcome in relation to work done within category (2).  The result of the Builder's acceptance of the Owners' repudiation is that the Builder still has in respect of that work the same accrued contractual right to payment under the Contract as the Builder had up until the time of termination of the Contract[89].  The Builder can enforce that accrued contractual right in a common law action in debt[90]. 

    [89]McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 476-477; [1933] HCA 25; Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (1936) 54 CLR 361 at 379-380; [1936] HCA 6; GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1 at 155 [651].

    [90]Young v Queensland Trustees Ltd (1956) 99 CLR 560 at 567, 569; [1956] HCA 51.

63. The continuing existence of a contractual right to payment, enforceable by an action in debt, leaves no room to recover payment by another action in debt on a non-contractual quantum meruit.  Times past, any such action would need to have proceeded on the fiction of an implied contractual promise on the part of the Owners to pay for an executed consideration by the Builder.  Then, it would have been enough to say that a contract would not be implied to the extent that the rights of the parties were governed by an express or "special" contract[91]. 

    [91]Summers v The Commonwealth (1918) 25 CLR 144 at 153; [1918] HCA 33.

64. Now, it is sufficient to point out that, through the contractual creation of the debt, the Builder has received from the Owners exactly what the Builder agreed with the Owners that the Builder would receive for having done the work.  The continuing existence of the enforceable contractual obligation to pay for the work means that there is "neither occasion nor legal justification for the law to superimpose or impute" a different, non-contractual obligation on the part of the Owners to pay for the work[92].  The more general point is that "[n]o action can be brought for restitution while an inconsistent contractual promise subsists between the parties in relation to the subject matter of the claim"[93].  The continuing application of the regime of rights and obligations set out in the Contract to govern the mutual rights and obligations of the parties in respect of payment for the work has the result that the law of restitution simply "has no part to play in the matter"[94].

    [92]Pavey (1987) 162 CLR 221 at 256.

    [93]Trimis v Mina (1999) 16 BCL 288 at 296 [54], quoted in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1 at 156 [655].

    [94]Pan Ocean Shipping Co Ltd v Creditcorp Ltd [1994] 1 WLR 161 at 164; [1994] 1 All ER 470 at 474.

    Category (3):  work for which the Builder has not accrued a contractual right to payment

65. More difficulty attends the outcome in relation to work done within category (3).  Determining the outcome requires this Court to make a choice.  Should the Builder be restricted in respect of that work to enforcing the Builder's undoubted entitlement to recover damages for loss occasioned to the Builder in consequence of the termination of the Contract?  Or should the Builder be able to elect to recover instead an amount representing the value of the work by way of restitution on a non-contractual quantum meruit?

66. No decision of this Court is directly in point.  Statements made by three members of the Court in Automatic Fire Sprinklers Pty Ltd v Watson[95], concerning whether a wrongfully dismissed employee is entitled to recover the value of services rendered or is confined to unliquidated damages for breach of the contract of employment, might be thought to point in both directions.  The statements were unnecessary to the decision in that case.

    [95](1946) 72 CLR 435 at 450, 462, 465; [1946] HCA 25.

67. Restricting the Builder to recovering damages for breach of contract has the support of some statements made in the House of Lords in Ranger v Great Western Railway Co[96] and of a formidable body of recent academic and professional writing[97].  Allowing the Builder to elect to recover an amount representing the value of the work by way of restitution on a non-contractual quantum meruit accords with the received understanding of the common law in Australia as repeatedly accepted in intermediate courts of appeal over the last three decades[98].  It also accords with the predominant approach of courts in the United States[99].

    [96](1854) 5 HLC 72 at 96, 118 [10 ER 824 at 834, 843].

    [97]eg, Dennys and Clay, Hudson's Building and Engineering Contracts, 13th ed (2015) at 926-927 [8‑019]; Mason, Carter and Tolhurst, Mason & Carter's Restitution Law in Australia, 3rd ed (2016) at 484-487 [1168], 592-593 [1408], 609-611 [1430]; Furst and Ramsey, Keating on Construction Contracts, 10th ed (2016) at 282-284 [9‑058]-[9‑063]; Havelock, "A Taxonomic Approach to Quantum Meruit" (2016) 132 Law Quarterly Review 470 at 480-482; Jackman, The Varieties of Restitution, 2nd ed (2017) at 89-90, 116-121; Carter, Contract Law in Australia, 7th ed (2018) at 920-921 [38‑39].

    [98]eg, Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234; Iezzi Constructions Pty Ltd v Watkins Pacific (Qld) Pty Ltd [1995] 2 Qd R 350; Legal Services Commissioner v Baker [No 2] [2006] 2 Qd R 249; Sopov v Kane Constructions Pty Ltd [No 2] (2009) 24 VR 510.

    [99]eg, Boomer v Muir (1933) 24 P 2d 570; United States v Zara Contracting Co Inc (1944) 146 F 2d 606; Loomis v Imperial Motors Inc (1964) 396 P 2d 467; Paul Hardeman Inc v Arkansas Power & Light Co (1974) 380 F Supp 298; Murdock-Bryant Construction Inc v Pearson (1984) 703 P 2d 1206.

68. The source of the received understanding in Australia can be traced on one line of descent back through the Privy Council's endorsement in Lodder v Slowey[100] of the decision of the New Zealand Court of Appeal under appeal in that case[101] to a series of scantily reported English cases towards the middle of the nineteenth century which began with Planché v Colburn[102].

