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High Court of Australia |
PAVEY & MATTHEWS PTY. LTD. v. PAUL [1987] HCA 5; (1987) 162 CLR 221
F.C. 87/004
Contract
High Court of Australia
Mason(1), Wilson(1), Brennan(2), Deane(3) and Dawson(4) JJ.
CATCHWORDS
Contract - Quantum meruit - Restitution - Unjust enrichment - Building contract not enforceable unless in writing - Claim for reasonable remuneration for work done under oral agreement - Basis of entitlement - Builders Licensing Act 1971 (N.S.W.), s. 45.
HEARING
1986, June 11; 1987, March 4. 4:3:1987DECISION
MASON AND WILSON JJ.: The important issue in this appeal is whether a builder may bring an action in indebitatus assumpsit for the value of work done and materials supplied under an oral building contract, notwithstanding the provisions of s.45 of the Builders Licensing Act 1971 (N.S.W.) ("the Act"). That section provides:"3. (1) ...
(a) the work involved in the carrying out of
the construction of, the making of
alterations or additions to, or the
repairing, renovation, decoration or
painting of, a dwelling, where that work
does not consist solely of work of one
class or description that is prescribed
for the purposes of the definition of
'trade work' in this subsection; or
(b) trade work,
but does not include any work, or work of any
class or description, that is prescribed for
the purposes of this definition...."
2. The appellant, which holds a builders' licence under the Act, sued the
respondent in the Supreme Court of New South Wales for
$26,945.50 being an
amount claimed to be due and payable under a quantum meruit. The appellant
calculated this amount as the sum
payable, after alleging that the amount of
$62,945.50 "represents a reasonable sum for the work done and materials
provided" and
giving credit for a payment of $36,000. The respondent, after
putting in issue some allegations of fact in the appellant's statement
of
claim and denying the reasonableness of the charges, pleaded that the contract
was a building contract and as such was unenforceable
by reason of s.45.
3. Enderby J. made a consent order that the issue presented by the pleading
of s.45 be tried as a separate preliminary issue. This
issue was tried by
Clarke J. on agreed facts which were as follows:
1. At all material times, the appellant was the holder of a
licence under the Act.
2. Between 6 August 1980 and 2 February 1981 the appellant
carried out the work, the subject of these proceedings,
at the respondent's property at 16 Northcote Avenue,
Swansea Heads.
3. The work was "building work" within the meaning of s.45
of the Act.
4. The work was done by the appellant in consequence of a
number of conversations which took place during the
period 1 July 1980 and 2 February 1981 between the
respondent and the appellant's duly authorized agent
upon terms that the appellant would do the work
requested by the respondent and the respondent would pay
the appellant a reasonable remuneration for that work,
calculated by reference to prevailing rates of payment
in the building industry.
5. There was no written contract for the carrying out of
the work.
4. Clarke J. decided the issue in favour of the appellant. He ordered that
the costs of the application for and of the hearing of
the separate issue be
paid by the respondent, that the remaining issues be tried by arbitration
agreed upon by the parties and that
either party have liberty to restore the
matter to the list within seven days if the parties could not agree on an
acceptable arbitrator
so that the court may appoint a referee. The Court of
Appeal (Street C.J., Samuels and McHugh JJ.A.) took a different view of the
substantial issue, allowing the appeal with costs, setting aside the judgment
and orders made by Clarke J., substituting judgment
for the respondent with
costs and ordering that the respondent, if qualified, be entitled to a
certificate under the Suitors' Fund Act 1951 (N.S.W.).
5. The Court of Appeal in this case, and in Schwarstein v. Watson (1985) 3 NSWLR 134, in which judgment was delivered on the same day, considered that an action in indebitatus assumpsit to recover the agreed remuneration for building work done pursuant to an oral contract that was wholly executed was an action to enforce that contract. Their Honours arrived at this conclusion after a very lengthy review of the history of indebitatus assumpsit as a result of which they found that in order to succeed in the action the plaintiff must plead and prove the special contract for building work under which he claims remuneration. Their Honours reinforced the conclusion reached in this way by invoking considerations of legislative policy which, they thought, supported a legislative intention to prevent a builder from recovering any remuneration in respect of building work unless the contract is in writing and complies with the statutory requirements.
6. As a matter of ordinary legal usage the words "enforceable" and "unenforceable" may refer either to the judicial and curial remedies available for the enforcement of a contract or to all the remedies available for the enforcement of a contract, including such remedies as the contract itself may provide. Section 4 of the Statute of Frauds 1677 (U.K.) ("Statute of Frauds") and its successor s.128 of the Instruments Act 1928 (Vic.), which was considered in Turner v. Bladin [1951] HCA 13; (1951) 82 CLR 463, provided for unenforceability of the first kind, whereas s.9 of the Money Lenders Act 1912 (W.A.), which was considered in Mayfair Trading Co. Pty. Ltd. v. Dreyer [1958] HCA 55; (1958) 101 CLR 428, esp. at pp 448-449, provided for unenforceability of the second kind.
7. The language of s.4 of the Statute of Frauds and of its successors, which specifically provided that no action should be brought on a contract or agreement unless it complied with the prescribed requirements, naturally attracted an interpretation that excluded enforcement by judicial and curial remedies. The words "enforceable" and "unenforceable" did not appear in the relevant statutory provisions. Nevertheless, as a matter of history and tradition the effect of the provisions has always been said to make a nonconforming contract or agreement unenforceable in the sense already discussed. On the other hand, where a statutory provision provides that a security or a contract shall be unenforceable, it is natural, in the absence of some restraining context, to interpret the provision as giving rise to unenforceability in the wider sense mentioned above. So, in Mayfair Trading the Court concluded that the injunction in s.9, which provided that if prescribed formalities were not observed no security should be "enforceable", rendered the mortgagee's power of sale unenforceable.
8. The provisions of s.45 of the Act are apt to provide for unenforceability in the wider sense; they are different from the traditional Statute of Frauds formula. They should therefore be read as entailing unenforceability of the contract, not only by means of legal proceedings, but also by means of any other remedy.
9. To say this is not to exclude the possibility that, in the context of the Act, the statutory concept of unenforceability extends to indirect, as well as direct, enforcement of the contract. The question then is whether the appellant's action on a quantum meruit amounts to a direct or an indirect enforcement of the oral contract.
10. 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. This conclusion does not accord with the acceptance by Williams, Fullagar and Kitto JJ. in Turner v. Bladin (at p 474) of the views expressed by Lord Denning in his articles in (1925) 41 Law Quarterly Review p 79, and (1939) 55 Law Quarterly Review p 54, basing such a claim in implied contract. These views were a natural reflection of prevailing legal thinking as it had developed to that time. The members of this Court were then unaware that his Lordship had, in his judgment in James v. Thomas H. Kent & Co. Ld. (1951) 1 KB 551, as reported in the authorized reports, discarded his earlier views in favour of the restitution or unjust enrichment theory. Since then the shortcomings of the implied contract theory have been rigorously exposed (see Goff and Jones, The Law of Restitution 2nd ed. (1978) pp.5-11) and the virtues of an approach based on restitution and unjust enrichment, initially advocated by Lord Mansfield and later by Fuller and Perdue (see "The Reliance Interest in Contract Damages" (1936-37) 46 Yale Law Journal 52, 373, esp. at p.387), widely appreciated (Goff and Jones, op cit. at p.15 et seq.; and see Deglman v. Guaranty Trust (1954) 3 DLR 785, at pp 794-795). We are therefore now justified in recognizing, as Deane J. has done, that the true foundation of the right to recover on a quantum meruit does not depend on the existence of an implied contract.
11. Once the true basis of the action on a quantum meruit is established, namely execution of work for which the unenforceable contract provided, and its acceptance by the defendant, it is difficult to regard the action as one by which the plaintiff seeks to enforce the oral contract. True it is that proof of the oral contract may be an indispensable element in the plaintiff's success but that is in order to show that (a) the benefits were not intended as a gift, and (b) that the defendant has not rendered the promised exchange value (Fuller and Perdue, op cit. at p.387 n.125). 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.
12. If the effect of bringing an action on a quantum meruit was simply to enforce the oral contract in some circumstances only, though not in all the circumstances in which an action on the contract would succeed, it might be persuasively contended that the action on a quantum meruit was an indirect means of enforcing the oral contract. So, if all the plaintiff had to prove was that he had fully executed the contract on his part and that he had not been paid the contract price, there would be some force in the suggestion that the proceeding amounted to an indirect enforcement of the contractual cause of action. However, when success in a quantum meruit depends, not only on the plaintiff proving that he did the work, but also on the defendant's acceptance of the work without paying the agreed remuneration, it is evident that the court is enforcing against the defendant an obligation that differs in character from the contractual obligation had it been enforceable.
13. In the present case the New South Wales Court of Appeal attributed a broader operation to s.45 by invoking the usual meaning of the expression "to enforce", which is "to compel observance of": see Reg. v. Bates (1982) 2 NSWLR 894, at p 895. The force of this approach to the problem is not to be underestimated because, as we have seen, the effect of the action on a quantum meruit is to enforce the plaintiff's claim in some circumstances in which an action on the contract would succeed, proof of the contract being an element in the quasi-contractual claim. However, it seems to us that in the context of a provision such as s.45 with its injunction that the contract shall not be "enforceable", it is more appropriate to look to the more precise legal meanings that have been assigned to the term in comparable situations where a contract or a security is expressed to be unenforceable.
14. This is not a case in which other provisions of the Act throw textual light on what is meant by the word. It is therefore a matter of determining whether any assistance is to be gained from an examination of the policy and purpose of the statute. On one view the purpose of s.45 is to protect the building owner against spurious claims by a builder by preventing the enforcement by him of nonconforming contracts. This in substance was the view taken by the Court of Appeal in this case and in Schwarstein v. Watson. That purpose includes the protection of the building owner against a claim by a builder on a written contract that fails to describe the building work sufficiently, even in a case where the builder has fully executed the contract on his part. But it would be going a very long way indeed to assert that the statutory protection extends to a case where the building owner requests and accepts the building work and declines to pay for it on the ground that the contract fails to comply with the statutory requirements. True it is that the informal contract, though not enforceable by the builder, is enforceable against him. But it is not to be supposed that it is enforceable against him on the footing that the building owner is under no liability to pay for building work upon which he insists and the performance of which he accepts. The consequences of the respondent's interpretation are so draconian that it is difficult to suppose that they were intended. An interpretation that serves the statutory purpose yet avoids a harsh and unjust operation is to be preferred.
15. And there is another view which may be taken of the statutory purpose which is more favourable to this interpretation. In Gino D'Alessandro Constructions Pty. Ltd. v. Powis (unreported - judgment delivered by the Full Court of the Supreme Court of Queensland on 26 September 1986), McPherson J. pointed out that the function of s.75 of the Builders' Registration and Home-Owners' Protection Act 1979 (Qld), a provision substantially similar to s.45 of the Act, was "to ensure, so far as possible, that a degree of precision is introduced into house building contracts, so that it can be readily determined what is the work to be done and whether loss or damage has been suffered ... so as to attract the benefit of the insurance afforded by s.69" of the Queensland Act. Although there are differences between the Queensland and New South Wales statutes, and their respective schemes of compulsory insurance for the benefit of home owners, s.45 may nevertheless be seen as performing a function similar to that undertaken by s.75 in the Queensland Act. On this view of the purpose and function of s.45, a view which in our opinion has much to commend it, we would not be justified in ascribing to the section the far-reaching consequences urged by the respondent.
16. Unlike the Court of Appeal we do not see any compelling analogy between s.45 of the Act and the money-lending legislation considered by this Court in Mayfair Trading and s.22 of the Money-lenders and Infants Loans Act 1941 (N.S.W.) considered by Walsh J. in Deposit & Investment Co. v. Kaye (1962) 63 SR (NSW) 453. The relevant provisions in those cases explicitly rendered unenforceable contracts executed by the moneylender. The statutes were directed at making unenforceable an obligation to repay money already lent and a security already given in respect of such an obligation. It was not possible to interpret these provisions so that they left on foot any quasi-contractual causes of action on the part of the lender. Request and receipt by the borrower of the money lent were integral elements in a situation in which the contract and all securities were expressed to be unenforceable. An additional feature of the money-lending cases is that the legislation was designed to protect borrowers by imposing onerous obligations on moneylenders to comply with the statutory requirements. The need to protect borrowers in this way was the outcome of oppressive conduct on the part of moneylenders. Section 45, seen in its setting and in conjunction with the insurance scheme established by the Act, stands on a different footing.
