Iezzi Constructions Pty Ltd v Watkins Pacific (Qld) Pty Ltd

[1994] QCA 49

IN THE COURT OF APPEAL	[1994] QCA 049
SUPREME COURT OF QUEENSLAND

Appeal No. 241 of 1993

Before Fitzgerald P. McPherson JA. Thomas J.

[Watkins Pacific Pty. Ltd. v. Iezzi Constructions Pty. Ltd.]

BETWEEN:

IEZZI CONSTRUCTIONS PTY. LTD.

Respondent/Plaintiff

AND:  CURRUMBIN CREST DEVELOPMENT PTY. LTD.

First Defendant

AND:  EPIMARK PTY. LTD.

Second Defendant

AND:  WATKINS PACIFIC (QLD) PTY. LTD. Appellant

Third Defendant

REASONS FOR JUDGMENT - FITZGERALD P.

Judgment delivered 21/03/94

This is an appeal from a judgment delivered in the Trial Division on 21 October 1993. The trial judge gave judgment against the appellant in favour of the respondent for $572,669.00, together with interest and costs. His Honour found that the amount awarded was payable in respect of work done by the respondent pursuant to two subcontracts with the appellant dated 25 October 1989 for which the respondent had not been paid.

Earlier that year, the appellant had entered into a contract with two other companies (the "Proprietor") in connection with the construction of a considerable number of home units on land owned by the Proprietor. Various amounts were payable by the Proprietor to the appellant under the contract, including "amounts properly and actually payable by the [appellant] to Trade Contractors under the subcontracts entered into by the [appellant]". The respondent was one of the "Trade Contractors"; its first subcontract related to carpentry work and the contract sum specified was $845,975.00; the second subcontract related to roof trusses and the contract sum specified was $119,500.00.

By 31 January 1990, when the appellant closed the site and prevented further work, the respondent had performed 85% of the work pursuant to the carpentry subcontract (valued at $718,190.00) and 98% of the work pursuant to the roof trusses subcontract (valued at $117,327.00). Payments totalling $262,848.00 had been made to the respondent under both subcontracts, leaving an unpaid balance of $572,669.00, the amount of the judgment. The appellant has not received and will not receive any payment from the Proprietor in respect of the work for which the respondent has not been paid; each of the two companies constituting the Proprietor is insolvent and there will be no distribution to creditors in either winding up.

It is not in dispute that the appellant repudiated the subcontracts, that the respondent terminated the subcontracts, or that, in the ordinary course, the respondent could recover for its unpaid work under the subcontracts, on a quantum meruit or as damages for the appellant's breach of the subcontracts. However, the appellant submits that, on the proper construction of the subcontracts, especially subclause 10(d), the respondent is not entitled to succeed.
Reference was also made in argument to clauses 12 and 13 of the subcontracts, but I have not set out those provisions, which I found of no real assistance in construing clause 10 of the subcontracts. As is pointed out by Thomas J. in his reasons, which I have read in draft, the subcontracts are very badly drawn. I have not found it helpful to engage in attempts to identify capricious consequences which might ensue in various circumstances as an aid to determining what was intended. It seems to me that, whatever construction is adopted, unsatisfactory results are possible.

Each subcontract provided for the respondent to complete the specified work "for the Contract Sum stated in the Second Schedule which is a firm lump sum and not subject to rise and fall ... ." Further, clause 10 of each subcontract provided:

"Progress (a) The Builder shall pay the Subcontractor the

Payments	Contract Sum by periodic progress payments at
10.	the frequency stated in the Second Schedule if such payments become due under the following provisions of this Clause. Otherwise the contract Sum or the balance thereof unpaid and payable (subject to this Contract) shall be payable on the satisfactory completion of the Works.
(b) The Subcontractor shall make application in writing to the Builder for progress payments on the day of each month referred to in the Second Schedule. The Subcontractor is referred to Annexure "A" which is the format of progress claims to be presented by the Subcontractor for payment by the Builder. These forms set out the minimum information required to be supplied by the Contractor to support his claim, the submission of which shall be a condition precedent to payment.
(c) The Builder shall make progress payments to the Subcontractor within fourteen (14) days after the Builder has received payment from the Proprietor in respect of the Work, the subject of the Subcontractor's claim. (d) It is expressly agreed that the Subcontractor's right to receive payment is entirely dependent upon the Builder having already actually received from the Proprietor payment in respect of the work, subject of the Subcontractor's claim, and that the Subcontractor shall have no other or further right to payment. (e) It is further agreed that the Subcontractor is not entitled to receive payment if there is a claim or set- of sought by the Proprietor against the Builder in respect of or related to the Works."

Under the Second Schedule, progress payments were to be made monthly, with claims made on the 7th of each month.

Before proceeding further, it is convenient to rearrange sub-clause 10(d) to better illustrate what is in issue. In effect, what that subclause provides is that "the [respondent's] right to receive payment [in respect of ... work the subject of the respondent's claim] is entirely dependent upon the [appellant] having already actually received from the proprietor payment in respect of [that] work ... and ... the [respondent] shall have no other or further right to payment."

At its widest, the appellant's submission was that sub- clause 10(d) expressly disentitled the respondent to payment of any claim in respect of work performed by it under the subcontracts, unless and until the appellant was paid in respect of that work by the proprietor. On this basis, "any claim" would include even a claim not made pursuant to the subcontracts, e.g., a claim for a quantum meruit or for damages. In my opinion, this is incorrect; subclause 10(d) is concerned only with the payment of claims made pursuant to the subcontracts, not with claims made otherwise in respect of work performed under the subcontracts.

The appellant's main argument proceeded from that conclusion and was based on the proposition that subclause 10(d) disentitled the respondent to the final payment upon the completion of the work under the subcontracts as well as to progress payments, unless and until the appellant was paid in respect of the material work by the Proprietor. The trial judge held otherwise, noting a concession made at the trial by counsel then representing the appellant, and a similar conclusion was arrived at by another Judge of the Trial Division when considering a similar clause in Trade Indemnity Australia Limited v. Parkinson Airconditioning Pty. Ltd. (unreported judgment delivered 27 September 1993). However, the appellant's proposition seems to me correct for reasons given today in the judgment on appeal in Trade Indemnity v. Parkinson. I agree with Thomas J. that differences between the respective subcontracts in the two cases do not require different constructions to be given to

clause 10, especially subclause (d).

On the basis that subclause 10(d) disentitled the respondent to the final payment upon the completion of the work under the subcontracts unless and until the appellant was paid in respect of the material work by the Proprietor, it was further submitted for the appellant that, in consequence of the operation of subclause 10(d), the respondent could not recover the amount unpaid for the work which it had done either on a quantum meruit claim or as damages.

