Unpaid invoice - New Zealand
3 Main options for dealing with an Unpaid Invoice in New Zealand.Unpaid invoices are a growing problem in New Zealand and the outlook is that the problem is likely to continue growing. However, there are a number of options available in New Zealand that can help you remedy the situation. These range from using the Business Disputes Register, using a debt collection Agency or going to court including a Tribunal. There is a good chance that you will need to use several of these options in combination.
1. The Business Disputes RegisterFiling an unpaid invoice dispute on the Business Disputes Register (www.disputesregister.org) is a very straightforward process and can be done in conjunction with the other options listed in this article. The idea is to make your dispute public, so that the party in the wrong (your client) will be incentivised to right their wrong otherwise they risk losing business.
The filing only costs $20 and takes a few minutes to complete. You simply identify the company you have dispute with, type a few details about your unpaid invoice and then your dispute is automatically published on the internet. Your client will get an email notifying them that details about the non-payment of your invoice are now publicly available on the internet and they are urged to contact you to negotiate its removal from the register. If your client cares about their business reputation, they will now reach out to you because you have the power to remove the dispute from the register once you are satisfied the matter is resolved.
2. Debt Collection
There are 2 main approaches for debt collection, each with it own benefits and drawback: using a debt collection agency and using debt collection lawyers
Debt collection agencies
Debt collection agencies typically charge a fee of between 10 and 30% with 20% being the average. Most operate on a no win no fee basis, though many will charge a small admin fee on top regardless of success. Beware that the fees they charge are subject to GST. Some companies boast 80% success rates, though this statistic is driven up by hire-purchase debt collection and the figure of unpaid invoices is likely to be well below 50%.. They operate by contacting your debtor in writing with a “scary” formal letter called “a notice” requesting payment. The letter will threaten legal action and a bad credit rating if the debt is not paid. However, they rarely follow up with legal action because of the costs involved.
They will need the following from you:
- Full details of the debt
- Debtor full name and address and all contact details
- Copies of invoices and statements (To enable late payment interest to be calculated)
- As much relevant correspondence and documentation as possible such as purchase order numbers, emails, letters and pre debt recovery letters sent
- Any known disputes or issues raised by the debtor
- Anything else you may believe will assist with the collection process.
Here is a list of debt collection agencies in New Zealand
- Marshall Freeman https://www.marshallfreeman.co.nz/
- Crown Collections https://crowncollections.nz/
- Cedar Financial https://cedarfinancial.com/
- Baycorp https://www.baycorp.co.nz/
- Slater Byrne https://www.slaterbyrne.co.nz/
- EC Credit Control https://www.eccreditcontrol.co.nz/ ) 25% on the first $10,000.00, 15% on the next , $10,000.00 5% over $20,000.00)
- Guardian Credit Services https://www.guardiancredit.co.nz/ ($39 + 23%)
- Debt Collectors Auckland https://debtcollectorsauckland.co.nz/
- NZC https://nzcollections.co.nz/ (25%)
- CIA Debt Recovery https://www.cia.co.nz/ (25% + GST)
- Debtworks https://www.debtworks.co.nz/
- Law Debt Ltd https://lawdebt.co.nz/
Debt collection lawyersThe main advantage of using a law firm to collect an outstanding debt is that a law firm will act in a regulated and professional manner and provide a level of credibility the process. Law firms usually charge by the hour instead of a success fee and this usually works out more expensive than a debt collection agency but not always.
Here is a list of law firms specialised in debt collection:
- Turner Hopkins https://www.turnerhopkins.co.nz/
- Rupert Ward Barrister https://rwardbarrister.co.nz/
- Norling Law https://norlinglaw.co.nz/
- Turner Hopkins https://www.turnerhopkins.co.nz/
- Smith and Partners https://smithpartners.co.nz/
- Chris Patterson Barrister https://www.patterson.co.nz/
- Rainey Collins https://www.raineycollins.co.nz/
- Barratt-Boyes Law Practice https://www.bblawpractice.co.nz/
- Harmans Lawyers https://www.harmans.co.nz/
- Anderson Lloyd https://www.al.nz/
3. Going to Court
In New Zealand, there is a statute of limitation that lasts for six years. This date is taken from the last payment, which is not necessarily the same as the invoice date. If there is a district or high court judgement in place, this can be up to twelve years
- Disputes Tribunal for claims under $30,000
- District Court for claims between $30,000 and 350,000
- High Court for claims over $350,000
Disputes TribunalDispute Tribunals are a very straightforward process and apply to small claims under $30,000. HOWEVER, although the decision is legally binding and theoretically must be followed, they have no power of enforcement and cannot even give you legal advice on how to enforce. If your client has refused to pay your invoice, then there is a good chance they will ignore the decision of the Tribunal as well. You will need to go to a District Court to apply for warrant to seize property if the other party is refusing to pay.
(if the client is still refusing to pay despite being ordered to do so by the Tribunal, then filing a dispute on the Business Disputes Register may well help spur your client into paying up in order to avoid further reputational damage).
Disputes Tribunals are quicker, cheaper and less formal than going to court. Instead of a judge, there is a referee and you cannot have a lawyer represent you, so you usually represent yourself. The referee will consider whether it is appropriate to help parties reach a settlement on a case by case basis. Where this is not considered appropriate, the referee will make a decision on the dispute.
Note your can use a Tribunal even if you’ve signed an agreement saying that you won’t use one.
To make a claim [LINK], you'll need to fill out a form plus pay a fee and provide specific information.
The fee amount is dependent on the size of the claim:
- $45 if less than $2000
- $90 if between $2000 and $5000
- $180 if over $30,000
Disputes Tribunal hearings are informal and take place in a meeting room rather than a court room. They are private and closed to the public and the press. You usually don’t need to give evidence under oath. The referee will lead you through the hearing, but it is best that you prepare well for the Tribunal and bring all the relevant documentation and evidence you have related to the dispute.
A typical tribunal hearing is run as follows: the referee introduces everyone ands explain how the hearing will run. Both parties explain their side of the dispute with the applicant (you) speaking first. When both have spoken there’s a discussion about the points that are in disagreement. Any witnesses are called into the hearing room to give evidence. Both parties and the referee can question the witnesses. The referee tries to help both parties agree how to settle the dispute. If the parties reach an agreement and it’s approved by the referee, it is binding. If the parties can’t agree, then referee makes a decision which may be given at the hearing or be posted to the parties later. Occasionally, the referee may need more information in which case the hearing is be put off and the parties will need to reconvene at another time.
District CourtThe District Court hears civil claims for less than $350,000. The claims often involve arguments over money and property and can include complex commercial transactions. It is best to employ a lawyer as proceedings in a District Court can be complicated.. If you cannot afford a lawyer, you may be able to get free legal advice from your nearest community law centre and you may also be able to get legal aid
The initial court filing fee is $200, but there are likely to be additional fees to be paid. See fees payable in respect of proceedings in District Courts (https://www.legislation.govt.nz/regulation/public/2009/0318/latest/DLM2438104.html )
High CourtThe High Court hears civil claims that are complex or for over $350,000. It is the highest court in New Zealand that is able to hear cases at ‘first instance’, before any appeals. The High Court also hears appeals from a number of other courts and tribunals, such as the District Court and Family Court. If your company is a party in High Court proceedings you should get legal advice as companies usually have to be represented by a lawyer.
You can search for a lawyer on the New Zealand Law Society website
The fee for filing most initiating documents is $1,350. See Fees payable in respect of proceedings in court https://www.legislation.govt.nz/regulation/public/2013/0226/latest/DLM5196180.html