17. In the result we would allow the appeal, set aside the order of the Court of Appeal and restore the order of Clarke J.
BRENNAN J.: In order to dispose of a question of law raised by the
defendant respondent's defence to the plaintiff appellant's
amended statement
of claim prior to the trial of the action, the parties furnished Clarke J. in
the Supreme Court of New South Wales
with an agreed statement of facts. The
question of law was formulated by his Honour in these terms:
" whether a builder licensed under the (BuildersMason and Wilson JJ. have set out the terms of s.45, the statement of facts and the course of the litigation. I need not repeat them. Section 45 is not couched in the same terms as s.4 of the Statute of Frauds 1677 but it is submitted that there is a sufficient analogy between the two provisions to warrant the application to s.45 of principles affecting the right to sue for the recovery of money due under an unwritten contract falling within the Statute of Frauds.
Licensing Act 1971 (N.S.W.)), who has completed
building works for another person pursuant to an
oral contract, is entitled to maintain a claim
for the reasonable cost of the works completed or
whether such claim is debarred by s.45 of the
Act."
2. When one party completes work which he has contracted with another party
to perform and the other party fails to pay what was
agreed, the party who has
done the work is entitled prima facie to sue for what is owing either on the
contract or on the debt which
arises on performance of the contract. The
origin of the alternative remedies is to be found in the history of that
fruitful action,
indebitatus assumpsit. The action depended on the fiction
that there is a separate and subsequent promise to pay a debt - indebitatus
assumpsit - though the debt arises out of a contract: see Ibbetson "Sixteenth
Century Contract Law: Slade's Case in Context" (1984)
4 Oxford Journal of
Legal Studies 295, at pp.315-317. An action lay for damages for breach of the
fictional subsequent promise to
pay the debt - damages which in theory might
not be in precisely the same amount as the debt: see Baker "New Light on
Slade's Case"
(1971) Cambridge Law Journal 51, at pp.55,56; Ibbetson, p.309.
A debt for a certain sum could also found an action of debt. But
whereas
indebitatus assumpsit led to a judgment in damages, judgment in an action of
debt was given for the precise amount of the
debt: see Ames Lectures on Legal
History (1913), p.89. However, indebitatus assumpsit and debt were both
actions founded on the
debt; in the cases where the debt arose out of a
contract, the actions were not founded on the contract. The debt, though
arising
from the contract, was itself a cause of action. As Dixon C.J.,
McTiernan and Taylor JJ. observed in their judgment in Young v.
Queensland
Trustees Ltd. [1956] HCA 51; (1956) 99 CLR 560, at p 567:
" The common law does not and never did conceiveIn time, the action of indebitatus assumpsit substantially replaced the action of debt. At first, both actions lay to recover only debts in a fixed amount but, in the course of the seventeenth century, the action of indebitatus assumpsit was held to lie when the remuneration or price to be paid for the doing of work or the supply of goods had been left indeterminate: see Stoljar The Law of Quasi-Contract (1964), pp.162-164; Jackson The History of Quasi-Contract in English Law (1936), p 42. In Hall v. Walland (1621) Cro.Jac.618 (79 ER 528) it was held that a "promise to pay tantum quantum meruerit is certain enough, and he shall make the demand what he deserves; and if he demand too much, the jury shall abridge it according to their discretion" (at p.619 (pp 528-529)). In Rolte v. Sharp (1627) Cro Car 77 (79 ER 668) it was held (at p 77 (p.669)) that it was "the common course, and always allowed" to plead a promise to pay tantum quantum meruit. And see Canwey v. Aldwyn (1639) Cro Car 573 (79 ER 1092) and Boult v. Harris [1685] EngR 2009; (1676) 3 Keble 469 (84 ER 828). In King v. Locke [1685] EngR 98; (1663) 1 Keble 422 (83 ER 1030) an action "on indebitatus for wares sold to pay quantum meruit" was held to be well brought, and in Web v. Moore (1691) 2 Ventris 282 [1726] EngR 531; (86 ER 442) the plaintiff was held entitled to recover as much as she deserved for "the consideration created a debt, tho' that debt was not reduced to a certain sum". If the contract which gave rise to the debt did not stipulate the remuneration or price and the jury assessed what the plaintiff deserved - "quantum meruit" - "the verdict of the jury (was) treated as equivalent to a determination of the parties at the time of bargain": Ames Lectures on Legal History, p.90.
of indebtedness in a sum certain for an executed
consideration as a mere breach of contract: it is
rather the detention of a sum of money and that
was so whether the creditor enforced his demand
by an action of debt or by indebitatus
assumpsit."
3. The first extension of indebitatus assumpsit to allow recovery on a quantum meruit for work done embraced only those cases where the debt on which the action was based arose out of a contract. However, at some later date, which Maitland puts between 1673 and 1705 (The Forms of Action at Common Law (1968 reprint), p.57), the action of indebitatus assumpsit was extended to actions in which the element of contract was purely fictitious: an obligation was imposed by law on the defendant and had nothing contractual about it: see Holdsworth History of English Law (1966 reprint), vol.VIII, pp.96-97. Thenceforward the action of indebitatus assumpsit embraced both actions founded on debts arising out of executed contracts and actions which were not contractual but quasi-contractual. The Statute of Frauds, when it was enacted in 1677, presented no impediment to the prosecution of actions in quasi-contract, for there was no contract on which the Statute might fasten. For the same reason, the modern equivalents of the Statute of Frauds do not impede the prosecution of modern actions which are not contractual but quasi-contractual.
4. It might have been expected that, when the forms of action ceased to govern the development of the substantive law, the distinction between an action on a contract and an action on a debt arising out of a contract would wither and the fiction of the subsequent promise to pay what was due would moulder away into irrelevance. But that was not the course which the law took. The law continued to recognize alternative rights to relief derived from the actions of debt and indebitatus assumpsit on the one hand and from the action on a special assumpsit (what we would call an action on the contract) on the other. Indebitatus assumpsit in particular proved to be useful in cases where the plaintiff had fully performed his obligations under a contract but an action founded on the contractual promise to pay could not succeed. Thus in Scarisbrick v. Parkinson (1869) 20 LT 175 the plaintiff who had served the defendant as a clerk for three years sued for 60 remuneration which the defendant had orally promised to pay him. By the first count in his declaration, he claimed that amount as due on the contract; by the second count, he claimed wages for the work he had done on a quantum meruit. The Court of Exchequer held that the plaintiff failed on the first count, for s.4 of the Statute of Frauds precluded an action on the contract which was not to be performed within a year. However, the plaintiff recovered a verdict for the same amount on the quantum meruit. That case was followed in Ward v. Griffiths Bros.Ltd. (1928) 28 SR (NSW) 425.
5. In Horton v. Jones (No.2) (1939) 39 SR (NSW) 305 Jordan C.J., delivering
the judgment of the Full Court, said (at p 319):
" Where there is or has been an express contract
between the parties, the cases in which it has
been held that an action for a quantum meruit may
be maintained are the following: ... (3) If a
person renders services to another under a
contract which is unenforceable by reason of the
absence of the written evidence required by the
Statute of Frauds, and the other sets up the
Statute as an answer to an action for the
stipulated remuneration, it has been held that
the former is entitled to recover a quantum
meruit: Scott v. Pattison ((1923) 2 KB 723); cf.
41 Law Quarterly Review, 79."
6. Then, in Turner v. Bladin [1951] HCA 13; (1951) 82 CLR 463 Williams,
Fullagar and Kitto JJ. said in their joint judgment (at
p 474):
" We consider that we should add that, thoughThe modern lawyer does not need to remember that the action of indebitatus assumpsit is founded on a separate and subsequent fictional promise to pay a debt arising out of a contract - a promise which the Statute of Frauds does not touch - but he needs to remember that this category of action of indebitatus assumpsit is founded on the debt to which the contract has given rise. As A.T. Denning (as his Lordship then was) pointed out in an article "Quantum Meruit and the Statute of Frauds" (1925) 41 Law Quarterly Review 79, at p.83, when "in 1677 the Statute of Frauds said 'No action shall be brought upon any agreement, etc'; the answer was quite clear 'This is not an action upon an agreement, it is an action upon a debt.'" The observation cited from Turner v. Bladin distinguishes between an action on the contract which is barred by the Statute of Frauds and an action on the debt arising out of the contract which is not.
the agreement sued on was found to be an
agreement for the sale of an interest in land, we
do not think that s.128 of the Instruments Act
was any defence to the plaintiff recovering at
law in an action of indebitatus assumpsit the
amount of the instalments which had become
payable at the date of the writ and overdue
interest to the date of judgment in the action.
The consideration moving from the plaintiffs to
the defendant was fully executed with the result
that the defendant became indebted to the
plaintiffs for the balance of purchase money and
interest. An action to recover these sums would
not be an action brought on the agreement but an
action of indebitatus assumpsit."
7. An understanding of the principles affecting the right to sue for the recovery of money due under a contract is impeded by an unhappy ambiguity in the use of the terms "implied contract" and "quantum meruit". Sometimes a contract is said to be implied when the contract is an actual, if tacit, agreement made by the parties; sometimes a contract is said to be implied when there is no actual agreement but the law imposes an obligation as though there were a contract between the parties. Even Blackstone did not avoid that ambiguity (Fifoot History and Sources of the Common Law (1949), p.367; Holdsworth History of the English Law, vol.VIII, p.96). Correspondingly, quantum meruit is sometimes used to describe an action to recover a reasonable sum which is due under a contract and sometimes to describe an action to recover a reasonable sum when the obligation to pay it is imposed by law independently of actual contract. As we have seen, indebitatus assumpsit was first expanded to embrace an action of quantum meruit when a contract did not stipulate a fixed sum as the remuneration of the work to be done. Later it was expanded to embrace an action of quantum meruit in quasi-contract when an obligation to pay was imposed by law independently of contract. There is now as there was in the seventeenth century a manifest difference between implying in a contract a term to pay quantum meruit and imposing an obligation to pay quantum meruit independently of contract. The difference between an implied term (or, for that matter, an implied contract) and an imposed obligation is material, for the Statute of Frauds may affect an implied term or implied contract and bar a claim for relief based upon it but a quasi-contractual claim for relief is not affected by the Statute.
8. A contract cannot be implied from the facts of a case while another
contract between the parties on the same matter is subsisting.
It was a
perceived error on the part of the Divisional Court in Scott v. Pattison
(1923) 2 KB 723 in implying a contract from the
facts which led the learned
author of the article in 41 Law Quarterly Review 79 to criticize that
judgment. The Divisional Court
had allowed a plaintiff to recover on an
"implied contract" to pay him while he was off work due to sickness though the
contract
of employment (on which no action could be brought under the Statute
of Frauds for want of writing) contained no term which entitled
the plaintiff
to pay for time off work. Apart from his time off for sickness the plaintiff
had worked for the whole of the contract
period. Salter J. said (at
pp.727-728):
" If a party to a contract, which is unenforceableIt does not appear from his Lordship's reasons why the Statute of Frauds did not apply to the contract which was implied. The learned author of the article had a more radical objection. He referred (at p.80) to what Brett L.J. had said in Britain v. Rossiter (1879) 11 QBD 123, at p 127:
under the Statute of Frauds, has rendered
services under that contract to the other party,
and the other party has accepted and benefited by
those services, then I think that the party who
has rendered the services can sue the other party
in debt on an implied contract to pay him
according to his deserts. That is not enforcing
the unenforceable contract but a different
contract which is quite enforceable."