So far as damages are concerned, that is correct. The appellant's repudiation of the subcontracts caused the respondent no loss or only nominal loss. More particularly, it did not cause it to lose payment, or the right to payment, for its unpaid work. That right depended on payment of the appellant by the proprietor. The respondent would have been no better off if there had been no breach of the subcontracts by the appellant. Indeed, given the insolvency of the Proprietor, the respondent would have been worse off if it had been required or permitted to complete the performance of its work under the subcontracts.

The conclusion that subclause 10(d) of the subcontracts controls the amount of the damages recoverable by the respondent for breach of the subcontracts is also correct in principle. When a contract is discharged by an innocent party for breach by the other party, it is determined only insofar as it is unperformed: McDonald v. Dennys Lascelles Ltd. (1933) 48 CLR 457. Rights and obligations which have been unconditionally acquired continue unaffected, (ibid), and rights which are future or contingent upon some event, not involving further performance of the contract, may mature and become immediately enforceable: Westralian Farmers Ltd. v. Commercial Agricultural Service Engineers Ltd. (in liquidation) (1936) 54 CLR 361. Further, unless otherwise provided by the contract, provisions of the contract continue to apply to actions under the contract after it has been discharged, including claims for damages for breach, whether the breach upon which the discharge of the contract was based or some earlier breach: Photo Production Ltd. v. Securior Transport Ltd. (1980) AC 827, 844; Segur v. Franklin (1934) 34 SR (NSW) 67, 72.

The appellant submitted that the provisions of the subcontracts, notably subclause 10(d), similarly operate to limit the respondent's recovery on a quantum meruit claim, although such a claim, following discharge of a contract by acceptance of a repudiation, is not a claim made under the contract but a claim to restitution or based upon unjust enrichment, which arises by law independently of any contract : Pavey and Matthews Pty. Ltd. v. Paul (1986) 162 CLR 221.

It is established that the terms of the subcontracts may be resorted to as evidence in estimating the value of the respondent's work on a quantum meruit claim (Pavey and Matthews v. Paul at pp.236-237, 250, 252, 257; Gino D'Alessandro Construction Pty. Ltd. v. Powis (1987) 2 Qd. R. 40, 58-59), and the view has been expressed by some text- writers that the contractual provisions limit the amount which is recoverable: see, for example, Greig and Davis "The Law of Contract" pp.1286-1287 and Fifth Cumulative Supplement p.291; cf Carter "Breach of Contract", 2nd ed. para. 1212. However, this view has been rejected in New South Wales: see Jennings Construction Ltd. v. Q.H. and M. Birt Pty. Ltd. (unreported judgment, Cole J., 16 December 1988) and Renard Constructions (M.E.) Pty. Ltd. v. Minister for Public Works (1992) 26 NSWLR 234, 271, 276-278, 283. In the latter case, Meagher JA., with whom Priestley and Handley JJA. agreed, said at pp.276 ff:

"The second point is that the amount of the arbitrator's award (particularly when aggregated with payments already made under the contract whilst it was on foot) exceeds the amount payable to the contractor under the contract, which latter amount must provide a "ceiling" on any quantum meruit claim. This point should also, in my view, be rejected. In the first place, it is contrary to what authority exists on the question. The Court of Appeal in New Zealand, in Slowey v. Lodder (1901) 20 NZLR 321, held that an innocent party who terminates a contract by acceptance of the defaulting party's repudiation may sue on a quantum meruit for the value of work done before repudiation, and that the fact that a judgment on this basis exceeds the amount which would have been payable under the contract is irrelevant. That decision was affirmed on appeal to the Privy Council: see Lodder v. Slowey [1904] AC 442. In the United States, there is abundant authority to the same effect: see, eg. Boomer v. Maire 24 P 2d 570 (1933), United States v. Zara Contracting Co. 146 F 2d 606 (1944), Re Montgomery's Estate 6 NE (2d) 40 (1936) and Williston on Contracts (3rd ed) (1970) vol 12 s 1485 at 304. Certainly those United States authorities are tainted by the view that acceptance of a repudiation effects a rescission ab initio, a view regarded in Australian as heretical since McDonald v. Dennys Lascelles Ltd. (1933) 48 CLR 457 and now recognised as such by the House of Lords in Johnson v. Agnew [1980] AC 367; but the reasoning on this point still remains unimpaired. Of these cases, Boomer v. Maire is the most spectacular, because in that case a sub-contractor on a construction project was awarded the sum of $258,000 as the fair value of the work he had performed for the defendant, even though only $20,000 remained as an outstanding debt due by the defendant under the contract. In so far as it is relevant, the decision of the Court of Appeal in England in Rover International Ltd. v. Cannon Film Sales Ltd. [1989] 1 WLR 912; [1989] 3 All ER 423 - which has attracted the attention of Professor Birks in (1990) 2 Journal of Contract Law 227, Mr Beatson in (1989) 105 LQR 179 and Dr. Carter in Finn (ed) Essays on Restitution (1991) at 206 - is to the like effect. I say "in so far as it is relevant" because it is a case dealing with a contract which was void ab initio, not a case of a contract terminated by the acceptance of a repudiation.

The cases to which I refer have been received with somewhat lukewarm enthusiasm by certain academic writers (see Geoff and Jones The Law of Restitution, 2nd ed. 91978), at 379-380, Greig and Davis The Law of Contract, 1st ed (1987) , at 1286-1287) on the apparent ground that they are "anomalous". But to my mind this criticism of them is superficial. They are right in principle as well as justified by authority. The law is clear enough that an innocent party who accepts the defaulting party's repudiation of a contract has the option of either suing for damages for breach of contract or suing on a quantum meruit for work done. An election presupposes a choice between different remedies, which presumably may lead to different results. The nature of these different remedies renders it highly likely that the results will be different. If the former remedy is chosen the innocent party is entitled to damages amounting to the loss of profit which he would have made if the contract had been performed rather than repudiated; it has nothing to do with reasonableness. If the latter remedy is chosen, he is entitled to a verdict representing the reasonable cost of the work he has done and the money he has expended; the profit he might have made does not enter into that exercise. There is nothing anomalous in the notion that two different remedies, proceeding on entirely different principles, might yield different results. Nor is there anything anomalous in the fact that either remedy may yield a higher monetary figure than the other. Nor is there anything anomalous in the prospect 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. Such a result would only be anomalous 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.

There is no such rule of law. Nor can one say that as a matter of observable fact there is any such rule. The most one say is that the amount contractually agreed is evidence of the reasonableness of the remuneration claimed on a quantum meruit; strong evidence perhaps, but certainly not conclusive evidence. On the other hand, 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."

Special leave to appeal to the High Court was refused on 22
October 1992.

I agree that subclause 10(d) of the subcontracts does not provide a legal ceiling on the amount recoverable by the respondent on a quantum meruit claim. Rather, the terms of the parties' subcontracts are one of the factors to be taken into account in determining what is the reasonable amount which the respondent deserves to be paid.

