Unpaid Invoice - British Columbia, Canada
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Unpaid Invoice - British Columbia, Canada

Unpaid Invoice - British Columbia, Canada

What do you do if you have a client located British Columbia, Canada, who, for no valid reason is failing 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 a small claims court.

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 $156 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 British Columbia 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 British Columbia 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

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, there will be further court process which will involve further costs. In fact you could find yourself in court a total of five times!

Small Claims Courts are for claims between $5,001 and $35,000 (in British Columbia). 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 BC Supreme Court which is not covered in this article. For claims under $5,000, you must use the online Civil Resolution Tribunal (CRT).

The CRT is a three-stage process:
  1. negotiation – first you communicate online with the other party to see if you can quickly settle the dispute between yourselves
  2. facilitation – if that doesn’t work, trained CRT staff will try to help you settle
  3. adjudication – if you can’t resolve the dispute, a Tribunal member may make a decision and it can be enforced like a court order in the Provincial Court, unless you or the other party files a notice of objection, in which case the claim will progress to the Small Claims Court.

For claims in Vancouver and Richmond that are between $5,001 and $10,000, you can have a one-hour simplified trial in a Provincial Courthouse held by a Justice of Peace Adjudicator. This person will ask questions, and your lawyer can ask the other party questions. The decision is within 30 days and sometimes immediate.

For all other claims up to $35,000:
Small Claims Court procedures are designed to be simple so people can feel comfortable coming to court without a lawyer if they don’t have one, however appointing a lawyer is recommended.

In British Columbia, you have two years to pursue a debt and therefore it is imperative that you act fairly quickly. This is called a “liability 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 and serve “Notice of Claim”. 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. The filing fee is $100 for Civil Claims up to $3000 and $156 for between $3,000 and $35,000.
  3. Serve the Claim on your Client (the “Defendant”) within one year of filing the Claim. Basically, you give them a copy of the stamped Claim in person or post it to their Registered Address using recorded mail.Complete an Affidavit of proof of Service for each defendant to prove to the court that you served the defendant(s).
  4. The Defendant then has 20 days to respond with a Dispute Note to the Court.
    • If the Defendant does not respond. You can file a Request the Court for a “Default Order” ($25). You must complete “Form 5”, following the instructions on the form, file it at the registry where the notice of claim was filed, together with a copy of the certificate of service (Form 4) for the notice of claim and pay a $25 fee
    • If the Defendant does respond. You generally attend a “settlement conference” with a judge. There is a possibility that the Defendant makes a Counter-Claim
      • You are able to settle the dispute
        • you need not return to court
      • You are unable to settle the dispute
        • You will be given a date for a Trial
        • At Trial, a different judge will hear you and the other party and any relevant witnesses, and make a decision based on the evidence presented. The judge may dismiss a claim or make a payment order or other type of order. If a person ordered to pay cannot do so immediately, the judge may, for example,  order the other party to make monthly payments. This is called a ‘payment schedule’. If no payment schedule is ordered at the end of the trial, either party may ask for a ‘payment hearing’ to get a payment schedule.
          • If the debtor refuses the obey a payment schedule, you can ask for a Payment Hearing by filing form 14. This must be served on the defendant.
            • The judge will confirm the terms of a payment schedule; or
            • change the terms of a payment schedule or other order in any manner that the judge thinks is fair to the debtor and the creditor; or
            •  issue a warrant (Form 15) requiring the debtor to be imprisoned for a specified period of not more than 20 days. Note imprisonment does not cancel the debt.


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 British Columbia, see here: https://www.bclaws.gov.bc.ca/civix/document/id/complete/statreg/261_93_00b