Quantum meruit and unjust enrichment in New Zealand Andrew Skelton*
Quantum meruit means the “amount deserved” and refers to a claim for a reasonable sum for work performed.1 A claim for a quantum meruit can arise either as a “contractual quantum meruit” or a “noncontractual quantum meruit”. A contractual quantum meruit is where the parties have entered into an agreement to provide services but either no price is agreed for the services, or the parties agree that the service provider is to be paid a reasonable price for the services without stating what the price is. The service provider is entitled to reasonable remuneration for the work performed. This is an entitlement that arises under the contract. A non-contractual quantum meruit arises by operation of law where work is performed for another and there is no contract or no enforceable contract. Noncontractual quantum meruit has been controversial both as to the legal basis for the remedy and valuation of the amount deserved. In this article, I discuss one of the most common circumstances in which an entitlement to a noncontractual quantum meruit can arise. That is where work is undertaken pursuant to a request to perform work or a letter of intent in the expectation that the parties will ultimately enter into a contract, but no contract materialises (anticipated contracts which fail to materialise).2 In particular, I focus on the recent decision of the High Court in Electrix v Fletcher Construction.3
Unjust enrichment in New Zealand law Many common law jurisdictions, in particular England and Australia, have recognised unjust enrichment as a unifying legal concept for a range of restitutionary remedies, including non-contractual quantum meruit.4 In these jurisdictions, it is recognised that four questions should be considered:5 a. Has the defendant been enriched? b. Was the enrichment gained at the expense of the claimant? c. Was the enrichment at the expense of the claimant unjust? d. Are there any defences available to the defendant?
APRIL / MAY 2022
These questions provide an analytical framework for application of the tests used to identify whether there has been an unjust enrichment at the expense of the claimant. One such test is “free acceptance” of work or services, for example, where a recipient of services knows that the services are not being provided gratuitously, but fails to take an opportunity to decline the services.6 This is considered to operate as a test for “enrichment” because a reasonable recipient should have known that the person who rendered services expected to be paid for them but the recipient did not take the opportunity to reject the services.7 It is also used as a test of “unjustness” because of the unconscionability of the recipient in not taking the opportunity to reject the services.8 The New Zealand courts have generally refrained from recognising unjust enrichment as the unifying basis for restitutionary claims such as quantum meruit and adopting the analytical framework discussed above.9 In many cases, the Court embarks on a survey of case law and academic commentary, attempting to distil the elements afresh. A recent example is the decision in Northlake Investments Limited v Wanaka Medical Centre Limited.10 In that case, the Court identified nine factors which were considered to be relevant to establishing liability in “inconclusive negotiation” cases. Several cases have acknowledged academic commentary to the effect that the purpose of the New Zealand law of restitution (and non-contractual quantum meruit) may not be to force the defendant to disgorge some underserved benefit, but to compensate the plaintiff fairly or restore the plaintiff’s position. Thus, it is suggested that establishing an enrichment or benefit to the defendant may not be necessary.11 However, the law of unjust enrichment and the restitutionary remedies that come with it are not concerned with disgorgement of gains by defendants, nor with compensation for losses suffered by claimants. These are the functions of the law of contract and civil wrongs. Rather, the concern is with the reversal of transfers of benefits between plaintiffs and defendants.12 The element of “benefit” can be difficult. But it is important not to focus only on residual objective benefit, in the sense of marketable residuum or end product. The recipient of pure services (such as a taxi ride) receives a benefit. And where a service produces an end product, it is the value of the work which is central to the claim for enrichment at the expense of the claimant not the realisable value of the end product.13
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