In Pavey and Matthews v. Paul, Deane J. said at p.257:
"In a category of case where the law recognises an
obligation to pay a reasonable remuneration or
compensation for a benefit actually or constructively
accepted, the general concept of restitution or unjust
enrichment is, as is pointed out subsequently in this
judgment, also relevant, in a more direct sense, to the
identification of the proper basis upon which the
quantum of remuneration or compensation should be
ascertained in that particular category of case.

The fact that the action which can be brought on a common indebitatus count consistently with the Statute of Frauds is founded on an obligation arising independently of the unenforceable contract does not mean that the existence or terms of that contract are necessarily irrelevant. In such an action, it will ordinarily be permissible for the plaintiff to refer to the unenforceable contract as evidence, but as evidence only, on the question whether what was done was done gratuitously. In many cases, such as where the claim is for money lent or paid, the obligation to make restitution will plainly involve the obligation to pay the precise amount advanced or paid. In those cases where a claim for a reasonable remuneration or price is involved, the unenforceable agreement may, as Jordan C.J. pointed out in Horton v. Jones [No. 1] ((1934) 34 SR (NSW) at pp.368-468) be referred to as evidence, but again as evidence only, on the question of the appropriate amount of compensation. If the unenforceable contract has not been rescinded by the plaintiff or otherwise terminated, the defendant will be free to rely on it as a defence to the claim for compensation in a case where he is ready and willing to perform his obligations under it: see Thomas v. Brown ((1876) 1 QBD 714). The defendant will also be entitled to rely on the unenforceable contract, if it has been executed but not rescinded, to limit the amount recoverable by the plaintiff to the contractual amount in a case where that amount is less than what would constitute fair and reasonable remuneration."

Then, after referring at pp.262-263 to the "ordinary common law right of the builder to recover, in an action founded on restitution or unjust enrichment, reasonable remuneration for work done and accepted under a contract which is unenforceable by him ...", His Honour continued on p.263-264:

"The tendency in some past cases to see the rationale of the right to recover remuneration for a benefit provided and accepted under an unenforceable contract as contract or promise rather than restitution has tended to distract attention from the importance of identifying the basis upon which the quantum of the amount recoverable should be ascertained. What the concept of monetary restitution involves is the payment of an amount which constitutes, in all the relevant circumstances, fair and just compensation for the benefit or "enrichment" actually or constructively accepted. Ordinarily, that will correspond to the fair value of the benefit provided (e.g. remuneration calculated at a reasonable rate for work actually done or the fair market value of materials supplied). In some categories of case, however, it would be to affront rather than satisfy the requirements of good conscience and justice which inspire the concept or principle of restitution or unjust enrichment to determine what constitutes fair and just compensation for a benefit accepted by reference only to what would represent a fair remuneration for the work involved or a fair market value of materials supplied. One such category of case is that in which unsolicited but subsequently accepted work is done in improving property in circumstances where remuneration for the unsolicited but subsequently accepted work is calculated at what was a reasonable rate would far exceed the enhanced value of the property. More relevant for present purposes is the special category of case where restitution is sought by one party for work which he has executed under a contract which has become unenforceable by reason of his failure to comply with the requirements of a statutory provision which was enacted to protect the other party. In that category of case, it would be contrary to the general notions of restitution or unjust enrichment if what constituted fair and just compensation for the benefit accepted by the other party were to be ascertained without regard to any identifiable real detriment sustained by that other party by reason of the failure of the first party to ensure that the requirements of the statutory provisions were satisfied."

What falls to be decided is the "amount which constitutes, in all the relevant circumstances, fair and just compensation [for the respondent] for the benefit or 'enrichment' actually or constructively accepted" by the appellant. One important factor is the "fair remuneration" , ie., "remuneration calculated at a reasonable rate" for the "work actually done" by the respondent. But other factors are also to be taken into account. The respondent's work produced little actual benefit to the appellant, only a valueless right to be paid for the respondent's work by the Proprietor. Further, the parties agreed by the subcontracts under which the respondent performed the work that it would not be paid under the subcontracts even after the work was completed unless and until the appellant was paid by the Proprietor and, as noted earlier, the appellant has not been, and will not be, paid. However, as also noted earlier, although it has a broad reach, subclause 10(d) does not extend to a quantum meruit claim and, in my opinion, it should not indirectly be given an operative effect so as to defeat such a claim.

Even so, it is no easy task to balance the competing considerations. In the end, one of two innocent parties will suffer. I have concluded that that party should be the appellant, which was in a better position than the respondent to obtain payment from the Proprietor in the course of the respondent's performance of the work and which contracted with the respondent on a basis which limited the appellant's liability to the respondent but did not do so in the circumstances now material.

Accordingly, I would dismiss the appeal, with costs to

be taxed.
IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 241 of 1993

Brisbane
[Watkins Pacific Pty. Ltd. v. Iezzi Constructions Pty. Ltd.]

BETWEEN:

IEZZI CONSTRUCTIONS PTY. LTD.

Respondent/Plaintiff

AND:  CURRUMBIN CREST DEVELOPMENT PTY. LTD.

First Defendant

AND:  EPIMARK PTY. LTD.

Second Defendant

AND:  WATKINS PACIFIC (QLD) PTY. LTD. Appellant

Third Defendant

Fitzgerald P. McPherson JA. Thomas J.

Judgment delivered 21.03.94

.....................

APPEAL DISMISSED, WITH COSTS TO BE TAXED.

CATCHWORDS:

Counsel:	Mr. P. Keane Q.C., with him Ms. J. Dalton for the appellant Mr. H. Fraser for the respondent
Solicitors:	Freehill Hollingdale and Page for the appellant Minter Ellison Morris Fletcher for the respondent
Hearing Date:	23/02/94

THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 241 of 1993

Brisbane

Before Fitzgerald P.
McPherson J.A.
Thomas J.

[Iezzi Const. P/L v. Watkins Pacific (Qld) P/L.]

BETWEEN

IEZZI CONSTRUCTIONS PTY LTD.

(Plaintiff) Respondent

AND

CURRUMBIN CREST DEVELOPMENT PTY LTD

(First Defendant)

AND

EIPMARK PTY LTD

(Second Defendant)

AND

WATKINS PACIFIC (QLD) PTY LTD

(Third Defendant) Appellant

REASONS FOR JUDGMENT - McPHERSON J.A.

Judgment delivered the Twenty-First day of March 1994

This appeal raises two questions. One is whether cl.10(d) of the contract in this case applies to a final payment or is confined to progress payments; the other is whether, if cl.10(d) does so apply, it extends to a quantum meruit claim made by the respondent plaintiff against the appellant third party after termination of the contract.

Clause 10(d) provides that the plaintiff's right as subcontractor is dependent on the third party builder's having actually received from the proprietor payment in respect of the subcontractor's claim, "and that subcontractor shall have no other or further right to payment". Viewed in isolation from the remainder of the clause, cl.10(d) is literally wide enough to cover payments of any kind whether they are progress or final payments.

