A recent TCC case examined the interaction of Construction Act payment provisions and statutory time limits, two areas that are critical considerations in any claim for payment under a construction contract. It also serves as a helpful reminder about the importance of having a clear written contract rather than relying on oral agreements.
The claimant, Mr Hirst and his company, carried out a residential construction project in Bradford which reached completion in December 2012. Mr Hirst claimed to have performed these works under an oral contract for Mr Dunbar, the defendant.
In March 2014, Mr Hirst demanded payment of over £400,000 from Mr Dunbar. Mr Dunbar did not respond to the demand and in August 2019, Mr Hirst issued court proceedings to recover the sums he considered due.
According to the Limitation Act 1980, the time limit for making a contractual claim is six years from when the claim ‘accrues’ or, in other words, when the limitation ‘clock’ begins to tick.
The defendant argued that no such contract existed but even if it did, the ‘clock’ began to tick on practical completion, and so was time-barred as this was more than six years before the claim was made.
Mr Hirst argued that his contract was subject to the payment provisions in the Housing Grants, Construction and Regeneration Act 1996 (the ‘Construction Act’) and therefore the ‘clock’ began to tick when he issued his demand in March 2014.
The court had to decide
- Whether there was an oral contract at all
- If there was a contract, whether the limitation period ‘clock’ began to tick when the works were completed – over seven years before the claim was made – or on demand for payment five years before the claim was made.
Was there a contract at all?
The court decided that there was no oral contract between the parties and that, in fact, the evidence showed the claimant performed the works because Mr Hirst believed he would eventually be able to buy the site. Instead of making an agreement with the defendant, he was acting on his own behalf and at his own risk. The court also found that even though neither Mr Hirst or Mr Dunbar had intended to mislead, neither were reliable witnesses and there were inconsistencies in both men’s accounts.
Was the claim out of time?
The court drew a distinction between provisions which are procedural and determine when payment is due and provisions which give rise to a right to payment.
The payment scheme in the Construction Act was considered to be a procedural provision for determining when a payment is due. Had the contract been entered into as alleged by the claimant, the right to be paid would still have existed whether or not a payment notice was issued to crystalise that right. The cause of action was therefore accrued on practical completion in December 2012.
Accordingly, had there been a contract, the TCC held that the claim would have been time-barred.