Solicitor Luke Patel explains why ‘Limitation is Not Extended by Late Invoice’
In the case of ICE Architects Limited v Empowering People Inspiring Communities the High Court had to consider whether a cause of action for payment for works undertaken accrued on the date when those works were completed or when the invoice was payable for those works in accordance with the parties’ billing arrangements.
In that case, ICE Architects (“ICE”) was appointed to provide design services for Empowering People Inspiring Communities (“EPIC”). ICE’s letter of engagement stated that it would invoice EPIC on a monthly basis for work completed and that EPIC would “endeavour to make payment within 30 days of receipt”.
ICE issued an invoice to EPIC on 23rd April 2009 for £42,375 which EPIC disputed. Following an Adjudication, ICE was awarded £24,033.85. ICE subsequently commenced court proceedings on the 21st May 2015 to try to recover the balance.
The Court at the first instance dismissed the claim on the basis that it was statute barred under the Limitation Act 1980 as proceedings had been commenced more than 6 years after ICE had completed the relevant works which the Court found to be the date when the cause of action had accrued.
ICE appealed on the grounds that the cause of action accrued 30 days after receipt of the invoice in accordance with the agreement between the parties and as stated in its engagement letter which it contended had displaced the general rule that the cause of action arose at the point of the completion of the works.
The High Court disagreed. The Court concluded that the wording in the engagement letter was only relevant to the process of billing and payment and that there was nothing in the letter to suggest that it was to do with when ICE’s entitlement to payment arose. The Court held that clear wording would be required to displace the default position that the cause of action accrued from the date of completion of the works. No such wording could be seen in the engagement letter
This case highlights the importance of timing when determining when a person is entitled to bring a claim for work and services. There is a distinction between the date on which a cause of action accrues and the date on which a party may be entitled to issue a claim for outstanding sums due. Unless otherwise agreed in clear language, the cause of action in respect of the debt will accrue on the date when the work or services is completed. It is therefore important to ensure that the date on which the work or services is completed is clearly identified and the parties invoice for such works as soon as reasonably practical after that point. Alternatively, the parties need to ensure that the terms of the contract clearly set out when a cause of action will accrue.
If you are involved in any contractual dispute then Blacks Solicitors can assist. Please contact Luke Patel on 0113 227 9316 or by email at “LPatel@LawBlacks.com”