There are, however, several matters that persuade me that cl.10 and in particular cl.10(d) must be more narrowly confined.

One is the character and effect of cl.10(d). A contract is illusory and void if the right to payment or performance is made to depend on the will of one of the parties to it: Thorley v. Goldberg (1964) 112 C.L.R. 597; but not if it is postponed to the happening of some external event such as payment or performance by a third party : Barnet v. Ira Birk Pty. Ltd. (1952) 52 S.R. (N.S.W.) 268.

Nevertheless, the particular disadvantage to which the plaintiff would be exposed in a case like this is that if the proprietor does not pay the builder, the plaintiff will have done the work for nothing. That means it must be taken as having contracted to work not for the Contract Sum agreed on in cl.2(iii) of this contract but for no more than the hope or chance of being paid that sum. A contract in those terms is enforceable; but it is not to be assumed that the parties intended that result unless the words used plainly require such a conclusion.

The contract in Gilbert-Ash Northern Ltd. v. Modern
Engineering (Bristol) Ltd. [1974] A.C. 697 was in that form.
It expressly provided that payments "both interim and in
full" would be made to the subcontractor as and when

included in a certificate and when the contractor received

the monies due thereunder. See [1974] A.C. 689, 697F-G.
Comparable clarity of expression is lacking in the present
case. Although the terms of cl.10(d) itself are not
restricted to progress payments, the impression that its
ambit is limited to such payments is suggested by the
context of cl.10 viewed as a whole. Clause 10 is set out in
full in the reasons on appeal of Thomas J., which I have had
the advantage of reading. In the printed form of contract
the clause, which bears the marginal heading "progress
payments", consists of five separate subclauses lettered (a)
to (e). Clause 10(a) provides for payment by periodic
progress payments at a specified frequency. Its provisions
do, however, extend beyond that subject. The second
sentence of the subclause says that "Otherwise the contract
sum or the balance thereof unpaid and payable (subject to
this Contract) shall be payable on satisfactory completion
of the Works"; but that is no more than a cautionary proviso
re-affirming a general rule and alerting the reader to what
follows in subsequent clauses, like cl.12(b), which limit
the right to final payment in other ways. The very fact
that the "Contract Sum or balance thereof" is described in
cl.10(a) as being payable "otherwise" serves to indicate
that these amounts are viewed as something apart and
separate from the progress payments that are the general
subject of cl.10.

The ensuing two subclauses of cl.10 deal only with progress payments. Clause 10(b) prescribes a procedure by which such payments are to be applied for. Clause 10(c) requires the third party builder to make progress payments to the subcontractor within 14 days after receiving payment from the proprietor for the work done. The terms of cl.10(d) have already been set out. Clause 10(e) is the other instance which is used to show that cl.10 is not confined to progress payments. It provides that the subcontractor is not entitled to receive payment if a claim or set off is sought by the proprietor against the builder in respect of or related to the works.

The inclusion of cl.10(e) is almost certainly attributable to the decision in Dawnays Ltd. v. F.G. Minter and Trollope & Colls Ltd. [1971] 1 W.L.R. 1205. In that case Lord Denning M.R. held that a claim for a liquidated sum based on an interim certificate could not, in the absence of express provision in that behalf, be defeated or diminished by raising a set-off or counterclaim. What came to be known as the rule in Downays case was followed in several later decisions of the Court of Appeal in England until disapproved by three of their Lordships in Gilbert-Ash (Northern) Ltd. v. Modern Engineering (Bristol) Ltd. [1974] A.C. 689. Subclause (d) would have been inserted in cl.10 with the object of excluding that rule. No one suggested that the rule ever applied to anything but progress payments.

It does not follow that, because there is an explanation for cl.10(e) that directly identifies it with progress payments, cl.10(d) is also to be limited in that way. It is plainly impossible to be dogmatic about a matter in which the opposing arguments are so evenly balanced, nevertheless, taken with the other circumstances mentioned, a doubt is raised about the proper scope of cl.10 as a whole and of cl.10(d) in particular. Obviously there would be a more compelling case for reading the subparagraph in cl.10(d) as dealing only with progress payments if it were simply one sentence in a whole paragraph which was not broken into separate lettered subparagraphs (a) to (e). So to read it would accord with the old tradition that punctuation strictly formed no part of the interpretative material available for construing an agreement. "It is from the words and from the context, not from the punctuation, that the sense must be collected", said Grant M.R. in Sanford v. Raikes (1816) 1 Mer.646, 651. It may be open to question how far the old rule continues to prevail; but it can scarcely be less apposite in modern times than excluding recourse to the marginal note or heading "progress payments", which is the rule the appellant defendant seeks to invoke.

The result to my mind is that in construing cl.10(d) it is proper to view it in its setting as part of a contractual provision dealing specifically with the matter of progress payments and not with payment generally. Even if the context alone is not clear enough to control the ambit of cl.10(d) by confining it to progress payments, it is sufficient to raise at least a rational doubt about its intended scope. Since the subcontract document is, as appears from its face, an instrument emanating from the defendant builder and not the plaintiff subcontractor, the case is, I think, one of those comparatively rare instances in which in this respect cl.10(d) ought to be construed contra proferentem.

On that footing, it would be unnecessary to consider the second of the two questions raised by the appeal. But I think I should express my concurrence with the conclusion arrived at on that question in the opinions of the other members of the Court. Even if cl.10(d) is to be construed as extending to final payment of the Contract Sum or any balance thereof, there is no basis for holding that it also controls the right to be paid the value of the work done claimed as a quantum meruit on termination of the contract following its repudiation by the builder. In such circumstances the right of a party in the position of the plaintiff to be compensated for work done before termination is too well settled by authority to be shaken. See Planche v. Colburn (1831) 8 Bing. 14; 131 E.R. 304; Segur v. Franklin (1934) 34 S.R. (N.S.W) 67.

With the contract out of the way, there is no reason in principle why the limitation imposed by cl.10(d) should continue to control the plaintiff's right to be paid remuneration for work it has done. It is true that particular contractual provisions sometimes survive termination of the contract whether occurring by reason of performance, repudiation, or otherwise. Of this the decision in Heyman Ltd. v. Darwin's [1942] A.C. 368 is perhaps the most prominent example. But in those cases the contractual provision survives because it is apparent from the terms of the agreement itself and of the particular provision in question that it is intended to continue governing the relations of the parties even after the rest of the contract is gone. Provisions limiting the quantum of damages claimable are capable of having such an effect, but that is only because of their being plainly intended to do so : see, for an example, Cellulose Acetate Silk Co. Ltd. v. Widens Foundry (1925) Ltd. [1933] A.C. 20. The decision in Photo Production Ltd. v. Securicor Transport Ltd. [1980] is another instance of that kind. The exemption clause in that case would have been almost useless if it had not been applicable to claims for damages arising on termination of the contract.

