W COOK BUILDERS PTY LTD (IN LIQUIDATION) RESPONDENT
Lumbers v W Cook Builders Pty Ltd (in liquidation) [2008] HCA 27 18 June 2008 A39/2007
ORDER
1. Appeal allowed with costs.
2.Set aside the orders of the Full Court of the Supreme Court of South Australia made on 1 March 2007 and, in their place, order that the appeal to that Court be dismissed with costs.
On appeal from the Supreme Court of South Australia
Representation
D F Jackson QC with M R Burnett for the appellants (instructed by Lynch Meyer Lawyers)
G O'L Reynolds SC with R D Ross-Smith and B R Kremer for the respondent (instructed by Rick Schroeder)
Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.
CATCHWORDS
Lumbers v W Cook Builders Pty Ltd (in liquidation)
Quantum meruit – Services performed and subcontractors paid – Entitlement to compensation – Appellants entered into oral agreement with building company for construction of domestic dwelling – Respondent performed some of the construction work – Appellants did not request respondent perform any services or pay any subcontractors – Whether claim for quantum meruit or money paid available.
Restitution – Unjust enrichment – Appellants accepted benefit of construction work performed by and at the expense of respondent – Claim that it would be unconscionable for appellants to retain benefit – Appellants made no direct request of respondent – Whether restitutionary claim available.
Contract – Domestic building contracts – "Cost plus" oral agreement between building company and owners – Informal reorganisation within building company's corporate group – Benefit and burden of oral agreement informally assigned by building company to related company – No notice given to owners of reorganisation or assignment – Some subcontractors paid directly by owners – Acknowledgement by building company that owners had met all progress claims made and paid all monies due under the oral agreement – Whether related company can demand compensation from owners for difference between amounts paid by owners and amounts outlaid by related company together with margin for supervision and profit.
Words and phrases – "expense", "free acceptance", "incontrovertible benefit", "unjust enrichment", "windfall".
GLEESON CJ. In September or October 1993, W Cook & Sons Pty Ltd ("Sons") entered into an oral agreement with the appellants, Mr Matthew Lumbers and Mr Warwick Lumbers, to construct a house at North Haven, near Adelaide. Mr Matthew Lumbers owned the land and Mr Warwick Lumbers had an unregistered lease for life over the property. For present purposes, it is unnecessary to distinguish between Mr Matthew Lumbers and Mr Warwick Lumbers ("the Lumbers") as parties to the contract. The house was described by the primary judge as "quite distinctive". It ultimately cost more than $1 million to build. It was completed in May 1995.
In circumstances that will be described below, most of the work required by the…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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Details
AGLC
Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27
Case
[2008] HCA 27
Decision Date
CaseChat Overview and Summary
The High Court of Australia considered an appeal by the Lumbers against W Cook Builders Pty Ltd (in liq) concerning a claim for payment arising from the construction of a domestic dwelling. The Lumbers had entered into an oral agreement with W Cook Builders Pty Ltd for the construction, but the respondent company, a related entity, performed some of the work and paid subcontractors. The dispute centred on whether the respondent could claim compensation from the Lumbers for the difference between the amounts paid by the Lumbers and the respondent's outlays, plus a margin for supervision and profit, particularly as the Lumbers had not requested the respondent to perform services or pay subcontractors directly.
The legal issues before the High Court included whether the respondent was entitled to recover compensation on the basis of a claim in *quantum meruit* or for money paid, and whether a claim for restitution based on unjust enrichment was available. Specifically, the court had to determine if the Lumbers had accepted a benefit from the respondent's work and expenses in circumstances where it would be unconscionable for them to retain that benefit, notwithstanding that they had not made a direct request to the respondent. The court also considered the effect of an informal reorganisation within the building company's corporate group, where the benefit and burden of the oral agreement were informally assigned to the respondent company without notice to the Lumbers.
