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Expanding Contractors’ Claims: The Impact Of ‘Unjust Enrichment’ On Contract


The Building and Construction list in the Supreme Court of NSW is testimony to the increase in building disputes in NSW. As lawyers it is our function to monitor the driving force behind that litigation and, if possible, to determine any shift in the thinking of the courts which might affect a litigant’s prospects.

The reported cases demonstrate growing reliance by contractors on the principle of unjust enrichment in order to recover claims. The purpose of this paper is not so much to consider the principles of unjust enrichment as it is to determine a possible shift in thinking by the courts on t his issue and to consider what that means for the contractor in practical terms

In Australia there are strongly opposing views on whether all the different categories of obligation that arise outside tort and contract can be unified under a third category of unjust enrichment; or, alternatively, whether the law of obligation is bound forever to recognise ‘non-wrongs’ a varied category of non-wrongs which give rise to an obligation on the part 0 f the principal to restore. One view is that that there certainly never was a project to unify ‘all those species of common law obligations which are neither contractual nor tortious in nature’.1 Another view is that the law of unjust enrichment is no more than that category of non wrongs which includes, and generalises, mistaken payment and all other events of the same kind.

Contractors are usually bound by tight and unforgiving contracts. Experience has taught us that it is unlikely that principals and contractors will, or can, contemplate all the events which steer the performance of a contract. The standard approach of a principal is to cast the onus of bidding on a cost basis on the contractor, for better or for worse.It is the inequity that this arrangement sometimes results in that provides the court with an opportunity to reach beyond the contract to bring about a more equitable result if a dispute arises. The legal process which the contractor must use to achieve this outcome in Australia is still that ‘varied category of non wrongs’ which give rise to an obligation on the pa rt of the principal to restore. They are

(a) quantum meruit;
(b) mistake;
(c) misrepresentation;
(d) claims under the Trade
Practices Act 7974 (Cth) or the
Fair Trading Act 7987(NSW);
(e) unconscionability;
(f) good faith; and
(g) e stoppel.

Although each of these causes of action has its own distinct character and elements, all have unjust enrichment as a single underlying basis.


It is possible to detect a shift in judicial thinking by the courts on the question of unjust enrichment.Contracts are not the last word in considering contractors’ claims.Principals could do well to avoid unreasonable conduct in their contract administration or they may reap the bitter rewards of unreasonable conduct from which their contract may not be able to protect them.

The cases which are discussed in this paper have been selected not solely for the propositions for which they stand but also because of the language which is used. language demonstrates that there is an increasing preparedness, if not a willingness, 0n the part 0f courts to use restitutionary principles to bring about fairness between contracting parties.

Sabemo Pty Ltd V North Sydney Municipal Council


Sabemo is an interesting judgment that has been approved on some occasions and not followed on others. Although its precise status as authority is not finally determined, the language used by Sheppard J is significant.


In Sabemo, the plaintiff had participated in numerous revised proposals for the development of Council land.

It was specifically agreed that the tender did no more than permit the parties to negotiate on proposals for the redevelopment (and, by implication, that this investigation or ‘negotiation’ was not a contract for remuneration).

Sabemo performed a significant amount of work to further the proposal. Some investigations were done at the specific request of the Council.
Ultimately, the Council accepted an alternative proposal and refused payment to Sabemo on the basis that it was always understood that the winning of the right to negotiate did not constitute an agreement to pay for work done in that process.