Here cl.10(d) might have an indirect impact on a claim for damages if that were the relief being claimed; but it would do so not because it was intended to survive termination of the contract but because what the plaintiff bargained to receive under the contract was not payment of the Contract Sum but merely the hope or chance of being paid that sum. In that case, the measure of damages for breach of contract would fall to be determined under the principles stated and applied in decisions like Chaplain v. Hicks [1911] 2 K.B. 786 and Howe v. Teefy (1927) 27 S.R. (N.S.W.) 301.

Compensation for loss of bargain is, however, a different matter from restitution for work done. Whether the foundation for restitution is considered to be a fictitious contract implied by law, or, according to contemporary notions, an obligation imposed by law to pay for benefits received and accepted, there is no self-evident reason why the provisions of cl.10(d) should govern the question whether or not anything is payable. It is true that "where there is evidence of the value set upon the services by the party on whom ultimately the burden of paying may fall, that may be looked at in determining what those services are worth" (Stinchcombe v. Thomas [1957] V.R. 509, 513, per Monahan J.); but effect is sufficiently given to that principle in a case like this by calculating the quantum of the plaintiff's entitlement by reference to the agreed consideration. There is no reason to carry into that assessment a factor that serves not to fix the amount to be paid but to prevent it from being paid at all. Once the contract is gone, it is the law that must determine whether payment should be made for the work done, and not the terms of an agreement that the parties have by their words and conduct finally put aside and discarded. For this purpose, it can make no difference whether it is said that it is the contract itself that is at an end, or that it is the obligations of the parties that are discharged. In either event, the qualification or limitation imposed by cl.10(d) is not one capable of prevailing against a result that in such circumstances is now imposed by law. In this respect I respectfully agree with what is said on this subject by Meagher J.A. in Renard Constructions (M.E.) Pty. Ltd. v. Minister for Public Works (1992) 26 N.S.W.L.R. 234, 276-278.

I also agree that the appeal should be dismissed with

costs.
IN THE COURT OF APPEAL
SUPREME COURT OF
QUEENSLAND

BRISBANE

Appeal No. 241 of 1993

[Iezzi Constructions Pty Ltd v. Watkins Pacific (Qld) Pty

Ltd]

BETWEEN:

IEZZI CONSTRUCTIONS PTY LTD

(Plaintiff) Respondent

AND:

CURRUMBIN CREST DEVELOPMENT PTY LTD

(First Defendant)

AND:

EPIMARK PTY LTD

(Second Defendant)

AND:

WATKINS PACIFIC (QLD) PTY LTD

(Third Defendant)	Appellant
The President Mr Justice McPherson Mr Justice Thomas

Judgment delivered 21/03/1994

Separate reasons for judgment delivered by each member of the Court

APPEAL DISMISSED WITH COSTS

CATCHWORDS: 

BUILDING CONTRACTS - subcontract - "pay when paid" clause - whether limited to progress claims - termination for fundamental breach - Photo Production Ltd v. Securicor Transport Ltd (1980) A.C. 827 discussed - quantum meruit - whether contract governs measure of claim - Pavey and Matthews Pty Ltd v. Paul (1986-1987) 162 C.L.R. 221 applied.

Counsel: 

P. Keane Q.C., with him J. Dalton for the

appellant

H. Fraser Q.C. for the respondent

Solicitors: 

Freehill Hollingdale and Page for the

appellant
Minter Ellison Morris Fletcher for the
respondent

Hearing Date: 23/02/1994

IN THE COURT OF APPEAL

SUPREME COURT OF

QUEENSLAND

BRISBANE	Appeal No. 241 of 1993
Before	The President Mr Justice McPherson Mr Justice Thomas

[Iezzi Constructions Pty Ltd v. Watkins Pacific (Qld) Pty

Ltd]

BETWEEN:

IEZZI CONSTRUCTIONS PTY LTD

(Plaintiff) Respondent

AND:

CURRUMBIN CREST DEVELOPMENT PTY LTD

(First Defendant)

AND:

EPIMARK PTY LTD

(Second Defendant)

AND:

WATKINS PACIFIC (QLD) PTY LTD

(Third Defendant) Appellant

REASONS FOR JUDGMENT - THOMAS J.

Judgment delivered 21/03/1994

The appellant ("Watpac") seeks to set aside a judgment given in favour of a subcontractor ("Iezzi") for $572,669 plus interest. The litigation arises out of building works performed for two owners ("Currumbin") and ("Epimark") by Watpac, in respect of which Iezzi was a subcontractor for carpentry work and the installation of roof trusses. It will be convenient to refer to Currumbin and Epimark as the proprietors, to Watpac as the contractor, and to Iezzi as the subcontractor.

On or about 25 October 1989 the subcontractor entered into contracts with the contractor to perform the carpentry subcontract and the roof trusses subcontract. By 31 January 1990 the subcontractor had completed 85 per cent of the carpentry subcontract and had performed work to the reasonable value of $718,190. It had also by that time completed 98 per cent of the roof truss work to the reasonable value of $117,327. The contractor had paid the subcontractor a total of $263,848. The amount outstanding, as found on a quantum meruit basis, was $572,669.

It is now common ground that on 31 January 1990 the contractor closed the site at which the subcontract works were to be performed, and the subcontractor was continuously thereafter shut out. On 6 June 1991 the contractor terminated the head contract upon which the contractor's right to possession of the site depended. The contractor also failed to provide the subcontractor with any current work schedule after January 1990 as required by the terms of the subcontract, and there was a continuous denial of access and of the necessary work schedule that would permit the subcontractor to complete its works.

The trial Judge found, and it is not now contested, that the contractor repudiated the subcontracts by refusing access to the site in order to allow it to complete the works, by failing to provide the necessary work schedules and by terminating the head contract thereby putting out of its power the possibility of performing its obligations to the subcontractor. The subcontractor lawfully terminated the subcontracts on 24 June 1991 by reason of the contractor's repudiation.

The trial Judge further found the subcontractor entitled to recover the reasonable value of the work done by it upon a quantum meruit, which was one of the alternative claims made by the subcontractor.

Upon this appeal the primary contention is that cl. 10(d) of the subcontract precludes the subcontractor from any relief, whether by way of quantum meruit, damages for breach of contract or otherwise. Shortly stated the submission is that cl. 10(d) precludes the subcontractor from receiving any payment from the contractor unless and until the contractor has actually received payment from the proprietor in respect of the work the subject of the claim, and that this obligation binds the parties notwithstanding the termination of the subcontract.

When the contractor closed the site on 31 January 1990 a number of payments then due under the head contract had not been made by the proprietor. The learned trial Judge noted that there was a period (although the precise period is not specified) during which the contractor held the subcontractor to the performance of the subcontracts notwithstanding that progress claims, properly made, were not satisfied.

It is common ground that the contractor has not received payment from the proprietors with respect to the work which grounds the present claim.

The clauses of the subcontract which are of principal relevance are cll. 2 and 10. Clauses 12 and 13 were also referred to in argument. The relevant parts of all four clauses will now be set out.

