Pavey was a licenced builder and made an oral building contract with Paul; this was paid for in part. However, Paul refused to pay the balance and when Pavey demanded it, Paul claimed the contract was unenforceable, relying on failure to comply with formalities (s 45 of the Builders Licensing Act required that, to be enforceable, a building contract must be in writing and signed).
On the issue of debt: an action for debt could not arise where the contract was not enforceable because of lack of compliance with formalities; this, they said, would constitute an action to enforce the contract.
Restitution: Their Honours agreed with Deane J, who held that an action for quantum meruit does not require proof of a contract, but is a claim to restitution arising as a result of (in this case) Paul accepting benefits from Pavey's performance. Such an action prevents Paul being unjustly enriched at Pavey's expense. Because the basis of the claim is ‘execution of work for which the unenforceable contract provided, and its acceptance by the defendant’, it does not involve enforcing the oral contract (although proof of such a contract might be relevant (eg, to prove the work was not intended as a gift)).
The purpose of the legislation in this case was to ‘protect the building owner against spurious claims by a builder by preventing the enforcement by him of nonconforming contracts.’ But, they held, this does not extend to cases where ‘the building owner requests and accepts the building work and declines to pay for it on the ground that the contract fails to comply with the statutory requirements.’ The consequences of such an interpretation would be ‘so draconian that it is difficult to suppose that they were intended. An interpretation that serves the statutory purpose yet avoids a harsh and unjust operation is to be preferred.’
Their Honours therefore provided relief based in restitution.
Deane J allowed the appeal for substantially the same reasons.