Unpaid Invoice - Alberta, Canada
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Unpaid Invoice - Alberta, Canada

Unpaid Invoice - Alberta, Canada

What do you do if you have a client located Alberta, Canada, who is refusing to pay your invoice?

 

You have sent your clients reminders; you have spoken to him or her to get an understanding of the situation and you have tried to keep it amicable and friendly. So what are your options if your client is still refusing to pay?

This is a common problem in Canada and abroad and you are not alone. Fortunately, there are a number of steps you can take to get paid ranging from making your non-payment public on the Business Disputes Register, to mediation and taking the case to tribunal.


Each option has its pros and cons and each is detailed in this article.

 

Here is a summary:

  File on the Business Disputes Register Mediation or Arbitration
Debt collection agency
Small claims Court
Cost $19.95
Depends on complexity and time required. Expect between $2000 and $4000 Typically, 25% of amount recovered

Minimum $100 or $200 for filing – depending on size. Expect to pay over $2000 if using lawyers (recommended)

Pros

Fast

Economical

Good solution when client is local or in another province or abroad

Good for resolving a complicated dispute without involving expensive lawyers

Might save the client relationship

Allows you to move on

Get justice

May get a default Judgment

Cons May ruin client relationship

Expensive

Unlikely to get full payment


Expensive

Lose control of process

Will ruin client relationship

Risky: you might lose. The other party might make a counter-claim

Time consuming

Expensive

Will ruin client relationship


A) File dispute on the Business Disputes Register

The most straightforward and simplest solution is to make details of your unpaid invoice public on the Business Disputes Register. Simply fill in the form giving details of your payment dispute. The fee for filing is $19.95. Your dispute is then automatically published on the internet on the disputes register for the general public to discover as a matter of public record. Your client will receive an email notification about the dispute being filed on the Disputes Register and is urged to contact you to negotiate its removal. If the dispute is subsequently resolved to your satisfaction, then you remove it from the register - this is a very important aspect of the service, because it is what compels your client to resolve your payment dispute. 

The dispute will appear on search engines when your client’s business name is searched by other parties. This will have a detrimental impact on the other party's reputation which is why they will be incentivised to respond and resolve your invoice promptly.


B) Mediation

Mediation is voluntary process which you and your client must be willing to undertake.  A mediator is always a neutral third party who tries to help you and your client reach an agreement. The mediator help encourages compromise, and ideally avoids you going to court.

The mediator is not a lawyer working for you, and you are encouraged to get independent legal advice for the mediation process.

Mediation services are offered by private practice mediators. The Alternative Dispute Resolution (ADR) Institute of Ontario and the Alternative Dispute Resolution (ADR) Institute of Canada are self-regulated organizations that provide standards of professional conduct as well as complaint processes.


Arbitration

Arbitration is similar to mediation, but the main difference is that both parties must agree to be bound by any decision made by the arbitrator. A decision made by an arbitrator is legally binding and enforceable against the parties. Arbitration is a less formal process.

An arbitration process may be more complicated and expensive than mediation, but arbitration can be faster and be less expensive than suing in court.

Arbitration services are offered by private practice arbitrators. Arbitrators may be members of the ADR Institute of Ontario or ADR Institute of Canada.


C) Appoint a Debt Collection Agency

Debt collection agencies charge a fee, typically 25% but varies depending on claim amount, age of debt and other factors.

Debt collection agencies are experts at getting invoices paid as they know which tactics work. Many cater to small businesses. Here is one debt collection agency explaining how it works:

“We aggressively contact them over the phone to have the matter resolved and we also send out a letter to reiterate that urgency. Should we continue to receive non-payment then we will automatically report them to their credit history after 30 days of submission. After that, we review for legal action. If legal action is declined, then we will continue to aggressively contact them to get the account resolved.”


Most agencies charge a fee, typically 25%, for any funds collected on your behalf, whilst others may buy the debt from you for cents on the dollar but this tends to be available for only larger companies.