    [100][1904] AC 442.

    [101]Slowey v Lodder (1901) 20 NZLR 321 at 358.

    [102](1831) 8 Bing 14 [131 ER 305]. See De Bernardy v Harding (1853) 8 Exch 822 [155 ER 1586]; Prickett v Badger (1856) 1 CB (NS) 296 [140 ER 123]; Inchbald v The Western Neilgherry Coffee, Tea, and Cinchona Plantation Co (Ltd) (1864) 17 CB (NS) 733 [144 ER 293]; Appleby v Myers (1867) LR 2 CP 651.

69. Examination of Planché v Colburn does not readily reveal a principled explanation for the doctrine it spawned[103].  The Privy Council's decision in Lodder v Slowey is devoid of reasoning.  The decision of the New Zealand Court of Appeal under appeal in that case appears to have proceeded on the notion that termination of a contract by acceptance of a repudiation operated to "rescind" the contract in the sense of avoiding the legal operation of the contract for the past as well as for the future[104].  Adherence to that notion accords with the explanation of Planché v Colburn and its progeny in the notes to the same 1868 edition of Bullen and Leake's Precedents of Pleadings[105] as was referred to in Roxborough v Rothmans of Pall Mall Australia Ltd[106].  The notion was subsequently authoritatively rejected in McDonald v Dennys Lascelles Ltd[107].

    [103]See Mitchell and Mitchell, "Planché v Colburn (1831)", in Mitchell and Mitchell (eds), Landmark Cases in the Law of Restitution (2006) 65.

    [104]Slowey v Lodder (1901) 20 NZLR 321 at 356-358.

    [105]Bullen and Leake, Precedents of Pleadings in Personal Actions in The Superior Courts of Common Law, 3rd ed (1868) at 37.

    [106](2001) 208 CLR 516 at 524-525 [14]; [2001] HCA 68.

    [107](1933) 48 CLR 457 at 476-477.

70. There are, however, two characteristically scholarly and concise judgments of Jordan CJ, delivered shortly after McDonald v Dennys Lascelles Ltd and without reference to Lodder v Slowey, which provide a different and more satisfying justification for the received understanding.  In Segur v Franklin[108], Jordan CJ noted with reference to McDonald v Dennys Lascelles Ltd that it was then "clearly settled that if one party to a contract repudiates his liabilities under it, the other party may treat such repudiation as an invitation to him to regard himself as discharged from the further performance of the contract".  The consequence, he noted, was that the other party "may accept this invitation and treat the contract as at an end, except for the purposes of an action for damages for breach of contract ... or", he added, "in a proper case, an action for a quantum meruit"[109].  Jordan CJ went on to explain[110]:

    "Where a wrongful repudiation has the effect of preventing the other party from becoming entitled to receive remuneration for services already rendered, which remuneration, according to the terms of the contract, he is entitled to receive only if the contract is wholly carried into effect, the innocent party, who has elected to treat the contract as at an end may, instead of suing for damages, maintain an action to recover a quantum meruit for the services which he has rendered under the contract before it came to an end.  Such an action is not regarded as an action for an unliquidated claim, but an action for a debt or liquidated demand".

    [108](1934) 34 SR (NSW) 67 at 72.

    [109](1934) 34 SR (NSW) 67 at 72.

    [110](1934) 34 SR (NSW) 67 at 72.

71. Returning to the topic in Horton v Jones [No 2][111], Jordan CJ re‑emphasised that "[a] claim to a quantum meruit is in the theory of the law a liquidated claim; and the claimant, if he is successful, is entitled to recover the amount at which he has assessed his claim, unless the jury reduces it".  That is an important statement about the nature of the common law action, to which I will return.  Jordan CJ added that there were circumstances in which an action for a quantum meruit would lie "[w]here there is or has been an express contract between the parties".  He instanced[112], with reference to Segur v Franklin:

    "If one party to an express contract renders to the other some but not all the services which have to be performed in order that he may be entitled to receive the remuneration stipulated for by the contract, and the other by his wrongful repudiation of the contract prevents him from earning the stipulated remuneration, the former may treat the contract as at an end and then sue for a quantum meruit for the services actually rendered".

    [111](1939) 39 SR (NSW) 305 at 317.

    [112](1939) 39 SR (NSW) 305 at 319.

72. Jordan CJ's explanation of the basis for a claim on a quantum meruit for the value of services rendered by the innocent party proceeded expressly on the modern understanding, settled in McDonald v Dennys Lascelles Ltd, that termination of a contract on acceptance of repudiation operates only for the future.  Unlike the reasoning of the New Zealand Court of Appeal in the decision upheld in Lodder v Slowey, the reasoning of Jordan CJ did not proceed on the notion that acceptance of repudiation operates to render a contract void from the beginning.  The notion had been discarded then, as it remains discarded now.

73. The explanation given by Jordan CJ in Segur v Franklin and in Horton v Jones [No 2] proceeded on the same conception of the nature of a non-contractual quantum meruit as was implicit in his Honour's reasons for judgment in Horton v Jones[113].  In an exposition of the common law pivotal to the reasoning of Deane J in Pavey[114], Jordan CJ in Horton v Jones characterised a non-contractual quantum meruit for services rendered as "an action of debt" to enforce an obligation, imposed by law independently of any genuine agreement between the parties, to pay "reasonable remuneration for the executed consideration"[115]. 

    [113](1934) 34 SR (NSW) 359.

