Legal: Timing is everything

You do some work for someone. When are you entitled to be paid for it? Or, to phrase the question more precisely: when does a cause of action for payment accrue in the eyes of the law? This was the very question that recently came before the courts in the case of ICE Architects Ltd vs Empowering People Inspiring Communities. 

ICE Architects Ltd (‘ICE’) provided services for Empowering People Inspiring Communities (‘EPIC’). On 23 April 2009 ICE invoiced EPIC for a sum of £42,375 + VAT (then 15%) for its services. The sum was disputed and, following adjudication, ICE was (on an unspecified date) awarded £24,033.85. On 21 May 2015 ICE issued proceedings claiming the balance of the invoiced sum, namely £24,697.40. Quite why it took so long for ICE to pursue this is a mystery not solved by the case report.

The length of time it had taken ICE to start proceedings was not lost on EPIC. It successfully argued that the claim was time barred as proceedings had been commenced more than six years after ICE’s cause of action had accrued, which EPIC argued was when ICE had completed its services. ICE appealed. 

The default position is that a party providing services is entitled to be paid once the work has been done […] parties can, if they so wish, agree to displace the default position and alter when time starts to run

Central to the decision on appeal was the impact of a letter from EPIC to ICE. In the letter was a statement regarding invoicing: ‘‘You will invoice EPIC on a monthly basis for work completed to date […] EPIC Ltd will endeavour to make payment within 30 days of receipt (unless otherwise stated)’’. Did these words mean that the limitation period started to run 30 days after the invoice? By such argument, ICE submitted that it had just sneaked under the time bar shutter, which on their case would have slammed down on 23 May 2015. 

The default position is that a party providing services is entitled to be paid once the work has been done and so the cause of action accrues from that time. However, cases such as Henry Boot Construction Ltd vs Alstom Combined Cycles Ltd [2005] show that parties can, if they so wish, agree to displace the default position and alter when time starts to run. In Henry Boot, on the terms of the contract, it was found that the contractor’s right to payment accrued when an interim certificate was issued (or should have been issued), not when the work was done. 

However, ‘‘clear words’’ are needed to displace the default position. Unfortunately for ICE, no such words existed, so ICE’s claim was statute barred. The cause of action had arisen on completion of the services (not the issue of the invoice) and ICE had therefore commenced proceedings too late.

the judgment looks at the age-old question of when a cause of action arises and, importantly, whether the timing of this can be altered

Aside from the trite observation that a party should not wait six years before pursuing its claim, the judgment looks at the age-old question of when a cause of action arises and, importantly, whether the timing of this can be altered. 

Does this analysis apply equally to a cause of action in respect of a defect claim? This is harder to assess. The courts held in Oxford Architects Partnership vs Cheltenham Ladies College [2006] that, for defective workmanship in the execution of a building contract, a cause of action usually accrues from the date of practical completion. The rationale behind this is simple: it is only at the point of practical completion that the contractor’s obligation to carry out the works under a building contract can be assessed as being defective. 

In relation to professional services contracts, it will depend on when the consultant has a continuing duty to review its design. In the case of University of Glasgow vs William Whitfield [1989], it was held that the architect’s duty to design was a continuing one, which extended until the building was completed. Thus the cause of action could be deferred until the project itself was completed, even though the design had been completed some time before.

However, consultants do not automatically have an ongoing duty to review their services. For example, in the Cheltenham Ladies College case, the court held there was no such continuing duty so the cause of action accrued on the date of the defective design. It also held that in instances when an architect does have a continuing duty, this can give rise to separate causes of action – a cause of action for a failure to provide a proper design arises at a different time from a cause of action for a failure to properly review a design.