" It is a proposition which cannot be disputed thatThe restriction on implying a contract from the facts was again stated by the learned author in a later article ("Quantum Meruit : The Case of Craven-Ellis v. Canons Ltd.", (1939) 55 Law Quarterly Review 54, at p 63):
no new contract can be implied from acts done
under an express contract, which is still
subsisting; all that can be said is that no one
can be charged upon the original contract because
it is not in writing."
" The Statute of Frauds does not render theIt follows that if a claim in indebitatus assumpsit founded on a debt arising out of a subsisting contract cannot be pursued by reason of the Statute of Frauds, no contract can be implied from the facts of the case which might circumvent the operation of the Statute.
contract void. It is still an existing contract,
and, except the right to sue on it, all the legal
consequences of a contract follow. So long,
therefore, as the express contract remains open
and unrescinded the plaintiff should not be
allowed to resort to an implied contract."
9. An obligation in quasi-contract, on the other hand, is imposed by law
independently of contract and is founded, as Denning L.J.
said in James v.
Thomas H. Kent & Co.Ld. (1951) 1 KB 551, at p 556, "not in contract at all,
but in restitution". A claim in
quasi-contract
is distinct from a claim for
money due under a contract. The distinction between a debt arising out of
contract -
whether a fixed
amount or a reasonable amount - and a
quasi-contractual pecuniary obligation imposed by law independently of
contract
has not always
been clearly drawn. In Scarisbrick v. Parkinson,
although the plaintiff recovered a verdict for the agreed remuneration,
the
contract
was treated merely as evidence of what was a reasonable sum, not as
giving rise to the debt on which the action was
founded. The
claim in that
case was not quasi-contractual. Way v. Latilla (1937) 3 All ER 759 which
followed Scarisbrick v. Parkinson,
was a different
class of case. It was
either a case where a term for reasonable remuneration was implied in a
contract of employment
or a case where
no contract came into existence because
the arrangement between the parties was not sufficiently definite to be
ascertainable:
see
per Jordan C.J. in Horton v. Jones (No.2), at pp 319-320.
The conversations of the parties - not amounting to a contract or not
settling
the term of the contract as to remuneration - were held relevant to the
question of amount. Without noting the distinction
between
Way v. Latilla and
Scarisbrick v. Parkinson, Lord Atkin said at p 764:
" That, in fixing a salary basis, the court may payThe distinction between the two cases - one where a special remuneration was fixed by contract and the other where there was no contract or an implied term to pay a reasonable remuneration - is not clearly drawn.
regard to the previous conversation of the
parties was decided by the Court of Exchequer in
1869, in Scarisbrick v. Parkinson, where the
terms of an agreement, invalid under the Statute
of Frauds, were held to be admissible as evidence
in a quantum meruit. This seems to me to be good
law, and to give effect to a principle which has
been adopted regularly by the courts not only in
fixing remuneration for services but also in
fixing prices, sums due for use and occupation,
and, indeed, in all cases where the court has to
determine what is a reasonable reward for the
consideration given by the claimant."
10. Is it possible to make a quasi-contractual claim in quantum meruit and
circumvent the operation of the Statute of Frauds on a
subsisting contract?
Jordan C.J. in Horton v. Jones (No.2) said, at p 319:
" No action will lie for a quantum meruit soHis Honour went on to say that where a contract does not provide for a special remuneration, an action for a quantum meruit may be maintained in certain circumstances: when a promise to pay a reasonable remuneration is implied from the employment of a person or an agreement to buy goods from him; when a wrongful repudiation of a contract is accepted by the party who has rendered services under the contract; and, as appears in the passage earlier cited, when the contract has been performed and the stipulated remuneration is due. None of these classes of claim except the second (which is not material here) is quasi-contractual. However, in the report of James v. Thomas H. Kent & Co.Ld. in the Law Reports ((1951) 1 KB 551), Denning L.J. is reported as saying (at p 556):
long as there is in existence an enforceable
express contract which provides for a special
remuneration."
" If the servant had fully performed his part ofHere his Lordship, having attacked in his articles in the Law Quarterly Review the implied contract theory of Scott v. Pattison, offers an alternative explanation for the decision in that case. By putting the case "not in contract but in restitution", his Lordship propounds a quasi-contractual obligation as the foundation for the decision. Following the approach taken in Way v. Latilla, he treats the contract merely as evidence of amount in an action of quasi- contractual quantum meruit. With respect, the notion that a quasi-contractual obligation existed in Scott v. Pattison seems to be wrong in principle. The principle is that no quasi-contractual obligation arises when there is a subsisting contractual obligation governing the same subject matter. That principle underlies the general rule established by Cutter v. Powell (1795) 6 TR 320 [1795] EWHC J13; (101 ER 573), namely, that no action of indebitatus assumpsit can be brought for anything done under a subsisting contract while it remains substantially unperformed. The principle inheres in the rule that when a contract providing for special remuneration is performed, no quasi-contractual obligation to pay arises: see per Jordan C.J. in Horton v. Jones (No.2). There is no distinction in principle between a contract which provides for remuneration that is special and a contract which provides for remuneration that is not special. When a subsisting contract provides, expressly or impliedly, for remuneration to be paid, the performance of that contract cannot give rise to a quasi-contractual right to remuneration. Although an action of indebitatus assumpsit lies when performance of the contract gives rise to a debt, it does not lie on a cause of action arising dehors the contract. If it did, the "reasonable remuneration" which might be recovered on a quasi- contractual claim would not necessarily be equal to the agreed remuneration whether "special remuneration" or not.
the contract by serving his full time, or, what
is the same thing, by serving his full time save
when excused by sickness, he could sue for a
reasonable remuneration which might be equal to
his stipulated wages: see Scott v. Pattison".
11. Where work is done by a plaintiff under a contract which expressly or impliedly provides for the plaintiff's remuneration, there is no ground in restitution or unjust enrichment for imposing an obligation to pay remuneration different from the agreed remuneration. If it were possible to impose a quasi-contractual obligation to pay reasonable remuneration when there is a subsisting unwritten contract which falls within the Statute of Frauds, the imposed obligation would be either inconsistent with the contract or it would duplicate the contractual obligation. An inability to sue on a contract provides no ground for imposing a quasi-contractual obligation inconsistent with the contractual obligation to pay remuneration, and the effect of the Statute on the contractual obligation cannot be circumvented by substituting a corresponding quasi- contractual obligation. A subsisting contract is the source and charter of the rights and obligations of the parties, and the law cannot impose other rights and obligations either to vary the contractual provisions or to negative the effect which the Statute of Frauds has upon them.
12. The objection to the quasi-contractual theory embraced by Denning L.J. to explain Scott v. Pattison cannot be levelled against the judgment of Jordan C.J. in the first case of Horton v. Jones (1934) 34 SR (NSW) 359, where his Honour admitted a quasi-contractual claim for remuneration in respect of work done in performance of a contract. In that case the plaintiff alleged that work was done and services were rendered under a contract by which the other party promised to make a will containing certain dispositions in her favour. The alleged contract was unenforceable for want of writing. That contract did not, of course, provide "for a special remuneration" but neither did it give rise to a debt. Jordan C.J. (at p.367), accepting that "(t)he existence of the unenforceable contract prevents a new contract, in respect of which special assumpsit could be maintained, from being implied from the acts performed", held the plaintiff to be entitled to pursue a quasi-contractual claim for work done and services rendered if "in the absence of the unenforceable contract, (the plaintiff) could maintain an action of debt upon the common money counts". His Honour held the contract to be evidence on the question of amount. Even if Jordan C.J. was right to hold that an action of indebitatus assumpsit lies when work is done in performance of a contract which stipulates a reward other than money (as in Horton v. Jones or Gray v. Hill (1826) Ry. & Mood.421 (171 ER 1070)) Horton v. Jones gives no support to the quasi-contractual explanation of Scott v. Pattison. By way of contrast, there is no difficulty in the way of recovery on a quasi-contractual quantum meruit when the work is done in performance of what is believed to be, but what is not, a valid contract (Craven-Ellis v. Canons,Ld. (1936) 2 KB 403) or when necessaries are supplied to an infant who lacks contractual capacity (Nash v. Inman (1908) 2 KB 1, at pp 8, 9) or when work is done in an expectation that a contract will be made (William Lacey (Hounslow) Ltd. v. Davis (1957) 1 WLR 932; (1957) 2 All ER 712). But when the work is done under a valid and subsisting contract which provides for remuneration to be paid for the work and which falls within the Statute of Frauds, no action of indebitatus assumpsit lies save on the debt arising on the contract.
13. It follows that the only actions which can be brought to enforce a debt
arising out of a subsisting unwritten contract falling
within s.4 of the
Statute of Frauds is an action of indebitatus assumpsit or, if the debt arises
out of a stipulation for a fixed
sum, an action of debt. That view accords
with what their Honours said in Turner v. Bladin. The reasons assigned by
their Honours
for their opinion (at pp 474-475) read as follows:
" We accept with respect the views expressed by
A.T. Denning (now Denning L.J.) in the articles
in 41 Law Quarterly Review, p.79 and 55 Law
Quarterly Review, p.63. His Lordship has now
expressed his adherence to these views as a
member of the Court of Appeal in James v. Thomas
H. Kent & Co.Ltd. In our opinion Koellner v.
Breese ((1909) 9 SR (NSW) 457; 26 WN
(N.S.W.) 92) was rightly decided. Cocking v.
Ward ((1845) [1845] EngR 970; 1 CB 858 (135 ER 781)); Kelly v.
Webster ((1852) 12 C.B.283 (138 E.R.912));
Sanderson v. Graves ((1875) LR 10 Ex 234) are
cases where the action was brought on the
agreement and are therefore distinguishable.
Phillips v. Ellinson Bros.Pty.Ltd. ((1941) 65
CLR 221) was also a case where the action was
brought on the agreement. Accordingly, if an
indebitatus count had been added to the statement
of claim, the learned Chief Justice could have
given judgment at common law".
14. Their Honours' reference to James v. Thomas H. Kent & Co. Ltd. has been
shown to be a reference to what Denning LJ. was
reported
as saying in the
report of the case then available in (1950) 2 All E.R.1099, at p.1103:
" If the plaintiff had fully performed his partIn Souch v. Strawbridge [1846] EngR 565; (1846) 2 CB 808 (135 ER 1161) Tindal C.J. said (at p 814 (p.1164)) that the Statute of Frauds "has no application to an action in the present form, founded upon an executed consideration". His Lordship did not say that the Statute of Frauds did not apply to executed contracts; he said that the Statute does not bar an action brought on an executed consideration: see Sanderson v. Graves (1875) LR 10 Ex 234, at p 238. The Statute applies to contracts which are executed as well as to contracts which are executory so that no action can be brought on a contractual promise to pay contained in an unwritten contract falling within the statute. But, as Denning L.J. pointed out in the passage quoted, the Statute does not preclude an action in debt on an executed consideration: and see Cocking v. Ward [1845] EngR 970; (1845) 1 CB 858, at p 870 [1845] EngR 970; (135 ER 781, at p 786); Knowlman v. Bluett [1853] EngR 801; (1873) LR 9 Ex 1, 307.
of the contract by serving his full time, or,
what is the same thing, by serving his full time
save when excused by sickness, he could sue for
his stipulated wages. So, also, if he had
served up to the time when any instalment fell
due, he could sue for that instalment. In those
cases his action would be in debt on an executed
consideration to which the Statute of Frauds has
no application. That was expressly laid down by
Tindal, C.J. in Souch v. Strawbridge (2 CB 814),
and is, I think, still good law to-day."
15. The other case of indebitatus assumpsit to which their Honours referred in Turner v. Bladin was Koellner v. Breese. There it was held that a plea raising the Statute of Frauds was bad when the declaration was framed (as the Full Court construed it) as a common money count for the balance of the price of land sold and transferred by the plaintiff to the defendant under an unenforceable contract.
