Craven-Ellis v. Canons Ltd

Facts

• Craven-Ellis was appointed managing director of Canons Ltd under a written service agreement
• The agreement was signed by directors of the company
• It was later discovered that the directors who signed the agreement had failed to acquire qualification shares as required by the Articles of Association
• Therefore, these directors had vacated office automatically and had no authority to act
• Consequently, the service agreement was void, never validly created
• Craven-Ellis had nonetheless performed substantial work as managing director

Issue

1. Whether a person who has rendered services under a contract that is void (for technical incapacity of the contracting parties) can recover reasonable remuneration on a quantum meruit basis?

Held

• The Court of Appeal held for Craven-Ellis: he was entitled to reasonable remuneration
• Although no valid contract existed, the company had received the benefit of his services
• The obligation to pay arose not from contract but from quasi-contract/restitution: it would be unjust for the company to retain the benefit without payment
• The measure of recovery is quantum meruit, what the services were reasonably worth, not necessarily the contractual rate
• The claim is independent of the void contract; it is founded on unjust enrichment

Ratio Decidendi

Where services are rendered and accepted under a supposed contract that is in fact void, the provider is not left without remedy. The law implies an obligation on the part of the recipient to pay reasonable remuneration for the benefit received. The obligation arises from restitution/unjust enrichment, not from the void contract itself. The measure is quantum meruit, the reasonable value of the services, assessed objectively.