• Alyce Cooper

Does someone owe you money? Make sure you know all this before trying to recover your debt


If you’re a business, or you’ve lent someone some money, and you’re trying to get that money back, our legal expert Alyce Cooper tells you how to go about it.


Pic - Gabby K


The Limitations Act 1969 (NSW) makes clear, that someone who is recovering a debt arising from a contract, must begin proceedings at Court within six years.


If you do not start proceedings within that six-year time frame, you are out of time and have no way of enforcing the debt and getting your money back.


Of course, if you have a signed contract that says another limitation period has been agreed, then it is perfectly fine to start the process later.


Deeds have a limitation period of 12 years, but for this article I will focus on a debt under a contract or tax invoice.


The legislation says that you start counting time from the ‘cause of action’. So, when is the cause of action?


A contract or tax invoice usually says when the debt is payable through a clause saying something like ‘this invoice is payable within seven days’. In that scenario, your six years would start ticking after the seven days. In other words, the time starts once the other party is in breach of making the payment to you.


Pic - Gabby K


What if there is no timeframe in the contract/invoice for payment?


A general rule is that the limitation period begins to run from the earliest possible time that the debt could be recovered.


Let’s say I issued an invoice to a client after I have completed work six months prior for them, but I didn’t have any payment terms in the invoice (unlikely, but let’s go with it). The limitation period would begin from the time I completed the work, not when I issued the invoice. This is very important for the reason that, if you don’t have payment terms declaring when the amount is due but you issue an invoice six months later, you have lost six months of the six year period to recover your debt.


Can you extend the limitation period? The simple answer is yes! One of the easiest ways to extend the limitation period, that I regularly use in debt recovery is, if the person who owes you the money has admitted that they owe money, in writing.


Picture this - in January 2014 you sent an invoice to Joe Bloggs for work done and the payment terms are seven days. Joe promises you payment for six years over email saying, “I know I owe the money, I just need time”.


Usually, your time would run out to take Joe to Court in January 2020, but because you have him admitting to the debt over email, the time will actually run from the date of the admission in the email.


Another one that gets my clients across the line is when someone is making payments by instalments over many years but decides to stop making the repayments. The six years can again be extended and calculated from the last instalment date. This is because the instalment payments are said to represent an admission to the debt.


It is important for people if they are owed money, to be conscious of when their cause of action has accrued and to monitor the period the debt remains unpaid and if any admissions or part payments are made, to reset your six year time limit.



Alyce Cooper is the Principal Solicitor at AKC Legal. Ms Cooper specialises in traffic law, criminal law, civil law, family law, Estate Planning and Probate matters.

The contents of this article should not be construed as specific legal advice to any individual reader’s situation. If you would like legal advice tailored to your situation, please contact AKC Legal on 0401 451 322.











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