"2. (a) The Subcontractor will execute and

complete the Works:-

(i)  as and when required by the Builder's directions or by the then current Builder's Work Schedule;

(ii) no later than the Date for Completion of

the Works;

(iii) for the Contract Sum stated in the

Second Schedule which is

a firm lump sum and not subject to rise
and fall; and ..."

"10. (a) The Builder shall pay the Subcontractor the Contract Sum by periodic progress payments at the frequency stated in the Second Schedule if such payments become due under the following provisions of this Clause. Otherwise the Contract Sum or the balance thereof unpaid and payable (subject to this Contract) shall be payable on the satisfactory completion of the Works.

(b)  The Subcontractor shall make application in writing to the Builder for progress payments on the day of each month referred to in the Second Schedule. The Subcontractor is referred to Annexure 'A' which is the format of progress claims to be presented by the Subcontractor for payment by the Builder. These forms set out the minimum information required to be supplied by the Subcontractor to support his claim, the submission for which shall be a condition precedent to payment.

(c)  The Builder shall make progress payments to the Subcontractor within fourteen (14) days after the Builder has received payment from the Proprietor in respect of the Work, the subject of the Subcontractor's claim.

(d)  It is expressly agreed that the Subcontractor's right to receive payment is entirely dependent upon the Builder having already actually received from the Proprietor payment in respect of the Work, subject of the Subcontractor's claim and that the Subcontractor shall have no other or further right to payment.

(e)  It is further agreed that the Subcontractor is not entitled to receive payment if there is a claim or set-off sought by the Proprietor against the Builder in respect of or related to the Works."

"12. (a) ...

(b) (i) As a condition precedent to receiving final payment under the Contract, the Subcontractor shall provide: (A) a fully particularized final statement to the Builder which will set out all monies paid, claimed or owing under the Subcontract. The Builder shall not be liable for any claim not fully particularized in the final statement; and (B) a release of all claims on any account whatsoever whether in contract, or tort (including negligence or breach of duty) against the Builder arising out of or associated with the Contract or the performance and execution of the Works in such form as may be required by the Builder in its absolute discretion.

(ii) Payment shall not be made until all the amounts in the final statement are resolved between the parties or determined by arbitration. The final statement shall be binding upon the Subcontractor and shall release the Builder from any further claims for monies owing under the Contract or recoverable in connection with the Works. No interest shall be payable until the final statement is resolved or determined."

"13. (a) If the Builder shall fail to make any payment to the Subcontractor as hereinbefore provided and such failure continues for fourteen days after the Subcontractor has given to the Builder written notice requiring payment, the Subcontractor may (without prejudice to any other right or remedy) suspend further execution of the Works until such payment has been made and such suspension shall automatically operate to extend the period or periods for completion (as the case may be) as provided in Clause 2 of this Subcontract.

(b)  If the Builder makes default under the provisions of Clause 10 hereof and irrespective of whether or not the Subcontractor has suspended further execution of the Works, or if the Contractor commits an act of bankruptcy or executes a Deed of Assignment or Deed of Arrangement or enters into a composition or other arrangements with its creditors or being a Company enters into liquidation whether compulsory or voluntary or abandons the Head Contract, the Subcontractor may (without prejudice to any other rights or remedies) thereupon by notice by registered post to the Builder determine this Subcontract.

(c)  Notwithstanding the foregoing the Builder may deduct from progress payments payable to the Subcontractor, not more than the percentage stated in the Second Schedule hereof to the limit of the amount stated in the Second Schedule hereof and such monies so deducted shall be retained by the Builder and held by him until any Defects Liability Period under the Head Contract shall have expired or until thirty days after the issue by the Architect of his Final Certificate under the Head Contract and final payment having been made (whichever is the later) and the Builder shall at the request of the Subcontractor notify him of the date of issue of any such certificate."

During final address at trial, counsel for the contractor conceded that the word "claim" in cl. 10(d) should be read as referring only to progress claims. The appellant was granted leave to withdraw that concession upon the appeal, it being agreed that the course of the trial was not affected and that the respondent could not have called evidence to affect the question.

It is agreed for the purposes of the appeal that "work, subject of the subcontractor's claim" in cl. 10(d) should be read as "work the subject of the subcontractor's claim". The main question is what is encompassed by "the subcontractor's claim". The phrase in this context is susceptible of more than one meaning. For example it is arguable that it might be intended to refer to any of the following:

1.    progress claims only (noting that the clause generally deals with progress payments); or

2.   progress claims and a claim for whatever balance is payable on completion of the works (see cl. 10(a));

3.    all claims contemplated by the contract;

4. all claims of whatever nature, including claims for
damages for repudiation or a claim for quantum meruit
after termination of the contract.
The contract is poorly drafted, and does not reveal

consistency of phrase or clarity of concept. Internal inconsistencies abound. The builder is sometimes referred to as the contractor; different clauses deal with the subcontractor's right to determine on abandonment of the head contract, making inconsistent provisions therefore; neutral words such as "fail" seem to have been used interchangeably with "default"; and no distinction is maintained between "due" or "owing". It seems difficult in many instances to tell whether a phrase is a rough paraphrase of an earlier differently worded phrase, or whether some subtle difference is intended. It is reasonable to start with the premise that it is not a document in which fine legal distinctions are intended to be made, or may be safely upheld. It has very much to be viewed in a commercial context.

Clause 2(a) shows clearly enough that it is a lump sum contract and not subject to rise and fall. It contemplates a total entitlement. Progress payments are provided for in cl. 10, but plainly these do not cover the full entitlement of the subcontractor. The contract looked at as a whole contemplates progress claims, a final claim by means of a final statement (under cl. 12), a right to payment of retention money (which presumably might be claimed when due), and of course claims for extras, variations and the like (cl. 15(e)).

Recognising that such claims are possible under the contract, and indeed will be anticipated to arise in the ordinary carrying out of the subcontract, attention may now be directed to cl. 10. Subclause. (a) does not expressly refer to any "claim". The second sentence contemplates an unpaid balance that is payable "on the satisfactory completion of the works". It expresses an entitlement which cannot sensibly be distinguished from the entitlement to "final payment" that is mentioned in cl. 12, as to which certain conditions are imposed upon the subcontractor before establishing such entitlement. Quite clearly the first sentence of subcl. 10(a) refers to progress payments and the second sentence refers (by way of the express contradistinction by use of the word "otherwise") to the balance entitlement on completion.

Subclauses 10(b) and 10(c) continue with the theme of progress payments, and cannot be taken to refer to anything else. Subclause (b) refers consecutively to "application ... for progress payments", "progress claims", and "his claim". Plainly the word "claim" here refers to a progress claim and no other. Again in cl. 10(c) "the subcontractor's claim" can only be referable to a claim for progress payments.

