SPRY CIVIL CONSTRUCTION PTY LTD v AUSSIE-DRAIN PTY LTD [2025] SASC 99

On Appeal from MAGISTRATES COURT OF SOUTH AUSTRALIA (MAGISTRATE JACKSON) CIV- 22-010382 Appellant: SPRY CIVIL CONSTRUCTION PTY LTD Counsel: MR S CARRAGHER - Solicitor: WRP LEGAL & ADVISORY Respondent: AUSSIE-DRAIN PTY LTD Counsel: MR T RICE - Solicitor: LYNCH MEYER Hearing Date/s: 03/03/2025 File No/s: CIV-24-011524 B SUPREME COURT OF SOUTH AUSTRALIA (Magistrates Appeal: Civil) DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment. The onus remains on any person using material in the judgment to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court in which it was generated. SPRY CIVIL CONSTRUCTION PTY LTD v AUSSIE-DRAIN PTY LTD; AUSSIE-DRAIN PTY LTD v SPRY CIVIL CONSTRUCTION PTY LTD [2025] SASC 99 Judgment of the Honourable Justice B Doyle 20 June 2025 CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - PERFORMANCE OF WORK - REMEDIES FOR BREACH OF CONTRACT MAGISTRATES - APPEAL AND REVIEW - SOUTH AUSTRALIA - APPEAL TO SUPREME COURT The respondent and cross-appellant (‘Aussie-Drain’) agreed by a contract entered into with the appellant and cross-respondent (‘Spry’) to carry out sub-surface drainage works at the Murray Bridge Racecourse. The contract was for a lump sum but included a clause that if rock was encountered, prices ‘need to be reviewed’. After carrying out about 37% of the required work, Aussie-Drain encountered rock. In order to complete the works, a rock saw was required and a different and more labour-intensive work method was called for. In the course of discussions, Aussie-Drain’s principal asserted that it was ‘not my job anymore’. Although one of Aussie-Drain’s workers remained on site, the other workers left and returned to Victoria. A magistrate found that Aussie-Drain repudiated the contract. With reference to the rule in Sumpter v Hedges [1898] 1 QB 673, Aussie-Drain’s claim for a restitutionary award in respect of the work it had carried out failed, save that the magistrate recognised an exception for the cost of the materials it had supplied. The magistrate also made an award in Aussie-Drain’s favour for work carried out (and materials supplied by it that were used in such work) after its repudiation of the contract. On appeal, Spry contends that the magistrate erred by finding that Aussie-Drain was entitled to recover in respect of the materials supplied by it in partially completing the works prior to repudiating the contract. Additionally, Spry contends that in respect of the subsequent work, the magistrate erred by including in the award a component reflecting GST. -- 1 of 30 -- By its cross-appeal, Aussie-Drain contends that: 1. when rock was encountered, the contract was automatically terminated, and the magistrate therefore erred by finding that Aussie-Drain repudiated the contract; 2. consequently, and in any event, it was entitled to recover on a quantum meruit basis for the work done and materials supplied by it before rock was encountered because the benefit of that work was freely accepted by Spry. Held, allowing the appeal in part and dismissing the cross-appeal: 1. the contract was not automatically terminated when Aussie-Drain struck rock; 2. the magistrate did not err by finding that Aussie-Drain repudiated the contract; 3. in accordance with the rule in Sumpter v Hedges, Aussie-Drain was precluded from recovering both for the work done and the materials supplied or installed on site prior to its repudiation of the contract; 4. the magistrate did not err by including a component reflecting GST in the award made for work carried out and materials supplied after Aussie-Drain’s repudiation of the contract. A New Tax System (Goods and Services Tax) Act 1999 (Cth) s 9-5, Public Ruling GSTR 2001/4, referred to. Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; Sumpter v Hedges [1898] 1 QB 673; United Group Rail Services Ltd v Rail Corporation New South Wales (2009) 74 NSWLR 618, applied. Nguyen v Luxury Design Homes Pty Ltd [2004] NSWCA 178; Eminent Forms Pty Ltd v Formosa [2004] SASC 192, distinguished. Adamson v Ede [2008] NSWSC 767; Angelopoulos v Sabatino (1995) 65 SASR 1; Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988; Aussie-Drain Pty Ltd v Spry Civil Construction Pty Ltd [2024] SAMC 149; Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560; Baltic Shipping Co v Dillon (1993) 176 CLR 344; Baumgartner v Baumgartner (1987) 164 CLR 137; Bolton v Mahadeva [1972] 1 WLR 1009; Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600; BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; Caves Beachside Cuisine Pty Ltd v Boydah Pty Ltd [2015] NSWSC 1273; Cleveland Bridge UK Ltd v Multiplex Construction (UK) Ltd [2010] EWCA Civ 139; Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1; Commonwealth Bank of Australia v Barker (2014) 253 CLR 169; Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184; David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; Dual Homes Victoria Pty Ltd v Moores Legal Pty Ltd (2016) 306 FLR 277; Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32; Gagner Pty Ltd v Canturi Corporation Pty Ltd (2009) 236 FLR 401; Hawkins v Clayton (1988) 164 CLR 539; Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635; Mackay v Dick (1881) 6 App Cas 251; Millington v Waste Wise Environmental Pty Ltd (2015) 295 FLR 301; Mineralogy Pty Ltd v Sino Iron Pty Ltd (no 6) (2015) 329 ALR 1; Moraghan v Cospak Pty Ltd [2007] VSC 483; Muschinski v Dodds (1985) 160 CLR 583; Oliver v Lakeside Property Pty Ltd (as trustee for the Lakeside Property Trust) [2005] NSWSC 1040; Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199; Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221; Peet Ltd v Richmond (No 2) [2009] VSC 585; Peters American Delicacy Co Ltd v Champion (1928) 41 CLR 316; Phillips v Ellinson Bros Pty Ltd (1941) 65 CLR 221; Realestate.com.au Pty Ltd v Hardingham (2022) 277 CLR 115; Redland City Council v Kozic (2024) 98 ALJR 544; Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596; South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611; Steele v Tardiani (1946) 72 CLR 386; Taylor v Laird (1856) 25 LJ Ex 329; United Group Rail Services Ltd v Rail Corporation New South Wales (2009) 74 NSWLR 618; Walsh v KC & WL Brain Pty Ltd (No 6) [2024] NSWDC 339, discussed. Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560, considered. -- 2 of 30 -- -- 3 of 30 -- -- 4 of 30 -- SPRY CIVIL CONSTRUCTION PTY LTD v AUSSIE-DRAIN PTY LTD; AUSSIE-DRAIN PTY LTD v SPRY CIVIL CONSTRUCTION PTY LTD [2025] SASC 99 Magistrates Appeal: Civil 1 B DOYLE J: The respondent and cross-appellant Aussie-Drain Pty Ltd (‘Aussie- Drain’) entered into a contract with the appellant and cross-respondent Spry Civil Construction Pty Ltd (‘Spry’) to carry out sub-surface drainage works at the Murray Bridge Racecourse. The work involved digging trenches and installing drainage pipes. The contract was a lump sum contract but it included a clause that stated that if rock was encountered, prices ‘need to be reviewed’. 2 A dispute arose when, having partially completed the work, Aussie-Drain encountered rock. This caused its trenching machine to break down on 7 October 2021. A rock saw was then needed to complete the works, and a different work method was called for. Most of Aussie-Drain’s workers and machinery departed the site on 8 October 2021, but one of its workers remained with a sanding machine. The balance of the work was carried out or procured using labour and machinery arranged by Spry, with the assistance of the remaining Aussie-Drain labourer and Aussie-Drain’s sanding machine. The pipes and other materials that Aussie-Drain had brought to site but not yet laid or installed were also used in carrying out the balance of the works. 3 Aussie-Drain made a claim in contract and restitution against Spry for the work done by it. Aussie-Drain contended that Spry had repudiated the contract on 8 October 2021 by refusing to allow Aussie-Drain to conclude the works with its labourers. By contrast, Spry contended that it was Aussie-Drain that had repudiated the contract, when its principal Mr Boersma had said to Spry’s Mr Rasheed words to the effect, ‘It is not my job anymore, I excluded rock’. Spry resisted Aussie-Drain’s claim in contract or restitution for the partially performed works. 4 Following a trial of Aussie-Drain’s claim, a magistrate1 found that when rock had been encountered this enlivened Aussie-Drain’s right to seek a review of the contract price,2 but that Aussie-Drain had by its conduct repudiated the contract before an attempt had been made to ‘activate the price review clause’.3 In this respect, the magistrate preferred the evidence of Spry’s witness Mr Rasheed about what had occurred during his discussion with Mr Boersma on 8 October 2021.4 5 The magistrate found that the contract was an entire, and not divisible, contract.5 Although Aussie-Drain had completed about 37% of the work required,6 1 Aussie-Drain Pty Ltd v Spry Civil Construction Pty Ltd [2024] SAMC 149 (‘Reasons’). 2 Reasons [124]. 3 Reasons [156]-[157]. 4 Reasons [84]. 5 Reasons [162]. 6 Reasons [84], [163]. -- 5 of 30 -- [2025] SASC 99 B Doyle J 2 this did not amount to substantial performance, and so it was not entitled to payment under the contract.7 6 Because Aussie-Drain had repudiated the contract, the magistrate held it was not entitled to succeed in a quantum meruit claim for the work done prior to 8 October 2021,8 applying the rule in Sumpter v Hedges.9 The magistrate qualified that conclusion by finding that payment for the costs of the materials was recoverable.10 7 The magistrate found that Aussie-Drain was also entitled to an award for work done and machinery provided after 8 October 2021.11 8 The total award made in favour of Aussie-Drain on its claim was $33,800.35.12 The magistrate rejected a set-off claim advanced by Spry.13 9 On appeal, Spry contends that insofar as the award included an allowance for materials supplied prior to Aussie-Drain’s repudiation, this was in error. The drainage pipe and other materials supplied prior to the repudiation were not loose materials that by some subsequent act Spry could be taken to have ‘freely accepted’ so as to warrant recovery. Spry submitted that the award therefore should only have been $21,125.30 (plus any pre-judgment interest). 