Whether pursuing unpaid invoices or defending your right not to pay them, you'll want to take a look at this High Court decision which considers what evidence is required to prove the value (“quantum”) of a claim seeking payment of invoices based on contract terms involving hours, rates and personnel levels.
You might also want to take a look to remind yourself that just because a defendant hasn't challenged a part of your case doesn't mean that you don't have to prove the position - omitting to do so could prove very costly, as it did here.
Subject to your appetite for case law you may, or may not, be happy to know that you won't have to look much further than this judgment. This is because the parties weren't able to find any other commentary or authority which touched upon the question of what proof is, in principle, needed to prove the quantum of a claim for moneys alleged to be due under invoices - a discovery the Court found "a little odd". This lack of authority may also be due to the fact that this point may be raised earlier in proceedings where a defendant requires the claimant to prove the quantum of their claim.
In fact, it’s a case so novel that even the creators of stock photographs haven't had the foresight to produce a dynamic and engaging image of an invoice that could accompany this piece...*
What was at stake?
The Claimant, a Service Provider, was claiming for fees due under invoices for consultancy services it provided.
The fees billed in those invoices were calculated in accordance with the Service Provider's standard terms of appointment, including that work would be charged on a time basis, calculated in six minute units at the hourly rate of the relevant fee earner (such rate could be increased by up to 50% where the work was complex or particularly important to the client, required particular expertise, or had to be executed quickly or in an inconvenient location).
The Defendant, the Customer, had signed an acknowledgement of these terms at the start of the engagement.
Further to the terms, an estimate was given of £16,500. But the final bill came in at roughly £80,000. The claim was for around £50,000’s worth of unpaid invoices.
The Claimant's predicament
The problem for the Service Provider was that it assumed that the question of whether the invoices had been calculated correctly was not an issue it had to prove because the Customer hadn't challenged their value in its Defence. The Customer only argued that the services had been performed negligently (a defence which failed).
Unfortunately for the Service Provider, the Customer benefited from Civil Procedure Rule 16.5(4), which states that where a claim includes a money claim "a defendant shall be taken to require that any allegation relating to the amount of money claimed be proved unless he expressly admits the allegation".
The County Court found in favour of the Service Provider on liability, but then dismissed the entirety of the claim due to evidential failings about quantum. It concluded that because of the hefty uplift in the final bill, it wasn't proof enough for the Service Provider to say that there had been a lot more work which had become more complex. It also wasn't enough that the invoices contained broad explanations of the work undertaken or that the estimate wording said it was subject to revision upwards.
To prove the value of the sums allegedly owed, the Service Provider should have provided the Court with evidence of:
- Who did the work;
- How long it lasted; and
- What was involved.
The Service Provider attempted to persuade the judge that it shouldn't have to descend into further detail when the Customer hadn't even said what further proof was required and, furthermore, had failed to plead an objection to the claim's quantification in its Defence and to argue the point at trial. But the judge rejected those pleas and, on appeal, the High Court upheld that decision (with one minor exception where one fee note had in fact been provided as evidence).
Takeaways and tips
The High Court was keen to point out that the nature and extent of the evidence required to prove the quantum of a debt claim such as this will vary depending on the circumstances of the case and that this decision "should not be taken as seeking to establish any principle of more general application" as each case "will depend upon its own facts".
However, the three point list above is certainly a helpful starting point for the preparation of evidence to prove an invoice claim – particularly in a case such as this where there is a significant difference between initial cost estimates and final bills.
The case also presents two further takeaways if you find yourself pursuing debt recovery through the courts. The first, don't get complacent. Just because you and your customers may be happy with the detail on an invoice as evidence of costs incurred, don't assume that the Court will be. The second, prove it. If the burden of proof sits with you, be sure to discharge it - it may not be enough to rely on the acts or omissions of your opponent.
Invoices in and of themselves will be insufficient, on the face of it, to prove their own value without being supported by underlying documentary (or other evidence) of any sums allegedly due. Unlike in this case, a business contemplating an invoice claim based on hours, rates and levels should provide as much documentary proof as possible of how any figures claimed have been calculated and constituted, for example:
- Records of who did what work and when (the Claimant apparently had these in this case, but did not disclose them in the trial bundle);
- Records of any uplifts applied, when and why;
- Proof of any disbursements incurred e.g. fee notes of third parties, receipts for chargeable expenses; and
- Contemporaneous communications with the client/customer explaining any anticipated (and actual) increase in costs beyond original estimates.
*If anyone has come across (or is able to produce) such an image please do reach out to email@example.com
In granting permission, Fordham J found it "a little odd that no commentary or authority has been identified which is said to assist the Court on what proof is, in principle, needed in an invoices case based on contract terms involving hours and rates and levels, given CPR 16.5(4)..."