16. Although it is true to say that a plaintiff who has performed his obligations under an unwritten contract falling within the Statute of Frauds can sue to recover the amount due under the contract (whether a fixed sum or a reasonable amount), that proposition does not necessarily apply when the contract is affected by another statute enacted for a different purpose and couched in different terms. The question here is whether s.45 of the Builders Licensing Act goes further than the Statute of Frauds and precludes a registered builder from suing for the amount due for work done pursuant to an unwritten contract when he has completed the work (or, perhaps, when he has substantially completed the work: see H. Dakin & Co., Limited v. Lee (1916) 1 KB 566; Phillips v. Ellinson Brothers Pty.Ltd. [1941] HCA 35; (1941) 65 CLR 221, at pp 235,246).
17. There is a difference in language and in purpose between s.4 of the Statute of Frauds and s.45 of the Builders Licensing Act. Section 4 of the Statute of Frauds prescribes that "no action shall be brought whereby to charge any (person) upon" an agreement not in writing being an agreement of a kind therein specified. Section 45 of the Builders Licensing Act provides that a "building contract" as therein prescribed which is not in writing "is not enforceable" by the holder of a licence "against the other party to the contract". A general denial of enforceability against one party is a more extensive sterilization of a contract than a denial of a right to enforce it by an action on the contract brought against that party. To make a contract unenforceable against a party is to give him a wider immunity than is given by preventing an action against him on the contract. A contract which is unenforceable cannot give rise to any legal remedy, whether curial or extra-curial: Mayfair Trading Co.Pty.Ltd. v. Dreyer [1958] HCA 55; (1958) 101 CLR 428, at pp 448-449.
18. In terms, s.45 is similar to s.22(1) of the Money- lenders and Infants
Loans Act 1941-1948 (N.S.W.) which Walsh J. considered
in Deposit & Investment
Co. v. Kaye (1962) 63 SR (NSW) 453. That sub-section provided that: "No
contract for the repayment of
money
lent by a money- lender ... and no
security given to any money-lender in respect of any such contract or loan
shall be enforceable
unless" certain conditions, including writing, were
satisfied. Walsh J. referred to the forms of action for the recovery of money
in relation to contracts to which the Statute of Frauds applied, noting that
recovery is sometimes allowed "on the basis that the
contract is an executed
one to which the Statute does not apply", but he attributed a different
operation to s.22(1) saying (at p.463)
that in a case where the money-lender
had not complied with the Act:
" ... as in some other cases of contracts which areSection 45 was passed to protect the building owner. I respectfully agree with the view of Samuels J.A. in Schwarstein v. Watson (1985) 3 NSWLR 134, at pp 140-141 (which his Honour adopted in the present case), that s.45 is designed "to ensure that a written record was made of the work to be done and the rate to be charged; it being notorious that disputes about both matters not infrequently arose requiring determination at tedious length". Or, as McHugh J.A. said in this case ((1985) 3 N.S.W.L.R.114, at p.132):
rendered void (but not illegal) by statute, the
law will refuse to allow a quasi-contract claim
for recovery, because to allow it would be
contrary to the effect and the policy of the Act:
... I think that in some cases it is relevant
also to an attempt to recover money paid in
relation to a contract which, although not
illegal, is void or is unenforceable because of
statutory provisions, to consider whether it is
the party for whose protection the Act was passed
who seeks a remedy, or whether it is that party
against whom the remedy is sought."
" Disputes between builders and home owners as to
what work was agreed upon and what was to be its
cost have plagued the building industry for many
years. Section 45 represents a legislative
attempt to overcome this problem by forcing
licensed builders to obtain written contracts for
building work before they are enforceable by
builders. We must give effect to the legislative
policy embodied in s.45, however harsh it may
seem in an individual case."
19. It may be that contracts falling within s.45 contain an implied term that
they will cease to be effective if the building owner
refuses to sign a
written agreement on the request of the licence holder before work begins, but
the present case does not call for
consideration of that question. The
existence of a building contract, valid in every respect save that it is
unwritten, is the postulate
on which this case is to be decided. Does s.45
leave the licence holder liable to perform the contract according to its terms
without
an enforceable right to payment?
20. If that is the effect of s.45, it is truly draconian. A law of that kind
evokes an anxious consideration of legal remedies
which might alleviate the
injustice which the legislature should not lightly be taken to have intended.
Section 45 is not expressed
to operate differently on contracts which are
executed and contracts which are not and it makes all contracts falling within
its
terms unenforceable by the licence holder. No cause of action founded on
the contractual promise to pay can arise. If the contractual
promise to pay
the licence holder's remuneration is capable of giving rise to an enforceable
debt, however, an action founded on
the debt - derived from the action of debt
or the action of indebitatus assumpsit - would provide an alleviating remedy,
preventing
injustice under s.45 as it has prevented fraud under the Statute of
Frauds. But when the concurrent actions of debt and indebitatus
assumpsit lay
to recover what was due under a contract the contractual promise to pay was
always treated as the source of the debt
on which those actions were founded.
The force of the contractual promise was spent in creating the debt and that
debt was the subject
of the fictional promise to pay: see Ames "The History of
Assumpsit" in Select Essays in Anglo- American Legal History (1909), vol.III,
259, at pp.281-286. Either action ultimately depended on a contract effective
to create what the law recognized as a debt. In Studdy
v. Sanders [1826] EngR 977; (1826) 5 B
& C 628, at p 638 [1826] EngR 977; (108 ER 234, at p 238) Holroyd J. said:
" ... it is said, 'Although an indebitatusAn action to recover money due on an executed contract may be distinguished from an action to enforce a promise to pay contained in the contract - the point of distinction being the debt to which the contract gives rise - but the debt is nevertheless a cause of action arising out of the contract. That appears in what was said in Young v. Queensland Trustees Ltd., at p 569:
assumpsit will not lie upon a special agreement
till the terms of it are performed, yet when that
is done, it raises a duty for which a general
indebitatus assumpsit will lie.' I take this to
be the reason for the common practice of
introducing two counts in declaring upon the sale
of a horse, one upon an executory and the other
upon an executed contract, although it is clear
the plaintiff might recover upon the last after
delivery."
" A debt recoverable under an indebitatus count wasIf s.45 makes the contract wholly unenforceable against the building owner, the contract is incapable of giving rise to a debt on which an action of debt or indebitatus assumpsit might be founded.
not and is not now conceived of simply as a
cause of action for breach of duty or obligation.
In other words it is a mistake to regard the
liability to pay a debt of a kind formerly
recoverable in debt or indebitatus assumpsit as
no more than the result of a breach of contract,
a breach which the creditor must affirmatively
allege and prove." (Emphasis added.)
21. Apart from legal theory, the submission that a licence holder can sue for remuneration due under his contract with the building owner when s.45 declares that the contract is not enforceable against the building owner seems contrary to the plain words of the statute. If s.45 were held not to bar such an action to recover a debt due under the contract the section would have had little, if any, practical effect on the litigation of building contracts where the holder of the licence had discharged his obligations to completion (or perhaps to substantial completion). If it were necessary to prove the discharge of the licence holder's obligations under the unwritten contract in order to establish an enforceable debt recoverable by the plaintiff, litigation arising out of unwritten building contracts would focus on the work which had been agreed upon and the remuneration promised. The effect of s.45 would be to exacerbate the very problem, identified by Samuels and McHugh JJ.A., which s.45 was intended to overcome. In my opinion, s.45 precludes the arising of an enforceable debt. The contractual promise to pay is clearly unenforceable and there is no room, while the unenforceable contract is subsisting, for a quasi-contractual claim.
22. In Queensland a different view has been taken of a provision similar to s.45 in an Act which, in the opinion of the Full Court of the Supreme Court of Queensland, is designed not so much to protect the building owner as to provide the machinery for administering an insurance scheme: see Gino D'Alessandro Constructions Pty.Ltd. v. Powis and Anor (unreported, 26 September 1986). Whether the different context of the Queensland provision is sufficient to warrant the operation attributed to its text may be doubted but that is not a question which we must now decide. In my opinion s.45, in its context in the Builders Licensing Act, precludes a licence holder from enforcing the obligations of a building owner under an unwritten contract between them to which that section applies whether or not the licence holder has executed the contract.
23. I would dismiss the appeal.
DEANE J.: At material times, the appellant company ("the builder") was the holder of a licence under the Builders Licensing Act 1971 (N.S.W.) ("the Act"). It carried out the work and supplied the materials involved in the renovation of a cottage at Swansea Heads in New South Wales for the respondent, Mrs. Paul. It is common ground that the work was "building work" within the meaning of s.45 of the Act and that it was carried out pursuant to an oral contract, between the builder and Mrs. Paul, to the effect that the builder would do the work requested by Mrs. Paul and that Mrs. Paul would pay the builder "a reasonable remuneration for that work, calculated by reference to prevailing rates of payment in the building industry". After the work had been completed and Mrs. Paul had accepted the benefit of it and taken up occupation of the renovated cottage, the builder instituted proceedings in the Supreme Court of New South Wales for what is claimed to be the balance (after giving credit for $36,000 already paid) owing to it in respect of the work. Its claim was for money payable as on a quantum meruit and corresponded with the old common indebitatus count for work done and materials provided. By her (amended) statement of defence, Mrs. Paul put in issue certain matters of fact and denied the reasonableness of the charges. She also pleaded that the contract pursuant to which the work had been carried out was a building contract which was not enforceable by the builder by reason of the provisions of s.45 of the Act. By consent, it was ordered in the Supreme Court that the issue raised by the defence based on s.45 be determined, upon agreed facts, as a separate preliminary issue. It is with that issue that the present appeal is concerned.
2. Section 45 of the Act relevantly provides that a contract under which a licensed builder "undertakes to carry out ... any building work ... is not enforceable against the other party to the contract" unless it "is in writing signed by each of the parties or his agent in that behalf and sufficiently describes the building work the subject of the contract". Plainly enough, the oral contract between the builder and Mrs. Paul was of the kind described in the section and failed to satisfy its requirements. The issue between the parties on the present appeal is whether the words of the section should be construed as applying to preclude the builder from suing to recover recompense for building work completed under an oral contract in circumstances where the work has been fully completed by the builder and accepted by the building owner. Whatever may be the merits of the present case, where Mrs. Paul claims to have already paid all that is reasonably due, such a construction of the section would inevitably lead to injustice in those cases where a builder had discharged all his obligations under the building contract only to find that he was unable to recover any payment at all by reason of some innocent failure to ensure that the contract satisfied the requirements of the section. Since the section does not preclude enforcement of the contract against the licensed builder, that broad construction could also give rise to the oppressive situation in which a builder was contractually bound to continue and complete building work under a contract in circumstances where the section operated to preclude recovery by him of any recompense at all on completion of the work. A likelihood of consequential injustice and oppression does not, of course, warrant a refusal to give effect to the legislative intent disclosed by the relevant words of the statute. It does, however, call for careful scrutiny of those words to determine whether any such legislative intent can properly be discerned in them.
3. At first instance in the Supreme Court, Clarke J. resolved the preliminary issue in favour of the builder. His Honour upheld a submission that the action was not one to enforce the oral contract which was rendered unenforceable by s.45 of the Act for the reason that the builder's claim was "quite independent of the contract and based upon the fact that the consideration moving from the plaintiff had been fully executed". Mrs. Paul appealed from Clarke J's decision on the preliminary issue to the Court of Appeal. There, a contrary view prevailed. It was held that the words of s.45, in the context of the legislative policy to be discerned in the Act as a whole, precluded any action by the builder to recover payment for the work done under the unenforceable building contract. That determination of the preliminary issue disposed of the builder's claim and the Court of Appeal ordered that judgment be entered in Mrs. Paul's favour. The appeal to this Court is from the judgment and orders of the Court of Appeal.