10 By its cross-appeal, Aussie-Drain contends that the magistrate erred in finding that it repudiated the contract. That is because, on Aussie-Drain’s case, the contract had been discharged (other than for breach on its part) at or before the time of the conduct which the magistrate found constituted a repudiation of the contract. Aussie-Drain contends that there was therefore no preclusion on it recovering on a quantum meruit basis for the value of the work done to that point. 11 Alternatively, Aussie-Drain contends that even if it repudiated the contract, its claim in quantum meruit should have succeeded on the basis that the requirements of ‘free acceptance’ were made out. Spry ‘took the benefit’ of Aussie-Drain’s work in partially completing the contract works, and by relying upon Aussie-Drain’s work as partially discharging its obligations to its head contractor, for which it was paid. 12 The disposition of the appeal and cross-appeal turns upon: 7 Reasons [163]. 8 Reasons [171]. 9 [1898] 1 QB 673. 10 Reasons [172]. 11 Reasons [173]-[180]. 12 Reasons [186], [193]-[195]. 13 Reasons [185]-[190]. -- 6 of 30 -- [2025] SASC 99 B Doyle J 3 (1) the proper construction of the contract and, in particular, the effect of the statement that the contract price needed to be reviewed if rock was encountered; and (2) whether if, Aussie-Drain repudiated the contract, it could nevertheless recover on a quantum meruit basis for the value of work and materials provided because Spry in effect adopted the works and, together with the completion of the balance of the works undertaken by or at its direction, relied upon Aussie-Drain’s part performance as discharging its contractual obligation to its principal. 13 If these two issues are resolved adversely to Aussie-Drain, it accepts that Spry’s appeal should be allowed and the award reduced on the basis sought by Spry. That is to say, if it does not succeed in its contention that it should recover for all the work it carried out before 8 October 2021, Aussie-Drain does not seek to support the distinction made by the magistrate between the provision of labour and the provision of materials prior to that date. The salient facts 14 Neither party challenges any of the magistrate’s findings as to the basal or background facts. So far as is relevant to the issues for resolution, the facts as found are summarised below. 15 The Murray Bridge Racing Club engaged Spry to construct an inner turf track at the Murray Bridge Racecourse in 2021.14 16 The inner turf track was to be situated within the course proper. To ensure the integrity of the inner turf track, it was necessary to create a system of sub-soil drainage. That involved digging narrow trenches, five metres apart, running from the outer edge to the inner edge of the inner turf track. The trenches were to slope towards the centre of the racecourse. A length of agricultural pipe was then to be placed in each of the trenches, with holes pierced into the pipe to allow for drainage of moisture into the pipes. The pipes were to be capped on the outer (top) end and fed into a collection pipe on the inside end. The collection pipe finished with a collection drain, to allow for the overall removal of moisture from the inner turf track.15 17 Aussie-Drain was engaged for the ‘Stormwater and Subsoil Drainage’ portion of the project. Spry’s Mr Rasheed contacted Aussie-Drain’s Mr Boersma and invited him to provide a quote for the works.16 18 The request for a quote was by email and specified in outline the work to be done, including by attaching plans and specifications. The work involved the 14 Reasons [9]. 15 Reasons [9]. 16 Reasons [10]-[11]. -- 7 of 30 -- [2025] SASC 99 B Doyle J 4 installation of 8,225 metres of drainage piping and the supply of that piping (but not the collector pipes). 19 The email asked Aussie-Drain to provide ‘details within your submission of any inclusions and/or exclusions that you have allowed within your pricing’. It stated that ‘[y]our price must be a fixed lump sum with a SOR for variations’.17 20 Mr Boersma’s email of 26 July 2021 in response attached a quotation in these terms:18 Sam Thank you for the opportunity to quote for the Drainage at the Inner Turf Track. 8225 m 65 mm AG drains + Sand @ $15.50 = $127,487.50 10% GST $ 12,748.75 Total $140,236.25 The price includes Installation and supply of all materials, including flushing caps. Disposal of spoil stockpiled on site. If rock is encountered or digging under utilities is required prices need to be reviewed. Regards Bill 21 Mr Rasheed spoke with Mr Boersma by telephone on 2 August 2021 and accepted the quotation by email dated 2 August 2021.19 22 The parties did not discuss what it would mean if rock was encountered. Mr Boersma’s evidence was that this was something he included for all of his quotations for jobs.20 23 The work was undertaken during the COVID-19 pandemic. There were some delays in Aussie-Drain mobilising its Victorian crew to the site in this State. The magistrate found there was no express term that the work start on a particular date. Neither the start nor the finish dates were ‘essential terms’.21 Those conclusions are not challenged on appeal. 24 The work commenced on 25 September 2021. The Aussie-Drain crew comprised Mr Boersma, Mr De Vent and two others. They had with them the 17 Reasons [12]. 18 Reasons [14]. 19 Reasons [15]. The Reasons state that the telephone discussion occurred on 2 September 2021. The parties to the appeal agree this is a slip. 20 Reasons [17]. 21 Reasons [27]. -- 8 of 30 -- [2025] SASC 99 B Doyle J 5 trenching machine, a sand backfiller, a tip truck, a front end loader, a trench backfiller and a skidsteer.22 25 Mr Boersma was the project manager and he operated the trenching machine. He organised the equipment for the site and the accommodation for his crew.23 Mr De Vent’s principal role was to operate the sanding machine, which pressed sand into the trenches on top of the pipes.24 Mr De Cleene was a truck driver. He drove the front-end loader with sand in it, putting the sand behind the trenching machine. He also loaded spoil into the tip truck. Mr Reich drove the tip truck, which collected the spoil from the trenching machine’s conveyor belt. He took the spoil to a designated area in the middle of the racecourse.25 26 Mr Boersma would drive the trenching machine along the trench’s string line. The machine would dig the soil, remove the soil (spoil) from the trench, lay pipe, and then add sand on top. Mr De Cleene would then deposit a pile of additional sand at the newly dug trench after every four or five lines had been completed. Subsequently, Mr De Vent would drive the sanding machine and put another load of sand over the trench. He would also cap the ends of the pipes.26 27 Mr Boersma said he saw rocks in the soil when they arrived but did not raise it due to the late start. He commenced in a location which appeared to have the least amount of rock.27 28 Rainfall led to some delays, but work resumed on 6 October 2021. It was on 7 October 2021 that the trenching machine broke down. On Mr Boersma’s evidence, which was accepted on this score, it failed due to the presence of rocks in the subsoil. He could feel rocks in the subsoil when operating the machine and could see little rocks flying everywhere. It broke down a few times and eventually required a bearing to fix the machine and it needed to be returned to the Victorian depot for repairs.28 29 The magistrate rejected Spry’s case that the trenching machine had been in poor condition from the outset,29 and it was accepted that there were rocks at the site sufficient to cause damage to the trenching machine, and that this required an alternative methodology to be derived.30 30 Mr Boersma told Mr Rasheed that the rock was too hard for the trenching machine and a rock saw was required. Mr Rasheed said he could arrange a rock saw to be onsite the next day. Mr Boersma’s evidence was that on the evening of 22 Reasons [31]. 23 Reasons [32]. 24 Reasons [33]. 25 Reasons [34]-[35]. 26 Reasons [36]-[38]. 27 Reasons [39]. 28 Reasons [41], [44]-[45]. 29 Reasons [103]-[105]. 30 Reasons [121]. -- 9 of 30 -- [2025] SASC 99 B Doyle J 6 7 October 2021 he devised a methodology for the rock saw with his crew that involved the rock saw digging the trench, displacing spoil to either side. Workers with shovels would then move the spoil out of the way. Another person would lay pipe into the trench.31 31 By this stage, on the magistrate’s findings, the trenching that had been dug was 3,036 metres of the total of 8,225 metres.32 32 On 8 October 2021 there was a meeting between Mr Boersma, Mr Rasheed and Spry’s supervisor Mr Kelly, during which Mr Boersma announced he would stay to establish a new methodology with the rock saw, and then he would return to Victoria.33 33 What was said during the meeting was contentious but the magistrate accepted Mr Rasheed’s evidence to the effect that Mr Boersma had said that it was ‘not his job anymore’ because he had excluded rock from the contract. The qualification to the magistrate’s acceptance of Mr Rasheed’s evidence was that she did not accept that Mr Boersma had offered to leave Mr De Vent and the sanding machine behind at no cost. 34 34 The magistrate found that by this time Aussie-Drain’s crew were keen to return to Victoria, having been confined to their rented accommodation for a number of days due to heavy rainfall and COVID-19 restrictions.35 The magistrate found that Mr Boersma said on 8 October 2021 that he was leaving the site with Mr De Cleene and Mr Reich. The labour hire had not been arranged before his planned departure.36 35 The rock saw arrived on site on 8 October 2021 and by discussion a methodology was devised. It was a lot more involved than had been the case with the trenching machine. It required more people. The rock saw made quite a mess and was quick, making the clean up work required more intensive. There was some contention about for how long Mr Boersma stayed onsite. Mr De Vent, who operated the sanding machine, continued with connecting the pipes and cleaning out the drains. The work was substantially but not entirely finished by around 25 October 2021, when Mr De Vent left the site.37 The work done after 8 October 2021 involved the use of sand and drainage pipe that Aussie-Drain had brought to site.38 31 Reasons [46]-[49]. 