As a follow on from the previous Australasian Automotive article relating to the collection of unpaid invoices, a question occasionally arises: When is a debt too old to pursue?
Victoria has a Limitations of Actions Act 1958, which has the effect of limiting how long a business has to recover a debt.
In the absence of a court judgement ordering payment, there is generally a six-year limitation.
If a court judgement has been obtained, then that extends the time a creditor has to collect to 15 years.
In the situation where payments are being made and then stop, the six-year time frame begins. There may also be a further scenario whereby a debt is past six years and the debtor admits the debt. This may change whether the debt is considered statute barred.
You should always keep records of any contacts made with the debtor, including time, date, their identity, etc.
A debtor can ask for copies of contracts, invoices and tribunal or court orders in relation to the debt.
The Magistrates Court has a judgement life of 15 years and generally includes penalty interest.
You might consider engaging the services of a debt collection agent.
Where a dispute arises as to the quality of the goods or services provided, the state-based Small Claims Courts or Civil and Administrative Tribunals can be cost effective forums for determining the dispute and obtaining orders for payment which can be converted to Magistrates’ orders usually at no further cost, if necessary.
The above is not legal advice and the reader is encouraged to seek independent guidance from a legal practitioner should the above situation arise.
Words: VACC Business and Consumer Affairs Manager John Caine. As featured in Australasian Automotive June 2023.