Birse Construction Ltd. v McCormick (U.K.) Ltd

A contractual cause of action generally accrues when the claimant first has the right to sue. Contractual notice, assessment or invoicing procedures do not postpone accrual unless they are essential conditions of the right to payment rather than merely procedural steps. A detailed construction contract may imply an obligation to consider claims fairly where agreement is repeatedly made an essential part of its administration. That obligation forms part of the contractual machinery and does not create a later limitation date. A revised presentation of the same claim does not restart limitation.

Birse claimed payment from McCormick under a building contract for additional site establishment costs arising from delay and disruption. The parties agreed three preliminary issues: whether the contractual claims were statute-barred; whether Fluor, acting as McCormick’s agent, owed an obligation to assess and seek agreement fairly and properly; and whether a claim for breach of that obligation was statute-barred. The court also considered whether the claim submitted in April 1997 was a new claim or a resubmission of the November 1996 claim.

1. Preliminary Issue 1: contractual claims. The claims were statute-barred. The contract established a lump-sum and milestone-payment regime. Agreed changes and additional site establishment costs were payable through formal contract amendments and invoicing. Disputed claims were subject to the Article 17 claims procedure.
2. In the absence of a contractual provision postponing accrual, a cause of action for payment accrues when the work or services are performed, or when the debt could first have been recovered by action. Procedural obstacles to enforcement do not ordinarily postpone limitation. The court applied Coburn v Colledge [1897] 1 QB 702, Reeves v Butcher [1891] 2 Q.B. 509 and Sevcon Ltd v Lucas C.A.V. Ltd [1986] 2 All E.R, 104.
3. Article 34.1, which contemplated interim valuations and made Fluor’s estimate conclusive, was inapplicable or ineffective because the contract otherwise provided for payment and because the specific commercial payment provisions prevailed over the general term. Even if applicable, it did not make Fluor’s rejection of a claim conclusive until acceptance of the works. The claims accrued when they were rejected, or deemed rejected after a reasonable response period, probably on or about 9 December 1996.
4. Preliminary Issue 2: fair assessment. The contract’s repeated emphasis on agreement made it unworkable for Fluor and McCormick to act unreasonably from the outset. An implied contractual obligation therefore required them to consider claims fairly and properly when seeking agreement. It was not a free-standing duty arising from agency or representation. The court applied the implication principles associated with Shirlaw v Southern Foundries (1926) Ltd [1939] 2KB 206.
5. Preliminary Issue 3: limitation. Any breach of the implied obligation accrued when the November 1996 claim was, or should have been, rejected. The April 1997 document merely revised and particularised the same claim based on the same events. It did not create a new cause of action or extend limitation. The answers to Preliminary Issues 1 and 3 were therefore Yes.