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The recent Court of Appeal judgment in Scully v Holland1 provides a stark reminder for construction sector participants that, if you provide services without a binding contract, you do so at your own risk.
The case, in which the appellant’s claims were dismissed, offers important lessons on contract formation, conditions precedent, and limitation periods.
The facts
Mr Scully, a construction consultant, provided plans, proposals and consultancy services to Ms Holland beginning 2011 in connection with proposed infrastructure projects in Papua New Guinea. He claimed payment under an oral contract allegedly formed in December 2012 and a written "Project Manager's Contract" signed in May 2013.
Ms Holland denied any binding agreement existed, and argued that any written contract was conditional on securing project funding from PNG – funding which never materialised. Despite never receiving payment, Mr Scully continued providing services until 2016, issuing over 45 invoices. The High Court dismissed his claim and he appealed.
Key issues and findings
1. No oral contract established
The Court upheld the finding that no binding oral contract was formed. Mr Scully's subsequent communications – requesting "confirmation" and "a formal contract" – were inconsistent with a binding agreement already being in place. His invoices also included charges for items not part of the alleged oral terms.
Key principle affirmed: Oral contracts require clear evidence of offer, acceptance and agreed terms. Subsequent conduct must be consistent with the alleged agreement.
2. Written contract subject to unfulfilled condition precedent
The written contract included a "special conditions" page making it subject to the release of funding from PNG. The Court found Mr Scully had agreed to this condition as he signed the page, or alternatively, that no contract was formed because Ms Holland had only agreed subject to the condition. The funding was never released, so no breach could occur.
Mr Scully acknowledged in September 2013: "once the funding is received then the full contract provisions kick in."
3. Services provided at own risk
The Court endorsed the finding that Mr Scully undertook his work at his own risk. Despite being "always suspicious" of Ms Holland, he continued providing services for years without payment. The Court observed that "it should have been obvious to [Mr Scully] that Ms Holland could not be trusted".
4. Quantum meruit claim time-barred
Mr Scully sought leave to amend his pleading to claim quantum meruit shortly before the appeal hearing. The Court declined: the claim was contrary to the trial judge's finding that Mr Scully merely had a "hope" of payment, a further trial would be required, and critically, the six-year limitation period had expired – his last services were in 2016.
5. Waiver not established
Mr Scully argued Ms Holland had waived the funding condition through her continuing requests for services. The Court disagreed: waiver requires "a clear, unequivocal representation" and evidence of reliance. Ms Holland had expressly reminded Mr Scully of the funding condition in September 2013, and he acknowledged it.
Chapman Tripp comment
Scully v Holland underscores the importance of formalising contractual arrangements before commencing substantial work. Consultants and contractors should not provide services on the expectation that payment will follow – particularly where warning signs exist about a project's viability or a counterparty's reliability.
Parties should also be alert to conditions precedent in construction contracts. If a contract is conditional on funding, approvals or other events, obligations may not crystallise until those conditions are satisfied. Continuing requests for services do not necessarily amount to a waiver.
Finally, the case is a reminder to act promptly. Alternative claims such as quantum meruit must be brought within the limitation period – waiting until appeal to raise new causes of action is unlikely to succeed.
