| Date | 26 February 1997 |
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| Judgment | Costain Tarmac Joint Venture -v- Zanen Dredging and Contracting 18 December 1996, 3 Bliss 10 |
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| The Issue | Payment of quantum meruit where no contract in place. |
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| Implication |
Where additional work is done outside the scope of the contract, the contractor is entitled to be reimbursed the value of the advantage, if any, received by the employer as a result of the work done or services performed. |
printIn construction related matters there are three main situations where entitlement to payment on a quantum meruit basis is most likely to arise. · Where the parties to a contract fail to agree a price. · Where no contract comes into existence. · When a contract is brought to a premature end by a repudiatory breach. In the first of these, the normal approach is for the quantum meruit to arise out of an implied term for payment, and the resulting obligation will generally be to pay a reasonable price or remuneration based on cost properly and reasonably incurred by the contractor. The second and third situations are often termed 'quasi-contractual', where payment is based upon the principle of restitution. This distinction is of great importance since in these cases, the obligation will be to reimburse the contractor for the value of the advantage, if any, received by the client as a result of the work done. By way of example, contractors often carry out work outside the scope of their contract complying with instructions which cannot be said to be authorised variations. The case of Costain/Tarmac JV -v- Zanen Dredging provides a useful illustration of the manner in which the courts will look at this issue. Costain/Tarmac were appointed by the Welsh Office as main contractors for the construction of the A55 Conwy bypass and river crossing. Part of the works involved dredging a trench in the bed of the estuary of the River Conwy, into which six prefabricated tunnel elements, made of reinforced concrete, were to be immersed and jointed together to form the carriageway of the bypass. These tunnel elements were constructed on-site in what was known as a casting basin, and when completed the casting basin was flooded and the tunnel elements floated out to their positions in the estuary where they were sunk into place. Zanen were engaged as dredging sub-contractors. The contract provided options for dealing with the casting basin once works were complete. One proposal was that the basin should be backfilled, and this had been priced by the JV as a saving in excess of £1 million, on the basis that it would be cheaper for them to backfill the casting basin rather than to remove the spoil and dispose of it off-site. As an alternative, Crown Estates, who were not a party to the main contract, wanted to build a marina using the flooded casting basin. Accordingly they entered into agreements with the Welsh Office and with Costain/Tarmac to the effect that the contractor would credit the Welsh Office with the £1 million previously mentioned, but would be paid by Crown Estates approximately £2.5 million for additional works around the perimeter of the marina. In consequence to this Zanen were given instructions for additional works which the court held could not constitute a variation under the terms of their original sub-contract. Since these works were therefore undertaken outside the sub-contract they fell to be evaluated using a quantum meruit approach. The issue before the court was how this should be done, particularly in relation to two matters. Firstly, what proportion, if any, should the sub-contractor receive of considerable profits which the JV had made on this additional work. Secondly, if the sub-contractor could make substantial savings against its competitors by being already mobilised on site, should these savings be passed on. As previously noted in cases such as this the resulting obligation of the main contractor is not to pay a reasonable price or remuneration based on cost incurred by the sub-contractor but instead to reimburse the value of the advantage, if any, received by the main contractor as a result of the work done. Depending on the facts, the value of the work might in some cases be equivalent to a reasonable compensatory price, but in other cases it would be more or less and sometimes nil. The court added that the proper way to evaluate a quantum meruit in such cases where there is no contract is to consider the relative bargaining positions of the parties at the outset of the job. In the present case the quantum meruit would therefore properly take into account a proportion of the profits generated by the main contractor, and would also properly include charges such as the likely cost of mobilisation and demobilisation which a competitor would have incurred, even though the sub-contractor in question was already on site.
CJ-9708
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