32 Reasons [78], [84]. 33 Reasons [51]. 34 Reasons [58], [146]. 35 Reasons [147]-[148]. 36 Reasons [152]-[153]. 37 Reasons [72]. 38 Reasons [76]. -- 10 of 30 -- [2025] SASC 99 B Doyle J 7 The magistrate’s reasoning in relation to the legal issues 36 The magistrate found that the contract did not stipulate a particular mode of performance. That is to say, it would have been permissible for Aussie-Drain to complete the works with the use of the rock saw and associated labour.39 37 However, the magistrate found that Aussie-Drain repudiated the contract on 8 October 2021. In reaching that conclusion, the magistrate evidently considered that the contract had not been discharged automatically when rock was encountered. The magistrate reasoned as follows:40 Aussie-Drain’s position was that the clause regarding encountering rock provided that a new price could be agreed, or the agreement could be discharged at that point because an essential term (price) could not be agreed. The accepted email quote stated: If rock is encountered or digging under utilities is required prices need to be reviewed. While this submission by Aussie-Drain is correct at law, factually, neither party attempted to activate the price review clause. There was no discussion about pricing for Aussie-Drain to continue the Works. I find that Aussie-Drain repudiated the contract by Mr Boersma stating that it was no longer his job, and then leaving the site with three out of four of its crew and all its machinery save for the sanding machine. 38 As has been observed, the magistrate was not satisfied that there had been substantial performance by this date of what she found was an entire contract. The result was that Aussie-Drain could not recover in contract.41 39 In respect of the alternative claim in quantum meruit, the magistrate accepted Spry’s submission that such a claim was not available because Aussie-Drain, having repudiated the contract, was not the innocent party. Spry had no option but to take the benefit of the completed works. It could not be said to have freely accepted the partially completed works. The magistrate referred to Sumpter v Hedges and to Australian authority considering that decision.42 She observed that the decision in Mann v Paterson Constructions Pty Ltd43 (‘Mann’) concerned a restitutionary claim by the innocent party to a terminated contract.44 39 Reasons [154]. 40 Reasons [155]-[157]. 41 Reasons [158]-[163]. 42 Oliver v Lakeside Property Pty Ltd (as trustee for the Lakeside Property Trust) [2005] NSWSC 1040, which in turn refers to Steele v Tardiani (1946) 72 CLR 386. 43 (2019) 267 CLR 560. 44 Reasons [168]-[170]. -- 11 of 30 -- [2025] SASC 99 B Doyle J 8 40 Accordingly, Aussie-Drain’s claim in quantum meruit for payment for this portion of the works failed.45 However, in a further paragraph which is the subject of Spry’s appeal, the magistrate added:46 The exception here is payment for the cost of the materials. Aussie-Drain is entitled to recover the cost of the materials. 41 The magistrate found there was no contractual agreement on 8 October 2021 in relation to the basis upon which the works would be carried out now that rock had been encountered. No price was agreed for Mr De Vent staying on with the sanding machine.47 But the work that was done after 8 October 2021 was clearly at the request of Spry, and Aussie-Drain chose to accept that work and the materials that had been left onsite for use. Having rejected Mr Rasheed’s evidence that Mr Boersma had offered these things on a gratuitous basis, there was a restitutionary claim based on an implied promise to pay a reasonable cost for the services.48 The contract and its repudiation 42 Aussie-Drain’s first ground of cross-appeal is that having found that there were rocks on site sufficient to cause damage to the trenching machine and to require an alternative methodology to be devised, the magistrate erred by failing to find that the contract was ‘discharged as between the parties in accordance with its terms’. Aussie-Drain contends that accordingly the contract could not have been (and was not) repudiated by it. 43 In its submissions on appeal, Aussie-Drain contended that the magistrate’s finding that Aussie-Drain had a ‘right’ to seek a review was inconsistent with the mandatory language of ‘need’ which appeared in Mr Boersma’s quotation email that formed, on the magistrate’s findings, part of the contract. It argues that if the clause were not mandatory – that is to say, if one party could decline to participate in the review – the clause would be rendered ineffectual and would not meet its commercial purpose. 44 The next step in the argument was that the effect of the clause or terms was to discharge the agreement as to price and require a new agreement as to price. 45 The final step in the argument was that because price is an essential term, the absence of any provision as to how it would be determined meant that the agreement was discharged when rock was encountered. 46 Aussie-Drain contends that if the parties had reached agreement as to price, they would have been bound to continue performing, but since no such agreement 45 Reasons [171]. 46 Reasons [172]. 47 Reasons [131], [173]. 48 Reasons [173]-[177]. -- 12 of 30 -- [2025] SASC 99 B Doyle J 9 was reached here, the agreement was and remained discharged by operation of its terms. Aussie-Drain could therefore recover based on a total failure of consideration. 47 The steps in that argument might be thought to reveal an internal tension, if not contradiction. It is said that the commercial purpose of the review clause can only be achieved if the review is mandatory. But the result of accepting the argument is said to be that the contract is automatically discharged upon the encountering of rock. If that is so, the apparent mandatory obligation to participate in or give effect to the review is not binding. In other words, giving effect to what is said to be the commercial purpose of the clause renders it inoperative. 48 However, another way of making the submission, which leads to the same result in this case, is to contend that the clause should be understood as providing that in the absence of agreement on a new price, Aussie-Drain is not required to carry on with the works if rock is encountered (or if digging under utilities is required). In other words, the clause should be construed as though it read: If rock is encountered or digging under utilities is required the parties are not required to continue performing the contract unless prices need to be are reviewed and agreed. 49 In order for Aussie-Drain to succeed, the effect of the clause must be that immediately upon rock being encountered or digging being required under utilities the contract is terminated. It only revives if there is a review that leads to agreement. On that approach, the statement that ‘prices need to be reviewed’ is non-promissory. At most, the review process is a contingency which, if it results in agreement, causes the contractual obligations to revive or continue (as varied). Since it is always within the power of the parties to agree to revive a terminated contract by fresh agreement, the clause in question is, in substance and reality, simply a termination clause. 50 Spry also appeals to the commercial purpose which it submits should be attributed to the clause, contending that if the effect of the clause permitted the parties simply to ‘go their separate ways’ upon the encountering of rock, the clause would not achieve its apparent purpose of seeking to facilitate a review of the price. 51 The question begged, however, is what effect does the clause have in law if the contract is not automatically discharged? Spry submitted in writing that a number of outcomes were open to the parties, including that Spry might agree to remove a rock or rocks at its own cost, with Aussie-Drain continuing to complete the works at an unadjusted price, or the parties might agree to an adjusted price, or they might be unable to agree but submit the issue for expert determination. Spry submits that none of those things happened because Aussie-Drain abandoned the job before engaging in any discussion or process that could amount to a review. 52 That submission identified a number of factual possibilities, but did not confront the legal question that arises if the parties are unable to agree a price or a process for review by which they will be bound. -- 13 of 30 -- [2025] SASC 99 B Doyle J 10 53 In the course of oral submissions, Spry contended that in the absence of reaching agreement there was an implied term to pay a reasonable price for the additional work or cost occasioned by the presence of rock. 54 Spry submitted in the alternative that if such a term would not satisfy the requirements for implication, the agreement was that the parties’ obligations would be discharged once efforts to agree had been exhausted. The concept of a deferred termination of this kind is not entirely novel.49 55 On either approach, the contract had not yet been discharged when Mr Boersma said it was not his job anymore, or when three of the four workers left South Australia. 