The Courts remind us of the importance of good record keeping

Introduction

The case of Premier Engineering -v-MW High Tech [2020] has given all contractors and businesses in the construction industry a very timely reminder of just how important good record keeping is on the not so interesting, but absolutely critical topic of timesheets and invoices.

The facts

MW High Tech Projects UK Ltd (“MW”) were contracted as an EPC contractor on a large project in Hull known as the Energy Works Hull project (“the Project”) worth £150m. In 2017, it employed Premier Engineering (Lincoln) Ltd (“Premier”), essentially to supply labour and supervision for multiple trades under the direction of MW. MW previously employed another contractor for these services who were not performing and replaced it with Premier.

MW retained responsibility for design and programming whilst Premier provided certain basic materials related to each trade. Premier were not employed under a typical subcontract where it was contracted to execute a defined scope of works, for an agreed price and which was to be completed within a defined period; its role was largely limited to that of a labour supply contractor with supervision. As Stuart-Smith J said, this set up meant that MW were “…to identify and control the work that the men supplied by Premier were required to carry out.” [para 7]

By 2018, Premier had substantially increased its supply of labour at the instruction of MW – the EPC contract included for substantial penalties for delay but by this time, MW “…had a failing project on its hands ” [para 3]. Accordingly, MW needed Premier to increase its labour supply in order for MW to mitigate its exposure to these damages.

Essentially, the parties fell out over the value of the labour supplied by Premier, primarily during 2018, with an amount of £1.3m disputed. As with many construction projects, the works commenced satisfactorily and the parties enjoyed a good relationship but as problems on the Project grew, the relationship deteriorated.

The fundamental difference centred on the applicability of timesheet records and turnstile data collection. The typical process for Premier’s timesheets was that each week it would submit to MW its labour hours comprising hours worked, together with operative travel and incentive hours. A MW representative would review and approve, and these approved timesheets would then form the basis of Premier’s invoicing, a fairly typical process. In support of its timesheets, Premier would provide paper signing in sheets which were to be later superseded by a biometric system. One of the main areas of dispute related to MW’s latter use of turnstile data as a means of verifying the timesheets. This was complicated by the fact that a significant part of Premier’s work was undertaken in areas outside of the turnstiles, including safety briefings and works in an area referred to as ‘Rix’s Yard’. To overcome this and with agreement from MW, Premier installed its own biometric system at the end of April 2018 to record its operative’s comings and goings which in turn, was used to verify its timesheets from that point on [para 41].

Findings

This judgement does not make for particularly exciting law but what it does do, is provide us with a timely reminder of just how important accurate timesheets and records are to proving your entitlement.

As there was no defined scope of works, contract price or completion date, it was held that MW essentially directed Premier’s labour with the judge stating:

“It also provides a reasonable explanation why Premier did not maintain records of what activities its labour was carrying out on a day to day basis.” [para 9]

Signed timesheets were essential evidence to substantiating Premier’s hours. In this respect, the judge said:

“Certain things follow from this. First, MW and Premier knew and agreed that all hours were to be recorded on timesheets for invoicing and those timesheets were to be signed. The purpose of signature is obvious and is to vouch for the accuracy of the timesheets. The importance of the timesheets is equally obvious and is that the timesheets would be used not only as the basis for Premier invoicing MW but also as the basis for Premier to pay their men, who would themselves be on hourly rates – hence the timesheets.” [para 13]

The judge also found that MW’s argument that it merely signed off timesheets without fully verifying what it had signed for was not acceptable:

“The purpose of having timesheets signed off by the employer's representative on site is clear: it is to signify knowing agreement and to prevent disputes later. Signed timesheets are therefore the primary (and should be the best) evidence for the parties and the Court. The idea that timesheets should be rubber-stamped without any meaningful check subverts the purpose of the system.” [para 23]

The time for challenging invoices was at or around the time they were submitted when the relevant MW staff were on site with current knowledge of the works, not substantially after:

“In this state of the evidence, the scrutiny and assessment of Premier's invoices at the time they were submitted is of cardinal importance for three simple reasons of reliability and justice. First, the invoices were submitted when Premier had current knowledge of the reasons why each sub-invoice was submitted. Second, MW's contemporaneous assessment of the invoices was carried out by people with current knowledge of Premier's work on the Project and what their requirements for plant and materials would be or had been. That was, therefore, the time when issues could and should have been raised if it was reasonably arguable that Premier was overcharging... Third, it is inevitable that the Court would have inadequate evidence on which to make detailed findings if the alleged overcharging is not raised until later. Even if detailed evidence were available, it would be grossly disproportionate to expect the Court to trawl through all the disputed items.” [para 254]

Although the judge broadly found in favour of Premier, it is noteworthy that he awarded Premier an amount of £0.5m against its claim of £1.3m (before VAT and interest). This itself should be a cautionary tale for anyone considering going to Court – even though Premier ‘won’ the case, it walked away with under 40% of its claim.

Practical tips

  1. As far as is practicable, employ subcontractors on a properly defined subcontract, setting out an agreed price, a defined duration and scope of works etc. Failure to do so could mean you assuming responsibility for your subcontractor’s works;
  2. In labour only contracts, agree the method of verifying hours worked in advance of starting works, whether that is through hard copy timesheets with signatures, turnstile records or biometric data;
  3. If using timesheets and you disagree with the hours stated on them, do not sign them, or expressly limit your approval to the hours that you do agree with. Trying to retrospectively argue that you did not actually agree with those hours signed for is unlikely to be accepted;
  4. Similarly, signing timesheets but adding ‘RPO’ to it (record purposes only) is unlikely to be reliable evidence that you disagreed with the hours. Think about the literal meaning of the words ‘record purposes only’: you are stating that your signature and the hours on the timesheet are for ‘record purposes’ – that is the whole purpose of the timesheet in the first place, a record to verify that the employer is satisfied with those hours; and
  5. Challenge invoices at the time of submission – do not rely on the Court to do this for you substantially after the fact as the Court (or adjudicator) is likely to find it a disproportionate use of its time.

Premier Engineering (Lincoln) Limited -v- MW High Tech Projects UK Limited [2020] EWHC 2484 (TCC)

https://www.bailii.org/cgi-bin/format.cgi?doc=/ew/cases/EWHC/TCC/2020/2484.html&query=(premier)+AND+(v)+AND+(mw)

Disclaimer

This content is provided free of charge for information purposes only. It does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by HD Construction Solutions Ltd.

Posted on 16/12/2020 in Records

David

David Daly, Director

David is a Chartered Quantity Surveyor and testifying expert witness with a breadth of domestic and international commercial experience. He is experienced in dispute...

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