4. The judgments in the Supreme Court in the present case and in Schwarstein v. Watson (1985) 3 NSWLR 134 contain expositions of the history and nature of the actions of debt and assumpsit. An understanding of those actions was seen by their Honours as necessary to an informed consideration of the question of the true basis upon which common law courts have found in some cases in favour of a plaintiff who has done work, paid money or transferred or surrendered property under a contract upon which an action could not be brought by reason of the provisions of the fourth section of the Statute of Frauds 1677 (U.K.). That question is of importance here for the reason that the builder has primarily relied upon a perceived analogy between those cases and its present claim to be paid a reasonable remuneration for the building work which it has completed and of which Mrs. Paul has received the benefit. It is convenient to turn at once to it. The discussion of relevant and, to some extent, conflicting authority which is to be found in the judgments in the present and other recent cases (see, in addition to Schwarstein, Gino D'Alessandro Constructions Pty. Ltd. v. Powis, unreported, Supreme Court of Queensland, 12 December 1985 (Macrossan J.) and 26 September 1986 (Full Court); Fablo Pty. Ltd. v. Bloore (1983) 1 QdR 107; Trimtor Building Consultants Pty. Ltd. v. Hilton (1983) 1 NSWLR 259; Triple "C" Holdings Pty. Ltd. v. Hogan (1983) 1 NSWLR 252 (a case decided in 1976)) and in academic writings (see, in particular, J.B. Ames, Lectures on Legal History (1913), Lectures XIII and XIV; H.A.J. Ford, "Indebitatus Assumpsit and the Statute of Frauds", Res Judicatae, vol. 6 (1952), 71; A.W.B. Simpson, A History of the Common Law of Contract (1975) ch. 8; W.S. Holdsworth, A History of English Law, 5th ed. (1942), vol. III, pp.446ff.; W.S. Holdsworth, "Unjustifiable Enrichment", Law Quarterly Review, vol. 55 (1939), 37) makes it possible for me to deal with the earlier cases in a more selective fashion than might otherwise be appropriate. For ease of discussion, I shall use the term "the Statute of Frauds" to refer indifferently to the fourth section of that Statute and to any subsequent statutory adoption of all or some of that section's provisions precluding the bringing of an action upon an oral or insufficiently recorded agreement.
5. As this Court (Griffith C.J., Barton and O'Connor JJ.) pointed out in
Bagnall v. White [1906] HCA 52; (1906) 4 CLR 89, at p
96, the ex tempore
dictum of Tindal
C.J. in Souch v. Strawbridge [1846] EngR 565; (1846) 2 CB 808, at p 814 [1846] EngR 565; (135 ER 1161, at p
1164) to the effect
that the Statute of
Frauds does not apply to "an action in
the present form, founded upon
an executed consideration" cannot properly
be
converted into
a general proposition to the effect that the Statute does not
apply
at all to executed contracts (in the sense
of executed on one
side). So
much was made clear by Bramwell B. and Amphlett B. in separate
judgments in
Sanderson v. Graves (1875)
LR 10 Ex 234.
Amphlett B. (at pp 241-242)
acknowledged that there were some "old" authorities
which supported such a
general proposition
but concluded
that "more modern decisions" must be seen as
having overruled them. Among
those "more modern decisions" was the considered
judgment
in Cocking v. Ward [1845] EngR 970; (1845) 1 CB 858 (135 ER 781) which had been
delivered by Tindal C.J. on behalf of a Court of Common Pleas
constituted
by
himself
and Maule, Cresswell and Erle JJ. In rejecting any general
proposition that the Statute of Frauds does not
apply to an
executed
contract,
Bramwell B. (in Sanderson v. Graves) demonstrated the need to identify some
other rational explanation
of those
cases where
recovery of recompense for an
executed consideration was permissible in a common law action notwithstanding
that the
provisions of
s.4 of the Statute of Frauds applied to the contract
under which the consideration had been given. His Lordship
said
(at p.238):
"It was contended for the plaintiffs, on theIn the last sentence of that passage Bramwell B. was not referring to the subsequent promise to pay which Slade's Case [1598] EngR 39; (1602) 4 Co.Rep. 92b (76 E.R. 1074) had established was implicit in the executory obligation in debt arising under the agreement and which would be relied on in a special count in assumpsit. To the contrary, his Lordship was referring to "a promise" or obligation arising not under the unenforceable agreement but by implication or imputation of "the law" upon the acceptance of the benefit of the executed consideration in circumstances where it appeared that the consideration had not been provided in the capacity of a volunteer. That distinction had been adverted to in earlier cases. For example, in Gray v. Hill (1826) Ry. & Mood. 420 (171 ER 1070), Best C.J. had observed (at p 421 (p 1070 of ER)): "(t)he 4th section of the statute is decisive against the plaintiff on the special count, but I think the plaintiff entitled to a verdict on the (common counts). The plaintiff has expended this money for the benefit, and at the instance of, the defendant; the law will therefore imply a promise not touched by the statute ...". Indeed, the distinction had been relied upon, in the year preceding that in which Sanderson v. Graves was decided, by a strong Court of Exchequer Chamber (Blackburn, Keating, Mellor, Lush, Grove and Archibald JJ.) in dismissing an appeal from the Court of Exchequer (Kelly C.B., Bramwell and Pigott BB.) in Knowlman v. Bluett [1853] EngR 801; (1873) LR 9 Ex 1 (Exchequer) and (1874) LR 9 Ex 307 (Exchequer Chamber). In that case, the plaintiff had sued in assumpsit to recover the debt arising from an agreement upon which the Statute of Frauds precluded the bringing of an action. Her declaration was "in form upon (the) special contract". As such, her action was not maintainable because of the absence of any memorandum in writing. However, the Court of Exchequer Chamber pointed out that it would be "unjust if (the plaintiff) could not obtain repayment of the sums she has expended" and upheld (at pp.308-309) her right to recover by treating her action as being "in substance" brought not on a special count but upon the common indebitatus count of money paid at the defendant's request.
authority of a dictum of Tindal, C.J., in Souch v.
Strawbridge, that the statute does not apply to
executed contracts. But, with all respect, that
cannot be true of all cases within s. 4. For, as
to some of them, the question cannot arise till the
contract is executed, e.g., cases of guarantee,
cases in consideration of marriage. There are
cases where, when the thing is executed, a
defendant might be liable, e.g., on a contract to
paint and deliver a picture on and not before a day
distant more than a year. If at the time appointed
the person ordering the picture took it, he would
be held to have renewed his promise at the moment.
So of any other case where the law would imply a
promise on the doing of anything by the promisor"
(emphasis added).
6. This distinction between suing on a special count which was seen as an action brought upon the unenforceable agreement and suing on a common indebitatus count which was not so seen was accepted in subsequent cases in England (see, in particular, Pulbrook v. Lawes (1876) 1 QBD 284, at pp 290-291; Scott v. Pattison (1923) 2 KB 723, at pp 726, 727-728). In this Court, the matter first arose in Bagnall v. White. The Court would seem not to have been referred to the decision of the Court of Exchequer Chamber in Knowlman but recognized (at p 96) that Pulbrook v. Lawes (particularly the reference in Blackburn J's judgment (at p 289) to Cocking v. Ward) provided support for Mr. Bagnall's claim to recover, on a common indebitatus count, compensation for the surrender of a lease pursuant to an agreement upon which action was precluded by the Statute of Frauds. Somewhat surprisingly, the Court avoided determining the question by rescinding the grant of special leave to appeal on the ground that "it would not be a proper thing ... to decide such a difficult matter in a case where so small an amount (was) involved" (p.97).
7. A similar point arose before the Full Court of the Supreme Court of New South Wales in Koellner v. Breese (1909) 9 SR (NSW) 457. There, the plaintiff had sued at common law to recover the purchase price of land sold and transferred under a contract upon which an action could not be brought by reason of the Statute of Frauds. The first count in the declaration was a common indebitatus count for, inter alia, land sold and transferred. The second count was a special count upon the executed agreement. A demurrer to the defendant's plea of the Statute of Frauds to both counts was upheld. In the course of his judgment, Simpson A.C.J. (with whom Cohen and Pring JJ. agreed) said the plea of the Statute of Frauds to the common count was clearly bad. His Honour concluded that the plea of the Statute to the special count was also bad for the reason that, as in Knowlman v. Bluett, "although in form a special count it is substantially to recover a debt which is recoverable under the first count. It amounts ... to no more than an argumentative common count ..." (p.460, emphasis added). The Full Court did not consider whether what could only be justified as "no more than an argumentative common count" should in any event be struck out of a declaration which already contained the relevant common count.
8. The basic propositions to be drawn from the above and other authorities
were identified by Jordan C.J. in Horton v. Jones (No.
1) (1934) 34 SR (NSW)
359, at pp 367-368 in a passage which was subsequently quoted with approval by
Williams J. in this Court (see
Phillips v. Ellinson Brothers Pty. Ltd. [1941] HCA 35; (1941)
65 CLR 221, at p 246). I take the liberty of stating those propositions,
with
which
I respectfully agree, in a different
order and in varied words.
Omitting all but one of the references cited by Jordan
C.J., they
are:
1. The "mere fact that the consideration isexecuted is not sufficient" to make the Statute of Frauds inapplicable.
2. "If, however, a person does acts for thebenefit of another in the performance of a contract (upon which an action cannot be brought by reason of the Statute of Frauds), and the other so accepts the benefit of those acts, or otherwise behaves in relation to them, that, in the absence of the ... contract, the former could maintain an action ... upon the common money counts, he may sue in indebitatus to obtain reasonable remuneration for the executed consideration: ... 41 Law Quarterly Review, 79."
3. "The existence of the unenforceable contractprevents a new contract, in respect of which special assumpsit could be maintained, from being implied from the acts performed ...; and the unenforceable contract may be referred to as evidence, but as evidence only, on the question of amount...."
4. The appropriate action to obtain suchreasonable remuneration is "an action of debt". "In such a case the action is in indebitatus only."
9. 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" (see Chitty's Treatise on Pleading, 7th ed. (1844), vol. 1, p.351). That being so, his Honour was not concerned to resolve the old conflict about whether the special quantum meruit and quantum valebant (or valebat) counts could lie in debt where the essence of the action was the alleged retention of a liquidated amount which was due (contrast, e.g., the views expressed in Chitty, op. cit., at p.375 and in Ames, op. cit., at p 89). It is true that Horton v. Jones (No. 1) was decided at a time when the old forms of action were still alive in New South Wales. The special quantum meruit and quantum valebant counts had, however, long been obsolete (see, e.g., Chitty, op. cit., at p 352; Horton v. Jones (No. 2), at p 316). The position was explained by Bullen & Leake (Precedents of Pleadings, 3rd ed. (1868), p.35), in words which were subsequently quoted with approval by Farwell L.J. in Lagos v. Grunwaldt (1910) 1 KB 41, at p 48: "(t)here were also formerly in use counts known as quantum meruit and quantum valebat counts, which were adopted where there was no fixed price for work done or goods sold, etc. (1 Chit. Pl. 7th ed. 351.) These counts however have fallen into disuse, and have been superseded by the general application of the indebitatus counts." In a case where there was no fixed remuneration or price, the action on one of the ordinary common indebitatus counts, which had absorbed the express quantum meruit and quantum valebant counts, was in substance to recover a "quantum meruit" or "quantum valebant" in the sense that it was to recover the amount which represented reasonable remuneration. It had, however, long been settled that such an action on an ordinary common indebitatus count was to recover the amount payable as a liquidated amount or debt. As Farwell L.J. observed in Lagos v. Grunwaldt (ibid.), "everything that could be sued for under those counts comes within the description of debt or liquidated demand". That being so, there remained no objection to such an action being brought in debt (see, generally, Horton v. Jones (No. 2), at pp 316ff.; Chitty, op. cit., at p 352; and, e.g., Gardner v. Bowman (1834) 4 Tyr. 412).