56 Spry’s alternative construction is similar to the construction urged by Aussie- Drain, save for one critical difference. On Aussie-Drain’s case, the contract is discharged automatically upon rock being encountered, with it being contemplated that the parties would review the price to attempt to agree a revised price that would see the balance of the works undertaken, but with the parties not being bound to engage in that process. On Spry’s alternative construction, the contract remains on foot whilst the parties undertake a review, but if the review does not result in an agreed price, the contract is discharged. On that approach, the parties must have some obligation to participate in the review, even though the result of their compliance with that obligation may fail to yield an agreed revised price. If not, it would be impossible to determine when they had discharged that obligation such that, in the absence of agreement, the contract would be at an end. 57 The rival contentions must be resolved by applying the well-familiar principles of construing commercial agreements. In Electricity Generation Corporation v Woodside Energy Ltd,50 the plurality summarised the relevant principles:51 … this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption “that the parties ... intended to produce a 49 A different situation again is illustrated by Peters American Delicacy Co Ltd v Champion (1928) 41 CLR 316. There, a clause in a long-term supply agreement read: ‘Prices are subject to alteration on giving [the] customer seven days’ notice in writing’. The majority considered that possible fluctuations in the prices of raw materials, machinery, wages and other eventualities made it reasonable to conclude the supplier had reserved to itself the right to ‘retire from a losing contract’, but only after fair notice had been given. 50 (2014) 251 CLR 640. 51 (2014) 251 CLR 640 at [35] (French CJ, Hayne, Crennan and Kiefel JJ) (citations omitted). -- 14 of 30 -- [2025] SASC 99 B Doyle J 11 commercial result”. A commercial contract is to be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”. 58 The application of these principles is complicated in the present case by the proposition that, generally speaking, price is an essential term of a contract for the provision of construction work and services, with the result that if price is not agreed, or if there is not an agreed process by which it is to be determined, the putative contract may be void for uncertainty. 59 Although uncertainty and incompleteness are conceptually distinct,52 in cases where no price is agreed at the outset, it may also be appropriate to conclude that the parties have not reached a consensus on the range of terms necessary before they are taken to have become bound.53 60 This is not such a case. No party suggests that the contract was void ab initio, nor that, because the parties failed comprehensively to stipulate how prices should be reviewed if rock were to be encountered, they had not reached the stage of entering into a binding agreement at all. 61 The parties plainly intended to be bound and acted accordingly. The question is as to their intention (objectively assessed) in the event that rock were to be encountered and, relatedly, whether that intention can be given effect. 62 On Spry’s preferred construction of the contract, it may be necessary to consider the principles relating to the implication of terms because on that approach, unless otherwise agreed, there is an obligation to pay a reasonable increase to the contract price to reflect the additional costs associated with the rock encountered in digging the trenches. Aussie-Dry contended that the BP Refinery requirements54 for implication could not be met in this case. 63 There may be scope for debate about whether each of the five requirements must be stringently and separately applied to a case such as the present where the contractual terms are not laid out in a comprehensive legally drafted document,55 or whether the test is simply whether the proposed term is ‘necessary for the 52 United Group Rail Services Ltd v Rail Corporation New South Wales (2009) 74 NSWLR 618 at [50] (Allsop P, Ipp and Macfarlan JJA agreeing). 53 See the discussion in Carter, Contract Law in Australia (2023, 8th ed) at [4-01]. 54 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283 (Privy Council). The requirements are that the term: (1) must be reasonable and equitable, (2) must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it (3) it must be so obvious that it ‘goes without saying’, (4) it must be capable of clear expression, and (5) it must not contradict any express term of the contract. 55 cf. Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988 at [27] (Lord Hoffmann), referred to in Commonwealth Bank of Australia v Barker (2014) 253 CLR 169 at [22] (French CJ, Bell and Keane JJ) and Mineralogy Pty ltd v Sino Iron Pty Ltd (No 6) (2015) 329 ALR 1 at [1002] (Edelman J). -- 15 of 30 -- [2025] SASC 99 B Doyle J 12 reasonable or effective operation of a contract of that nature in the circumstances of the case’.56 64 But this is not a case where the putative implication addresses a topic which is not mentioned at all in the written terms or in the parties’ discussions. Where the subject matter of the posited term is one which is addressed, albeit briefly or cryptically, a distinction between implication and exegesis can become hard to maintain. Unless the sentence in the quotation had no legal effect, the real question is: what did it mean? That question is answered by the interposition of the reasonable businessperson familiar with the relevant context. 65 Spry’s alternative construction involves an acceptance that the parties are subject to some kind of binding obligation to participate in a price review. This alternative construction would only be accepted if the obligation in question were sufficiently certain to be binding. In order to be binding the content of the obligation must be able to be ascertained so as to permit a determination of whether a party has failed to comply with the obligation. 66 Whilst the clause is expressed in passive terms (‘prices need to be reviewed’), it is useful to recall Lord Blackburn’s statement in Mackay v Dick that:57 as a general rule … where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his party for the carrying out of that thing. 67 The statement that prices need to be reviewed if rock is encountered may therefore be understood as carrying with it the implication that the parties will participate in such a review. The question then becomes whether the promise to participate has sufficient content to constitute a binding obligation. 68 In the context of commercial agreements the parties will often, if not generally, be taken to have agreed that they will perform their obligations in good faith. The content of a duty of good faith is typically said to include a duty to act honestly, reasonably and with fidelity to the bargain,58 but it does not require altruism to the point of ignoring self-interest as if the party was a fiduciary.59 69 Where the good faith requirement is said to attend an obligation to negotiate, an absence of any sufficient contractual indication about what any ultimate 56 Hawkins v Clayton (1988) 164 CLR 539 at 573 (Deane J), cf. Realestate.com.au Pty Ltd v Hardingham (2022) 277 CLR 115. 57 (1881) 6 App Cas 251 at 263. See also Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607 (Mason J, Barwick CJ, Gibbs, Stephen and Aickin JJ agreeing). 58 See, eg, Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199 at [288] (Allsop CJ, Besanko and Middleton JJ agreeing). 59 See, eg, South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611 at [432] (Finn J), United Group Rail Services Ltd v Rail Corporation New South Wales (2009) 74 NSWLR 618 at [70] (Allsop P, Ipp and Macfarlan JJA agreeing). -- 16 of 30 -- [2025] SASC 99 B Doyle J 13 agreement might look like may, in some cases, lead to the conclusion that a good faith obligation to negotiate with respect to an agreement lacks legal content.60 If no base price is agreed at all, and the basis for payment for works to be performed is entirely at large, a contract in which the price is to be fixed by agreement or negotiation between the parties may be open to the criticism that it is a ‘bare’ agreement to agree.61 70 Here, of course, the base price for the works including the provision of the relevant materials was fixed. An agreement to participate in a review, or to negotiate a revised price, in the event of an identified contingency arising, is different from a bare agreement to agree. It is an agreement to negotiate with respect to a variation to a fixed price occasioned by two identified contingencies. The posited agreement is ancillary to an existing binding contract. It is perhaps more akin to a dispute resolution clause by which the parties agree to seek to resolve the dispute before taking particular steps,62 or to a case where a firm agreement has been made and the parties undertake to seek to reach a fuller or more detailed agreement,63 than it is to a case in which the parties have not yet reached a consensus on the terms essential to a binding agreement. 71 As the analysis undertaken in United Group Rail Services Ltd v Rail Corporation New South Wales64 by Allsop P shows, the question whether an agreement to negotiate in good faith about a matter is capable of being binding depends upon the contractual context in which it arises. The greater the variety of circumstances that are likely legitimately to bear on the parties’ negotiating positions, and the fewer the surrounding terms which are available to anchor, or provide a frame of reference for, the negotiations, the more likely the agreement is to be uncertain and unenforceable. 72 As Allsop P explained, one aspect of good faith is fidelity to the existing bargain. In the present case, there is an existing bargain with a clearly agreed scope of works and base price. There are two identified contingencies. The result is that there is a framework against which questions of good faith participation can be assessed, even though there is no clear statement of the nature of the revision to the price contemplated. 73 In context, however, the nature of the contemplated revision is obvious enough. In the case of rock, the contemplation of the clause is that the parties will negotiate in good faith in relation to any increase in price that may be required to reflect the additional time, risk, machinery, labour or materials that may be necessitated by the presence of rock. 60 See, eg, the discussion in Caves Beachside Cuisine Pty Ltd v Boydah Pty Ltd [2015] NSWSC 1273 at [98]-[124] (Kunc J). 