Does the same meaning carry forward into subcl. 10(d) which speaks of "the subcontractor's right to receive payment" and "the work be subject of the subcontractor's claim"? The submission of Mr Keane Q.C. on behalf of the contractor was that the words in subcl. 10(d) apply to the subcontractor's right to receive any payment under the subcontracts, and he supported this by pointing out that subcl. (a) contains a reference to rights other than rights to progress payments. He further submitted that the words of subcl. 10(e) relate to payments generally and ought not to be limited to an entitlement to receive progress payments.

Mr H. Fraser Q.C. for the subcontractor referred to the heading to cl. 10 ("progress payments") and to the inappropriateness of inserting a clause capable of denying payment entirely to a subcontractor in the context of a clause dealing primarily with progress payments. He submitted that subcl. (e) ought not to be read as applying to more than progress payments, and that capricious results favouring the builder would ensue if subcl. 10(d) were read in the manner contended for by the contractor.

The submissions upon both subcll. 10(d) and 10(e) were in direct conflict. Subcl. 10(e) is a provision highly favourable to the builder whether it is taken to relate to progress payments, or, as the contractor submits, to all payments the subject of any claim by the subcontractor. It denies an entitlement to payment on the part of the subcontractor if there is any claim "sought" by the proprietor against the builder in respect of "or related to" the works (i.e. the subcontract works). This could suspend a subcontractor's entitlement irrespective of any fault or deficiency on its part, and it has nothing to do with any money-flow situation involving the builder. It is not a clause which should be given any wider interpretation than cl. 10 demands as a whole. As the learned trial Judge observed:

"One can see why a claim or set-off by the Proprietor against the Builder may disentitle the Subcontractor to a progress payment, but there is no conceivable reason why such a claim should deprive the Subcontractor of payment upon satisfactory completion of the subcontract works."

In the absence of any clear contrary indication it seems more reasonable to construe it as referring to progress claims than to claims of any kind that the subcontractor may make against the contractor. I do not in any event think that the construction of subcl. 10(e) provides the key to the meaning of subcl. 10(d), but I do reject Mr Keane's submission that subcl. 10(e) plainly refers to all kinds of payment and that therefore a similarly wide meaning ought to be given to the ambiguous words in subcl. 10(d). At best for the contractor subcl. 10(e) fails to give any signal one way or the other on the meaning of subcl. 10(d); at worst it is a provision that might be thought to strengthen the prospect that only progress payments are being referred to.

In a related submission, Mr Keane relied upon subcl. 12(b) as supporting his submissions. It is difficult however to see this clause as more than a statement of requirements to be fulfilled by the subcontractor before becoming entitled to receive the final payment. It does not support the view that the subcontractor is disentitled to receipt of the final payment unless and until the builder shall have been paid for such work by the proprietor.

It was further submitted for the contractor that subcl. 13 gives to the subcontractor the right to avoid what might otherwise be thought to be an unduly harsh result, namely the prospect of being bound to continue to perform the subcontract works notwithstanding non-payment from the proprietor to the contractor, and ultimately being denied payments, including both progress and final payments. As to this, Mr Fraser submitted that if cl. 10(d) has the meaning contended for by the contractor, then non-payment of a progress claim would not be a failure to make a payment "as hereinbefore provided". The subcontractor would therefore not have the right to suspend further execution of the works (under cl. 13(a)), and neither would it have the right to determine the subcontract under subcl. 13(b). On this footing a subcontractor could be bound to complete a contract for no payment when it was perfectly obvious that the proprietor could not pay the contractor and the contractor would not have to pay the subcontractor. It seems to me that Mr Fraser's submission is correct, and that if the wide effect contended for by the builder under subcl. 10(d) is allowed, the rather surprising consequences mentioned above could follow.

Mr Fraser submitted that subcll. 10(b), 10(c), 10(d) and 10(e) fit comfortably together as sequential references to progress claims. Indeed, in my view so does subcl. 10(a), the first sentence of which is plainly concerned with progress payments, and the second sentence of which may be thought to be making an express contradistinction. In short, the whole of subcl. 10 may be seen to be dealing with the subject of progress payments, with only one sentence of it clearly relating to something else. Furthermore, the first sentence of subcl. 10(a) seems to be a reinforcement of the prospect that some progress payments will fail, because the contractor's promise to pay periodic progress payments is limited by the statement "if such payments become due under the following provisions of this clause".

The second sentence however which deals with the final entitlement, is not so expressly limited, although it recognises the unpaid balance as being "subject to this contract". The point is not conclusive but it favours the view that periodic progress payments are the ones that are dealt with under the following entitling and disentitling provisions of cl. 10.

None of the above considerations is of itself

conclusive of the proper construction of subcl. 10(d).
However looking at the contract as a whole and taking into
account those considerations I think that the proper
construction of cl. 10(d) is to regard it as a clause
generally referring to progress claims, and as suspending
only to the right to receive payment for progress claims.

Progress claims are claims of a specific kind recognised by the contract, and can only be made during the subsistence of the contract. In my view the words of subcl. 10(d) are incapable of referring to the plaintiff's claim in the present case for remuneration on a quantum meruit. Claims of the kind contemplated by subcl. 10(d) were not made by the plaintiff and the claim upon which the plaintiff succeeded was not a claim within the contemplation of subcl. 10(d). In short there are no facts to which the disentitling provision can apply.

Mr Keane however submitted that even on the above construction, the terms of subcl. 10(d) would continue to govern the subcontractor's rights to remuneration, and that such rights are limited to an entitlement to progress payments which in the circumstances could never arise. This overlooks the subcontractor's right to other payments, and its primary entitlement to be paid the full price.

In this case the plaintiff was deprived of the opportunity of completing the contract by reason of breaches on the part of the defendant. The submission is that whether or not the defendant breached the contract the plaintiff would not have been able to earn anything further thereunder because subcl. 10(d) would have prevented it. Mr Keane's submission is based upon Photo Production Limited v. Securicor Transport Limited (1980) A.C. 827. That decision overruled Harbutt's Plasticine Limited v. Wayne Tank and Pump Co. Ltd (1970) 1 Q.B. 447 and other cases which held that when a contract is terminated for fundamental breach of a contract the guilty party might not then rely upon an exception or limitation clause to escape liability for the breach. The notion upon which Harbutt's Plasticine depended was that the whole contract, including the exclusion clause, ceased to exist upon the termination of it. (Harbutt's Plasticine above, p. 465.) Some support for that view may be thought to have existed in statements made by Lord Reid in the Suisse Atlantique case (1967) 1 A.C. 361, 398. That view however was disapproved. Lord Wilberforce stated:

"When in the context of a breach of contract one speaks of 'termination,' what is meant is no more than that the innocent party or, in some cases, both parties, are excused from further performance. Damages, in such cases, are then claimed under the contract, so what reason in principle can there be for disregarding what the contract itself says about damages - whether it 'liquidates' them, or limits them, or excludes them?" (at p. 844).

