Debt Recovery

Civil Litigation & Dispute Resolution
Dec 07 2022

New Zealand’s growing living costs, rising interest rates and declining business confidence means business are likely to experience an increase in their debtors in the coming months. Given the choice between paying a mortgage or rent and paying an outstanding invoice for services/goods already received, those struggling financially will likely chose to keep a ‘roof over their head’ rather than pay an invoice for something they already have.

So, if your are in business and your are owed money, what can you do?

Act fast.

Generally, if a customer has the money to pay your invoice – and has no issue with the service provided or the invoiced amount – they will pay your invoice when due. Failure to pay without any communication from your customer is a warning sign.

As soon as an invoice becomes overdue, contact your customer. While sending overdue invoice reminders or statements may be what your accounts system automatically does, these are easy to ignore. Direct contact is not.

In the first instance we recommend making a phone call to your customer and talking to them about the invoice, noting it has not been paid, and requesting payment. It may be during this phone call that the customer raises any issues they have with the invoice or service provided. You should discuss any issues with the customer and agree to a resolution (if appropriate). Follow the phone call up with an email recording what you discussed and that you expect payment of your invoice.

If, after any issues have been resolved, the invoice remains outstanding, it is time get a little more forceful. If you have provided your customer with specific Terms and Conditions (Terms) you should reiterate to your customer their rights and obligations under those Terms. For example:

  • If your Terms provide for you to charge the customer interest on the outstanding invoice, start doing so (you can always agree to write off any interest accrued at a later date if payment is received). Put your customer on notice that interest is accruing on the outstanding invoice, specify the rate and make it clear that interest will continue to accrue until payment is received in full.
  • Your Terms may also give you a contractual right to recover from the customer any debt collection agency fees and/or solicitor-client costs (commonly referred to as indemnity costs) incurred in recovering, or attempting to recover, an outstanding invoice. If so, make this clear to the customer and advise that if payment is not forthcoming you will refer the matter to your solicitors, the costs of which will be sought to be recovered from the customer.

Make it clear to your customer that if they attend to payment now, it will save them costs in the long term.

If you have made contact with the customer and payment remains outstanding, it is time to contact us.

Past experience shows that a letter from a solicitor is an effective tool in getting your debtors to either pay the invoice or engage with you, or us, to arrange payment terms.

When a debt recovery matter is referred to us the first step we take is to write a “letter of demand” to your customer.

In this letter we advise the customer that we act for you, we briefly set out the background to the matter, the goods/services provided, the invoice(s) issued and any discussions or correspondence you may have had with the customer around payment of the invoice.

We then state the contractual arrangements and/or statutory obligations between you and the customer, including any default interest and indemnity costs provisions.

It is important that the letter of demand is accurate and thorough as it can be relied on by you to evidence your adherence to due process, and reasonableness, in the event Court proceedings are issued.

The letter of demand will request payment in full or request that the customer contact us to discuss a payment arrangement if payment cannot be made in one lump sum. (The terms of any payment arrangement will first be discussed with you and, once agreed, recorded in writing.) A date for payment, or a payment proposal, is specified, usually within 10 workings days of the date of the letter. We put your customer on notice that if payment is not received or an acceptable payment arrangement entered into by the specified date, Court proceedings could be issued against them without further notice. We take care to ensure your rights and position are reserved in full.

Dependent on the reason for your customer failing to pay your invoice, a letter of demand from us will often, but not always, compel the customer to stop ignoring your invoice (or paying others in preference) and make payment. On receipt of a letter of demand, a customer experiencing genuine, short-term, financial issues will likely contact us, or you, to discuss a payment arrangement.

Time to consider Court proceedings?

If our letter of demand does not result in payment or a response from your customer, and depending on the sum outstanding, the next step we recommend is to issue Court proceedings. Before issuing Court proceedings, we always consider the feasibility of doing so, balanced with the likelihood of recovery from your customer.