61 cf. Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 at 604 (Gibbs CJ, Murphy and Wilson JJ). 62 United Group Rail Services Ltd v Rail Corporation New South Wales (2009) 74 NSWLR 618. 63 Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 at 26 (Kirby P). 64 (2009) 74 NSWLR 618 at [30]-[69]. -- 17 of 30 -- [2025] SASC 99 B Doyle J 14 74 The review would not be an occasion more generally to revisit the profitability of the job in relation to the work already completed to that point. A party in the position of Aussie-Drain who nominated a revision to the price which did not reflect any assessment by it of the additional work now required by the discovery of work, and which was instead designed to ensure that there would be no agreement, thus enabling Aussie-Drain to escape the contract and make a claim based on a quantum meruit, would likely breach its obligation to honestly and to genuinely review the price. 75 As Allsop P said:65 It may well be that it will be difficult, in any given case, to conclude that a party has not undertaken an honest and genuine attempt to settle a dispute exhibiting fidelity to the existing bargain. In other cases, however, such a conclusion might be blindingly obvious. Uncertainty of proof, however, does not mean that this is not a real obligation with real content. 76 Spry contends that whatever may be the difficulty in more borderline cases, since Mr Boersma effectively disclaimed the job and announced that the labourers would be leaving South Australia before any proposal for a revised price had been made by Aussie-Drain, this is an obvious case. 77 As I have observed, Spry contended that because Aussie-Drain’s conduct was repudiatory it is not necessary to resolve whether, on a failure of good faith negotiations, the contract would be discharged, or whether an obligation to pay a reasonable increase to the price should be recognised. All that is necessary is to reject Aussie-Drain’s contention that the contract was discharged immediately upon the encountering of rock. 78 At one level that may be so, but I would only reject Aussie-Drain’s submission if I am satisfied that one or other of Spry’s constructions is tenable and correct. If I am to reject Aussie-Drain’s submission without finding that there is an obligation to pay a reasonable price increase in the absence of agreement, I must consider whether the posited good faith obligation would be sufficiently certain to be enforceable on that hypothesis. 79 There is, in my view, much to be said for the proposition that there is here an obligation to pay a reasonable additional amount occasioned by the presence of rock, but even if I assume there is no such obligation, with the result that the contract is discharged if negotiation fails to yield agreement, I am satisfied that there is a sound basis to recognise a binding obligation to participate in good faith. Even if the effect is that the parties’ obligations will come to an end if, having so conducted themselves, they fail to reach agreement, this is more consistent with the meaning that would be attributed to the clause by a reasonable businessperson than is the construction urged by Aussie-Drain. 65 (2009) 74 NSWLR 618 at [74]. -- 18 of 30 -- [2025] SASC 99 B Doyle J 15 80 First, the clause in question speaks of a review. Spry’s construction gives greater voice to those words than does Aussie-Drain’s, which results in an automatic termination, and therefore does not mandate participation in a review. Aussie-Drain’s construction is to the effect that the parties have only agreed to the carrying out of the excavation works if rock is not encountered. That does not seem to reflect the language and objectively manifested intent of the parties. 81 Secondly, viewed in prospect, it could not be known whether, if rock was to be encountered, this would have a significant or a relatively insignificant effect on the nature of the work, and thus the time, risk, equipment or materials that would be involved. It is a surprising intention to attribute to the parties that, should any rock be encountered, either would be free to escape the bargain, without more. 82 Thirdly, the nature of the work required was not highly complex. In the event that rock was encountered which did not entirely preclude the work being done, the negotiation about a satisfactory adjustment to the price would not be likely to be complex or subject to such imponderables that it would be impossible to assess whether the parties were in fact participating in a review of the price in good faith. The same observation may be made in relation to the other contingency (digging under utilities). 83 The fact that one cannot exclude circumstances where it may be difficult to say whether the parties have participated in a price review in good faith should not, in my view, deter the Court from giving the contract a meaning which reflects the apparent attitude of the parties. Aussie-Drain said that prices would need to be reviewed if rock was encountered. It did not say that it would not carry out the works if rock was encountered. Spry accepted the quote without expressing a reservation about precisely how far it might be called upon to go in participating in a review of the price. The parties’ conduct is consistent with an acceptance that meaning could be given to that qualification upon the quoted price. A lawyer may have stopped to wonder exactly what would be required, but the parties were not lawyers. They were practical business-people. The commercial law should foster and support commercial practice, not fight it.66 84 For those reasons, I would reject Aussie-Drain’s contention on the cross- appeal that the contract was automatically discharged on the encountering of rock. I am satisfied that even in the absence of an implied obligation to pay a reasonable increase to the price in the event of a failure to reach agreement, there was an extant obligation upon Aussie-Drain to participate in good faith in a review of the price necessitated by the encountering of rock when it engaged in the conduct found by the magistrate. The challenge to the finding that Aussie-Drain repudiated (or renounced) the contract therefore fails. 66 P Devlin, ‘The Relation Between Commercial Law and Commercial Practice’ (1951) 14 Modern Law Review 249, referred to with approval in United Group Rail Services Ltd v Rail Corporation New South Wales (2009) 74 NSWLR 618 at [57] (Allsop P, Ipp and Macfarlan JJA agreeing). -- 19 of 30 -- [2025] SASC 99 B Doyle J 16 A claim in restitution by a party found to have repudiated the contract 85 There is no challenge to the finding that the contract was an entire contract which was not substantially performed. Accordingly, on the footing that Aussie- Drain repudiated the contract, the only basis upon which it might recover for work done or materials supplied prior to the repudiation is on a restitutionary claim for quantum meruit or quantum valebat. 86 Authority suggests that a contract-breaker will not succeed in a restitutionary claim of that kind solely by virtue of pointing to the fact that the innocent party has received a benefit as a result of partial performance. This is the so-called rule in Sumpter v Hedges.67 87 In that case, the plaintiff builder contracted to build two houses and stables on the defendant’s land for a lump sum price. Before the work was substantially complete, the plaintiff said he could not go on with it, and the finding was that he abandoned the contract. The defendant therefore found his land with unfinished buildings on it, and he thereupon completed the work. The plaintiff had in fact received a part payment but not, he contended, the full value of the work he had completed. He pursued a claim in quantum meruit. The Court of Appeal unanimously rejected the claim. 88 Chitty LJ observed that the mere fact the defendant had completed the work was not evidence from which the inference could be drawn that he entered into a fresh contract to pay for the work done by the plaintiff. 68 Collins LJ said, in a passage later adopted by Dixon J in Steele v Tardiani,69 that:70 There are cases in which, though the plaintiff has abandoned the performance of a contract, it is possible for him to raise the inference of a new contract to pay for the work done on a quantum meruit from the defendant’s having taken the benefit of that work, but, in order that that may be done, the circumstances must be such as to give an option to the defendant to take or not to take the benefit of the work done. It is only where the circumstances are such as to give that option that there is any evidence on which to ground the inference of a new contract. Where, as in the case of work done on land, the circumstances are such as to give the defendant no option whether he will take the benefit of the work or not, then one must look to other facts than the mere taking the benefit of the work in order to ground the inference of a new contract. In this case I see no other facts on which such an inference can be founded. The mere fact that a defendant is in possession of what he cannot help keeping, or even has done work upon it, affords no ground for such an inference. He is not bound to keep unfinished a building which in an incomplete state would be a nuisance on his land. 89 The position was different, however, with respect to loose materials left onsite by the plaintiff builder. The trial judge had awarded the plaintiff the value of those materials and no challenge was made to that conclusion on appeal. This 67 [1898] 1 QB 673. 68 [1898] 1 QB 673 at 675. 69 (1946) 72 CLR 386 at 403 (McTiernan J agreeing). 70 [1898] 1 QB 673 at 676. -- 20 of 30 -- [2025] SASC 99 B Doyle J 17 was undoubtedly on the basis that the defendant had a choice whether to keep or return those materials. 