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A judgment has recently been given in a High Court case where the Judge found that the six year contractual limitation period for making a claim ran from the date of completion of the work and not the date of the invoice. An important lesson for anyone who was thinking of waiting for more than six years before issuing action for a contractual debt!
Section 5 of the Limitation Act 1980 says that an action founded on a simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued. In this particular case the claimant provided architectural services to the defendant and on 23 April 2009 sent an invoice to the defendant. It was payable by 23 May 2009. That invoice was disputed and an adjudication took place. On 21 May 2015 the claimant began proceedings for the balance that it claimed was due to it. The County Court Judge decided that the claim was time barred under the 1980 Act.
In bringing the claim the claimant particularly relied upon a letter which the Defendant had written to it before the work began. In the letter the defendant said, “You will invoice EPIC on a monthly basis for work completed to date. The basis of payment proposed in the appendix to the document described above is acceptable. EPIC Limited will endeavour to make payment within thirty days of receipt (unless otherwise stated).” In the County Court the claimant argued the limitation period started to run thirty days after the invoice. The claimant also argued that a Project Partnership Agreement meant that the limitation period was extended to twelve years and also it sought to rely upon RIBA terms which it said were incorporated into the agreement.
The County Court Judge found that neither the Project Partnership Agreement nor the RIBA terms were incorporated into the Agreement. So far as the letter was concerned, the County Court Judge decided that the issuing of the invoice was not the fact which entitled the clamant to be paid; it was the fact that the work had been done which entitled the claimant to be paid and to raise the invoice. The majority of the work had been done by March 2008, although some of it was undertaken in December 2008. The Judge therefore decided that the claim had been started more than six years after the cause of action arose and the claim failed.
The claimant appealed to the High Court but lost before the High Court Judge; she found that a reasonable person in the position of the parties to the contract would have understood the words in the letter to be an agreement concerning only the billing and payment process and not when the cause of action arose. She said that there was nothing in the letter to suggest that the parties were intending that the claimant’s entitlement to payment did not arise when the work was done. She said that it would require clear words to displace the timing of the accrual of the cause of action. The principal authority that the Judge relied upon dated back to 1897 but it was still good law.
Key points to note are that time will begin to run when the work is completed and not when it is invoiced and if the parties want to agree otherwise, they have to be very clear in the wording which they agree to displace that presumption.
If you need guidance on these matters then our team would love to talk to you. Please contact the Dispute Resolution team on 01274 306000.