Late invoicing does not extend time limit

In the case of ICE Architects Ltd v Empowering People Inspiring Communities [2018] EWHC 281 (QB), the English High Court had to consider whether ICE Architect’s cause of action for payment for works  accrued on the date on which the work was completed or  30 days after it had issued its invoice in accordance with  the parties’ billing arrangements. The Court held that the default position in an action for payment for works or services is that the cause of action arises at the time of completion of the work. That default position had not, the Court said, been displaced by the parties’ agreement in respect of billing arrangements. 

Background

The Claimant, ICE Architects (ICE) was appointed to provide design services to the Defendant, Empowering People Inspiring Communities (EPIC). The letter of appointment, under a heading, “Basis of Payment”, stated that ICE would invoice EPIC on a monthly basis for work completed to date and that EPIC would “endeavor to make payment within 30 days of receipt”.

ICE issued an invoice to EPIC on 23 April 2009 for £42,375, which EPIC disputed. Following an adjudication, ICE was awarded £24,033.85 and ICE commenced court proceedings on 21 May 2015 for the balance. The Court of first instance dismissed the claim, finding that the claim was statute barred under  the Limitation Act 1980, as the proceedings had been commenced more than 6 years after the cause of action had accrued,  based on the date of  performance of the relevant services. ICE appealed.

Issue on appeal

The issue before the  Court was  whether ICE’s  cause of action accrued (i) on the date on which the work was completed (some of the work had been completed as late as December 2008);  or (ii) 30 days after receipt of the invoice in accordance with the agreement between the parties as stated in the appointment letter.

Court’s decision

The Court dismissed the appeal. The parties agreed that the default position in an action for payment for works or services is that the cause of action arises at the time of completion of the work. The central question for the Court was whether the default position had been displaced by the contractual terms in the appointment letter. The exercise for the Court was to objectively interpret the parties’ intentions derived from the letter. The Court held that a reasonable person in the position of the parties would have understood the words in the appointment letter to be an agreement concerning only the process of billing and payment, namely the monthly provision of an invoice with payment within 30 days thereafter. Nothing in the language of the relevant paragraph, viewed in isolation or in the context of the letter as a whole, the Court said, suggested that the parties were intending that ICE’s entitlement to payment did not arise when the work was done.

The Court cited Lord Neuberger’s obiter statement in Legal Services Commission v Henthorn [2011] EWCA Civ 1415, that clear words are needed if the timing of accrual of the cause of action in an action for work or services is to be displaced. No such clear words could be seen in the appointment letter, the Court said.

Conclusion

This case shows the importance of timing when determining whether a person is entitled to claim for work and services. The judgment makes it clear that a cause of action for payment for works and services will accrue on completion of such works or services unless there are clear words in the contract displacing that default position. It is not clear what wording would suffice to make the cause of action accrue only after the issue of the invoice. Usually, the creditor would like to be paid sooner, rather than later.

Key Contacts

Kwok Kit (KK) Cheung

Partner | Litigation and Dispute Resolution

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