90 The reasoning in Sumpter v Hedges reflects that a claim in quantum meruit at that time which did not rely on an express promise to pay a reasonable amount for the work done or materials provided was seen as lying in quasi-contract.71 The problem was analysed by asking whether an implied promise to pay could be inferred. That was also the way the principle was summarised by Starke J in Phillips v Ellinson Bros Pty Ltd:72 It is a principle of English law that parties having contracted to do an entire work for a specific sum can recover nothing unless the work be done or it can be shown that it was the other party’s fault that the work was incomplete or that there is something to justify the conclusion that the parties have entered into a fresh contract. 91 Australian law no longer resorts to the fiction of implied contract and recognises a variety of cases in which a claim in restitution succeeds in order to avoid unjust enrichment.73 But the rule in Sumpter v Hedges apparently survives, as does the problem of identifying when, if ever, a claim by the repudiating party may nevertheless succeed by reference to the ‘free acceptance’ by the innocent party of the work or materials undertaken or provided.74 92 In order to consider Aussie-Drain’s contention that it should be permitted to recover on a non-contractual quantum meruit in respect of work done and materials provided prior to its repudiation, it is helpful to locate the rule in Sumpter v Hedges within the broader framework of principles relating to restitutionary claims for work carried out under or with reference to a contract. 93 Broadly, the position is as follows. (1) No claim in restitution may be made by a party who has provided goods or services under a contract which remains enforceable, open and capable of performance.75 (2) A claim in restitution may be made by a party who has provided goods or services under a contract which is found to have been inoperative or unenforceable for some reason,76 unless the policy of the law which renders the contract inoperative or unenforceable also precludes a claim in restitution.77 71 Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560 at [182] (Nettle, Gordon and Edelman JJ). 72 (1941) 65 CLR 221 at 233-234. 73 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221. 74 Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635 at [52] (Gleeson CJ). See also Bolton v Mahadeva [1972] 1 WLR 1009. 75 Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560 at [169] (Nettle, Gordon and Edelman JJ). 76 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221. 77 Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498. -- 21 of 30 -- [2025] SASC 99 B Doyle J 18 (3) Whilst the matter is not free from controversy,78 it appears that a claim in restitution may be made by a party who has provided goods or services under a contract which is subsequently frustrated.79 (4) Where a contract is terminated because a party has repudiated the contract, it is necessary to consider whether the contract was an entire contract, or a divisible contract and, if so, whether divisible in discrete stages, or infinitely divisible. That is because the innocent party: (a) is confined to claims that have accrued under the contract in respect of a completed divisible part of contract works, or in respect of any work undertaken pursuant to an infinitely divisible contract; but (b) may elect between a claim for damages or a restitutionary claim based upon a quantum meruit in respect of work carried out under an entire contract where the work was not substantially complete, or in respect of a divisible component of the contract works that was not substantially completed. 94 The decision in Mann concerned this last category of case. 95 A majority (comprising Gageler J and Nettle, Gordon and Edelman JJ) held that a restitutionary claim was available in such a case and to the extent described. The minority (Kiefel CJ, Bell and Keane JJ) placed emphasis on the proposition that restitutionary claims should not disturb or interfere with the risk allocation under a contract, and therefore considered that the innocent party was in such a case confined to remedies under or for breach of the contract. 96 The majority justices held, however, that the contract price exerted an influence over the quantification of the quantum meruit award. Gageler J concluded that the award should never exceed the contract price,80 so as to substantially eliminate the distortion of contractual incentives.81 Recognising that a degree of deference to the contract as a reflection of the parties’ risk allocation is appropriate in point of principle,82 Nettle, Gordon and Edelman JJ held that the award should prima facie not exceed a fair value calculated in accordance with the contract or appropriate part of the contract price. But they did not exclude the possibility of cases where, in accordance with principle, the circumstances would dictate that it would be unconscionable to confine the plaintiff to the contractual measure.83 78 See, eg, Mason, Carter and Tolhurst, Restitution Law in Australia (2025, 5th ed) at [1234], Carter, Contract Law in Australia (2023, 8th ed) at [34-10]. 79 Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560 at [189] (Nettle, Gordon and Edelman JJ), Redland City Council v Kozic (2024) 98 ALJR 544 at [184] (Gordon, Edelman and Steward JJ). 80 (2019) 267 CLR 560 at [94]-[95]. 81 (2019) 267 CLR 560 at [90]-[91]. 82 (2019) 267 CLR 560 at [214]. 83 (2019) 267 CLR 651 at [215]-[216]. -- 22 of 30 -- [2025] SASC 99 B Doyle J 19 97 The rule in Sumpter v Hedges concerns a variant upon the fourth class of case described above, where the party whose repudiatory conduct has led to the contract’s termination seeks to advance a claim for restitution in relation to work done pursuant to the contract but which did not amount to substantial performance of an entire contract or a divisible component of the works. 98 Although Gageler J described this as the ‘more difficult category of case’84 which he put to one side, in my view, there is nothing in the reasons of the other majority justices85 that warrants abandoning the prima facie preclusion on recovery synonymous with Sumpter v Hedges. 99 It may be observed that if a claim were to be permitted by the party whose repudiation resulted in the termination of the contract it would, consistently with Mann, be limited by the contract price in the same way as is the claim of an innocent party. Accordingly, to allow a claim in restitution by the contract-breaker would not permit the contract-breaker to achieve a higher return for the completed work than it would have recovered had it continued to perform. To that extent, at least, the restitutionary award would reflect a degree of deference to the contractual allocation of risk and return. 100 It has also been argued that the reliance by Nettle, Gordon and Edelman JJ upon failure of the agreed return, independently of fault, as supplying a justification for restitution, might logically entail that Sumpter v Hedges was wrongly decided.86 In my respectful view however, it is not apparent that the reasoning of Nettle, Gordon and Edelman JJ was necessarily independent of fault,87 and their Honours were careful to warn against reasoning based on any universal theory, as distinct from incremental development by reference to and analogy with decided cases.88 They emphasised that in this country restitution arises in recognised categories of case and is not necessarily available whenever, and to the extent that, a defendant is enriched at the plaintiff’s expense in circumstances that render the enrichment unjust.89 101 In any case, the general rule in Sumpter v Hedges was, as earlier noted, approved in the earlier High Court decision of Steele v Tardiani. There is no occasion or justification for a single judge of this Court to question its continued application as a prima facie rule of preclusion. 84 (2019) 267 CLR 560 at [81] (Gageler J). 85 The minority justices must be taken to have regarded such claims as even less deserving, and more likely to subvert the contractual allocation of risk and responsibility, than would the claim under consideration in Mann. 86 Mason, Carter and Tolhurst, Restitution Law in Australia (2025, 5th ed) at [1160]. 87 See, eg, (2019) 267 CLR 560 at [170] (and see also Gageler J’s reasons at [79]). See also Redland City Council v Kozik (2024) 98 ALJR 544 at [180] (Gordon, Edelman and Steward JJ). 88 (2019) 267 CLR 560 at [212]-[213]. 89 (2019) 267 CLR 560 at [213], referring to David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 378-378 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ), Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560 at [73]-[74] (Hayne, Crennan, Kiefel, Bell and Keane JJ, at [139] (Gageler J). -- 23 of 30 -- [2025] SASC 99 B Doyle J 20 102 Even if I were unconstrained by authority, and notwithstanding the arguments made by respected scholars against retention of the rule,90 I consider that there is much to be said for its retention, including for the reasons that have been advanced in its defence by McFarlane and Stevens.91 The law of contract having determined that – on the proper construction of a contract – a party is not entitled to payment under the contract until they complete the works (or a divisible portion of the works), it is difficult to see a reason in justice why that party should, by reason of it having renounced its obligations under the contract, be in a position to advance a claim on restitutionary grounds for the value of the work performed. 103 Considered in terms of ‘unjust factors’,92 in the case of a claim by a contract- breaker in respect of their incomplete performance, it is also difficult to identify an unjust factor, independent of the fact of the receipt of a benefit by the defendant. 104 At least in respect of an entire contract or a divisible portion of a contract, the party who by their conduct renounces the contract cannot say that they provided the services on a basis that has failed or failed to sustain itself. The services were provided on the basis that they would be paid for under the contract when the work was substantially completed by them. Nothing has relevantly changed when the contract-breaker repudiates the contract and fails substantially to complete the works. 