In 1999, Kane Constructions (Kane) entered into
a building contract with developers for the development of a mixed
residential and commercial property known as the Boilerhouse
In November 20071, the Victorian Court of Appeal
upheld the trial judge's finding that Kane was entitled to, and
did, terminate the building contract at common law as a result of
the developers' repudiation. The repudiatory conduct was
constituted by, amongst other things, persisting in an incorrect
interpretation of the contract, failing to pay the full amount of
progress certificates, deducting liquidated damages from payments
due and having recourse to a bank guarantee without any entitlement
to do so.
On 15 June 2009, the Court of Appeal handed down its reasons for
judgment in respect of both parties' quantum
appeals2. In doing so, the unanimous court, comprising
President Maxwell and Justices Whelan and Kellam, upheld the long
established principle that a builder is entitled to elect to
recover upon a quantum meruit following its acceptance of a
repudiation of the contract.
The court additionally confirmed the principles set out in
Renard Constructions (ME) Pty Ltd v Minister for Public
Works3 holding that the contract price:
cannot act as a ceiling on a builder's quantum meruit
does not represent the "best evidence" of the value
of the benefit conferred.
In this respect, the Court accepted Kane's submission that
the contract price "provided very little guidance because
the actual course of events in the carrying out of the works was
'radically different' from what had been anticipated when
the contract was entered into."
Kane also successfully appealed the trial judge's findings
that deductions from the fair and reasonable costs incurred in
performing the works should be made for:
variations disallowed under the contract; and
delay costs for which no contractual extensions of time were
As the Court found, "It is because the quantum meruit
remedy rests on the fiction of the contract's [sic] having
ceased to exist ab initio that the contract can have no
'continuing influence' when the value of work is being
assessed on a quantum meruit".
An application for special leave to appeal to the High Court has
been lodged by the developers. It is not expected that the
application will be heard this year. The result of the application
will be advised in a future edition of Critical Path.
Deacons represented Kane in the proceedings.
1 Sopov & Ors v Kane Constructions Pty Ltd (No 1)
 VSCA 257.
2 Sopov & Ors v Kane Constructions Pty Ltd (No 2)
 VSCA 141.
3 (1992) 26 NSWLR 234.
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