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When is it too late to claim?

Two recent decisions, one concerning a claim for a very large sum of money and one for one very much smaller, give further guidance on how limitation periods affect claims for payment under a construction contract.

The small claim

LJR Interiors Ltd v Cooper Construction Ltd concerned drylining works by LJR for Cooper, which were completed in 2014.  The works were subject to a purchase order rather than a formal contract, so the Scheme for Construction Contracts applied by default.  Cooper paid for the works, save for £1900 which it disputed.  LJR took no formal action at the time to recover this balance.

In 2022 LJR issued a further payment application, seeking £3,256.58 & VAT.  Cooper failed to pay the sum claimed or to serve a payless notice and LJR referred the claim to adjudication.  The adjudicator rejected Cooper’s argument that the claim was statute barred, taking the view that the breach of contract for limitation purposes did not occur until the final date for payment of the sum applied for.  The adjudicator further decided that the Scheme did not impose any time limit for submitting an application for payment.  Cooper still didn’t pay and LJR issued proceedings to enforce the adjudication award.  Cooper cross applied for a part 8 declaration that the claim was barred for limitation.

Unsurprisingly the court agreed with Cooper, dismissing the enforcement application and directing that the claim was stature barred.  In the absence of any specific contractual condition precedent for payment, such as the issue of a certificate, the right to be paid accrues when the work in question is done.  Any other situation would allow the claiming party to indefinitely prolong limitation by delaying issuing an application for payment.

Limitation issues are enforced robustly by the courts and will usually operate as a complete defence to a claim.

The big claim

The Court of Appeal considered a similar issue, albeit not for a construction contract, in Consulting Concepts International Inc v Consumer Protection Association (Saudi Arabia).  CCI and CCP entered into an agreement on 10 June 2013, which provided that CCI’s invoices would be paid with 90 days.  CCI delivered invoices for c.$15m in late 2013 and also claimed sums due under an undertaking given by CCP.  CCP didn’t pay and CCI issued proceedings on 27 December 2019.  Save for one invoice, this was within 6 years plus 90 days of the invoices.  In other words, the claim would be in time for limitation purposes if the cause of action didn’t start running until 90 days after delivery of the invoices.

CCP applied to strike out the claim on the basis that it was statute barred.  It succeeded in both the High Court and Court of Appeal.

As with the LJR v Cooper case, the case referred to the 2005 decision of Henry Boot Ltd v Alstom Ltd, which confirms that in the absence of a clear condition precedent a debt accrues when the work in question is done.  The right to sue for payment might be delayed (such as waiting 90 days after delivery of invoices in this case) but that doesn’t stop time running for limitation purposes in the meantime.

Practical implications

Both cases are a reminder not to take any risks over limitation and, if there is any doubt, to either issue proceedings or agree a standstill within six years of the work being carried out.  Limitation issues are enforced robustly by the courts and will usually operate as a complete defence to a claim.  The cases also emphasise the importance of good contract administration and prompt invoicing.

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Disclaimer
This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full General Notices on our website.

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