The simple reasoning adopted by Sheppard J5 was that, given the nature, extent and purpose of the work, it was inconceivable that the party that received the benefit (the Council) would do so at the expense of the other party who did the work gratuitously (Sabemol:

[The) first party does work beneficial for the project, and thus in the interests of both parties, which work the first party would not be expected, in other circumstances, to do gratuitously, the first party will be entitled, by operation of law and notwithstanding that the parties did not intend, expressly or impliedly, that such obligation should arise, to compensation or restitution from the second party if the latter unilaterally abandons the project for reasons pertaining only to himself. 6 (Emphasis added)

The obligation to pay arose independently of the contractual position:

[lt is now recognised that there are cases where an obligation to pay will be imposed fa promise to pay implied} notwithstanding that the parties to a transaction, actual or proposed, did not intend, expressly or impliedly, that such an obligation should arise. The obligation is imposed by the law in the light of all the circumstances of the case.7

Importantly, his Honour identified the obligation to restore in these circumstances as a matter of principle:

The question / must ask myself is whether, at this stage of the development of the law in this country, it is right to say that, in some circumstances, in a case of this kind, there will be occasions when the law, irrespective of the common intention of the parties, will impose on one an obligation to pay the other for work done. After due reflection / have reached the conclusion, notwithstanding the weighty authority which the early Australian decisions have, that there is such a principle in existence.

It is difficult to determine the precise basis on which Sheppard J based his decision in Sabemo. It appears that restitutionary relief

[It is now recognised that there are cases where an obLigation to pay wiLL be imposed fa promise to pay impLied) notwithstanding that the parties to a transaction, actuaL or proposed, did not intend, expressly or impLiedly, that such an obLigation should arIse. was granted without the use of any of the existing categories of ‘unjust enrichment’, a number of which were unavailable at the time of the decision. However, it should be noted that it will be rare for factual circumstances to fall outside the scope of the categories outlined above.

Pavey & Matthews Pty Ltd v Paul (1987)9

Pavey & Matthews is authority for the proposition that a plaintiff may recover on a quantum meruit basis where a contract has been fully performed but is unenforceable.


Pavey &Matthews carried out some work to renovate a cottage for Mrs Paul. There was an oral agreement that Mrs Paul would pay a reasonable remuneration for the work done. The work was done, Mrs Paul took occupation of the cottage. Some payment was made but Mrs Paul denied any obligation to pay the balance claimed by the builder stating that the contract was unenforceable under the Builders Licensing Act 1971 (NSW) because it was not in writing.
It was held that this did not preclude a claim upon a quantum meruit basis independently of any contractual obligation, as the claim was based upon the principles of restitution for unjust enrichment.


It is the wording in the judgment of Deane J that attracts attention:

To identify the basis of such actions as restitution … is not to assert a judicial discretion to do whatever idiosyncratic notions of what is fair andjust might dictate. … [Unjust enrichment) 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 plaint if and which assists in the determination … of whether the Law shouLd, in justice, recognise such an obligation in a new or deveLoping category of case. 10 (Emphasis added]’

ABB Power Generation Ltd v Chapple (2001)11

As a decision of the Court of Appeal 0 f the Supreme Court 0 f WA, ABB v Chapple is of persuasive authority only in the courts of NSW. However, the approach taken by both Murray J (with whom Einfeld A-J agreed) and Temple man J is of assistance in determining the current trend of the law.


Cockburn Cement contracted for the construction of industrial equipment known as an ‘electrostatic precipitator’ at premises in Spearwood, WA. A company was engaged to oversee the project as a whole who then entered into a subcontract for the supply and installation of the precipitator with ABB.

ABB subcontracted with CIS to clad the precipitator with insulating lagging. CIS entered into a subcontract with the scaffolder (‘Chapple’) to erect scaffolding for the cladding sub contractor who made an allowance for that cost component in their contract with the Principal Subcontractor.

The whole project was to be accelerated. The design drawings for various elements of the project were not complete when the various contractual arrangements were entered into and quotes for the work were submitted. General plot plans for the precipitator and its layout were available. However, drawings to show particular items associated with the precipitator were not available.

Chapple prepared a quotation to CIS without allowing for these items. The nature of the precipitator as constructed, without allowing for such associated works and protrusions, enabled the quote to be prepared upon the basis of the use of modular scaffolding which comes in standard sizes and fittings and is much cheaper and more expeditious to erect.

