Your Silence Speaks Volumes: Quantum Meruit Claims when Conduct Creates Liability Beyond a Contract
By Eleanor Bock
How far does an original agreement extend: If work was done, should it be paid for fairly?
| In this newsletter we cover a recent emphasis on the importance of individuals receiving fair and reasonable remuneration, especially in cases where no formal written contract or agreement exists. If you are working in the construction industry and engaging in work that is ongoing – whether contracting it, or doing it, this newsletter will provide a basic outline of important points to consider. In the leading quantum meruit authority, the case of Mann, the High Court held that a contractor generally cannot use quantum meruit to escape the pricing structure of an existing contract. However, this newsletter will focus on the 2025 decision of Locke, where the NSW Court of Appeal clarified how quantum meruit principles may still apply where work continues beyond the original contractual scope, as workers are entitled to fair and reasonable remuneration. |
What is a Quantum meruit claim?
A quantum meruit claim usually arises when a party seeks compensation for the services provided to another party where no formal written contract or agreement exists. This can arise when work has been completed beyond the scope of the contract, the contract has become unenforceable or when the contract has been rescinded.
What happened in the case of Locke?
Mr Locke was a director of Gold and Copper Resources Pty Ltd (GCR) and had been the managing director and chief executive officer. He was subjected to investigations in relation to alleged ‘spending discrepancies’. He contacted Quantum Forensic Solutions (QFS), a firm of forensic accountants, to have them produce a report in response to the allegations.
In his contract with QFS there was a term that they would charge Mr Locke using hourly rates, but that the total cost of the contract would not exceed $20,000. Despite this, QFS continued to work beyond the $20,000 cap, in the end issuing invoices totalling $219,454.89.
The Court drew inferences from documents that this work performed after the completion of the contracted work was performed at the request of Mr Locke.
Mr Locke then appealed this decision arguing that there was a breach of the Brown v Dunn rule, claiming that the materials from which the inference (the primary judge made) were not put to him in cross-examination. He also argued that the amounts QFS had invoiced were not fair and reasonable given the hours claimed and the rates charged. This newsletter focuses on his second claim of appeal.
The Decision on ‘Fair and Reasonable Payment’
Mr Locke argued that there was insufficient evidence for the primary judge to conclude that the hours charged by QFS were fair and reasonable. He accepted that the rates were the same as those used in the contract term, however, he argued that the completion of the contracted ‘phase 1’ (the capes phase) meant those terms did not apply to work completed after. In this argument, the rate agreed upon in the contract should not have been carried across to later work.
The NSW Court of Appeal held that the conduct of Mr Locke created an inference that he had agreed to the rate and hours charged by the QFS. In deciding this they considered;
- There had been a substantial amount of work completed by QFS.
- Mr Locke was heavily involved with that work completed by QFS.
- Mr Locke continued to give instructions to QFS, notwithstanding he had received invoices on an ongoing basis from them.
- Evidence, such as emails, showed Mr Locke had acknowledged the work done by QFS was substantive.
- Mr Locke provided assurances of invoice payments.
- Mr Locke had paid $10,000 beyond the initial phase 1 contract (paying $30,000 in total).
The court found:
- that Mr Locke had plenty of time to address the rate at which that work was charged and at no time protested the rates, number of hours of amount of any invoice, and
- that direct evidence of fair and reasonable work was not essential. This is because the auditors were subject to professional and ethical obligations.
- it was found that as the work done outside the contract was of the same nature as the work done inside it, it was only natural that the same rate continued to be charged.
What does this mean for you and construction law?
The decision in Mann, remains the leading quantum meruit claims authority. In that case, the High Court significantly limited the ability of parties to recover on a quantum meruit basis where an enforceable contract already governed the work performed. However, Locke demonstrated that courts will still closely examine the conduct of the parties where work continues beyond the original contractual scope.
Therefore, this means two things;
(1) Where parties continue to engage in work beyond an original contractual scope, courts may infer that the work was to be remunerated on a fair and reasonable basis. This is bar for proving hours worked were fair and reasonable is fairly low.
(2) The rate at which services are charged will often be implied from a previous contract. This will likely happen when services are the same but fall outside the contract’s scope.
The key point for the Construction industry is that the Court is primarily concerned with ensuring that those who have carried out works receive ‘fair and reasonable remuneration for the work done’. Your conduct will be vital in determining the costs you are liable for. In this case, the Court found that silence, while enabling ongoing work to continue, and partial but not whole payments, were suggestive that Mr Locke was consenting to the rate and hours charged. When Contracting in any capacity in the Construction industry, the key point is proactivity. Clarify the costs and expectations of the work from the start. Developers and Contractors should be aware that the Court will infer from your conduct whether the costs of the work are fair and reasonable. Do not leave it until the end to dispute a cost if you disagree with it.
If you have any questions about fair and reasonable remuneration or more generally, construction litigation, our experts at Crisp Law are here to assist.
Contact Crisp Law for advice and information:
Telephone: +61 2 8042 8701
Email: admin@crisplaw.com.au
References
Locke v H.C. Loneragan & Company Pty Ltd as trustee for the Loneragan Family Trust t/as Quantum Forensic Solutions (QFS) [2025] NSWCA 166
Mann v Paterson Constructions Pty Ltd [2019] HCA 32
Photo by Amina Atar on Unsplash
