Building Without a Safety Net: Quantum Meruit Cannot Rescue a Defaulting Builder

Caroline Skeoch

Principal LawyerAitken PartnersView Profile

Kaylee Smith

Law GraduateAitken PartnersView Profile

When a building project unravels, it is often assumed that a builder can simply fall back on a quantum meruit claim and recover the value of the work performed. (The Latin term quantum meruit means "as much as is deserved" or "what the work is worth). For many years, this was viewed as a practical safety net where contractual rights had become uncertain or unavailable. Recent Victorian authorities, however, demonstrate that this assumption can be dangerous.

The Court of Appeal's decisions in Singh v Ozzie Homes Building & Construction Pty Ltd [2026] VSCA 25, Cardona v Brown (2012) 35 VR 538, and A.M.O. Rifat Holdings Pty Ltd v Dib [2026] VSCA 124 collectively illustrate a clear judicial trend: quantum meruit is not a universal fallback remedy and will not rescue a builder from the consequences of its own contractual default. Rather, the remedy remains confined to limited circumstances grounded in principles of unjust enrichment and restitution.

These decisions serve as an important reminder that the starting point remains the contract itself. Where a builder has acted inconsistently with the contract terms, particularly in relation to progress payment entitlements, suspension rights or termination procedures, the courts are increasingly reluctant to permit recovery through quantum meruit.

The question is no longer whether work has been performed, but whether there is a principled restitutionary basis for requiring the owner to pay for that work once the contractual relationship has broken down. These decisions help to provide greater protection for owners by confirming that a builder cannot rely on its own contractual default to recover payment for an incomplete project.

Singh v Ozzie Homes Building & Construction Pty Ltd [2026] VSCA 25 (Ozzie Homes):

Ozzie Homes entered into a contract with the Singh’s to construct a residential home and later claimed payment for the lock-up stage. The Singh’s refused to pay on the basis that the stage had not been completed, as the contract required the installation of external doors and the builder had only installed plywood sheeting.

In response, Ozzie Homes suspended works and purported to terminate the contract for non-payment, and crucially, failed to provide the contractual notice required before suspension.

The owners subsequently engaged another builder to complete the project.

The Court found that no payment was due to Ozzie Homes because the lock-up stage had not been reached. It further held that the builder's purported termination was ineffective because its prior suspension of the works, without the required notice, itself constituted a substantial breach of contract. As neither party had validly terminated the agreement, the Court concluded that the contract came to an end through abandonment rather than termination.

Having failed on its contractual claim, the builder sought to recover on a quantum meruit basis. In considering that claim, the Court restated the circumstances in which a claim for quantum meruit may arise and, importantly, the limits on a builder's ability to rely upon it.

In rejecting the builder's claim, the Court examined three potential pathways (which we will explore below), by which a quantum meruit claim might arise and explained why none were available on the facts.

• Restitution based on unjust enrichment
• Acceptance of a Benefit
• Mann v Paterson – sue for value of work completed.
  
  

1. Restitution based on unjust enrichment:

The High Court decision in Lumbers v W Cook Builders Pty Ltd (in liq) (Lumbers), highlighted that it would be unjust for owners to retain benefit for the works done at their request. The work completed outside the contract can be caught under this premise. However, in Ozzie Homes the work completed were works outlined in the contract, and no new requests for works by the owners existed.

2. Acceptance of a benefit:

A quantum meruit claim can arise where there is an acceptance of some benefit, where it gives rise to an obligation to pay for that benefit. Crucial to this avenue for a quantum meruit is the free acceptance of such benefit.

In Ozzie Homes, the works were built onto the owner’s land, this does not truly allow for the owner’s free acceptance or ability to freely reject the works. Importantly, mere retention of the works on the land does not infer acceptance: Singh v Ozzie Homes [2026] VSCA 25, at [152], adopting Lumbers.

3. Mann v Paterson – Value for works completed

Following the High Court's decision in Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560, a builder may recover on a quantum meruit basis for the value of work performed only in limited circumstances, namely where the builder is the innocent party, the owner has wrongfully repudiated the contract, and the builder elects to accept that repudiation and terminate the contract.

In Ozzie Homes, however, the builder could not bring itself within those principles. Having suspended the works without the required notice and unsuccessfully purporting to terminate the contract, it was not the innocent party. As a result, the builder fell outside the scope of the quantum meruit remedy recognised in Mann and was unable to recover the value of the completed works on that basis.

Given that none of the above three paths to recovery under a quantum meruit claim were available to Ozzie Homes, they were unable to recover anything for the works performed. However, the Court acknowledged that contractual abandonment may, in some circumstances, give rise to an unjust enrichment claim, it held that such a claim is unavailable where the claimant is the defaulting party, as was the case here in Ozzie Homes.

Cardona v Brown (2012) 35 VR 538 (Cardona)

The Court's reasoning in Ozzie Homes is consistent with the earlier Court of Appeal decision in Cardona, which similarly involved a builder seeking payment despite not having satisfied the contractual requirements for the relevant construction stage.

As a result, the builders' suspension of work constituted a repudiation of the contract, which the owners validly accepted. The decision reinforces that a builder who is itself in default cannot circumvent the contractual payment regime by seeking restitutionary recovery for work performed. Cardona therefore laid much of the groundwork for the approach taken in Ozzie Homes, namely that a builder cannot rely on restitutionary principles to escape the consequences of its own contractual default.

A.M.O. Rifat Holdings Pty Ltd v Dib [2026] VSCA 124 (A.M.O)

The limits identified in Mann were further explored in A.M.O., where the Court again rejected a builder's quantum meruit claim, this time due to fundamental evidentiary deficiencies.

The main reasons for rejection of the builders claim here was the lack of clear evidence – namely an undifferentiated table of all trade invoices for incomplete stages, to adduce the value of the work that was performed. In the Courts view they were simply unable to value the work done, that is by applying a backward looking restitutionary remedy no value could be determined. In their judgement, the Court also emphasised that the builder could not seek a claim for a full stage price minus the cost of rectification – to accept that premise would be to ‘elide quantum meruit with expectation loss’:[74].

Conclusion:

The recent authorities confirm that quantum meruit is not a guaranteed fallback when a building contract breaks down. Ozzie Homes, Cardona, and A.M.O. each demonstrate the courts' reluctance to permit restitutionary recovery where a builder has failed to comply with the contract or cannot properly establish the value of the work performed.

While quantum meruit remains available in limited circumstances, particularly where an innocent party accepts a repudiation, it is not a mechanism for avoiding the consequences of contractual default. For builders, the clear lesson is that compliance with payment, suspension and termination provisions agreed to in contracts remains the safest path to recovery.