| Date | 26 January 2005 |
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| Judgment | Mowlem plc v PHI Group Ltd, TCC 28 July 2004 |
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| The Issue | Entitlement to payment on a quantum meruit basis under the principle of restitution. |
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| Implication |
Payment for goods or services claimed under the principle of restitution may be denied in circumstances where the goods or services are provided for a mutual benefit. |
printThe Latin term "quantum meruit" means "the amount deserved". It is generally applied to claims for a reasonable sum reflecting the cost of carrying out work or providing goods or services. A claim cannot be made for a quantum meruit if there is an existing contract between the parties to pay an agreed sum. Quantum meruit may however arise where the parties to a contract have failed to agree a price or where a party has carried out work in the reasonable expectation of a contract being formed but where agreement is never reached on the essential terms of that contract. This latter situation is often referred to as falling within the "law of restitution", or the doctrine of "unjust enrichment". The law of restitution will ensure the payment of a reasonable price for goods or services rendered in circumstances where it would be unjust to allow one party to be enriched at the expense of the other, and where the goods or services have been freely accepted. A leading textbook gives the following example: "Suppose that I see a window cleaner beginning to clean the windows of my house. I know that he will expect to be paid. So I hang back unseen until he has finished the job; then I emerge and maintain that I will not pay for work which I never ordered. It is too late, I have freely accepted the service. I had my opportunity to send him away. I chose instead to let him go on. I must pay the reasonable value of his work." Construction disputes are rarely as simple as this of course. It might be held that the window cleaner is simply a "risk taker" willing to clean the windows on this occasion without charge in the expectation of a contract for payment for future services. In short, everything will depend upon the specific facts of the case. These issues were examined in the recent case of Mowlem v PHI Group. Mowlem had subcontracted earthworks and the design and construction of retaining walls to PHI under a DOM/1 standard form of subcontract. The work involved the construction of terracing to form suitably level areas which would be surfaced for use as car parking. Mowlem had undertaken to supply free issue fill material which was to be incorporated by PHI into the earthworks. Whilst the free issue material met the grading requirements of the subcontract, it was however found to be unsuitable because it could not be compacted properly. It was too wet and insufficiently free draining and contained some non-contractually compliant material such as road scrapings. In order to overcome the difficulties in compacting the fill, it was necessary to import hardcore material made up largely of crushed brick complying with the Department of Transport's 6F2 specification. Mowlem claimed from PHI the cost of the 6F2 material and since the use of that material meant that less free issue fill was required by PHI in earthworks, Mowlem also claimed for the cost of carting away from the site the surplus material. These matters were referred to an arbitrator who rejected Mowlem's claims. Firstly Mowlem had argued that there was an express agreement that PHI would pay for the 6F2 material. The arbitrator found that there was no such agreement, it being the case that PHI had maintained throughout that the responsibility for the fill problems lay with Mowlem. As a fall back position Mowlem had claimed an entitlement to be paid a quantum meruit, arguing that it was implicit as a matter of law that in PHI's requests for Mowlem to supply imported material there was a promise to pay a reasonable price. The arbitrator also rejected that claim, pointing out that Mowlem had a choice of what materials within the specification it supplied and that, acting in its own interests, Mowlem had supplied fill which was wet and had poor drainage characteristics. The fill had only been made fit for purpose by the inclusion of the 6F2 material. Crucially, the arbitrator found that both parties had an interest in finding a solution to the problem in order that they could comply with their respective obligations under the main contract and subcontract. In effect, the parties had acted together for their mutual benefit and therefore this was not a case in which PHI had freely accepted the 6F2 material such that Mowlem would be entitled to a restitutionary payment. On appeal to the Technology and Construction Court, Judge Gilliland QC concluded that in the circumstances described in this case it was clearly open to the arbitrator to find that the material was supplied for the parties' mutual benefit. Mowlem had continued to supply the 6F2 material knowing that liability for payment was not accepted by PHI. Those were conclusions of fact which could not be overturned by appeal to the court. The arbitrator's conclusion that there were no grounds for applying a term into the subcontract that a reasonable price was to be paid for the 6F2 material was a conclusion that could not be challenged and was clearly correct in law. Similarly, the approach of the arbitrator to the question of restitution could not be faulted in law. Mowlem's claim for the cost of carting away the surplus material from site was also rejected by the arbitrator on the basis that Mowlem had failed to establish any legal basis for the claim. Judge Gilliland confirmed that there was no basis to overturn the decisions of the arbitrator and the appeal was rejected.
CJ-0503
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