The High Court allowed the appeal, setting aside the orders of the Full Court of the Supreme Court of South Australia. The court reasoned that the respondent's claims failed because the Lumbers had not requested the respondent to perform the work or incur expenses, nor had they freely accepted the benefit of the respondent's services in circumstances that would give rise to an obligation to pay. The court found that the Lumbers had met all progress claims and paid all monies due under the oral agreement to the original building company. The informal reorganisation and assignment of the contract within the corporate group, without notice to the Lumbers, did not create a direct contractual or restitutionary liability on their part to the respondent. The court emphasised that the principles of unjust enrichment require more than simply receiving a benefit; there must be an absence of a request or a free acceptance of the benefit, which was not established in this case.
The High Court ordered that the appeal to the Full Court of the Supreme Court of South Australia be dismissed with costs.
Orders
Orders of the court
1. Appeal allowed with costs.
2. Set aside the orders of the Full Court of the Supreme Court of South Australia made on 1 March 2007 and, in their place, order that the appeal to that Court be dismissed with costs. (Per judgement of Gleeson CJ and joint judgment of Gummow, Hayne, Crennan and Kiefel JJ
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
GLEESON CJ
GUMMOW, HAYNE, CRENNAN AND KIEFEL JJ
On 8 November 1999, Builders served the Lumbers with a notice of demand for payment of $274,791, comprising the alleged deficiency of $181,904, together with a 10% supervision fee of $92,887. On 11 November 1999, Builders caused a workers' lien to be registered on the title to the property. Builders' claim was made some four years after the construction had been completed. Mr Warwick Lumbers suggested in his evidence that the claim might have been considered differently had he been provided with a bundle of invoices rather than a notice of demand.The decision of the primary judge Some features of the procedural context in which the matter came for hearing before Judge Beazley have been noted above. He remarked that "complexity has arisen from the casual basis upon which the parties have chosen to deal with each other, and indeed in the manner in which they have conducted the litigation." The fact that Sons took no part in the trial, that Mr McAdam did not give evidence, and that Mr Jeffrey Cook, although an experienced builder, was "able to give only scant evidence with respect to 'administration issues'" added to the difficulties. It may be remarked that the restitutionary principles on which the respondent relied were designed to overcome what otherwise would have been deficiencies in the law, but in the present case they appear to have been called in aid principally to overcome deficiencies in evidence and unusual aspects of procedure. There were issues at trial, not presently relevant, concerning the amount of the claim; there were questions of the total amount of payments to subcontractors, allowances for defects, and the fee for supervision and management. The trial judge resolved most of those issues in favour of Builders, and quantified the claim at $261,715. There was also an issue, which was the subject of argument in the present appeal but which may be put to one side for the moment, arising out of the fact that Builders was unlicensed. Section 39 of the Builders Licensing Act 1986 (SA) ("the Builders Licensing Act") provided:"An unlicensed person who performs building work in circumstances in which a licence is required under this Act shall not be entitled to recover any fee or other consideration in respect of the building work unless the Tribunal or any court hearing proceedings for recovery of the fee or consideration is satisfied that the person's failure to be licensed resulted from inadvertence only." For reasons that turned upon the evidence of Mr Jeffrey Cook, the primary judge found that Builders' failure to obtain a licence did not result from inadvertence. There is no challenge to that finding. The main issue was a dispute as to whether Builders was entitled to claim directly against the Lumbers. Referring to the conduct of Mr Jeffrey Cook after the reorganisation, the judge said: "He did not speak to Mr McAdam, Warwick Lumbers or [the architect] about the terms of the contract which he and his immediate family were apparently taking over in Builders. He did not raise the question of price despite the fact that all of the major variations took place after the re-organisation. He had no involvement in quantifying the amounts to be requested of the Lumbers, despite the large sums being debited to Builders' accounts for the work.I have already discussed the failure of Builders to obtain a licence. Jeffrey Cook did not request the Lumbers to make payments direct to Builders rather than Sons ...Finally when the building work was completed, Mr Cook appears to have made no attempt to quantify what was outstanding or seek payment from the Lumbers. It was only well after the liquidation of Builders that anyone put the Lumbers on notice that any sum was outstanding, and suggested a direct claim as an equitable assignee."
Ratio Decidendi
Legal Principle Established
Established by:
GLEESON CJ,
GUMMOW, HAYNE, CRENNAN AND KIEFEL JJ