When cause of action for payment accrues
Consulting Concepts v Consumer Protection Assoc (SA) (Court of Appeal) [2022]
This case is a rare example of it being critical to determine exactly when a right to payment accrues due
Facts:
Consulting Concepts International (CCI) is a company created and registered under the laws of the State of New York. Consumer Protection Association (Saudi Arabia) (CPA) is an organisation established under the law of the Kingdom of Saudi Arabia. It provides services to consumers resident in the Kingdom through education about their rights, handling their complaints and helping to protect consumers’ interests. Under an agreement between the parties dated 4th June 2013 CCI was to provide consultancy services and the parties were to collaborate to develop and implement strategies, programs and public policies to address asthma within the Kingdom of Saudi Arabia. CCI alleged that there was then an “extension” to the June 2013 agreement when the parties entered into an oral “Second” Agreement under which, the parties agreed that CCI would provide consultancy and related services unrelated to asthma. Between June and December 2013, CCI provided services under the June 2013 agreement and the Second Agreement and CCI rendered invoices to CPA. None were ever paid.
The original Agreement provided that "All invoices submitted by CCI will be paid within 90 days by submission of said Invoice by Consumer Protection Association to a Bank account designated by CCI.".
CCI apparently submitted an invoice for asthma related services on 17th December 2013 for $3million. It subsequently issued 2 more invoices for non-asthma related work totalling just in excess of $12million. In fact these simply confirmed invoices already issued related to work carried out between September, October and November 2013. The invoices were apparently issued on 14th September and 2nd November. Two other invoices were issued after 16th October and 7th November respectively related to work carried out between mid-August and November.
The High Court held that the claim regarding unpaid invoices was time barred as it had been brought more than 6 years after the cause of action had accrued. CCI appealed. The claim form was only issued on the 27th December 2019.
Decision:
Dismissing the appeal, the Court of Appeal confirmed that a service provider's right to payment arose as soon as their work was done unless there was a "special term" to the contrary and did not depend upon the making of a claim for payment.
i) There is an established principle that, in the absence of any contractual provision to the contrary, a cause of action for payment for services provided will accrue when those services have been provided. In such circumstances, the right to payment does not depend upon the making of a claim for payment.
ii) It is a question of construction whether the terms of the contract produce a different result.
iii) Contracts will frequently contain terms which require something to be done before a service provider is contractually entitled to payment or to enforce his right to payment.
iv) It is necessary to distinguish between (i) terms which are conditions precedent to the right to payment arising, and (ii) terms which impose conditions for the bringing of proceedings and which are concerned with limiting the right to bring an action to enforce an entitlement to payment. The latter are regarded as procedural conditions which affect the right to bring proceedings for a period of time in respect of a cause of action which already exists. Bars to enforcement of accrued causes of action are merely procedural and do not prevent the running of time.
Affording time to pay did not postpone the accrual of the cause of action, although it might afford a defence to a claim brought before the credit period expired. Clear words were needed to displace the default position. The effect of the provision here was clearly to require CCI to submit an invoice to CPA, and to oblige CPA to make payment within a period of 90 days. The clause did not require payment on the 90th day after submission of the relevant invoice. It referred to payment "within 90 days". Since payment earlier than the 90th day was contemplated, this suggested that CCI's right to payment arose earlier than that.
The cause of action in respect of the work, which was the subject of each invoice, accrued when that work was completed. Since it was completed by the time when it was invoiced, and since each invoice was issued more than 6 years before the issue of the Claim Form (the final invoice being dated 17 December 2013), CCI's claim in respect of the invoices was time-barred and should be struck out.
Each invoice stated that it was "due immediately". However, the court made clear that the wording on the invoice could not change the terms of the June 2013 Agreement regarding payment.
Points to Note:
- Only rarely will it be critical to determine when payment accrues due but this case, (following a 2018 High Court decision in the case of Ice Architects v Empowering People Inspiring Communities) appears to have definitively decided the position regarding when a right to payment accrues due in the context of the provision of services.