As modular scaffolding could not be used, it was necessary to use tubular scaffolding so as to accommodate the structure upon which the work was to be done. This process was much slower and more expensive and was an expense which had not been allowed for. Nor had the requirement of ABB, namely that a crane entry be built into the body of the precipitator to allow certain work to be done inside the perimeter of the precipitator.

As the scaffolding was erected it was discovered that one of the effects was to require special and additional work to be done to pick up items and convey them over the scaffolding over the top of the crane entry. This required a construction of four links in the scaffolding known as cross-over bridges which again incurred extra costs in materials and labour.

Having successfully completed the work required, Chapple sued to recover the additional costs incurred in performing the extra work. Chapple brought a quantum meruit claim against ABB, with whom he had no direct contractual relationship, based entirely upon the fact that, in the erection of the scaffolding, ABB assisted and directed Chapple so as to provide for the crane entry in the scaffolding construction.


The Supreme Court of WA, both at first instance and on appeal, allowed the claim by Chapple against ABB.
On appeal it was held:

It is clear that in this area of the law the obligation to pay reasonable compensation for the non-monetary benefit accepted by the defendant does not depend at all upon the law of contract or quasi-contract, but is an obligation independently imposed by the law in circumstances where to accept and retain the benefit of the service provided by the plaint if maybe seen to result in the unjust enrichment of the defendant. As I understand the law, liability will follow unless the defendant, who ought reasonably to have understood that the plaintiff would expect to be paid for the services provided, rejected them when they were proffered.

With respect to the particular circumstances of the case, Murray J stated:

To my mind, the evidence amply supported the conclusion that it was ABB who requested the extra work of establishing the crane entry to enable a hopper to be installed within the precipitator. In the meantime, the construction of the scaffolding needed to proceed in a form which would accommodate this additional element. It was, in my opinion, clearly appreciated that extra work would be required and that Fremantle Scaffolding [Chapple} expected to be paid for it. Precisely what the nature of that work was, was a matter for the scaffolders.

ABB’s obligation to pay restitution on a quantum meruit basis was considered in the following manner:

The point was that Fremantle Scaffolding was required to continue with and complete the construction, incorporating at the request of Mr Campbell on behalf of ABB whatever modifications or additional work was necessary. To my mind, the fact that Mr Campbell made no specific request for particular work or work of a particular character to be performed by scaffolders within their area of expertise is of no moment. Her Honour [at first instance} found that in general terms extra work was requested, ABB had the benefit of it and in the commercial setting of this project it would, in my opinion, clearly be unjust that Fremantle Scaffolding should bear the cost without the capacity to recover it to the extent that it was reasonably incurred. The nature of the benefit to ABB was, in common with other areas of the claim by Fremantle Scaffolding, to enable the whole project to be carried on expeditiously despite the need to accommodate changes in the work required. 14 (Emphasis added)

In ABB v Chapplethe Court held that while the claim was phrased in terms of quantum merit the underlying basis which afforded the action was unjust enrichment.


What does this mean for contractors? We suggest the following:

1. The equitable notion of unjust enrichment was emphasised by the High Court in ANZ Banking Group Ltd v Westpac Banking Corporation16 where the Court said: The basis of the common law action of money had and received for recovery of an amount paid under fundamental mistake of fact should now be recognised as lying not in implied contract but in restitution or enrichment. In other words, receipt of a payment which has been made under a fundamental mistake is one of the categories of case in which the facts give rise to a prima facie obligation to make restitution … Contemporary legal principles of restitution can be equated with seminal equitable notions of good conscience… 17

2. The contract is not necessarily the last word on contractors’ claims.

3. The courts are open to considering claims on the basis of equitable notions of good conscience, 18 based on unjust enrichment.

4. Currently, enrichment claims must still be brought under the banner of mistake, estoppels, misrepresentation (both at common law and under statute), quantum merit, lack of good faith and unconscionability.19

5. Notwithstanding (4), if the work is not clearly defined within the scope of works, the courts have a practical tendency to ask four simple questions:

(i) Was there work done?
(ii) Was the work of any value?
(ii) Did the defendant accept the benefit of the work done?
(iv) Was the work at the expense of the contractor?