If your customer has disputed the invoice and/or the services provided, and the debt is $30,000 or less, you can refer the matter to the Disputes Tribunal for determination. Generally, (except for specific exceptions) parties are not entitled to be legally represented at a Disputes Tribunal hearing, unless it appears to the Disputes Tribunal to be proper in all the circumstances to allow legal representation, and such representation is approved by the Disputes Tribunal. Even though we may not be able to represent you in the Disputes Tribunal, we can assist you in preparing your claim. However, any legal costs incurred by you in relation to a Disputes Tribunal claim are not recoverable by way of a costs award. The Disputes Tribunal does not have jurisdiction to award costs, other than in exceptional circumstances.

If the debt is under $350,000 then the District Court is likely the appropriate jurisdiction in which to issue proceedings. If the quantum is higher, or there are more complex contractual or property matters involved, the proceedings should be issued in the High Court.

Being served with Court proceedings may be what is required to get your customer to engage in payment discussions or settlement negotiations. If the customer ignores the Court proceedings, and judgment is entered in your favour by default, then you will have a Court order on which to rely to take further enforcement steps, if you so choose. We can help with enforcement action if the matter comes to this.

What now?

Being owed money, no matter what the sum, is stressful in itself without having to incur legal fees to recover what is due to you. That is why we always approach debt recovery matters with pragmatism and efficiency. We do not want you to have to “throw good money after bad” so we do our best to streamline the process with the first step always being a letter of demand.

If you have outstanding invoices that need addressing, or you would like to discuss your debt recovery and enforcement options, contact us. If you do not currently have Terms and Conditions, we can help you with those too.

AUTHORS

You may also like ...