Lord Diplock, who had earlier in Lep Air Services Limited v. Rolloswin Investments Ltd (1973) A.C. 331, 350 expressed the view that "secondary obligations" arise upon the "rescission" of a contract, including an obligation to pay damages, and that this latter obligation was "just as much an obligation arising from the contract as are the primary obligations that it replaces", further developed this theory in Securicor, but it is unnecessary for present purposes to pursue it.

Although the High Court has not directly addressed the point of departure between Harbutt's Plasticine and Photo Production, it has acted consistently with Photo Production in Darlington Futures Ltd v. Delco Australia Pty Ltd (1986) 161 C.L.R. 500 and Sunbird Plaza Pty Ltd v. Mahoney (1988) 166 C.L.R. 255.

Photo Production deals with the assessment of damages for breach of contract, and in such cases, although the contract is discharged by reason of the breach, the measure of damages must be calculated by reference to the situation as it would have been had the contract been performed. It is therefore easy to see, and would seem to accord with principle, that for the purposes of assessing damages for breach of contract the terms of the contract must continue to govern the situation. The position may however be otherwise in relation to a claim for quantum meruit.

The history and nature of claims of quantum meruit was considered by the High Court in Pavey and Matthews Pty Ltd v. Paul (1986-1987) 162 C.L.R. 221. The result of that analysis was succinctly stated by Mason and Wilson JJ. (at p. 227) as follows:

"Deane J., whose reasons for judgment we have had the advantage of reading, has concluded that an action on a quantum meruit, such as that brought by the appellant, rests, not on implied contract, but on a claim to restitution or one based on unjust enrichment, arising from the respondent's acceptance of the benefits accruing to the respondent from the appellant's performance of the unenforceable oral contract."

The type of claim under primary consideration in that case was one which arises when work is done in purported reliance upon an unenforceable contract, but the analysis was not limited to that particular basis for the bringing of such a claim. The claim in the present case falls into the second category of claims for quantum meruit, described by Jordan C.J. in Horton v. Jones (No. 2) (1939) 39 S.R.N.S.W. 305, 319.

"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."

(Compare Segur v. Franklin (1934) S.R.N.S.W. 67, 72.)

That adequately describes the nature of the present claim. Quite plainly both the majority (Mason, Wilson and Deane JJ.) and Brennan J. (although in dissent) have rejected implied contract as the foundation of the right to recover on a quantum meruit and the reasoning can hardly be less applicable to a claim arising upon the destruction of a contract than upon an unenforceable contract. Plainly such a claim is not one to enforce the contract (p. 227), and "the purpose of proving the contract is not to enforce it but to make out another cause of action having a different foundation in law" (p. 228). The obligation that the court enforces "differs in character from the contractual obligation had it been enforceable". It therefore seems reasonably clear that unlike an assessment for damages for breach of contract, the terms of the contract do not directly apply to the assessment of the plaintiff's rights.

The question comes down to whether the contract, which was the original source of the party's rights, in effect reaches into the quantification of the quantum meruit claim and governs the result notwithstanding the termination of the original contract.

Deane J. (in Pavey and Matthews above) having referred to Horton v. Jones (No. 2) (above), observed:

"The 'action of debt' for 'reasonable remuneration' to which Jordan C.J. referred was not an action on the old express quantum meruit count under which a plaintiff claimed not a liquidated amount payable by the defendant but a nominated sum being 'so much money as he therefore reasonably deserved to have'".

"such an action is plainly not brought upon the
unenforceable contract ..." (p. 253).

His Honour expressly adopted Jordan C.J.'s view that such an action "is not to recover the agreed amount under the unenforceable agreement but to enforce an obligation to pay 'reasonable remuneration'" (p. 253) and also that "the unenforceable contract may be referred to as evidence, but as evidence only, on the question of amount". (Horton v. Jones (No. 1) (1934) 34 S.R.N.S.W. 359, 367; Pavey and Matthews above p. 252.) This is recognised in cases including Way v. Latilla (1937) 3 All.E.R. 759; Scarisbrick v. Parkinson (1869) 20 L.T. 175; and Gino D'Alessandro Constructions Pty Ltd v. Powis (1987) 2 Qd.R. 40, 58-59, but in none of them is it suggested that the court is bound to apply the contract. The language is that the terms of the contract "may be resorted to" in estimating the value of the services (D'Allesandro above p. 58).

A similar point arose in Renard Constructions (M.E.) Pty Ltd v. Minister for Public Works (1992) 26 N.S.W.L.R. 234. The Court was unanimously of the view that a quantum meruit claim by a contractor is not subject to any ceiling to be derived from the terms of the contract (pp. 271, 276- 278), Handley J.A. agreeing with Meagher J.A. on this point.

The fact that such a judgment exceeds the amount which would have been payable under the contract is irrelevant (Lodder v. Slowey (1904) A.C. 442). Meagher J.A. observed:

"The law is clear enough that an innocent party who accepts the defaulting party's repudiation of a contract has the option of either suing for damages for breach of contract or suing on a quantum meruit for work done. An election presupposes a choice between different remedies, which presumably may lead to different results.

The nature of these different remedies renders it highly likely that the results will be different.

If the former remedy is chosen the innocent party is entitled to damages amounting to the loss of profit which he would have made if the contract had been performed rather than repudiated; it has nothing to do with reasonableness. If the latter remedy is chosen, he is entitled to a verdict representing the reasonable cost of the work he has done and the money he has expended; the profit he might have made does not enter into that exercise. There is nothing anomalous in the notion that two different remedies, proceeding on entirely different principles, might yield different results. Nor is there anything anomalous in the fact that either remedy may yield a higher monetary figure than the other. Nor is there anything anomalous in the prospect 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. Such a result would only be anomalous 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. There is no such rule of law. Nor can one say that as a matter of observable fact there is any such rule. The most one can say is that the amount contractually agreed is evidence of the reasonableness of the remuneration claimed on a quantum meruit; strong evidence perhaps, but certainly not conclusive evidence. On the other hand, 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."

In my view the assessment of the reasonable value of the work performed by the subcontractor does not call for application of the special contractual condition in cl. 10(d). It has nothing to do with the reasonable value of the services.

I therefore reject the submission that for the purposes of the present claim cl. 10(d) precludes any positive assessment. A further difficulty lies in the path of this submission in that at trial express admissions were made of the reasonable value of the work as $718,190 and $117,327 respectively, and this was the basis upon which the learned trial Judge proceeded.

No point was taken on appeal to the effect that the separate remedy of quantum meruit was not available nor was it suggested that any inconsistent election occurred in bringing an alternative claim for damages for breach of contract. In this regard Gino D'Allesandro Constructions v. Powis (above) suggests that the remedy was properly available to the plaintiff.

In my view the plaintiff would be entitled to its judgment even if cl. 10(d) were regarded as covering the final payment as well as progress payments. However it is not necessary to pursue this possibility.

The appeal should be dismissed with costs.