6. The language adopted in the decisions discussed above may indicate a move towards acknowledging a ‘unifying principle’20 where unjust enrichment of itself is recognised as a cause of action. If this is so, a contractor may not have to prove the technical requirement of the various claims such as mistake, misrepresentation, stopple and so on, in addition to the general elements of unjust enrichment.

7. It may be sufficient to show that the defendant has accepted the benefit of services provided in circumstances which make it unjust that the plaintiff should not be remunerated because there was no rejection by the defendant of the notion that the work should be done.

8. If a party is aware that another party is providing services and expects to be paid for those services, then they cannot accept the benefit of those services under the pretext that there is no contract. Furthermore, they will have to make it clear that they do not intend to pay for the services (see, for example, Brenner v First Artists’ Management Pty Ltd 21 l.

9. 1fthe High Court, when the issue arises for consideration, does not accept the unifying principle of unjust enrichment as a cause of action in its own right, it is likely that in the current environment the existing categories: (a) are more readily accepted by the courts in considering contractors’ claims; and (b) may expand22-which is also good news for contractors.

10. Either way it seems as if the environment is ripe for expanding claims and that draconian regimes of contract management under badly drafted contracts are at risk if the outcome appears to be unfair:

11. Contractors can, with more confidence, oppose the imposition of unacceptable consequences of a contract by going outside the contract, particularly for issues which are not anticipated in the contract or incorrect information arising out of the contract. One may well ask what is the corollary to this approach? The answer is a well drafted contract which:

• anticipates the issues;
• Fully discloses all relevant information;
• is transparent; and
• is approached in good conscience and good faith

Anything less has the tendency to allow contractors to expand their claims..

While the cases outlined above, indicate an important development in the approach taken by the courts to ~unjust enrichment claims (as it is broadly understood), it is not possible at this stage to point to an authoritative statement of Legal principle. It is worth remembering the warning of Mason P of the NSW Court of Appeal in Brambles Holdings Ltd v. Bathurst City Council 23. In that case, Mason P adopted Heydon JA’s use of the term ‘restitution industry [academic division)’ and said that ‘until the necessity arises’ to decide the question, it is ‘best that judges keep silent’.


1. The Hon Mr Justice W M C Gummow, Preface to Ian Jackman, The Varieties of Restitution (1998) The Federation Press, Leichhardt.

2. Professor Peter Birks QC FBA, Annual Miegunyah Lecture 1998, ‘Equity, Conscience, and Unjust Enrichment’ (1999) 23 Melbourne University Law Review.

3. Supra at note 2.

4. Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880.

5. [1977] 2 NSWLR 880 at 881 F-G and at 903A-B.

6. [1977] 2 NSWLR 880 at 881A-B, see also at 902G-903B.

7. [1977] 2 NSWLR 880 at 898A-B.

8. [1977] 2 NSWLR 880 at 899G-900.

9. Pavey & Matthews Pty Ltd  v Paul(1987) 162 CLR 221.

10. (1987) 162CLR221 at 256-257 per Deane J
11. ABB Power Generation Ltd v Chapple (20D1) 25 WAR 158
12. {2001) 25 WAR 158at 161[11] per Murray J.

13. (2001) 25 WAR 158 at 166[36] per Murray J.

14. 2001J 25 WAR 158 at 167[37] per Murray J4

15. (2001) 25 WAR 158 at 166[33].

16. ANZBankingGroup Ltd v Westpac Banking Corporation (1988] 1, 64 CLR622.

17. (1988) 164 CLR 622 at 629.

18. See supra at note 14.

19. See supra at note 9.

20. See supra at note 9.

21. Brenner v First Artists’ Management Pty Ltd [1993] 2 VR at 257-259.

22. Professor Peter Birks QC FBA, ‘The Law of Restitution at the End of an Epoch’.

23. Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153.

24. (2001) 53 NSWLR 153 at 155[2] and 155[3] per Mason P.
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