Buying property with family – fun or potential fiasco?
In the present economic climate, getting into (or climbing) the property ladder is tough. To get a deal across the line, purchasers are increasingly looking to alternative ownership options. One such option we commonly see is ‘co-ownership’ of property between family members. Taking matters a step further than the traditional parental guarantee of a child’s purchase, we are now seeing co-ownership between multiple relatives (such as siblings and their spouses, or parents and all/some of their children). This is despite that not all owners intend to live in or maintain the property. While this sounds good on paper, unfortunately these arrangements often proceed without the appropriate documentation and can go wrong. Untangling them can be complex where there has been intermingling of purchase funds, family members not being treated equally, deaths occurring and relationships souring over time. What to do if you want to buy property with other people? If you are buying property with others (often who are not your spouse or partner), you should have a written agreement to cover key aspects. The terms can cover: ownership shares and monetary contributions to purchase (including bank loans); who will live in the property; who will pay property expenses and maintenance; what will happen if someone wants to sell the property and others don’t; what happens on death of a party; and how will any proceeds of sale be distributed. This way, if a dispute does arise there will be a clear path forward to minimise any fall out (if possible). Property Sharing Agreements are used to document these arrangements, which are simple but effective. Purchasers can also consider whether funds should be gifted or loaned. Our property lawyers can assist you with this process. You can also read our article on Gift v Loan. If you are wanting to buy property with your partner or spouse, there are a different set of questions and documentation to consider (for example, whether you need a contracting out agreement). Our dedicated family team can advise you on all aspects of relationship property. See also our article on Contracting Out Agreements 101. When it goes wrong A recent example of an undocumented family property purchase is the case of Boot (As Executor and Trustee of Estate of Hart) v Stephens [2023] NZHC 3863. Parents (the Harts) helped their daughter and her husband (the Stephens) buy a property.  The title said that each couple owned a 50% share of the property, but in reality, the Stephens contributed more to the purchase price. They also paid for most of the property expenses in that time. Years later, both the Harts died, and their other five children wanted to sell the property so that 50% of the sale proceeds could be distributed to the children via their mother’s estate. The Stephens claimed that they were entitled to 67% of the property. Additionally, they had lived in the property for 17 years and did not want to sell. Ultimately, the Court held that, given the family’s intentions and contributions, the Stephens were entitled to 66% and could buy out the estate’s 34% interest. Regrettably, the dispute and litigation took a toll on the siblings’ relationships. If you own property with your family and there is a dispute There are a number of options to resolve a dispute if there is no written agreement, including obtaining Court orders to force a sale under the Property Law Act 2007. First and foremost, our experienced litigation lawyers can help you to resolve matters before Court through negotiation or mediation, if possible. If negotiations are not successful, we can guide you through the litigation process.
Read more
New Firearms Registration Law
The second phase of the firearms reform process that began in 2019 reached a new milestone on 24 June 2023 with the introduction of the Arms Amendment Regulations 2023. The new firearms registry set up under the Regulations is administered by the Firearms Safety Authority. The Authority launched in late 2022. It works with the Commissioner of Police to provide a range of services related to firearms registration. The registry will progressively impose reporting requirements on New Zealand’s 240,000 licenced firearms owners over the next five years. For simplicity, in this article, we refer to “guns” and “weapons”. But these obligations apply to all “arms items”: firearms, magazines, pistols, restricted weapons, ‘major parts’, and pistol carbine conversion kits. The Regulations do not currently require the registration of other parts which require a firearms licence to purchase. This includes grips, frames, chassis systems, flash suppressors, and silencers. Firearms that are inoperative do need to be registered. The only exclusions are antique guns, and airguns (except for “especially dangerous airguns”). Guns are classed as antiques if manufactured before 1899, are held solely as antiques, and if incapable of firing rimfire and centrefire ammunition. Firearms dealers are subject to somewhat more onerous obligations, and required to register their stock before 24 June 2025. The Authority will proactively contact dealers to advise them how to register their stock. From 24 June 2023, gun owners can voluntarily register their weapons at any time, either by setting up a MyFirearms account on the Authority’s online portal (which allows use of the RealMe service already in use by IRD and other departments), or by phone (freephone 0800 844 431). To register, gun owners will require details of their firearms licence, and the identification details for their weapons (including manufacturer, year of manufacture, action, calibre/gauge, and serial number). Any custom made weapons or other items without identifying marks will need to be registered over the telephone. All gun owners will need to have registered their weapons with the Authority before the close of 31 August 2028 by the latest. However, an earlier deadline can apply in some circumstances. Gun owners will need to take care of registration earlier than 31 August 2028 if: They apply for a new licence, endorsement, or licence renewal. New licence holders will need to register their guns when they get their licence. Renewing owners have 30 days after the renewal to register their guns. They buy, sell, supply, or receive a gun. The item that changes hands must be registered as soon as practicable after the weapon changes hands, and they must register all of their guns (even those not changing hands) within a month after the transfer. They import a gun. That item must be registered within 30 days after the gun is released by customs, and all their other weapons must be registered a month after that same day. They manufacture or export a gun. That item must be registered within five days after the export or manufacture is complete, and all their other weapons must be registered a month after that same day. They notify the Police that they have lost a gun, had one stolen, or have destroyed a firearm. In that case, they will