    [114](1987) 162 CLR 221 at 250-251.

    [115](1934) 34 SR (NSW) 359 at 367.

74. Within the explanation in Segur v Franklin and Horton v Jones [No 2], in my opinion, are reasons consistent with Pavey's recognition of "unjust enrichment" as a "unifying" (as distinct from "universal" or "all-embracing"[116]) legal concept as to why the common law should recognise a right to restitution in the particular category of case[117].  Within the same explanation, in my opinion, is also guidance as to what the proper measure of restitution in that category of case should be[118].  For reasons that will become apparent, I am unable to answer the ultimate question, of whether the common law of Australia should continue to recognise a right to restitution in this category of case, without also determining the proper measure of restitution. 

    [116]See Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560 at 595 [74], 615 [130], 617 [136], 618-619 [139]-[141]; [2014] HCA 14.

    [117]Pavey (1987) 162 CLR 221 at 256-257.

    [118]Pavey (1987) 162 CLR 221 at 256-257.

75. The starting point is to appreciate that the category of case is one in which it is the "very fact" that a contract becomes unenforceable that "provides the occasion for (and part of the circumstances giving rise to) the imposition by the law of the obligation to make restitution"[119].  The innocent party has rendered services in part performance of the totality of the services necessary to be performed in order for the innocent party to accrue a contractual entitlement to payment in the future.  Termination of the contract, consequent upon acceptance by the innocent party of its repudiation by the defaulting party, supervenes.  The result is that "as on the one side no further acts of performance can be required, so, on the other side, no liability can be brought into existence [since] it depends upon a further act of performance"[120].  Through acceptance of the wrongful repudiation of the defaulting party, the innocent party is thereby in the present position of having rendered services in part performance of the contract for which that party has not accrued and cannot accrue a contractual entitlement to be paid.  The defaulting party is correspondingly in the present position of having had the benefit of the services rendered in part performance of the contract for which that party has not incurred and will not incur any contractual obligation to pay. 

    [119]Pavey (1987) 162 CLR 221 at 256.

    [120]Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (1936) 54 CLR 361 at 380.

76. To recognise the "unjustness" of the defaulting party having had the benefit of the services rendered by the innocent party in part performance of the contract in a case of a default amounting to a wrongful repudiation, I do not think it necessary to analogise to any other category of case.  Nor do I think it appropriate to attempt to discern and apply some other all-embracing criterion of liability in the common law of restitution.  By preferring to maintain a narrow focus, I am adhering to the standard common law judicial technique of deciding no more than what needs to be decided. 

77. A submission of the Builder causes me to divert from that narrow focus if only to explain why I choose to maintain it.  The submission is to the effect that the justification for the common law to continue to recognise a right to restitution in the particular category of case is now sufficiently to be found in the application of the concept of "failure of basis".

78. The concept of "total failure of consideration", renamed as "failure of basis", was invoked in novel circumstances to explain the imposition of an obligation to repay money that had been paid in Roxborough[121] and to explain the imposition of an obligation to pay for services that had been rendered in Barnes v Eastenders Cash & Carry Plc[122]. Undoubtedly, the concept can help to explain the imposition of obligations to make restitution across a range of established categories of case.  The present category is one in which the concept has some explanatory power[123].  One party has rendered services, from which the other has benefited, on a "basis" that "has failed to sustain itself" in the events that have occurred.  That is to isolate an important part of the story.  But it is not to tell the whole story.  The other important parts that need to be told are that the services were rendered pursuant to a valid contract which the defaulting party has wrongfully repudiated and which the innocent party has terminated so as to result in the innocent party failing to accrue a right to payment for the services under the contract yet having an entitlement to claim damages from the defaulting party for non-completion of the contract.

    [121](2001) 208 CLR 516 at 524-529 [14]-[24], 555-558 [101]-[109], 589 [199].

    [122][2015] AC 1 at 41-44 [103]-[115].

    [123]cf Beatson, "The Temptation of Elegance:  Concurrence of Restitutionary and Contractual Claims", in Swadling and Jones (eds), The Search for Principle:  Essays in Honour of Lord Goff of Chieveley (1999) 143 at 148-149.

79. Useful as the concept of total failure of consideration or failure of basis can be, it is important not to surrender to that one concept the hegemonic status steadfastly denied to the concept of unjust enrichment[124].  The common law method, as Sir Frederick Jordan himself observed extra-judicially, has never purported to be one in which the determination of a particular case has been deduced from supposed "fundamental principles of justice".  The general principles of the common law are, in his language, "built up" from the "collation of decided cases"[125].  They are monitored by reference to how well they fit within the wider body of the law and how well they work in practice; where problems are revealed, they can be revised or even abandoned at the appropriate level within the judicial hierarchy. 

    [124]cf Roxborough (2001) 208 CLR 516 at 543-544 [71]-[73]; Barnes v Eastenders Cash & Carry Plc [2015] AC 1 at 41 [102], 43 [113].

    [125]Jordan, Appreciations (1950) at 58-59.

80. Bearing constantly in mind the adage that the life of the common law has been not logic but experience[126], there is a need to resist the temptation to intellectual gratification that accompanies any quest to portray cases in which the common law recognises an obligation of restitution as the conscious or unconscious application of one Very Big Idea.  The need is to avoid the pitfalls of overgeneralisation[127], just as it is to ensure that considerations that are practically important but theoretically inconvenient are not overlooked or underappreciated.

    [126]Holmes, The Common Law (1881) at 1.

