Birse Construction Ltd v McCormick (UK) Ltd (Formerly Mccormick (UK) Plc)

In a construction contract, a contractor’s cause of action for disputed additional costs ordinarily accrues when the event giving rise to the claim has occurred, the contractual claims procedure has been followed, and the employer or its agent has rejected the claim or failed to respond within a reasonable period. A claims clause regulates when and how a claim must be made; it does not itself create the substantive entitlement. A final-payment and release mechanism does not postpone accrual unless the contract provides for review or formalisation of earlier claims at that stage. Prompt-notice requirements are inconsistent with delaying enforceability until completion or acceptance of the works.

The appeal arose from a construction contract under which Birse claimed additional Site Establishment costs arising from 29 events. The work was substantially completed in November 1996. Birse made a formal claim on 14 November 1996, resubmitted it in April 1997, and issued proceedings in May 2003. McCormick contended that the claims were statute-barred under the Limitation Act 1980.

The High Court determined three preliminary issues against Birse. The appeal concerned only whether the cause of action was postponed until final payment and release, or until a Notice of Acceptance of the Work was issued in September 1997. The central issue was the proper construction of the contractual claims, payment, and final-release provisions.

Lord Justice Clarke gave the judgment of the court. Lord Justice Carnwath and Mr Justice Patten agreed.

1. Article 17 and accrual. The contractual claims procedure was broad enough to cover disputed claims for additional Site Establishment costs under Article 8.3, as well as disputed Changes. Article 17 was procedural. It regulated when and how a claim had to be made and did not itself create a substantive right to recover money.
2. For each claim, the cause of action accrued when the relevant event had occurred, the applicable notice and supporting claim steps had been taken, and the Managing Contractor had rejected the claim or failed to respond within a reasonable period. A dispute could arise at that point, but the court did not confuse the dispute with the cause of action. The approach was consistent with the principles cited in Coburn v College [1897] 1 QB 702 and Reeves v Butcher [1891] 2 QB 509.
3. The 29 events had occurred by November 1996 and Birse’s formal claim was made on 14 November 1996. The causes of action therefore accrued in late November or December 1996. They were consequently statute-barred.
4. Article 39 and Article 34.2 did not provide for a review or wrapping-up of earlier disputed claims at final payment. Nothing in the contract prevented Birse from commencing litigation or arbitration before the Notice of Acceptance of the Work. The requirements for acceptance, a Release Certificate, and payment of retention did not postpone accrual.
5. The argument based on the temporarily conclusive estimate under Article 34.1 had been abandoned. The court accepted the judge’s rejection of it. The later decision in Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] EWCA Civ 814 concerned different problems under a different contract and had no bearing on this appeal.

The appeal was dismissed on the permitted ground. Renewed applications for permission to appeal on the remaining grounds were refused.

• Court of Appeal (Civil Division): The appeal was dismissed on the permitted ground, and renewed applications for permission to appeal on the remaining grounds were refused: [2005] EWCA Civ 940.
• High Court of Justice, Queen’s Bench Division, Technology and Construction Court: On 9 December 2004, His Honour Judge Peter Coulson QC answered all three preliminary issues against Birse, including holding that the claims were statute-barred.