10. The impression has sometimes been conveyed by colourful phraseology that the retention of the old forms of action in New South Wales until 1970, when they were abolished by the belated introduction of the Judicature Act system of pleading, meant that the administration of civil justice in that State had lagged behind the 19th century. Such an impression bears little relationship to the reality. Whatever may have been the comparative advantages and disadvantages of the formal system of pleading and the formal separation of law and equity (see, e.g., Sir Owen Dixon, "Concerning Judicial Method", Australian Law Journal, vol. 29 (1956), 468, at pp.469-470), the substantive common law developed in New South Wales with little real hindrance from the continued observance of them. In a situation where causes of action could be joined, where it had become unnecessary to specify the particular form of action adopted or to plead the fictional promise in an action of assumpsit and where "the same conveniences as to final judgment and the assessment of damages (were) extended to all causes of action to which they can be applied" (see Bullen & Leake, op. cit., at p.36; Common Law Procedure Act 1853 (N.S.W.) ss.3, 37, 45, 85, 86, 87; Common Law Procedure Act 1899 (N.S.W.) ss.5, 49, 129, 130, 131), any real point in distinguishing in the ordinary case between a common indebitatus count in debt and one in assumpsit had disappeared and the fictional assumpsit underlying a common indebitatus assumpsit count had become largely forgotten. Indeed, the notion that an action on a common indebitatus count for a reasonable remuneration was not an action to recover as a debt the actual liquidated amount payable but was an action for breach of some unmentioned fictional assumpsit or promise to pay it would have sounded as bizarre in the ears of a practising New South Wales lawyer at the time Horton v. Jones (No. 1) was decided as in the ears of a practising lawyer in a jurisdiction where the old forms of action had been formally interred. In that context, the present significance of Jordan C.J's statement that the relevant action upon a common indebitatus count was "an action of debt" to obtain "reasonable remuneration" is not that his Honour intended to suggest, for he plainly did not, that an action on a common indebitatus count in assumpsit would have been unavailable or inappropriate. Its present significance is that, once liability to pay reasonable remuneration is recognized as arising not from the "unenforceable contract" (which "may be referred to as evidence, but as evidence only, on the question of amount") but from the operation of law upon the circumstances, there is plainly no need to resort to the fictional promise of assumpsit to explain why the Statute of Frauds does not preclude the bringing of an action upon a common indebitatus count to recover the amount of that liability as a liquidated sum. The reason for that is that such an action is plainly not brought upon the unenforceable contract regardless of whether it is seen as an action in debt to recover the amount of that reasonable remuneration or as an action in assumpsit to recover damages for breach of the fictional assumpsit to pay that liquidated amount.
11. The reference by Jordan C.J. to an article in (1925) 41 Law Quarterly Review was to the first of two related articles in that journal in which Mr. A.T. Denning, as his Lordship then was, discussed the availability of an action in a common indebitatus count notwithstanding the provisions of the Statute of Frauds (see also (1939) 55 Law Quarterly Review, 54). In those articles, Lord Denning propounded a general proposition, based on Tindal C.J's dictum in Souch v. Strawbridge, that "the Statute of Frauds does not apply when the claim is in substance in indebitatus assumpsit on an executed consideration" (vol. 41, at p 85) or, more broadly expressed, "that once the contract is executed, the Statute of Frauds does not apply" (vol. 55, at p.63). In the context of Professor Ames' celebrated analysis of the development of express and implied assumpsit (see the revised reprint of the Harvard Law Review articles (vol.2 (1888-89), pp.1, 53) in Ames, op. cit., at pp.129ff. and 149ff.), Lord Denning's essential justification of that general proposition was his then view that an action on a common indebitatus count in a case where an unenforceable contract had been executed by the claimant was an action in assumpsit on the fictional promise of the other party to the contract to discharge the very debt arising under the executed but unenforceable agreement. Upon analysis, that view, which (as will be seen) Lord Denning was himself subsequently to abandon, conflicts with Jordan C.J's view, with which I have indicated my agreement, that an action on the common indebitatus count in such a case is not to recover the agreed amount under the unenforceable agreement but to enforce an obligation to pay "reasonable remuneration". It is, however, necessary that particular attention be paid to that earlier view expressed by Lord Denning since his two articles were subsequently cited with approval in the joint judgment of this Court in Turner v. Bladin [1951] HCA 13; (1951) 82 CLR 463.
12. With due respect, there are several related criticisms which can be
levelled at Lord Denning's earlier view about why an action
on a common
indebitatus count could be brought upon an executed consideration provided
under a contract upon which the Statute of
Frauds precluded the bringing of an
action. First, that explanation does not lie well with Tindal C.J's judgment
in Souch v. Strawbridge
which, far from resting on any fictional promise to
pay the debt arising under the executed agreement, rests on the same basis as
that which can be discerned in subsequent cases, namely, that the obligation
which it is sought to enforce is one which arises independently
of, and not
derivatively from, the unenforceable agreement. Thus, as Tindal C.J.
explained (2 C.B. at p.814 (135 E.R. at p.1164)),
"(t)here was evidence enough
to shew that the child was placed under the care of the plaintiff at the
charge of the defendant, with
his assent, and that he had made payments on
account of its maintenance. That is equivalent to the proof that is
ordinarily given
in an action for goods sold and delivered, whence the law
implies a promise on the defendant's part to pay for them". The second
criticism is that I see little appeal in logic in the proposition that to sue
on a fictional promise to pay the very debt arising
under an executed
agreement is not to bring an action upon that agreement. The fictional
assumpsit to pay may have constituted a
convenient procedural device for
enabling the substance of a dispute to be litigated by acceptable legal
procedures. It did not,
however, obliterate the reality that an action on an
indebitatus count to recover the liquidated amount payable under an executed
agreement was an action brought upon the agreement regardless of whether, for
procedural reasons, the pleader sued directly to recover
the debt or
indirectly to enforce a fictional promise to pay it. Indeed, to identify the
discarded procedural fiction of a promise
to pay the debt arising under an
executed agreement as the rationale of a substantive juristic concept is to
accord to the fiction
a significance which it did not enjoy when it was
utilized by common lawyers as a live stratagem. As Lord Wright pointed out
("Sinclair
v. Brougham", Cambridge Law Journal, vol. 6 (1938), 305, at p 317:
"The old common lawyers were a robust people, andThe third criticism of the explanation advanced by Lord Denning in his Law Quarterly Review articles is a more fundamental one and is made with the benefit of the hindsight flowing from subsequent elucidation of the law for which Lord Denning is entitled to no small part of the credit. It is that adverted to by Sir Robert (now Lord) Goff and Professor Jones in their landmark work The Law of Restitution, 2nd ed. (1978), at pp.320-321, namely, that the basis of the obligation to make payment for an executed consideration given and received under an unenforceable contract should now be accepted as lying in restitution or unjust enrichment. Indeed, so much was recognized by Professor Ames himself (see Ames, op. cit., at pp.162-166 and, per Viscount Haldane L.C., Sinclair v. Brougham (1914) AC 398, at p 417). In such a case, the underlying obligation or debt for the work done, goods supplied, or services rendered does not arise from a genuine agreement at all. It is an obligation or debt imposed by operation of law which "arises from the defendant having taken the benefit of the work done, goods supplied, or services rendered ..." (per Starke J., Phillips v. Ellinson Brothers Pty. Ltd., at p 235) and which can be enforced "as if it had a contractual origin" (per Lindley L.J. (emphasis added), In re Rhodes (1890) 44 ChD 94, at p 107 and see, among many other relevant works and cases, Lord Wright, op. cit., at pp 317ff.; R.M. Jackson, The History of Quasi-Contract in English Law (1936); Pulbrook v. Lawes, at p 290 (per Blackburn J.) and pp 290-291 (per Lush J.); Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour, Ltd. [1942] UKHL 4; (1943) AC 32, at pp 61-62; Deglman v. Guaranty Trust (1954) 3 DLR 785, at pp 788, 794-795; the judgment of Lord Denning himself (then Denning L.J.) in James v. Thomas H. Kent & Co. Ltd. (1951) 1 KB 551, at p 556; and the judgment of the Privy Council, delivered by Lord Denning, in Kiriri Cotton Co. Ltd. v. Dewani (1960) AC 192, at pp 204-205).
if a fiction was convenient under the old rigid
forms of pleading they did not worry about its
correspondence to reality or to juristic concepts.
But it does not follow that they did not realize
the true nature of the concept."
13. It is not necessary to pursue here the question whether, now that the common law is released from the controls of the old forms of action, there is a continuing need for or utility in the traditional approach that any claim which would in previous times have been asserted by a common indebitatus count must be seen as lying either in contract or quasi-contract (see, e.g., the discussion of the subject by Lord Wright, op. cit., and by W.S. Holdsworth, "Unjustifiable Enrichment", Law Quarterly Review, vol. 55 (1939), 37). It suffices to say that, even accepting that traditional approach, it is clear that the old common indebitatus count could be utilized to accommodate what should be seen as two distinct categories of claim: one to recover a debt arising under a genuine contract, whether express or implied; the other to recover a debt owing in circumstances where the law itself imposed or imputed an obligation or promise to make compensation for a benefit accepted. In the first category of case, the action was brought upon the genuine agreement regardless of whether it took the form of a special or a common count. It follows from what has been said above that the cases in which a claimant has been held entitled to recover in respect of an executed consideration under an agreement upon which the Statute of Frauds precluded the bringing of an action should be seen as falling within the second and not the first category. In that second category of case, the tendency of common lawyers to speak in terms of implied contract rather than in terms of an obligation imposed by law (see, e.g., per Salter J., Scott v. Pattison (1923) 2 KB 723, at pp 727-728) should be recognized as but a reflection of the influence of discarded fictions, buried forms of action and the conventional conviction that, if a common law claim could not properly be framed in tort, it must necessarily be dressed in the language of contract. That tendency should not be allowed to conceal the fact that, in that category of case, the action was not based upon a genuine agreement at all. Indeed, if there was a valid and enforceable agreement governing the claimant's right to compensation, there would be neither occasion nor legal justification for the law to superimpose or impute an obligation or promise to pay a reasonable remuneration. The quasi-contractual obligation to pay fair and just compensation for a benefit which has been accepted will only arise in a case where there is no applicable genuine agreement or where such an agreement is frustrated, avoided or unenforceable. In such a case, it is the very fact that there is no genuine agreement or that the genuine agreement is frustrated, avoided or unenforceable that provides the occasion for (and part of the circumstances giving rise to) the imposition by the law of the obligation to make restitution.
14. To identify the basis of such actions as restitution and not genuine agreement is not to assert a judicial discretion to do whatever idiosyncratic notions of what is fair and just might dictate. The circumstances in which the common law imposes an enforceable obligation to pay compensation for a benefit accepted under an unenforceable agreement have been explored in the reported cases and in learned writings and are unlikely to be greatly affected by the perception that the basis of such an obligation, when the common law imposes it, is preferably seen as lying in restitution rather than in the implication of a genuine agreement where in fact the unenforceable agreement left no room for one. That is not to deny the importance of the concept of unjust enrichment in the law of this country. It constitutes a unifying legal concept which explains why the law recognizes, in a variety of distinct categories of case, an obligation on the part of a defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff and which assists in the determination, by the ordinary processes of legal reasoning, of the question whether the law should, in justice, recognize such an obligation in a new or developing category of case (see Muschinski v. Dodds (1985) 60 ALJR 52, at p 67; [1985] HCA 78; 62 ALR 429, at p 455; Goff & Jones, op. cit., at pp 11ff.). In a category of case where the law recognizes 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.
15. 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) (see above), 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.
16. Specific reference must, at this stage, be made to Turner v. Bladin. In
that case, this Court (Williams, Fullagar and Kitto
JJ.) upheld an order for
specific performance of an oral agreement for the sale of a quarry business
made by the Supreme Court of
Victoria (Herring C.J.). The agreement had been
fully executed by the seller by delivery of possession. Having upheld the
judgment
for specific performance, the members of the Court expressed, in
their joint judgment (at p.474), the view that the Statute of Frauds
would
not, in any event, have provided "any defence to the plaintiff recovering at
law in an action of indebitatus assumpsit the
amount of the instalments (of
purchase price) which had become payable at the date of the writ and overdue
interest to the date of
judgment in the action". Their Honours went on
(ibid.) to explain why they thought that that was so. They said:
"The consideration moving from the plaintiffs toThose comments were about a matter which apparently had not been canvassed in argument (see p.466). They were completely obiter in that they related to a question which was not even in issue between the parties, namely, whether the plaintiff would have been entitled to succeed at common law "if an indebitatus count had been added" (see p.475). Nonetheless, weight must be paid to them. At the cost of some repetition, I shall indicate why it is that I am respectfully unable to accept the view of the law which they reflect.
the defendant was fully executed with the result
that the defendant became indebted to the
plaintiffs for the balance of purchase money and
interest. An action to recover these sums would
not be an action brought on the agreement but an
action of indebitatus assumpsit. We accept with
respect the views expressed by A.T. Denning (now
Denning L.J.) in the articles in 41 Law Quarterly
Review, p.79 and 55 Law Quarterly Review, p.63.