    [127]See Smith, "Restitution:  A New Start?", in Devonshire and Havelock (eds), The Impact of Equity and Restitution in Commerce (2019) 91 at 95-96.

81. In the common law of restitution, as in the common law of tort, particular categories of case give rise to their own particular sorts of problem.  Once properly identified, the problems that arise in any particular category "will then become the focus of attention in a judicial evaluation of the factors which tend for or against a conclusion, to be arrived at as a matter of principle"[128].  That is what needs to happen here.  The various categories of case in which money paid under a contract might or might not be recovered on the ground of a total failure of consideration or failure of basis having resulted from the termination of the contract, upon acceptance of a repudiation[129] or upon the happening of a frustrating event[130], raise their own problems.  So too does the more difficult category of case where it is the defaulting party who seeks to recover the value of services rendered to the innocent party[131].  For present purposes, all of them can be put to one side.

    [128]Sullivan v Moody (2001) 207 CLR 562 at 580 [50]; [2001] HCA 59.

    [129]eg, Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 350-354; [1993] HCA 4, discussing, amongst other cases, McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 477 and Dies v British and International Mining and Finance Corporation [1939] 1 KB 724.

    [130]eg, Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32.

    [131]eg, Sumpter v Hedges [1898] 1 QB 673, discussed in Steele v Tardiani (1946) 72 CLR 386 at 403; [1946] HCA 21; Lumbers v W Cook Builders Pty Ltd (In liq) (2008) 232 CLR 635 at 656 [51]-[52]; [2008] HCA 27. See also McFarlane and Stevens, "In Defence of Sumpter v Hedges" (2002) 118 Law Quarterly Review 569.

82. The critical question in the present category of case is why the common law should not treat the innocent party as adequately remunerated for the services rendered to the defaulting party by having an entitlement to maintain an action for damages for breach of the contract in part performance of which the innocent party rendered those services.  Accentuating that question is the common law's belated recognition of the availability to the innocent party of damages measured by reference to the loss attributable to the innocent party's reliance on the contract[132].  Indeed, a plausible explanation of Planché v Colburn and its nineteenth century progeny is that most if not all were cases in which the party who had rendered services before the other's repudiation was in substance compensated in damages measured by reference to his or her reliance loss[133]. 

    [132]The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54.

    [133]Kull, "Restitution as a Remedy for Breach of Contract" (1994) 67 Southern California Law Review 1465 at 1489, referring to Fuller and Perdue, "The Reliance Interest in Contract Damages:  2" (1937) 46 Yale Law Journal 373 at 394.  See also Tridant Engineering Co Ltd v Mansion Holdings Ltd [2000] HKCFI 1 at 107.

83. My view is that the answer to that critical question cannot lie in the notion of the contracting parties having arrived at a contractual "allocation of risk", which the common law of restitution will not disturb[134].  Contracting parties are, of course, at liberty to determine by contract the "secondary" obligations, which are to arise in the event of breach or termination of the "primary" obligations they have chosen to bind them[135].  Even where the parties have not so determined, it may for some purposes be appropriate to describe obligations that the common law imposes to pay damages for breach of contract as "secondary" obligations which, in the event of termination by acceptance of a repudiation, are "substituted" for the primary obligations[136].  However, it would be artificial as a matter of commercial practice and wrong as a matter of legal theory to conceive of contracting parties who have not addressed the consequences of termination in the express or implied terms of their contract as having contracted to limit themselves to the contractual remedy of damages in that event.  Parties contract against the background of the gamut of remedies that the legal system makes available to them.  The common law gives to them the benefit, and saddles them with the detriment, of what they expressly or impliedly agree in their contract.  Outside the scope of what they agree in their contract, the common law gives to them what the common law itself allows them to get.

    [134]cf Lumbers v W Cook Builders Pty Ltd (In liq) (2008) 232 CLR 635 at 663 [79].

    [135]Moschi v Lep Air Services Ltd [1973] AC 331 at 350.

    [136]Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 at 849.

84. Nor can I see that the answer is to be found in the notion that overlapping remedies in contract and in restitution are in some way anomalous.  Tidiness has never been a feature of a common law system.  Overlapping remedies available at the option of an innocent party against another party who is in contractual default are commonplace.  Remedies at common law can overlap with those in equity.  At common law, causes of action in contract can overlap with causes of action in tort, and the potential for a cause of action in restitution to overlap with a cause of action in damages for breach of contract was recognised in Baltic Shipping Co v Dillon[137].

    [137](1993) 176 CLR 344 at 355.

85. Rather, I consider that answering the critical question needs to be informed by a weighing of the practical consequences of continuing to allow an innocent party to maintain a non-contractual quantum meruit as an alternative to an action for unliquidated damages for breach of contract.  To those consequences I now turn.

86. One practical consequence which flows from a non-contractual quantum meruit being "in the theory of the law" an action for a debt is that the action can have significant procedural advantages to an innocent party over an action for damages for breach of contract under procedural rules in Australian courts[138].  Typically, those advantages include a capacity to obtain default judgment[139].

    [138]See generally Mason, Carter and Tolhurst, Mason & Carter's Restitution Law in Australia, 3rd ed (2016) at 1025 [2922].

    [139]eg, Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 21.03(1)(a); City Mutual Life Assurance Society Ltd v Giannarelli [1977] VR 463 at 468. See also Alexander v Ajax Insurance Co Ltd [1956] VLR 436 at 445; Edwards v Australian Securities and Investments Commission (2009) 264 ALR 723 at 739-740 [81]-[87].