need to register that gun immediately, and their other weapons within 30 days after that gun was lost, stolen, or destroyed. Ammunition does not need to be registered. However, if a gun owner buys ammunition after 24 June 2025, they will need to register all weapons within their possession within 30 days after the purchase. There is no charge for registering a firearm. Where a gun changes hands, the obligation to register the change in ownership is with the person making the transfer (ie. the seller or person giving the gun away or exporting it). If a licenced firearms owner has no items in their possession, they will still be required to register and declare “No Arms Items”. Guns can only be registered to one licenced owner. If a person is responsible for a weapon for a club, range, organisation, or business, they will need to register the firearm against their licence. If a gun is being loaned or given for safekeeping to another licence-holder for less than 30 days, the transfer does not need to be registered. Any longer term loans will need to be registered by the person handing over custody of the weapon. Gun owners who fail to register their weapons in a timely manner face a fine of $10,000, even for unintentional breaches of the regulations. Deliberately failing to comply the rules can lead to fines of $20,000, or up to two years in prison. So, if in doubt, it will pay to seek advice. The information held by the registry (ie. the firearms owned by a licence holder) will be accessible by the Police when carrying out their lawful duties. Upon request, holders of firearms licences and dealer’s licences to view their own information and confirm/verify the licence, endorsement, and permit status of any person they are buying or selling firearms to. However, they will not be able to see what firearms are owned by the other party. If in any doubt over your registration obligations, or if you have any questions at all related to firearms and the law, Holland Beckett Law’s wide-reaching practice – from criminal to civil, from city to country – allows us to provide the answers you need.
Read more
Don’t hit ‘Send’ on a lawsuit – some hidden pitfalls of being online
“If you’ve got nothing nice to say, say nothing at all” may be an old adage, but it still has force in the social media age. Seemingly ancient legal concepts can bite in unexpected ways for those freely expressing their opinions online. Some may be familiar, such as defamation and harassment. Others, like malicious falsehood, and the Harmful Digital Communications Act (HDCA), are less familiar. But they can all have significant consequences, and can even lead to criminal charges. In this article, we highlight some of the do’s and don’ts for interacting online. One of the major possible pitfalls is the law of defamation. This is the area of law aimed at protecting reputation. It enables someone who believes they have been unfairly disparaged to sue to regain their standing. Large sums can be awarded by way of compensation where defamation is established. The obvious tension between this ability to sue and freedom of speech has seen the boundaries of defamation gradually pushed back in recent decades. There are now a number of defences to these claims aimed at protecting those expressing their honestly held opinions and providing fair comment on matters of public importance. Truth is also a defence to defamation. But succeeding in using one of these defences can be challenging, and a good defence is second best to not being sued in the first place. The law is technical, but taking some basic steps can avoid a lot of upset: Where stating something about a person as a matter of fact, ensure it’s true. Avoid repeating rumours, gossip, and innuendo: those repeating defamation can be sued just as much as those originating it. In stating an opinion, ensure that you’re putting forward what you honestly think, and that you’re basing it on facts that you’re clear are correct. Avoid exaggeration or aiming to be malicious. It’s also easy to stray into making statements of fact in offering up an opinion. If you’re in charge of a page on social media, ensure you review it regularly and remove anything potential defamatory you find. There’s been a number of examples of page hosts being targeted for ‘permitting’ defamation to spread on their watch. This includes where you’re posting a review of a business, leaving feedback on someone on TradeMe or TripAdvisor, recounting your experiences of an employer, or commenting on a news article you’ve seen online. Businesses can also run into difficulties in with defamation (not to mention consumer and intellectual property law) in offering comparisons between their own products and services and those of their competitors. For example, Local toy manufacturer Zuru recently had to respond a claim by Lego that Zuru had breached trademark law in saying its products were compatible with Lego. Though Zuru succeeded, it will have incurred significant costs, and uncertainty, in defending the lawsuit. One of the areas that can give people grief with defamation is the fact you can be found liable even if you didn’t mean to do harm. Other parts of the law respond to those who do set out to cause loss or offence. Injurious falsehood allows someone to sue to be compensated for financial loss they have suffered as a result of lies knowingly told about them. While more limited in scope than defamation, there are fewer available defences than in defamation. Not all processes are focused on financial compensation, and some can involve the criminal law. An application can be made for a harassment order by the target of repeated hostile posts on electronic forums. Compared to claiming financial compensation, harassment orders are reasonably easy to obtain. Breaching a restraining order is a criminal offence, punishable by six months’ imprisonment or a fine of $5,000. The HDCA is perhaps the widest-reaching, and most potent, tool available for regulating online conduct. Any conduct found to be likely to cause serious emotional harm because it is menacing, grossly offensive, indecent, harassing, or malicious can give rise to an order under the HDCA. The District Court, in making an order, can compel harmful content to be taken down, and an apology made. The same penalties apply for breaching an order under the HDCA as with a harassment order. In particularly serious cases, the posting of the harmful communication itself can be punished by 2 years in jail or a fine of $50,000. At the same time, while seeking to protect people online, the Courts are sensitive to the values of freedom of expression. These laws are applied in a manner that balances that right. The above is only very general guidance and shouldn’t be relied on as legal advice. If you run into any of these unexpected pitfalls online, or feel you have been the target of harmful or inaccurate communications, Holland Beckett’s dispute resolution and litigation team can help.
Read more

Start typing and press enter to search

Scroll to Top