His Lordship has now expressed his adherence to
these views as a member of the Court of Appeal in
James v. Thomas H. Kent & Co. Ltd.. In our opinion
Koellner v. Breese was rightly decided."
17. The research of others (see, in particular, McPherson J. in Gino D'Alessandro Constructions Pty. Ltd. and Priestley J.A. in Schwarstein, at p.150) has demonstrated that their Honours' reference in the above passage to the judgment of Denning L.J. in James v. Thomas H. Kent & Co. Ltd. was intended as a reference to his Lordship's judgment as reported in the All England Reports ((1950) 2 All ER 1099) and not to the later revised version of it in the authorized reports ((1951) 1 K.B. 551). That being so, their statement that they did not think that the Statute of Frauds would provide "any defence to the plaintiff recovering at law in an action of indebitatus assumpsit" and their endorsement of Lord Denning's articles and judgment are properly to be read as an acceptance of the view that the appropriate common indebitatus count in such cases is to be seen as being in assumpsit for breach of the fictional promise to pay the very debt arising under the unenforceable agreement. I have already sought to explain why it is that I consider that that view is mistaken and that the appropriate indebitatus count was to recover a debt arising not from the unenforceable agreement but under an obligation or promise imposed or imputed by law to make fair and just restitution. It is unfortunate that Denning L.J's revised judgment in James v. Thomas H. Kent & Co. Ltd. was unavailable in this country until after the judgment in Bladin had been delivered since, in that revised judgment (at p 556), his Lordship abandoned the approach which their Honours accepted largely in reliance upon his authority. There, Denning L.J. stressed that what the plaintiff could recover in such an action was not the debt arising under the unenforceable contract at all but reasonable compensation which "might" be "equal" to the stipulated amount. The reason for that, his Lordship explained (ibid.), was that "(t)he proper ground of the claim is not in contract at all, but in restitution". Once this view is accepted, and I have explained why I think that it should be, there remains no reason to define the claim as being on a common indebitatus count in assumpsit. The fictional promise of assumpsit has no further purpose to serve and the claim for restitution can just as properly and much more realistically be seen, as Jordan C.J. saw it, as being the equivalent of a common indebitatus count in debt to recover the actual liquidated amount. That is not, of course, to indicate disagreement with the view expressed by their Honours in Bladin that the plaintiff in that case could have recovered on the equivalent of a common indebitatus assumpsit count. If in such an action the defendant relied upon the unenforceability of the agreement, the plaintiff's entitlement would be to be paid the amount which constituted fair and reasonable compensation for the property which he had transferred and which had been accepted by the defendant in circumstances where the plaintiff was precluded from suing on the agreement to recover the stipulated instalments of the agreed purchase price. Regardless of whether such a hypothetical action on a common indebitatus count was seen as lying in debt or in assumpsit, it would not, in those circumstances, have been brought either upon or to enforce that agreement.
18. It was submitted on behalf of Mrs. Paul that the cases establishing the right of a claimant to recover compensation for an executed consideration under an agreement upon which the bringing of an action is precluded by the Statute of Frauds could not be applied, by analogy, to sustain the right of the builder to sue her on a common indebitatus count in the present case to recover a liquidated amount representing reasonable remuneration for the work done and materials provided under the contract which was rendered unenforceable against her by the provisions of s.45 of the Act. The primary basis of this submission was the distinction between a provision precluding the bringing of an action by either party upon an agreement (such as the Statute of Frauds) and a provision that an agreement is not enforceable by a designated party against the other party to it (such as s.45 of the Act).
19. On the approach accepted in Bladin, namely that the action which could be brought consistently with the Statute of Frauds was a common indebitatus assumpsit count based on the fictional promise to pay the actual debt arising under the agreement, there was obvious force in this submission since it would not necessarily follow from an acceptance of the view that such an action was not technically brought "upon" the unenforceable agreement that the action could not properly be seen as nonetheless brought to enforce it. Once the approach in Bladin is rejected, however, the force in the submission disappears. The common indebitatus count for compensation does not involve enforcing an agreement which is unenforceable by the builder under s.45 of the Act any more than it involves bringing an action upon an agreement upon which the bringing of an action is precluded by the Statute of Frauds. As has been seen, the basis of such an action lies not in agreement but in restitution and the claim in restitution involves not enforcing the agreement but recovering compensation on the basis that the agreement is unenforceable.
20. In any event, as Macrossan J. pointed out in his judgment at first instance in Gino D'Alessandro, "currently held concepts and the common intellectual stock of the present day" will ordinarily be more relevant in interpreting a modern statutory provision than "historical investigation of the old forms of action and the pleading niceties dependent upon them" (see, to the same effect, Lord Wright, op. cit., at p.316). When one has regard to currently held concepts, it is apparent that the common perception has long been that the claimant on a common indebitatus count seeking compensation for a consideration moving from him which has been executed and accepted is not properly to be seen as "enforcing" the contract upon which the bringing of an action is precluded by the Statute of Frauds. To the contrary, it has long been the accepted general practice to describe an agreement to which the provisions of the Statute of Frauds apply as "unenforceable" (see, e.g., per Jordan C.J., Horton v. Jones (No. 2), at p 319; per Street C.J., Murdock v. Kennedy (1952) 69 WN (NSW) 191, at p 192) or "unenforceable by action" (see, e.g., per Gavan Duffy C.J., Starke and McTiernan JJ., Perpetual Executors and Trustees Association of Australia Ltd. v. Russell (1931) 45 CLR 146, at pp 152, 153) and one can point to statements in the cases which spell out in terms the proposition that an indebitatus count for payment of the money owing for a fully executed consideration does not involve "enforcing the unenforceable contract" (see, e.g., per Salter J., Scott v. Pattison, at pp 727-728).
21. Finally, it was submitted on behalf of Mrs. Paul that to allow recovery by the builder of what is fair and reasonable compensation for work done under a contract which is rendered unenforceable against her by s.45 of the Act would be contrary to the legislative intent to be discerned in the words of the section when read in the context of the Act. In support of that submission, reliance was placed on various decisions on the effect of provisions in money-lending legislation. I do not agree with this submission for reasons which I shall briefly state. I would note that, apart from considerations based on the particular history of the Queensland Act, those reasons correspond closely with those advanced by McPherson J. in the Full Court of the Supreme Court of Queensland in rejecting a corresponding submission which was made in Gino D'Alessandro Constructions Pty. Ltd.
22. The decisions on the money-lending legislation do not seem to me to be really in point. In the legislation involved in those cases, it was possible to argue, both by reference to the different words used and the quite different history of money-lending legislation, that it was the plain legislative intent that the money-lender should be precluded from recovering any compensation for the loan which had been made and received by the borrower. The relevant provisions went well beyond a mere statement that the agreement was to be unenforceable by the lender and were plainly directed towards imposing unenforceability in the ordinary case at a stage after the consideration had been fully executed by the lender, that is to say, after the money had been lent without an adequate memorandum in writing of the terms of the loan. Thus, the sub-section of the Nigerian Moneylenders Ordinance (s.19(4)) which was before the Privy Council in Kasumu v. Baba-Egbe (1956) AC 539 expressly provided that a money-lender should not be entitled to enforce "any" claim "in respect of" any transaction in relation to which he had made default in complying with the requirement that he should enter certain particulars in a book. Section 9(1) of the Money Lenders Act 1912 (W.A.), which was before this Court in Mayfair Trading Co. Pty. Ltd. v. Dreyer (1958) 101 CLR 428, provided that no contract for the "repayment by a borrower of money lent to him ... or for the payment by him of interest on money so lent, and no security given by the borrower ... in respect of any such contract" should be enforceable in the absence of the prescribed note or memorandum. In Deposit & Investment Co. Ltd. v. Kaye (1962) 63 SR (NSW) 453, at p 460, Walsh J. expressly drew attention to the fact that the form of the relevant provision did not simply say that "the contract of loan is not to be enforceable" but provided that "the borrower's obligations and the security for the performance of them shall not be enforceable".
23. There is no apparent reason in justice why a builder who is precluded from enforcing an agreement should also be deprived of the ordinary common law right to bring proceedings on a common indebitatus count to recover fair and reasonable remuneration for work which he has actually done and which has been accepted by the building owner (cf. Johnsons Tyne Foundry Pty. Ltd. v. Maffra Corporation [1948] HCA 46; (1948) 77 CLR 544, at p 565). Nor, upon a consideration of the words of s.45 in their context in the Act, am I able to identify any legislative intent to deprive the builder of that ordinary common law right. The section does not make an agreement to which it applies illegal or void. Nor do its words disclose any legislative intent to penalize the builder beyond making the agreement itself unenforceable by him against the other party. It may be that the bringing of an action as on a common indebitatus count would conflict with the apparent legislative policy underlying s.45 if the claimant in such an action were entitled as of right to recover the amount which the building owner had agreed to pay under the unenforceable agreement. I am, however, unpersuaded that the bringing by a builder of an action on the common indebitatus count in which he can recover no more than what is fair and reasonable in the circumstances as compensation for the benefit of the work which he has actually done and which has been accepted by the building owner conflicts with any discernible legislative policy. Plainly enough, the survival of 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 does not frustrate the purpose of the section to provide protection for a building owner. The building owner remains entitled to enforce the contract. He cannot, however, be forced either to comply with its terms or to permit the builder to carry it to completion. All that he can be required to do is to pay reasonable compensation for work done of which he has received the benefit and for which in justice he is obligated to make such a payment by way of restitution. In relation to such work, he can rely on the contract, if it has not been rescinded, as to the amount of remuneration and the terms of payment. If the agreed remuneration exceeds what is reasonable in the circumstances, he can rely on the unenforceability of the contract with the result that he is liable to pay no more than what is fair and reasonable.
24. 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 work 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 provision were satisfied. Thus, if it is established on the hearing of the present case that Mrs. Paul has sustained an identifiable real detriment by reason of the failure of the builder to ensure that there was a written memorandum of the oral contract which satisfied the requirements of s.45 of the Act, that would be an important factor in determining what constituted fair and just restitution in the circumstances of the case for the work done and materials supplied of which she has accepted the benefit. The mere fact that the reasonable remuneration for the building work done at Mrs. Paul's request exceeded Mrs. Paul's expectations would not, however, of itself constitute any such identifiable real detriment since it is not necessary for the purposes of s.45 of the Act that a written contract contain either an agreed price for the building work or an estimate of what the cost of it to the building owner will ultimately be.
25. I would allow the appeal and restore the judgment and order for costs of the learned primary judge. I note that in the application for special leave to appeal, senior counsel for the builder undertook on the builder's behalf to pay any party and party costs incurred by Mrs. Paul on the appeal to the Court of Appeal which are not recoverable by her under the Suitors' Fund Act 1951 (N.S.W.).
DAWSON J.: It is curious that in the interpretation of a modern statute it should be necessary to unearth the forms of action which find their origin in mediaeval jurisprudence and which might be thought to have been long since buried. However, the question in this case involves the nature of the cause of action and that is something upon which indebitatus assumpsit, from which the cause of action is derived, is capable of shedding light.
2. The question is whether a claim for reasonable remuneration for work done in the execution of an oral building contract providing no specific price or sum, is a claim to enforce the contract within the meaning of s.45(1) of the Builders Licensing Act 1971 (N.S.W.). Under s.45(1) a building contract which is not in writing and does not otherwise comply with the requirements of the Act is not enforceable by the builder.
3. Since the work for which payment is claimed was done pursuant to the oral agreement, which provided that the builder should be paid a reasonable remuneration, at first sight it may seem that the claim is to enforce that agreement. However, a claim for reasonable remuneration is a claim upon a quantum meruit, the origin of which is to be found in the old action of indebitatus assumpsit.