Note that in Canada, there are strict rules in place around debt collection that are unique to each province and territory. For example, practices such as calling a debtor each day or using threatening language may be illegal in some jurisdictions. Debt collection agencies are well-versed in the law and can help your business to avoid accusations of harassment or illegal collections practices.



D) Small Claims court

First of all, before even considering this route, make sure your client has sufficient funds to pay you, as it is a costly and risky solution. Expect to pay about $2000 in legal fees for a straightforward claim. The judge might order the person you are suing (“the defendant”) to pay some of the costs if you win the case, but If you lose, you might have to pay your own costs and some of the defendant’s costs.

Even if you win, the person or business you sued may not pay you or return your goods. If this happens, you will need to enforce (attempt to collect) the judgment, which also involves fees.

Small Claims Courts are for claims up to $35,000 (in Alberta). You can still use a small claims court for a higher amount, but you waive your right for the amount above $35,000. For higher claims you will need apply to the Court of Queen's Bench which is not covered in this article.

In Alberta, you have two years to pursue a debt in and therefore it is imperative that you act fairly quickly. This is called a “limitation period”. Your time limit to pursue legal action for an unpaid debt may start when you knew, or ought to have known, that the debt was not going to be paid.




  1. Your first step is to file a “Civil Claim form” (“Debt Claim-Attachment B”) online, in-person or by mail. it is very important that your client, the “Defendant” is named properly, otherwise it can affect your success and you may be unable to collect your money if you obtain a Judgment as a Judgment cannot be enforced against an improperly named Defendant. When naming a business, you must use the proper legal name. The name on a business card, invoice, or contract might not be the legal name of the business. Do a corporate search to obtain the correct legal name.
  2. File the Civil Claim at any Provincial Courthouse in Alberta. The fee is $100 for Civil Claims up to $7500 and $200 for between $7,500 and $50,000.
  3. Serve the Claim on your Client (the “Defendant”) within one year of filing the Civil Claim. Basically you give them a copy of the stamped Claim in person or post it to their Registered Address using recorded mail.
  4. Complete an Affidavit of Service (Form 8A) for each defendant to prove to the court that you served the defendant(s).
  5. The Defendant then has 20 days to respond with a Dispute Note to the Court. The Court Clerk will forward copies of Dispute Notes to all parties.
    • If the Defendant does not respond. You can file a Request the Court for a “Default Judgment” or a “Request to Note in Default” (no fee)
      • The Provincial Court Office will prepare a Certificate of Default Judgment and send to all parties by regular mail. It may take two weeks or more for the Certificate to be mailed
      • The Court does not collect the money for you. If the Defendant does not voluntarily pay you the amount awarded in the Judgment, you must then take steps to enforce (collect) the Judgment by filing file the certified copy of Certificate of Default Judgment in Court of Queen’s Bench
    • If the Defendant does respond. - Does he dispute the Civil Claim?
      • Defendant offers to settle the Civil Claim
        • You must accept or refuse the settlement
      • Defendant disputes the Civil Claim
        • The action may be selected for Mediation
        • If the action is not selected for Mediation or Mediation fails, the Court may decide to proceed with a Pre-Trial Conference
        • If a Pre-Trial Conference is not selected or it fails then 
          • the action will proceed to either a:
            • Simplified Trial
            • Trial
            • Binding judicial Dispute Resolution
          • If you receive a Judgment (win). The defendant might still refuse to pay so you will need to  take steps to enforce (collect) the Judgment at your expense, and all enforcement steps must be taken through the Court of Queen’s Bench by you. You can try to get the money:
            • by "garnishment", for example, of the debtor's bank account or wages
            • through the seizure and sale of personal property or land (the defendant's personal property or land is taken and sold, with the profits being used to pay you back money owed)
      • The Defendant may file a Counterclaim against you
        • You can pay the Counterclaim
        • Or file a Dispute Note to their Counterclaim
        • The Defendant may file a Claim against someone else (“adding a Defendant by Counterclaim” or “Third Party Claim”)

Note: Only a maximum of 15% of legal fees can be added against the debtor and that is up to a Judge's discretion.

For more details about going to court in Alberta, see here: https://www.Albertacourts.ca/scj/small-claims-court/