87. More importantly, a non-contractual quantum meruit has the advantage that proof of the value of services rendered is almost invariably more straightforward than proof of contractual loss.  Questions of causation and remoteness play no part.  The availability of the action allows the innocent party to choose to adopt the course of quickly and cheaply obtaining judgment for an easily quantifiable liquidated amount instead of embarking on a long and more expensive and more uncertain pursuit of a potentially larger judgment for unliquidated damages.  Choice by the innocent party to adopt that course has the flow-on systemic advantage of shortening trial and pre-trial processes.

203. In some circumstances, it is necessary or appropriate that the benefit of work to the defendant be determined without reference to a contract price.  As Dixon J observed in South Australian Harbors Board v South Australian Gas Co[313], identification of "a fair and reasonable rate of remuneration, in other words a quantum meruit", raises a "question of fact", the answer to which "depends very much upon the methods of reasoning which are pursued".  Where the claim to quantum meruit is founded upon a contract which does not expressly fix a price for services, "usually" the value of those services will be "assessed by reference to charges commonly made by others for like services", unless no such standard is available[314].  In such cases, practical necessity justifies the default application of an objective price derived from outside the contract which ordinarily depends on evidence of supply costs and market conditions[315].

     [313](1934) 51 CLR 485 at 499 (Evatt and McTiernan JJ agreeing at 508); [1934] HCA 45.

     [314]South Australian Harbors Board v South Australian Gas Co (1934) 51 CLR 485 at 501 per Dixon J, see also at 490 per Starke J.

     [315]See Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 at 616 per Brennan J; [1982] HCA 53.

204. Equally, where the claim is founded on an obligation to pay for services rendered under a contract which is unenforceable, it has been held that "[o]rdinarily" the measure of restitution "will correspond to the fair value of the benefit provided (eg remuneration calculated at a reasonable rate for work actually done or the fair market value of materials supplied)"[316].  Prices stated in the contract are regarded as relevant, but they remain "evidence only, on the question of amount"[317].  That approach is informed by a legal concern that direct application of the contract price would risk incoherence with the policy of the law rendering the contract unenforceable, although this will always require consideration of that policy.  As Mason and Wilson JJ noted in Pavey & Matthews Pty Ltd v Paul[318]:

     "If the effect of bringing an action on a quantum meruit was simply to enforce the oral contract in some circumstances only, though not in all the circumstances in which an action on the contract would succeed, it might be persuasively contended that the action on a quantum meruit was an indirect means of enforcing the oral contract."

     [316]Pavey & Matthews (1987) 162 CLR 221 at 263 per Deane J.

     [317]See Scarisbrick v Parkinson (1869) 20 LT 175 at 177 per Kelly CB; Ward v Griffiths Bros Ltd (1928) 28 SR (NSW) 425 at 427 per Street CJ; Horton v Jones (1934) 34 SR (NSW) 359 at 367-368 per Jordan CJ; Pavey & Matthews (1987) 162 CLR 221 at 236-238 per Brennan J, 250, 252, 257 per Deane J, 267-268 per Dawson J.

     [318](1987) 162 CLR 221 at 228.

205. By contrast, where a contract is enforceable, but terminated for repudiation, there are no reasons of practicality and few in principle to eschew the contract price.  It has been said that "[t]he defendant cannot refuse to abide by the contract and at the same time claim its protection" against the innocent plaintiff[319].  But, as has been seen[320], where a contract is terminated for breach, it continues to apply to acts done up to the point of termination, and it remains the basis on which the work was done.  There is, therefore, nothing about the termination of the contract as such that is inconsistent with the assessment of restitution by reference to the contract price for acts done prior to termination.  The contract price reflects the parties' agreed allocation of risk[321].  Termination of the contract provides no reason to disrespect that allocation.  Granted, there may be difficult questions of apportionment of the contract price, such as where performance of a small part of the entire obligation is the most valuable part of the contractor's work[322].  There may also be difficult questions in identifying the contract price, such as where the expected benefits to the contractor include not only payments of money but also the value of promises or releases.  But such difficulties of valuation and apportionment have long been encountered in other areas[323].

     [319]Lord, Williston on Contracts, 4th ed (2003), vol 26, §68:41 at 475.

     [320]See [165] above.

     [321]See Mason, Carter and Tolhurst, Mason & Carter's Restitution Law in Australia, 3rd ed (2016) at 610 [1430].

     [322]See, eg, Whincup v Hughes (1871) LR 6 CP 78 at 81 per Bovill CJ.

     [323]See, eg, Attwood v Maude (1868) LR 3 Ch App 369.

206. The incongruity of restitutionary awards in excess of contract price, and related anomalies, have been acknowledged in other jurisdictions.  In England, it has been held at first instance that there can be no justification for restitutionary recovery in excess of the contract price[324].  That accords with the position in some jurisdictions in the United States, which have either in effect returned to the pro rata contract price as the prima facie measure of the innocent party's recovery of quantum meruit or adopted the total contract price as a limit on the recovery otherwise assessed[325].  According to the Restatement of the Law Third, Restitution and Unjust Enrichment[326], "modern academic commentary is almost uniformly critical of a rule that permits money 'restitution' free of the contract price".

     [324]Taylor v Motability Finance Ltd [2004] EWHC 2619 (Comm) at [26] per Cooke J.