105 In the case of ‘entire contracts’, as Professor Birks once put it, such a plaintiff finds him or herself: 93 … in the same position as a payor of money in advance whose payment is construed not as a mere prepayment but as a deposit to bind. Of both of them it then becomes true that their restitutionary claim based on failure of consideration is defeated for the reason, obvious once that construction has been adopted, that the consideration has not failed. The consideration in such a case is that the value to be forfeited shall serve as a sanction against non-performance, so that, when the sanction attaches, the consideration cannot be said to fail. The only hope of such parties is recourse to relief from penalties and forfeitures. 106 Or, as it has been expressed by Edelman and Bant:94 In other words, the agreed basis upon which the builder performed was that he would only be entitled to payment when entire performance was rendered. Because the builder did not render entire performance, and because the defendant did not prevent the builder from completing, the basis upon which the builder performed the work could not be said to have failed. 90 See, eg, Burrows, The Law of Restitution (2002, 2nd ed) at 354-359. 91 McFarlane and Stevens, ‘In defence of Sumpter v Hedges’ (2002) 118 Law Quarterly Review 569. 92 In Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [150], the Court said that restitutionary recovery for unjust enrichment ‘depends on the existence of a qualifying or vitiating factor falling into some particular category’. 93 Birks, ‘In Defence of Free Acceptance’ in Burrows (ed), Essays on the Law of Restitution (1991) at 113- 114. See also Virgo, The Principles of the Law of Restitution (2015, 3rd ed) at 340-341, referring inter alia, to Cleveland Bridge UK Ltd v Multiplex Construction (UK) Ltd [2010] EWCA Civ 139 at [135] (Sir Anthony May). 94 Edelman and Bant, Unjust Enrichment (2016, 2nd ed) at 268. -- 24 of 30 -- [2025] SASC 99 B Doyle J 21 107 In this way, fault is a relevant point of distinction between the present case and the position of an innocent claimant who may advance a claim of the kind that succeeded in Mann, or a claimant who seeks restitution in the aftermath of the frustration of a contract. That is not to suggest that fault on the part of the defendant is an ingredient in a claim in restitution, but rather that fault on the part of the claimant may deny the existence of a reason for restitution because it may mean that it cannot really be said that the basis upon which the benefit was provided has relevantly failed.95 108 Edelman and Bant explained the position in this way:96 It is in this sense that Lord Wright stated in Fibrosa that failure of consideration requires a failure for a reason ‘not involving fault on the part of the plaintiff’.97 Similarly, in Baltic Shipping, Mason CJ, with whom Brennan and Toohey JJ agreed, said that ‘There can, of course, be no such failure when the plaintiff’s unwillingness or refusal to perform the contract on his or her part is the cause of the defendant’s non-performance’98 upon which the failure of consideration relies. These cases do not signify, therefore, some independent requirement of fault in the unjust factor of failure of consideration. Instead, they merely serve as emphasis for the need for the consideration to have wholly failed. This in turn is necessary to ensure that the claim in restitution does not undermine or contradict the contractual regime. 109 To permit a non-contractual restitutionary claim by the party who has repudiated an entire contract to succeed, without more, would be contrary to authority and would, in my respectful view, result in undesirable incoherence with the law of contract.99 110 The real question is whether there is more in this particular case, by analogy with the basis upon which the builder in Sumpter v Hedges had been able to recover for the materials left onsite and which the owner of the land chose to use in completing the works. 111 The label that has often been applied to describe the cases in which recovery is permitted by the contract-breaker is ‘free acceptance’. This concept has a wider operation than as an exception or qualification to the rule in Sumpter v Hedges. It is also used to describe cases in which, absent any contract, a party who has provided goods or services to another without any request, may nevertheless be 95 It may be noted, by way of analogy, that recovery of contributions to a joint endeavour by the medium of the imposition of a constructive trust, is only available where the substratum of a joint relationship or endeavour is removed ‘without attributable blame’: Muschinski v Dodds (1985) 160 CLR 583 at 620 (Deane J), referred to in Baumgartner v Baumgartner (1987) 164 CLR 137 at 148 (Mason CJ, Wilson and Deane JJ). The connection between the principles informing that case and non-proprietary common law restitutionary claims may be seen from the references to Muschinski v Dodds in Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 at [16] (Gleeson CJ, Gaudron and Hayne JJ), [100]-[104] (Gummow J). See also Edelman, ‘Unjust enrichment and the law of trusts’ (2011) 35 Australian Bar Review 219 at 235-236. 96 Edelman and Bant, Unjust Enrichment (2016, 2nd ed) at 277. 97 Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32 at 64-65 (Lord Wright). 98 Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 352. 99 See also Virgo, The Principles of the Law of Restitution (2015, 3rd ed) at 95, 340-341. -- 25 of 30 -- [2025] SASC 99 B Doyle J 22 able to advance a restitutionary claim.100 In such cases an act of free acceptance provides both a basis upon which it would be unjust to permit the recipient of the goods or services to retain the benefit, and proof that the goods and services were of benefit so as to comprise an enrichment. 112 In the case of claims for restitution by a party who has repudiated a contract, the work or services rendered may or may not have been compliant with the contract. In the present case, there is no suggestion that the trenching work that was completed was not in accordance with the contractual specifications; the only issue is that it was not completed. It could in one sense be said that the work was ‘requested’ and, given it was requested under the contract, in a general sense, it would be hard for the recipient to say that it was not of any benefit. But on another view: ‘An order for a whole house cannot be understood as a request for or free acceptance of part of a house’.101 Or, as another has put it:102 Where the basis of the claim is assent or acceptance the receipt of part performance cannot in itself amount to such assent because it was received with the expectation and subject to the condition that more was to come. If that expectation and condition fail, the failure cannot affect the quality of the original receipt. 113 At all events, when ‘free acceptance’ is relied upon as an exception to the preclusion upon recovery arising under the rule in Sumpter v Hedges, factual benefit is insufficient to demonstrate ‘free acceptance’.103 And the fact that the work was called for by the contract and, therefore, requested to that extent, is insufficient, without more, to ground recovery. The authorities support the proposition that over and above the implicit request for the provision of the work or services under the contract that has been terminated, there must be an element of choice in the receipt of the relevant benefit or, put another way, an opportunity to reject the claimant’s partial performance.104 114 Aussie-Drain submitted that whereas Sumpter v Hedges illustrates that merely by taking possession of their land, a party cannot be taken to have chosen to accept or reject work performed on their land, the position was different here. Spry was not the owner but was engaged to perform works to construct the racing track for Racing SA at the Murray Bridge Racecourse. Aussie-Drain submits that Spry elected to accept the benefit of the works performed by Aussie-Drain by seeking and accepting payment for the works from Racing SA and by taking contractual responsibility for any defect in those works. 115 In my view, the fact that Spry is not the owner of the land is not of itself significant, at least not in the way contended for by Aussie-Drain. Indeed a party 100 See, eg, Angelopoulos v Sabatino (1995) 65 SASR 1 at 6-13 (Doyle CJ, Duggan and Nyland JJ agreeing). 101 Birks, Unjust Enrichment (2003) at 52. 102 Beatson, ‘The Use and Abuse of Unjust Enrichment’: Essays on the Law of Restitution (1991) at 69. 103 See, eg, Steele v Tardiani (1946) 72 CLR 386 at 402 (Dixon J), Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635 at [51] (Gleeson CJ). 104 See, eg, Oliver v Lakeside Property Trust Pty Ltd [2005] NSWSC 1040 at [80] (Barrett J). -- 26 of 30 -- [2025] SASC 99 B Doyle J 23 that does not own the land on which works have been undertaken (here, trenches dug in which drainage pipe has been installed and covered with sand) may have even less practical capacity to reject or somehow return the value of the work undertaken than does the owner of land. Either way, short of pointlessly digging up the drainage pipes that had been laid, there was no practical means available to Spry to return, or not accept, the benefit of the works done. 116 The question whether a benefit is accepted after the exercise of a real choice is not answered by reference to whether the benefit is to land owned by the person, but by reference to the factual realities of the matter. The same problems arise whether services are provided to land or in respect of chattels. ‘One cleans another’s shoes; what can the other do but put them on?’105 117 The fact that Spry relied upon the works performed by Aussie-Dry as partly discharging its obligation to its principal in relation to the broader contract works seems to me to be neither here nor there. It is no different to the homeowner in Sumpter v Hedges completing the works and enjoying the benefit of the builder’s part performance by living in the home. 118 It is also difficult to see why Spry taking contractual responsibility for any defect in the works, vis-à-vis its principal, involves an act of free acceptance. 