Mann v Paterson Constructions Pty Ltd

What happened?

Paterson Constructions built two townhouses for the Manns under a domestic building contract that provided for progress payments by stage. The owners requested variations, which the builder carried out without the written documentation the Domestic Building Contracts Act 1995 (Vic) required. The relationship broke down, the owners repudiated, and the builder accepted the repudiation and claimed on a quantum meruit for the value of all the work.

What did the Court decide?

The builder could not recover a quantum meruit for stages it had completed: its entitlement for those was the contract price. For work on any incomplete stage a majority allowed a restitutionary claim, with the contract price operating as a ceiling on it. Which stages had in fact been completed was left open: "it is not entirely clear which stages had been completed" ([178]), and the question went back on the remitter. For the variations, the statute provided the exclusive route.

Why does this case matter?

It closes what had become a genuine escape hatch. On the older approach a builder who had made a bad bargain could accept the owners' repudiation and then recover the market value of the work, sometimes far exceeding the price it had agreed — so the party in the right came away with more than the contract ever promised it, at the expense of parties who had behaved badly but had not agreed to that.

Read the judgments for how divided the reasoning is. The outcome commanded a majority; the route to it did not, and later argument in this area is still largely about which reasoning to follow.

Exam and application relevance

The dividing line is whether a contractual right to payment had accrued, not whether the contract happened to put a price on the work. For a stage completed before termination the right had accrued and the contract governs. For a stage left incomplete it had not, so a restitutionary claim is open — and there the contract price operates as a ceiling. Be careful whose reasoning you cite for how firm that ceiling is: Gageler J stated it without qualification, while Nettle, Gordon and Edelman JJ reserved the possibility of departing from it in an exceptional case. Check whether a statute occupies the field before any of this.

Check your understanding

The builder had completed several stages before the owners repudiated. Why does that make those stages the contract's business rather than restitution's?