     [325]See Palmer, The Law of Restitution (1978), vol 1, §4.4(c) at 398‑401; Skelton, Restitution and Contract (1998) at 57‑60.

     [326]American Law Institute, Restatement of the Law Third, Restitution and Unjust Enrichment (2011) §38 at 645.

207. More recently, in England, the courts have adopted a more nuanced approach.  In Cressman v Coys of Kensington (Sales) Ltd, Mance LJ observed[327] that the "general concern" of the law on restitution "is with benefit to the particular defendant, or so-called 'subjective devaluation'"[328].

     [327][2004] 1 WLR 2775 at 2787 [28] (Thorpe LJ and Wilson J agreeing at 2795 [52], [51]).

     [328]See Birks, An Introduction to the Law of Restitution (1989) at 109‑132; Burrows, The Law of Restitution, 3rd ed (2011) at 47‑60; Virgo, The Principles of the Law of Restitution, 3rd ed (2015) at 69-72.

208. In Benedetti v Sawiris, the Supreme Court of the United Kingdom accepted that concepts responding to subjective devaluation may be applied in appropriate cases.  Lord Clarke of Stone-cum-Ebony JSC observed[329] that "the starting point in valuing the enrichment is the objective market value, or market price, of the services performed", the relevant price being that "which a reasonable person in the defendant's position would have had to pay for the services".  His Lordship went on to hold[330], however, that, because of "the fundamental need to protect a defendant's autonomy", a defendant would be "entitled to prove that he valued the relevant services (or goods) provided by the claimant at less than the market value"; albeit, and importantly, not by reference to subjective intentions or expectations of the value of the services to the defendant at the relevant time.

     [329][2014] AC 938 at 956 [15], 957 [17] (Lord Kerr of Tonaghmore and Lord Wilson JJSC agreeing), quoting Benedetti v Sawiris [2010] EWCA Civ 1427 at [140] per Etherton LJ (emphasis added).

     [330][2014] AC 938 at 957 [18].

209. Lord Reed JSC, although doubting the aptness of the expression "subjective devaluation", accepted[331] that a court is free to depart from market value either where receipt of a benefit is involuntary or where the recipient assumed responsibility for payment on a particular basis – for example, that the cost of the service would be a specific sum.  And importantly, as his Lordship observed[332], while in practice most such cases are likely to fall within the scope of the law of contract, "some could fall within the scope of unjust enrichment (eg if a contract were void or unenforceable)".

     [331][2014] AC 938 at 986‑987 [113]‑[117].

     [332][2014] AC 938 at 987 [115].

210. Lord Neuberger of Abbotsbury PSC, although not expressing a concluded view on the subject, stated[333] as follows:

     "In my view, it may well be that, in some cases of unjust enrichment, subjective devaluation could be invoked by a defendant to justify the award of a smaller sum than that which would be prima facie payable ...

     [I]t may often be unreasonable for a claimant to claim a market-based payment ... where there have been prior discussions and the defendant has indicated that he would not be prepared to pay as much as the market price for the benefit.

     It would seem wrong ... for the claimant to be better off as a result of the law coming to his rescue, as it were, by permitting him to invoke unjust enrichment, than he would have been if he had had the benefit of a legally enforceable contractual claim for a quantified sum."

     [333][2014] AC 938 at 1006 [187], 1007‑1008 [191]‑[192].

211. Their Lordships' observations in Benedetti accord with the contention in Goff & Jones[334], and the contentions of other leading academic writers to similar effect[335], that the law of restitution should respect the contracting parties' allocation of risk.  In that regard, the learned editors of Goff & Jones state[336] that:

     "this is not indirectly to enforce the terms of a contract that has been terminated; rather, it is a reflection of the fact that the ground of recovery is failure of basis, and the parties have agreed what the basis of the transfer is to be.  The contract price implicitly allocates certain risks to the supplier of the goods or services, such as the risk that the market value of the goods or services will increase before performance, and the risk that the goods or services prove to be more costly to supply than the supplier had anticipated.  Allowing a supplier bringing an action in unjust enrichment to recover more than the contract price for any goods or services supplied under the contract would clearly reallocate those risks to the purchaser."

     [334]Mitchell, Mitchell and Watterson (eds), Goff & Jones:  The Law of Unjust Enrichment, 9th ed (2016) at 51 [3-10], 53‑54 [3-16]‑[3-17], 71-72 [3-52]-[3-54].

     [335]Virgo, The Principles of the Law of Restitution, 3rd ed (2015) at 99-102; Edelman and Bant, Unjust Enrichment, 2nd ed (2016) at 84, 141‑151; Mason, Carter and Tolhurst, Mason & Carter's Restitution Law in Australia, 3rd ed (2016) at 95‑96 [215], 609-610 [1430]; Furst and Ramsey, Keating on Construction Contracts, 10th ed (2016) at 283-284 [9-062].

     [336]Mitchell, Mitchell and Watterson (eds), Goff & Jones:  The Law of Unjust Enrichment, 9th ed (2016) at 71-72 [3-54].

