Key Findings

A party seeking contribution for shared costs should secure an express agreement before works are undertaken. Reliance on later arguments about benefit, fairness or implied expectations will be difficult.

Relevant Facts

The Appellant, Mead Property Investments Pty Ltd (MPI) was contracted by its owner (Mr Cauchi) in or around early 2018 to manage the development of a land subdivision for land owned by Mr Cauchi and his brother. The subdivision included land from adjoining properties, one of which was owned by the Respondent, P&M Galea Pty Ltd (PMG). The subdivision would result in the creation of 50 residential lots, of which the Cauchi’s owned 40 lots, and PMG owned 4. In or around March 2021, and after extensive negotiations, the parties entered into a land swap deed under which the parties agreed to transfer land parcels to ensure sole ownership of each lot following registration (Land Swap Deed).

MPI incurred a range of expenses including making payments and organising the carrying out of works required to satisfy the conditions of the consent for the subdivision. The Land Swap Deed entered by the parties provided that each party would be responsible for payments associated with their own respective lots, however, no agreement was made regarding the costs associated with the subdivision itself.

MPI asserted that it was entitled to reimbursement from PMG for costs that arose from the subdivision. PMG subsequently denied that it had any obligation to contribute to the cost of subdivision and refused to reimburse MPI.

NSW District Court

In the first instance, MPI commenced proceedings against PMG to recover the costs of the subdivision on the following grounds:

1. PMG was liable in contract: MPI asserted the Land Swap Deed should be interpreted to render PMG responsible for a share of the overall costs of the subdivision.
2. MPI was an agent of PMG: MPI argued that it acted as PMG’s agent, and therefore was entitled to be indemnified for costs and expenses incurred.
3. Restitution on a quantum meruit basis: MPI argued that PMG had been unjustly enriched by obtaining the benefit of the created lots because of the subdivision works.

Justice Cole did not accept that there was:

1. any arrangement to share the costs associated with the subdivision; or
2. an express or implied request by PMG for MPI to provide the services.

As a result, the District Court dismissed MPI’s claim entirely.

NSW Court of Appeal

MPI appealed the decision, solely pursuing restitution on a quantum meruit basis. The appeal was based on the assertion that PMG freely accepted the benefits of payments made and services performed by MPI in relation to the subdivision. MPI’s position, relying on Damberg v Damberg (2009) 52 NSWLR 492 (Damberg), was that the test for free acceptance was whether a reasonable person should have known that PMG was expected to reimburse MPI, even in the absence of an express or implied request.

The Court found that MPI was unable to demonstrate why a reasonable person in PMG’s position would be expected to pay MPI for its services for the following reasons:

1. PMG’s was unaware of the arrangement with Mr Cauchi that MPI would undertake the works associated with the subdivision;
2. MPI was the primary beneficiary of the project, given its predominant share of the resulting lots;
3. The Land Swap Deed was comprehensive and entered into at arms length; and
4. There was a lack of reliable evidence to substantiate any prior oral agreements for PMG to contribute to the costs, namely that the amounts demanded by MPI varied dramatically based on the types of costs incurred.

The Court distinguished this case from typical unjust enrichment claims.

For the reasons above, the NSW Court of Appeal dismissed the appeal.

Implications

From a legal perspective and given the Courts are yet to hand down any strict precedent regarding the test of free acceptance as an unjust factor in restitution claims, this decision highlights that such claims continue to be decided by the Courts on the relevant facts of each case.

For our clients, the case highlights the importance to ensure that, during the course of business dealings, written contracts and agreements with clear, express obligations are in place.

The decision also demonstrates that, particularly in circumstances where a provider of a service was also the principal beneficiary of those services, it is difficult to establish a claim for quantum meruit.