4. Assumpsit, from which indebitatus assumpsit grew, was delictual in its beginnings, being an offshoot of case. It was based upon the idea of loss or detriment suffered by reliance upon the promise or undertaking of the defendant. When assumpsit was used, as it was, as an alternative action to debt, the basic notion was a promise to pay, but the promise was not that contained in the agreement out of which the debt arose, assuming there to have been an agreement. It was a separate and subsequent promise to pay the debt which was the foundation of the action and not the underlying agreement. Indeed, in the sixteenth century the agreement was regarded as spent in creating the debt so that a new promise was required for a creditor to charge his debtor in assumpsit. See J.B. Ames, "The History of Assumpsit", (1888) 2 Harvard Law Review 53, at p.55.
5. This was consistent with the action in debt, for which assumpsit became an
alternative, because debt was not an action to enforce
payment pursuant to an
agreement; it was more in the nature of a real action to recover a thing. Thus
in Young v. Queensland Trustees
Ltd. [1956] HCA 51; (1956) 99 CLR 560, at p 567, this Court
observed:
"The common law does not and never did
conceive of indebtedness in a sum certain for an
executed consideration as a mere breach of
contract: it is rather the detention of a sum of
money and that was so whether the creditor enforced
his demand by an action of debt or by indebitatus
assumpsit."
6. In time the new promise to pay came to be implied or, perhaps, more
correctly, inferred from the circumstances, and every student
of legal history
is familiar with Slade's Case [1598] EngR 39; (1602) 4 Co. Rep. 92(b) (76 E.R. 1074) in which
at p.94(a) (p.1077 of E.R.) it was
decided that "every contract executory
imports
in itself an assumpsit, for when one agrees to pay money, or to
deliver any thing,
thereby he assumes or promises to pay, or deliver
it ...".
Thereafter proof of the new promise became unnecessary. This form of
assumpsit took the name of indebitatus assumpsit and
it came to supplant debt
as a means of recovering liquidated sums. It is to
be distinguished from the
other form of assumpsit in
which the action was for breach of a promise,
albeit a separate promise, to
perform the terms of an agreement. It is from
this latter
form of assumpsit that the modern action in contract has
developed. See
Maitland, The Forms of Action at Common Law, (1948), p.70.
In
indebitatus assumpsit there may have been an underlying agreement
or contract
from which the debt arose, but the gist of the
action was the promise to pay
the debt or assumpsit. It was enough, therefore,
"to allege the general
nature of the indebtedness,
as for goods sold, money lent, money paid at the
defendant's request, money had
and received to the plaintiff's use, work and
labor
at the defendant's request, or upon an account stated, and that the
defendant
being so indebted promised to pay. This was the origin
of the
common counts": see Ames, op.cit., pp.57-58.
7. All of this is of significance because one of the common counts was quantum meruit, it being regarded as a claim for a liquidated sum. This may sound strange to our ears, but the form of the count shows why it was so. "The quantum meruit count, instead of stating that the defendant was indebted to the plaintiff in a certain sum of money for work, &c., as in the indebitatus count, was in this form, 'and whereas also, afterwards, to wit, on &c., in consideration that the plaintiff, at the request of the defendant, had done work, &c. (stating the subject-matter of the debt according to the fact, and usually as in the indebitatus count), he the defendant promised the plaintiff to pay him so much money as he therefore reasonably deserved to have;' and the count then averred, 'that the plaintiff therefore deserved to have a named sum, whereof the defendant afterwards, to wit, on &c., aforesaid, had notice.'" Chitty on Pleading, 7th ed. (1844), vol.I, p.351. Since the simple indebitatus count was also available where no specific price or sum was agreed upon, it came to be used instead of quantum meruit and the latter as a separate count fell into disuse: Chitty, op.cit., p.353.
8. The common counts afforded a remedy even where there was an express agreement which could not be enforced for some reason, providing that the agreement was executed or completely performed so that the implied promise to pay - which was not a contractual promise - might be applied. In those circumstances the rule that where there is an express contract the plaintiff cannot resort to an implied one had no part to play. The action was on the implied promise rather than any underlying contract. Cases such as Cutter v. Powell (1795) 6 TR 320 [1795] EWHC J13; (101 ER 573) are explicable upon the basis that the contract was an entire contract which had not been performed. It was not possible to imply a promise to pay for the work which had been performed because such a promise would be inconsistent with the express contract which provided for payment only upon the performance of the whole contract. The situation was different where the contract had been executed or performed since in that situation there was no inconsistency in the enforcement of an implied separate promise to pay a debt arising from the performance of the contract. Even if the contract was unenforceable there was no reason why the separate promise should be so. See Chitty, op.cit., pp.349-350.
9. The common counts, whilst based upon an implied promise, were nevertheless based upon a promise implied in fact and not a fictitious promise. For that reason they may be distinguished from those cases in which indebitatus assumpsit was held to lie as a remedy in quasi-contract. In those cases there could be no promise in fact, but it was implied in law. The implication was in a great number of those cases drawn from the fundamental principle that one person shall not unjustly enrich himself at the expense of another. Because it is possible to identify the cause of action in this case by reference to a common count based upon a promise implied in fact and not upon a constructive obligation or quasi-contract, it is unnecessary to examine the scope of unjust enrichment as a cause of action and the part played by indebitatus assumpsit in assisting or arresting its development in the common law. See Goff and Jones, The Law of Restitution, 2nd ed. (1978), pp.8-9.
10. The historical account of indebitatus assumpsit, which I have endeavoured
to give as simply as possible, throws up fundamental
notions which have a
modern application. In Horton v. Jones (1934) 34 SR (NSW) 359 it was held
that the plaintiff was entitled to
pursue a claim upon a quantum meruit for
services rendered notwithstanding the existence of an oral contract for those
services which
was unenforceable by reason of s.4 of the Statute of Frauds.
Jordan C.J., at pp. 67-368, explained why:
"If, however, a person does acts for the benefit ofAnd in Turner v. Bladin [1951] HCA 13; (1951) 82 CLR 463, where an action could not be brought upon a contract because of s.128 of the Instruments Act 1928 (Vict.), which was the equivalent of s.4 of the Statute of Frauds, it was held that the statute was no bar to indebitatus assumpsit. At pp.474-475 this Court (Williams, Fullagar and Kitto JJ.) said:
another in the performance of a contract which is
unenforceable by reason of the fourth section of
the Statute of Frauds, and the other so accepts the
benefit of those acts, or otherwise behaves in
relation to them, that, in the absence of the
unenforceable contract, the former could maintain
an action of debt upon the common money counts, he
may sue in indebitatus to obtain reasonable
remuneration for the executed consideration: Gray
v. Hill (1826) Ry. & Mood. 420 (171 ER 1070);
Mavor v. Pyne [1825] EngR 754; (1825) 2 Car & P 91 (172 ER 41);
Savage v. Canning (1867) 16 WR 133; Knowlman v.
Bluett (1874) LR 9 Ex 307; Merrell v. Loft
(1895) 13 NZLR 739; Scott v. Pattison (1923) 2
KB 723; (1925) 41 Law Quarterly Review, 79. In
such a case the action is in indebitatus only. The
existence of the unenforceable contract prevents a
new contract, in respect of which special
assumpsit could be maintained, from being implied
from the acts performed: Britain v. Rossiter
(1879) 11 QBD 123; and the unenforceable
contract may be referred to as evidence, but as
evidence only, on the question of amount:
Scarisbrick v. Parkinson (1869) 20 LT 175; Ward
v. Griffiths Bros. Ltd. (1928) 28 SR (NSW) 425.
It would seem that the mere fact that the
consideration is executed is not sufficient to
found an action, unless the circumstances are such
as to make it possible to maintain an action on the
common money counts: Cocking v. Ward [1845] EngR 970; (1845) 1 CB
858 (135 ER 781); Pulbrook v. Lawes (1876) 1
QBD 284 at pp 289-290; cf. Bagnall v. White
[1906] HCA 52; (1906) 4 CLR 89; and contrasting Koellner v.
Breese (1909) 9 SR (NSW) 457."
"An action to recover these sums would not be an
action brought on the agreement but an action of
indebitatus assumpsit. We accept with respect the
views expressed by A.T. Denning (now Denning L.J.)
in the articles in (1925) 41 Law Quarterly Review,
p.79 and (1939) 55 Law Quarterly Review, p.63. His
Lordship has now expressed his adherence to these
views as a member of the Court of Appeal in James
v. Thomas H. Kent & Co. Ltd. (1951) 1 KB 551. In
our opinion Koellner v. Breese was rightly decided.
Cocking v. Ward; Kelly v. Webster [1852] EngR 598; (1852) 12 CB
283 (138 ER 912); Sanderson v. Graves (1875) LR
10 Ex 234 are cases where the action was brought
on the agreement and are therefore distinguishable.
Phillips v. Ellinson Bros. Pty. Ltd. [1941] HCA 35; (1941) 65
CLR 221 was also a case where the action was
brought on the agreement. Accordingly, if an
indebitatus count had been added to the statement
of claim, the learned Chief Justice could have
given judgment at common law ..."
11. The reference to James v. Thomas H. Kent & Co. Ltd.,
despite the citation, is a reference to the report of the
case in (1950) 2 All ER 1099, where Denning L.J. is
reported to have said at p.1103:
"If the plaintiff had fully performed his part
of the contract by serving his full time, or, what
is the same thing, by serving his full time save
when excused by sickness, he could sue for his
stipulated wages. So, also, if he had served up to
the time when any instalment fell due, he could sue
for that instalment. In those cases his action
would be in debt on an executed consideration to
which the Statute of Frauds has no application.
That was expressly laid down by Tindal, C.J., in
Souch v. Strawbridge [1846] EngR 565; (1846) 2 CB 808 (135 ER
1161) and is, I think, still good law to-day."
12. In the report of that case in (1951) 1 K.B. 551 at p.556 the relevant
part of that passage appears rather differently as follows:
"Even if the servant has not served his full time,
but is dismissed beforehand without good cause,
then he can recover payment for any work he has
done as upon a quantum meruit. It used to be said
in the old days that in that case his action was on
an implied contract and that was also said in Scott
v. Pattison (1923) 2 KB 723; but that is not a
correct way of approach because, in none of these
cases can you have an implied contract covering the
same ground as an existing special contract. The
proper ground of the claim is not in contract at
all, but in restitution. It is money which, in
justice, ought to be paid for services rendered."
13. For the reasons which I have already given, it will be apparent that I cannot, with respect, agree that an action upon a quantum meruit is an action upon an implied contract or, at all events, an implied contract which covers the same ground as an existing contract. Whether or not restitution, released from its abode in indebitatus assumpsit, would also support a claim in those circumstances is something which it was unnecessary to consider in order to decide that case as it is unnecessary in this case. In my view, the observations of this Court in Turner v. Bladin and those apparently made originally by Denning L.J. in James v. Thomas H. Kent & Co. Ltd. are correct.
14. It is for these reasons also that I have reached the conclusion that, were the plaintiff to succeed in its action in this case, the result would be, not the enforcement, directly or indirectly, of the contract, but the enforcement of an obligation which, whilst it arose from the performance of the contract, was separate and distinct from it. In reaching this conclusion I feel no need to regard the action in this case as one in quasi-contract nor do I think it should be so regarded. Otherwise, I am in agreement with the view of Mason and Wilson JJ. that s.45 of the Builders Licensing Act ought not to be construed as having any application and with the reasons which they give for that view. I also agree that no analogy is to be drawn between s.45 and the money-lending legislation considered by this Court in Mayfair Trading Co. Pty. Ltd. v. Dreyer [1958] HCA 55; (1958) 101 CLR 428 or s.22 of the Money-lenders and Infants Loans Act 1941 (N.S.W.) considered by Walsh J. in Deposit & Investment Co. v. Kaye (1962) 63 SR (NSW) 453.
15. I would allow the appeal.
ORDER
Appeal allowed.
Order that the order of the New South Wales Court of Appeal be set aside and
in lieu thereof order that:
(1) The appeal to that Court be dismissed.
(2) The order of Clarke J. dated 3 February 1984 berestored.
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