212. Until recently, one view of English restitutionary jurisprudence was to treat the concept of unjust enrichment as if it were a definitive legal principle that supplies a sufficient premise for direct application by rigid, uniform application of questions concerning whether there is (1) an enrichment, (2) at the plaintiff's expense, (3) in circumstances of an unjust factor, and (4) subject to defences[337].  Within that rigid approach, there was something of a tendency to treat tests for and measures of "enrichment" as governed by a single principle; thus encouraging a view of the benefit abstracted from the contract price[338].  More recently, some members of the Supreme Court of the United Kingdom have cautioned against mechanical application of the "four questions" of enrichment, expense, injustice and defences[339].  In Swynson Ltd v Lowick Rose Llp, Lord Sumption JSC denied[340] that English law had a universal theory which explains all of the cases in which restitution is available.  In view of those developments, it may be that the law of restitution in the United Kingdom and the law of restitution in Australia are no longer quite as far apart as was previously imagined.

     [337]See, eg, Banque Financière de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221 at 227 per Lord Steyn, 234 per Lord Hoffmann; Benedetti [2014] AC 938 at 955 [10] per Lord Clarke of Stone-cum-Ebony JSC (Lord Kerr of Tonaghmore and Lord Wilson JJSC agreeing); Menelaou v Bank of Cyprus Plc [2016] AC 176 at 187 [18] per Lord Clarke of Stone-cum-Ebony JSC, 197 [61] per Lord Neuberger of Abbotsbury PSC. See Mitchell, Mitchell and Watterson (eds), Goff & Jones:  The Law of Unjust Enrichment, 9th ed (2016) at 8 [1-09].

     [338]See, eg, Birks, An Introduction to the Law of Restitution (1989) at 116‑117.

     [339]See, eg, Investment Trust Companies v Revenue and Customs Commissioners [2018] AC 275 at 295 [40]-[42] per Lord Reed JSC (Lord Neuberger of Abbotsbury PSC, Lord Mance, Lord Carnwath and Lord Hodge JJSC agreeing); Swynson Ltd v Lowick Rose Llp [2018] AC 313 at 326 [22] per Lord Sumption JSC (Lord Neuberger of Abbotsbury PSC, Lord Clarke of Stone-cum-Ebony and Lord Hodge JJSC agreeing), 351‑352 [110]‑[112] per Lord Neuberger PSC. See also Skandinaviska Enskilda Banken AB (Publ) v Conway [2019] 3 WLR 493 at 520‑521 [79]‑[80] per Lord Reed, Lord Wilson, Lord Lloyd-Jones, Lord Briggs and Sir Donnell Deeny.

     [340][2018] AC 313 at 326 [22] (Lord Neuberger of Abbotsbury PSC, Lord Clarke of Stone-cum-Ebony and Lord Hodge JJSC agreeing).

213. Whether or not that is so, however, in this country restitution arises in recognised categories of case and is not necessarily available whenever, and to the extent that, a defendant is enriched at the plaintiff's expense in circumstances that render the enrichment unjust[341].  Although, over time, novel categories of case may come to be recognised, or existing categories refined, that must occur in accordance with the common law's ordinary process of incremental development:  by analogy with decided cases, albeit that, within that process of development and refinement, the four questions may serve to focus attention on the nature, availability and measure of restitutionary relief, and so assist in structuring understanding as to avoid the development of the law of unjust enrichment degenerating into an exercise in idiosyncratic discretion.

     [341]David Securities (1992) 175 CLR 353 at 378‑379 per Mason CJ, Deane, Toohey, Gaudron and McHugh JJ; AFSL (2014) 253 CLR 560 at 595 [73]‑[74] per Hayne, Crennan, Kiefel, Bell and Keane JJ, 618 [139] per Gageler J.

214. Accordingly, in this country, it has not been found necessary to resort to a generalised approach of so-called subjective devaluation and, at least to that extent, what was held in Benedetti is incapable of direct application.  But the concerns which inform the analysis in Benedetti are just as relevant here as they are in England.  For just as a contract may inform the scope of fiduciary and other equitable duties[342], the price at which a defendant has agreed to accept the work comprising an entire obligation is logically significant to the amount of restitution necessary to ensure that the defendant's retention of the benefit of that work is not unjust and unconscionable.  In point of principle, deference to contract as a reflection of parties' agreed allocation of risk is at least as appropriate in Australia as it is in England[343].

     [342]See, eg, Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 97 per Mason J; [1984] HCA 64; Bofinger v Kingsway Group Ltd (2009) 239 CLR 269 at 291 [52] per Gummow, Hayne, Heydon, Kiefel and Bell JJ; [2009] HCA 44, quoting The Equity Trustees Executors & Agency Co Ltd v New Zealand Loan & Mercantile Agency Co Ltd [1940] VLR 201 at 205 per Lowe J; Friend v Brooker (2009) 239 CLR 129 at 150‑151 [47] per French CJ, Gummow, Hayne and Bell JJ; [2009] HCA 21.

     [343]See and compare Lumbers (2008) 232 CLR 635 at 662‑663 [78]‑[79] per Gummow, Hayne, Crennan and Kiefel JJ.

215. As has been seen, the decision of the Supreme Court of the United Kingdom in Benedetti did not go so far as to make the contract price the limit of restitutionary recovery.  Although supportive of the conclusion that the amount to be allowed by way of restitution should not ordinarily exceed the contract price, it leaves open the possibility of exception.  It is appropriate that this Court adopt a similar approach.  It is consistent with the Australian understanding of restitutionary remedies that a contract, although discharged, should inform the content of the defendant's obligation in conscience to make restitution where the failed basis upon which the work and labour was performed was the contractor's right to complete the performance and earn the price according to the terms of the contract.  It is, therefore, appropriate to recognise that, where an entire obligation (or entire divisible stage of a contract) for work and labour (such as, for example, an entire obligation under or an obligation under a divisible stage of a domestic building contract) is terminated by the plaintiff upon the plaintiff's acceptance of the defendant's repudiation of the contract, the amount of restitution recoverable as upon a quantum meruit by the plaintiff for work performed as part of the entire obligation (or as part of the entire divisible stage of the contract) should prima facie not exceed a fair value calculated in accordance with the contract price or appropriate part of the contract price.

