Services and overpayments

Elecref logo, via their siteThe English Court of Appeal recently considered two interesting issues in Furmans Electrical Contractors v Elecref Ltd [2009] EWCA Civ 170 (10 March 2009). Furmans were subcontractors installing electrical cabling on jobs on which Elecref were electrical contractors. In early September 2007, a dispute arose as to the basis on which Furmans were remunerated; in particular, Elecref claimed that they had been overcharged. In early October, Elecref made one further payment on foot of an invoice from Furmans, but thereafter declined to make any further payments on foot of invoices covering various periods from August to October. Furmans sued to recover those amounts, and Elecref counterclaimed for the overpayments.

Waller LJ (Arden and Moore-Bick LJJ concurring) effectively allowed Furmans’ claim but dismissed Elecref’s counterclaim, and in doing so made two interesting comments. First, as to Furmans’ cliam, he said:

32. On the pleadings it seemed to us that the claim was a standard claim in this type of case. The claim form simply alleged that services had been provided and the claim was for sums set out in the unpaid invoices. It did not plead any express terms as to price and prima facie the claim was based on a contract or possibly more accurately on a series of contracts to supply services and materials as identified in invoices. Without more what the claimant would be entitled to is a reasonable sum for those services and materials. That, I should emphasise, is not strictly a quantum meruit claim. A quantum meruit claim is a restitutionary claim which can be made when there is no contract. (See the judgment of Goff J as he then was in BSC v Cleveland Bridge Co [1984] 1 All ER 504). That case itself shows that a court will be reluctant to find no contract, albeit that was the conclusion in the particular circumstances of that case. Simply because no price has been agreed expressly does not lead to the conclusion that there is no contract. The contract may simply be one for a reasonable price.

This is the first point of interest in this case, confining quantum meruit entirely to the restitutionary context. He expressly denies that the contract for a reasonable price which he postulates can properly be characterised as a quantum meruit, and by expressly confining that concept to the restitutionary context, he implicitly denies that it can arise on any other basis, such a plaintiff’s reliance or a defendant’s wrongdoing. It is true that BSC v Cleveland Bridge Co is an important case concerning a restitutionary quantum meruit, but there is nothing in that case to deny that a quantum meruit can be made out on other bases as well. The quantum meruit is an action for a reasonable sum for the value of work done, and nothing in that is inherently restitutionary. Of course, it will often be restitutionary, where the defendant has been unjustly enriched by the work done by the plaintiff. But it can be contractual, if the parties agree that the work would be remunerated on that basis. It can be reliance-based, if the plaintiff did the work in reliance on representations made by the defendant. Or it can be based on the defendant’s wrongdoing. And these latter three will, by definition, respond to matters other than the defendant’s unjust enrichment. Hence, the quantum meruit is a protean action, and it is not confined to restitution for unjust enrichment.

On the facts, Waller LJ held that there was no difficulty in finding that there was a series of individual contracts under which Furmans agreed to supply services and materials for Elecref at a daily rate, assessed on the basis of a reasonable number of hours. Since Mr Recorder Burrell QC in the court below had done the calculations on that basis, he upheld that aspect of the Recorder’s judgment.

However, the Recorder had set-off the amount by which Elecref said Furmans were overchraging, both in respect of those invoices and in respect of the earlier paid invoices, and Waller LJ reversed the Recorder on this issue, because Elecref had not established any contractual or restitutionary basis for the recovery of the claimed overpayments. In particular, he held that, once Elecret had raised their doubts about the basis on which Furmans were invoicing for the work, but had not sought to reclaim their money but instead made the October payment, Elecret had waived any claim to recover the money:

41. Elecref did not allege in their counterclaim any basis other than the oral agreement on which they should be allowed to reopen the paid invoices. They did not plead any mistake or other misrepresentation. They did not establish the oral agreement nor did they in fact establish at trial any mistake or other misrepresentation. Furthermore in making a substantial payment once they knew of the complaint they were making, even if there had been some mistake or representation they waived their rights. They thus did not establish any basis on which they were entitled to reopen the invoices already paid.

This is Waller LJ’s second interesting comment, and it contains the seeds of two reasons to reject Elecref’s counterclaim: either they were not mistaken at all, or they subsequently waived their rights to any claims they might have had. On the first basis, Elecref would not have been mistaken if they had entertained doubts as to the basis of Furmans’ invoices and nevertheless paid to settle the claim; not having articulated their doubts, they had taken the risk that the doubts were well-founded. Even if they were mistaken in some of their payments, nevertheless, on the second basis articulated by Waller LJ, Elecref’s October payment is crucial to establishing that they had waived their claims in respect of any alleged prior overpayments (and, it seems, in respect of potential overpayments in the invoices on which Furmans were claiming in this case).

These are two important issues, and it would have been better if he had separated them out. The impact of doubt on mistake claims is a matter which caused great difficulty to the House of Lords in Deutsche Morgan Grenfell Group Plc v Inland Revenue [2007] 1 AC 558, [2006] UKHL 49 (25 October 2006); whilst the simple reference to “waiver” potentially conceals several different doctrines, including waiver strictly so called, acquiescence, election and estoppel. A little more linguistic accuracy on these issues would therefore have been advisable.