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Sometimes, a party may provide services to another, expecting a contract to be signed between them, only to find that the contract never comes to fruition.  Alternatively, a party may provide services to another outside the scope of their contract or following the contract’s expiration.  In such situations, the question arises of whether the party providing the services is entitled to any form of compensation concerning the services.  The common law has developed the concept of quantum meruit to address such situations.

Quantum Meruit Claims Fall Within the Broader Category of Claims for Restitution or Unjust Enrichment

“Quantum meruit” is a Latin phrase meaning “as much as one deserves.”  Historically, claims based on quantum meruit were claims for restitution about services provided to a defendant but not paid for.  The concept was given significant attention in the 1954 case of Deglman v. Guaranty Trust Co. of Canada.   However, since Deglman, the law around quantum meruit has been subsumed within the broader topic of restitution or “unjust enrichment,” which has significantly evolved over the last several decades.  Unjust enrichment or restitution is now a specific cause of action, not unlike tort or breach of contract.  As the Supreme Court of Canada explained in Peel (Regional Municipality) v. Canada, this concept aims to ensure a benefit is restored to a plaintiff where it would be unjust for the law to permit the defendant to retain it.

A Claim for Unjust Enrichment or Restitution Requires Proof of Three Elements

The concept of unjust enrichment has been applied in many cases, most notably in family law.  However, the Supreme Court of Canada has clarified that the general principles set out in those cases are not confined to family law matters.  As explained in Kerr v. Baranow, “the underlying legal principles of the law of unjust enrichment are the same for all cases.”

For a plaintiff to successfully bring a claim against a defendant for unjust enrichment, the plaintiff has to prove three things: (a) the defendant has been enriched or received a benefit, (b) there has been a “corresponding deprivation” of the plaintiff, and (c) there is no “juristic reason” for the enrichment.

Concerning the first element, a plaintiff has to establish that he or she “gave something to the defendant which the defendant received and retained,” as the Court pointed out in Kerr.  It must be a tangible benefit, but it may be either positive or negative “because the benefit conferred on the defendant spares him or her an expense” he or she would have otherwise.

The second element requires the plaintiff to prove that the enrichment “corresponds to a deprivation the plaintiff has suffered.”  It is not enough to show that the defendant has received a benefit.

The third element of the test for unjust enrichment has received extensive attention from courts.  In short, it requires that “there is no reason in law or justice for the defendant’s retention of the benefit conferred by the plaintiff” (per Kerr).  For example, a valid contract between the parties may constitute a “juristic reason” for the defendant’s enrichment such that the plaintiff’s claim for unjust enrichment would fail.  Proof of a gift to the defendant might likewise constitute a juristic reason.

Determining Whether a “Juristic Reason” Exists Requires a Two-Part Analysis

In Garland v. Consumers’ Gas Co., the Supreme Court of Canada outlined a two-part test that was to be used to determine whether a juristic reason exists.  First, the plaintiff must show no reason that falls within an “established category,” such as a contract or gift, to defeat its claim for restitution.  If no such category applies, a prima facie case favours the plaintiff.  This can be rebutted through the second part of the analysis if the defendant can show another reason the plaintiff’s claim should fail.  At this point, courts need to consider the parties’ reasonable expectations and matters of public policy.

A Finding of Unjust Enrichment Generally Results in One of Two Types of Remedies

If a plaintiff can successfully prove unjust enrichment, the issue becomes the appropriate remedy.  As the Court explained in Kerr, such a plaintiff may be entitled to either a monetary award or a “proprietary remedy,” meaning a remedy related to specific property.  The latter type of remedy often engages a legal concept known as the “constructive trust,” which may result in a plaintiff being deemed to own a portion of, or all of, specific property due to their contribution in relation to it.  This often arises in the context of family law disputes.

However, claims for quantum meruit typically warrant a monetary award.  Such claims usually involve providing services by a party to another without compensation. The Court in Kerr noted that such cases were one kind of unjust enrichment case, entitling a plaintiff to a fee-for-service monetary award.  This could be assessed in many ways, including “by the cost to the plaintiff of providing the service, the market value of the benefit, or even the value placed on the benefit by the recipient.”

The Legal Test for Establishing a Claim for Quantum Meruit Requires Proof

The leading case in Ontario concerning quantum meruit-type claims for unjust enrichment is Consulate Ventures Inc. v. Amico Contracting & Engineering (1992) Inc.  The Court of Appeal, in that case, pointed out that “services provided in reliance on ‘some underlying measure of agreement’ and at the request, or with the acquiescence, of the beneficiary of the services are compensable,” provided there is no juristic reason for the enrichment. In other words, if a plaintiff provides services to a defendant and the defendant has requested or acquiesced in providing those services, the plaintiff may be entitled to a quantum meruit remedy so long as there is no juristic reason underlying the provision of the services.  

Quantum meruit claims for services rendered can arise in any number of contexts.  For example, real estate brokers and others who provide similar services outside a valid listing agreement have brought such claims (see, for example, Ariston Realty Corp. v. Elcarim Inc.).  Alternatively, in 2002759 Ontario Ltd et al. v. Koropeski et al., the Ontario Superior Court of Justice considered the claim of a general contractor for restitution in relation to extras provided by the contractor.  The Court noted that quantum meruit was available as a remedy even where there was an express or implied agreement for the extras so long as no price was agreed upon in that agreement.  

Determining the Amount of an Award for a Quantum Meruit Claim Involves Considering Several Factors

The Koropeski case is noteworthy for setting out several additional principles respecting quantum meruit in a commercial context. In that case, the Court observed that the onus was on the contractor to prove “both the existence and the value of the extra work.”  Ultimately, the Court noted that its duty was to determine “a fair and reasonable fee for the service provided, by assessing what it was worth having regard to the relevant circumstances … [including] the course of dealings between the parties, any estimates obtained, the costs incurred, the scope of work, the actual work done, and the market value of the services provided.”

While a written contract between parties containing written terms is usually a preferable way of managing a relationship, businesses should be cognizant of how the law may aid a party that has provided services in the absence of any such contract.

Toronto Litigation Lawyers Advising Clients On Business Disputes Involving Claims for Restitution

The team at Milosevic & Associates in Toronto is experienced in providing strategic and practical advice concerning all kinds of business disputes, from contract disputes to shareholder disputes and other complex corporate commercial litigation matters involving quantum meruit claims.   Contact us online or by phone at (416) 916-1387 for a consultation.