Contracts for services – how long have you got to claim payment?

In a debt claim for payment for services, the Court of Appeal has ruled that time started to run for limitation purposes as soon as the services had been performed, rather than when the invoices were issued, or payment was due. As a result, a claim for c.£50m was time-barred, as it was brought more than six years after the work had been done.

Background

A debt claim must be issued at court within the relevant limitation period. If the limitation period has expired, the defendant has a complete defence to the claim. A claim for the payment of sums due under a contract for services must be issued within six years of the date on which the right to payment (cause of action) for that work arose.

Consulting Concepts International Inc v Consumer Protection Association (Saudi Arabia) [2022] EWCA Civ 1699

In June 2013, the claimant, Consulting Concepts Intl Inc (CCI), and the defendant, Consumer Protection Association (Saudi Arabia) (CPA), entered into an agreement for CCI to provide consultancy services to CPA. The agreement provided that invoices issued by CCI would be paid by CPA within 90 days.

On 27 December 2019, CCI issued a court claim against CPA for unpaid invoices. All of the services for which CCI sought payment had been performed by 17 December 2013, and the invoices were issued on or before 27 December 2013, with the 90-day deadline for the payment of each invoice expiring thereafter.

CPA argued that CCI’s right to payment arose as soon as the services had been performed and it applied for an order striking out the claim on the basis that it was time-barred. CCI argued that because the parties had agreed a deadline for payment, i.e. within 90 days of an invoice being issued, its right to payment arose on the expiry of that period, which meant that the claim was within the six-year limitation period.

The judge held that the right to payment arose when the services had been performed. As a result, the claim was time-barred, and it was struck out. CCI appealed. The Court of Appeal dismissed the appeal and upheld the order striking out the claim.

The Court of Appeal confirmed that a service provider’s right to payment arises as soon as the services have been performed and, unless there are clear contractual words to the contrary, is not deferred until an invoice is issued or payment is due. To provide certainty for contracting parties, there is a distinction between when the right to payment arises, which starts the clock for limitation purposes, and when that right may be enforced via the courts e.g., if payment is not made within 30, 60 or 90 days.

Comment

Service providers may wish to ensure their contract terms are clear as to when the right to payment arises. If there is any doubt, it should be assumed that time begins to run for limitation purposes as soon as the services have been performed. If steps taken to recover payment of unpaid invoices are not successful, it would be advisable to start litigation well in advance of the expiry of the six-year limitation period. Limitation is a complex area, so always take advice on the particular circumstances of your case.

How can we help?

If you would like advice and assistance in relation to debt collection, please contact our debt recovery team. The team recovers commercial and consumer debts of all sizes for businesses, organisations and individuals. Please view our Debt Recovery Pricing Guides here.