119 That Spry was prepared to rely on the partly performed works (rather than re-perform them) and to be exposed to a risk of liability in the event that they were inadequate may reflect that Spry considered the works were competently performed, although it may equally reflect a commercial decision that the risk of relying on the works was outweighed by the cost of re-performing them. But even assuming the former, it does little more than demonstrate that Spry received a benefit from the partly performed works. If a party who renounces a partly- performed entire contract wishes to recover on a quantum meruit, they are required to demonstrate more than that the work was of benefit. 120 Aussie-Drain also relied upon the fact that Spry had pleaded a set-off in its defence which was premised on a breach of the contract. By reference to the decisions in Nguyen v Luxury Design Homes Pty Ltd106 (‘Nguyen’) and Eminent Forms Pty Ltd v Formosa107 (‘Eminent Forms’), this was said to involve an act of acceptance of the works. 121 Both Nguyen and Eminent Forms involved the proposition that where the innocent party seeks damages for defective performance this may permit the party in breach, and who would otherwise be precluded by the rule in Sumpter v Hedges 105 Taylor v Laird (1856) 25 LJ Ex 329 at 332 (Pollock CB), recently referred to in Redland City Council v Kozic (2024) 98 ALJR 544 at [208] (Gordon, Edelman and Steward JJ). 106 [2004] NSWCA 178. 107 [2004] SASC 192. -- 27 of 30 -- [2025] SASC 99 B Doyle J 24 from making a restitutionary claim, to responsively claim the reasonable or fair value of the work carried out. 122 In most cases of that kind, there will be no occasion to decide whether the making of a claim for damages based on alleged defects in the works gives rise to a basis for an independent claim in restitution. The value of the work done (but not paid for) can be and will usually need to be brought to bear in the proper quantification of the claim for damages. 123 The point is captured in the following passages from Hudson’s Building & Engineering Contracts,108 referred to with approval by McColl JA in Nguyen:109 Thus where the contract is entire, the owner may get the benefit of valuable works not entirely completed by the builder without having to pay for them, unless the circumstances are such as to justify a quasi-contractual remedy. So a builder who has not fully completed the work, through no fault of the owner, cannot overcome his difficulty by ignoring the contract and sue on a quantum meruit for the work he has done. However, the rigours of this rule are often considerably reduced because, in a large number of cases where there is not entire performance, the owner may decide to sue the builder for damages for breach of contract. If he does, he will, on general principles of damages for breach of contract, have to give credit for what he would have had to pay had the contract been properly performed. But in a case where the owner decides not to sue he may derive considerable advantage from the foregoing rules, which are, however, an essential and necessary sanction to discourage the deliberate breaking or abandonment of contracts, which would be absent if in such cases the builder was entitled to demand partial payment notwithstanding his own breach … … But it remains true that an owner should weigh carefully the damages recoverable, on the one hand, against the advantage he may derive under the [entire contract rule] from the builder's inability (depending on the state of the accounts) to sue for the balance of the price of the work, on the other, since if the owner decides to sue for damages he will have to give credit under the basic Robinson v Harman … principle … for what the work would have cost him if properly completed or performed. 124 It is not apparent to me why the mere making of a claim based on defective performance should be taken to amount to an act of acceptance of the works for relevant purposes.110 Perhaps it may be said that to complain about the work that was done and to seek a remedy based upon its departure from the required contractual standard is in some way to treat the works as being performed under or with reference to the contract, rather than on some other basis. However, if and to the extent that the making of such a claim can be taken to amount to an act of free acceptance which then, quite separately from any question of quantification of the damages, permits a claim to be made in restitution for the work done, I consider that the present case does not fall within that class of case. 108 (1995, 11th ed) at [8.114]. 109 [2004] NSWCA 178 at [54]. 110 See Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 at [203] (Bathurst CJ, Macfarlan and Meagher JJA agreeing). -- 28 of 30 -- [2025] SASC 99 B Doyle J 25 125 In the present case, Aussie-Drain made a claim against Spry in restitution. It was only subsequently to this that Spry pleaded, by way of set-off, and not by way of any distinct counter-claim, that it had suffered loss and damage by having been required to carry out the balance of the works for a price which was only approximately $12,000 less than the entire contract price. Whatever the merits of it, the gravamen of its pleading was that as a consequence of this, it could not be said to have been unjustly enriched.111 The claim did not seek to hold Aussie-Drain to any particular contractual standard for the works completed. 126 In my view, the pleading is entirely defensive and does not amount to conduct which is in the nature of free acceptance. And looking at the matter more generally, I would not conclude that by raising this pleading, Spry has acted in a manner that makes it unconscientious to retain the benefit of the works partly performed. Disposition 127 It follows that I would dismiss the cross-appeal and allow the appeal, with the result that the award in Aussie-Drain’s favour is to be reduced by the amount of the materials supplied by it prior to its repudiation of the contract. 128 Standing back, the result might from one perspective appear surprising. Aussie-Drain carried out work about which no specific complaint is made and which must, to some extent, have been of benefit to Spry, but for which it will receive no payment. However, to a significant extent, this follows from the unchallenged characterisation of the contract as ‘entire’, and from Aussie-Drain’s repudiation of its obligations. GST 129 Spry made a further contention in its written and oral submissions that the remaining award by way of restitution in respect of the loose materials left behind and which were properly the subject of a restitutionary claim ought not to have included a component for GST. 130 Citing a New South Wales District Court decision,112 Spry contended that the amount payable in respect of the materials should be GST exclusive because, as an operator of a commercial business, Aussie-Drain would be entitled to claim a tax input credit for any GST it paid in respect of the materials. 131 That decision relied entirely upon the judgment of the New South Wales Court of Appeal’s in Gagner Pty Ltd v Canturi Corporation Pty Ltd,113 but does not contain an analysis of its applicability to a restitutionary award. The discussion of the issue by Campbell JA (with whom Macfarlan JA and Sackville AJA agreed) 111 The appropriateness of framing a defence in this way be doubted. See, eg, Redland City Council v Kozic (2024) 98 ALJR 544 at [217] (Gordon, Edelman and Steward JJ). 112 Walsh v KC & WL Brain Pty Ltd (No 6) [2024] NSWDC 339. 113 (2009) 236 FLR 401; [2009] NSWCA 413. -- 29 of 30 -- [2025] SASC 99 B Doyle J 26 in that case was in the context of a damages claim.114 In that context it is understandable that a claimant who asserts that they have incurred expenses that should be compensated for by way of damages should only recover the net cost to them of the expenses. If they will obtain an input tax credit for any GST remitted, the net cost to them is the GST-exclusive amount.115 In such a case the damages award is not itself a taxable supply.116 132 I am not persuaded that the present case is on all fours. A claim in restitution is not a claim for compensation for loss and damage. I do not think it is appropriate to assume that a quantum meruit award would not give rise to an obligation to remit GST in circumstances where the basis for the award, being the provision of goods and services, will often if not usually amount to a ‘taxable supply’.117 133 The award to be made in respect of the materials left onsite and which were used by Spry after the repudiation should include a component for GST. The relevant figure is therefore $8,215.68. The award in respect of Mr De Vent’s labour and the hire of the sanding machine is not disputed and should stand in the amount of $13,656.60. The total award (before any pre-judgment interest) is therefore $21,872.28. 134 I would allow the appeal to the extent only of reducing the award in the manner indicated. I would dismiss the cross-appeal. I will hear the parties on the precise form of order and as to costs. 114 (2009) 236 FLR 401; [2009] NSWCA 413 at [133]-[154]. 115 See also Millington v Waste Wise Environmental Pty Ltd (2015) 295 FLR 301; [2015] VSC 167 at [36], [66]-[67] (Croft J), Dual Homes Victoria Pty Ltd v Moores Legal Pty Ltd (2016) 306 FLR 277; [2016] VSC 86 at [289] (Dixon J). 116 A New Tax System (Goods and Services Tax) Act 1999 (CR), s 9-5, Public Ruling GSTR 2001/4. 117 My view appears to accord with the position adopted in Adamson v Ede [2008] NSWSC 767 at [62]- [63], [67]-[68] (Smart AJ) and Peet Ltd v Richmond (No 2) [2009] VSC 585 at [70]-[82] (Hollingworth J). See also Moraghan v Cospak Pty Ltd [2007] VSC 483 at [55] (Lasry J). -- 30 of 30 --