| Date | 21 September 2005 |
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| Judgment | Birse Construction Ltd v McCormick (UK) plc, CA 26 July 2005 |
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| The Issue | The accrual of causes of action in respect of claims for additional payment under a construction contract. |
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| Implication |
The
date of the accrual of a cause of action for sums due under a contract
will depend on the terms of the contract itself. Where the contract
provides for monies claimed under a contract to be resolved by formal
amendment to the contract, the cause of action will normally arise
when the claim for those monies is initially presented. |
printThe term 'cause of action' broadly refers to the right of a party to bring legal proceedings, for example to be paid monies due under a contract. The date of accrual of the cause of action for sums due under a contract will usually depend upon the terms of the contract itself. However, the starting point for any consideration of this question is the established principle that, in the absence of any contractual provision to the contrary, a cause of action for payment for work performed or services provided will accrue when that work or those services have been performed or provided. In such circumstances, the cause of action does not depend on the making of a claim for payment by the party who has provided the work or services. Establishing the date of accrual of the cause of action can often be critical to the bringing of a claim. The Limitation Act provides that the period of limitation for bringing claims for breach of contract will begin from the date of the accrual of the cause of action. If that date is established by a certificate of practical completion for the construction works, then there may be little room for doubt as to the expiry of the period of limitation. Frequently however, the matter is more complex and an example of the difficulties that can arise is given by the recent Court of Appeal decision in the case of Birse Construction v McCormick (UK). Birse had entered into a contract with McCormick in September 1995 to construct a facilities consolidation project at McCormick's premises in Haddenham in Buckinghamshire. The bulk of the work had been completed by November 1996 and as a result, on 15 November of that year, Birse was able to settle its claim for the direct costs of all changes to the work in an agreed sum of approximately £1 million. The previous day, on 14 November 1996, Birse had made a formal claim for additional site establishment costs to reflect the delay and disruption to the work and its additional time on site. This claim document, which was expressly excluded from the settlement agreement, relied upon 29 separate events which had occurred between November 1995 and November 1996. In April 1997, Birse submitted a further claim document which still had at its heart the same 29 events, although the sums claimed had been significantly reduced. Little then happened until May 2003, when Birse commenced proceedings against McCormick. It was therefore recognised that any cause of action which accrued before May 1997 would be statute barred, there being an effective limitation period of six years. McCormick immediately applied for a ruling from the court that Birse's claims were statute barred and this was heard as a preliminary issue in the Technology and Construction Court. In accordance with the contract between the parties, Birse was entitled to be paid a series of lump sums for carrying out the work according to a Milestone Payment Schedule. Changes to the amounts payable under the Milestone Payment Schedule would only come about under the terms of the contract if there was a work order which had been authorised by the management contractor acting on behalf of McCormick. This equally applied to any claims for increase in the lump sum for site establishment charges. The contract also provided for a final payment process, which allowed for the administrative completion of the contract including the final payment of retention monies once the management contractor had issued a notice of acceptance of the work and Birse had issued a certificate to the effect that it had no further claims under the contract. Birse relied upon this latter contract provision. It argued that its claims were not time barred on the basis that it had only one cause of action in respect of its disputed claims. This did not accrue until final payment, because that was the first occasion on which the management contractor's decision on the claims was not to be regarded as a temporary position. Judge Peter Coulson rejected this argument. He held that the final payment provisions of the contract made no reference either to reviewing previous claims or to renewing or formalising previous claims made by the contractor. The contract worked on the basis of a formal mechanism for payment of the lump sum contract price and any changes to that lump sum, including any additional site establishment costs. In the event of a dispute as to those amounts, there was a formal contract procedure for the resolution of those disputes. That being the case, Birse's cause of action accrued when the dispute first arose in connection with its claims for site establishment costs. In the Court of Appeal, Lord Justice Clarke agreed with those conclusions. There was nothing in the words of the clause dealing with final payment which supported Birse's contention that at that stage, and not before, the cause of action accrued in respect of the claims being advanced by Birse for site management charges. In consequence, Birse's appeal was dismissed.
CJ-0537
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