216. So to recognise does not exclude the possibility of cases where, in accordance with principle, the circumstances will dictate that it would be unconscionable to confine the plaintiff to the contractual measure.  One such possibility is arguably afforded by the infamous case of Boomer v Muir[344], which has been explained[345] on the basis of the defendant's continuing breaches being responsible for a cost overrun that rendered the contract unprofitable.  As Dooling J observed in that case[346], the question whether the plaintiff could recover in excess of the contract price "depends upon whether it is equitable to permit" the plaintiff to depart from the pricing structure agreed with the defendant.  Nonetheless, as Lord Neuberger of Abbotsbury PSC observed in Benedetti[347], in many such cases it would appear wrong that a claimant should be entitled to a better result in restitution than would have been available to him or her under contract.

     [344](1933) 24 P 2d 570.

     [345]See Cohen, "The Fault Lines in Contract Damages" (1994) 80 Virginia Law Review 1225 at 1304-1305; Gergen, "Restitution as a Bridge Over Troubled Contractual Waters" (2002) 71 Fordham Law Review 709 at 711-712.  See and compare Andersen, "The Restoration Interest and Damages for Breach of Contract" (1994) 53 Maryland Law Review 1 at 22‑26.

     [346](1933) 24 P 2d 570 at 576 (Spence A‑PJ and Sturtevant J agreeing at 580).

     [347][2014] AC 938 at 1007-1008 [192].

217. In this matter, it was not suggested that there are circumstances sufficient to warrant departure from the prima facie position that a claimant should not achieve a better result by way of restitution than under the contract.  It follows that VCAT was in error in assessing the amount of restitution otherwise than in accordance with the contract rates.  Ground 2 should be upheld.

     Remitter to VCAT and costs

218. The appellants contended that, if the matter were remitted to VCAT for further determination, it should be remitted to VCAT constituted otherwise than by Senior Member Walker.  The basis for that contention was submitted to be that the Senior Member made adverse findings as to the credibility of the appellants, in particular of the first appellant, that the Senior Member had already expressed a view upon the facts and found in favour of the respondent's restitutionary claims, and that, if remitted, there would need to be a further hearing with evidence led as to the question of valuation of the construction costs in accordance with this Court's ruling.  Thus it was submitted that it would be fairer to the parties that the matter be heard and decided by a differently constituted Tribunal[348].

     [348]See Northern NSW FM Pty Ltd v Australian Broadcasting Tribunal (1990) 26 FCR 39 at 40. See also Johnson v Johnson (2000) 201 CLR 488 at 492 [11] per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ; [2000] HCA 48; Isbester v Knox City Council (2015) 255 CLR 135 at 146 [20]-[23] per Kiefel, Bell, Keane and Nettle JJ; [2015] HCA 20.

219. The contention is not persuasive. Ultimately, it will be a matter for VCAT to decide how it is to be composed for the purposes of the further determination. But it is to be observed that, subject to the overriding discretion of VCAT, there should be no need or justification for any of the parties to have an opportunity of adducing further evidence. The further determination should involve no more than the application of the law, as explained in these reasons, to the facts as already found, and the recalculation of amounts in accordance with contractual rates and, if determined by VCAT to be applicable by reference to the criteria prescribed by s 38(6)(b), by reference to the rate prescribed in relation to variations by s 38(7) of the DBC Act. The evidence already adduced and the findings already made are complex and extensive, and it is evident that the Senior Member, with the benefit of having dealt with the matter until now, would be much better placed to apply the evidence and findings than would another member coming freshly to the task. Given the nature of the task involved in the redetermination, it is difficult to accept, or even suppose, that the hypothetical observer could reasonably perceive a realistic possibility of any degree of bias.

220. The respondent contended that, if the appeal were allowed, the costs of the appeal from VCAT to the primary judge should be reserved to his Honour for redetermination.  The basis of that contention was said to be that, because the appellants had originally advanced 13 questions of law and 17 grounds of appeal, but proceeded with only two issues, there were likely to be costs thrown away which the appellants should bear and which his Honour would be best placed to determine.

221. That contention is also unpersuasive.  As already noticed, senior counsel for the appellants informed the primary judge at the outset of his opening that there were only two issues, and thereafter the application for leave to appeal and the appeal to his Honour proceeded accordingly.  Consequently, although it is not inconceivable that there were some costs thrown away by reason of the inclusion in the appellants' notice of appeal of the other grounds and questions of law, it is not apparent that they were substantial enough to justify departure from the ordinary course that costs should follow the event.  The ordinary course should be adhered to.

     Conclusion and orders

222. It follows that the appeal should be allowed with costs.  Orders 1, 2 and 3 of the Court of Appeal should be set aside.  In their place, it should be ordered that the application for leave to appeal be granted; the appeal to the Court of Appeal be allowed with costs; orders 2 to 5 of the primary judge be set aside and, in their place, it be ordered that the appeal to the primary judge be allowed with costs; the orders of VCAT be set aside; and the matter be remitted to VCAT for further determination according to law.