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C's employment contract provides that he will perform services in exchange for payment by employer D. Payment to take the form of salary plus a discretionary annual bonus, geared to salary. On D's behalf, C negotiates a claim against D's insurer and recovers £80 million for his employer. He is required to do this work under the contract. While the insurance negotiations are under way, D allegedly tells C that he will be paid a special performance-linked bonus if the negotiations are successful. D then pays C salary and discretionary annual bonus, but no special performance-linked bonus. D then commits a repudiatory breach by sacking C, which C accepts with the result that the employment contract is terminated. On the alleged facts, can C claim in UE for a quantum meruit award with respect to the negotiation work, rather than suing for damages for breach of contract? No, says Cooke J in Taylor v Motability Finance Ltd [2004] EWHC 2619 (Comm), striking out C's restitutionary claim.

At [23]-[27] Cooke J holds as follows:

"The Claimant sought to argue that there was room for concurrent remedies in contract and restitution, relying on the decision of the House of Lords in Henderson v Merrett [1995] 2 AC 145 at page 193 where Lord Goff said that there was nothing antithetical in principle to concurrent remedies in contract and tort. On this basis it was argued that the same position would obtain as between contract and restitution. Lord Goff went on however to say that there would not be room for concurrent liability in contract and tort where the tortious duty was so inconsistent with the applicable contract that such tortious liability had to be taken as excluded. In the context of contract and restitution, it is clear that the parties, in agreeing a contract, intend that to apply and there is therefore no room for restitution at all where there is full contractual performance by one party and, even on the Claimant's own case part performance by the other. Not only is it true to say that, historically, restitution has emerged as a remedy where there is no contract or no effective contract, but there is no room for a remedy outside the terms of the contract where what is done amounts to a breach of it where ordinary contractual remedies can apply and payment of damages is the secondary liability for which the contract provides.

"The decisions of the House of Lords in Johnson v Agnew [1980] AC 3677, Photo Products v Securicor Transport [1980] AC 827 and Lep Air Services Limited v Rolloswin Investments Limited [1973] AC 331 establish the position where there is a repudiation of the contract which is accepted or which is effective to bring the contract to an end. In those circumstances the contract is not rescinded ab initio, but future obligations are discharged from the moment the contract comes to end. All accrued rights remain in being and, so far as executory elements are concerned, the primary obligation to perform is replaced by a secondary obligation to pay damages.

"The position is wholly different from that where money is paid for a consideration which wholly fails. In such a case there is a total failure of consideration and the money is recoverable. Although this means that the payer may escape from the consequences of a bad bargain, there is no room for extending this to a situation where both parties have performed substantially and there is a full and adequate remedy for breach of contract which will compensate the Claimant for any loss suffered. The point is clearly set out in Goff & Jones’ The Law of Restitution at paragraphs 20-007 and between paragraphs 20-019 and 20-023. The authors there say that there is no English authority to suggest that an innocent party, who has rendered services or supplied goods, may elect to sue in restitution if he has performed or substantially performed his part of the contract. If therefore he can claim under the contract whether in debt or in damages, that is the true measure of his entitlement, because it is that which he bargained for. If it were otherwise, not only would the Claimant be able to recover more than his contractual entitlement in respect of bonus, but he could also seek to establish that he was underpaid in terms of salary, despite his agreement thereto.

"Moreover, notwithstanding the California case of Boomer v Muir 24 P. 2d 570 (1933) there can also be no justification, even if a restitutionary claim is available, for recovery in excess of the contract limit. Such recovery in itself would be unjust since it would put the innocent party in a better position than he would have been if the contract had been fulfilled. In deciding any quantum meruit regard must be had to the contract as a guide to the value put upon the services and also to ensure justice between the parties (compare the comments of Jacob J at paragraphs 76-79 in Vedatech Corporation v Crystal Decisions [2002] EWHC 818 (CH).

"Notwithstanding therefore the multiplicity of authority to which the Claimant's skeleton made reference and the academic treatises in which the view is express that the law should move in a different direction, in my judgment the current state of the law is clear both as a matter of principle and by reference to the decisions of the House of Lords to which I have referred. Whilst restitution is undoubtedly a developing area of law and factual questions are important in the context of deciding such issues, here the essential facts which matter are clear and, on the Claimant's own case he is entitled to pursue a contractual claim in circumstances where he has fully performed and the Defendant has partly performed. I therefore accede to the Defendant's application for summary judgment in respect of the claim pleaded in paragraph 50 of the Particulars of Claim."

I am cross-posting this message to ODG and RDG as contract and UE lawyers may both find it interesting. Any thoughts anyone?

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Charles Mitchell