Does someone or another business owe you money or are you drowning in debt? You know that pun... don't lend people money, it gives them amnesia! Seriously though, don’t wait until it’s too late to get what's yours and similarly, don't let someone walk all over you after years of being tardy. You’ve worked hard enough your entire life to get where you are. Act now.
You should always keep in mind the limitation period when it comes to debt. Otherwise you may be prevented from bringing your claim or could even extend the limitation period depending on what side you're on. Yes, that means the debt could be wiped completely clean or you could be giving the other side more time to sue you!
Like most legal matters, debts are subject to a statute of limitations (basically a time period for you to bring forth your action). That’s why debt collection is an important matter for many businesses and individuals.
A failure to collect can also lead to very serious financial trouble for many businesses and hence the importance to know when a debt can and cannot be collected.
What is the limitation period in Australia?
In Australian, the statute of limitation for a debt can vary depending on the type of debt and the jurisdiction. For this article, we will consider the most common type of debt which is a simple contract debt. This is because it is the most common form of debt which typically arises.
The limitation periods in the below table applies to unsecured personal loans and credit cards (referred to as simple contracts) and also for debts following a Court Judgement.
When does the limitation period begin?
Generally, the limitation period commences on the date the cause of action arises (when the right to take action begins, which is usually the time when the debt falls due or there is a failure to meet the terms of the agreement). This can, however, depend on several factors including your jurisdiction, the terms of the agreement and the type of debt.
You should be aware though that in some situations, the limitation period can be reset such as when the entity who owes money makes a payment or there is an acknowledgement of the debt. Further, depending on your jurisdiction, the limitation period can be reset… over and over and over. That’s why it is so important to contact us now so we can give you the right advice in a way that is affordable, efficient and timely.
Re-starting the limitation period has been described as giving your right of action:
‘a notional birthday and on that day, like the phoenix of fable, it rises again in renewed youth—and also like the phoenix, it is still itself’.
I’ve waited too long…
If you are within the limitation period, you can sue the entity who owes you the debt for recovery, however, if it has expired, the debt is statute-barred.
Statute-barred debts are debts in relation to which a statutory limitation period has expired and you have no recourse at law. Each jurisdiction in Australia has enacted legislation that sets limitation periods for different types of debts and other legal liabilities. The legislation also prescribes what happens when the limitation period expires.
The rationales underpinning limitation regimes was set out quite succinctly by Justice McHugh in the matter of Brisbane South Regional Health Authority v Taylor :
The effect of delay on the quality of justice is no doubt one of the most important influences motivating a legislature to enact limitation periods for commencing actions. But it is not the only one. Courts and commentators have perceived four broad rationales for the enactment of limitation periods. First, as time goes by, relevant evidence is likely to be lost. Second, it is oppressive, even “cruel”, to a defendant to allow an action to be brought long after the circumstances which gave rise to it have passed. Third, people should be able to arrange their affairs and utilise their resources on the basis that claims can no longer be made against them. … The final rationale for limitation periods is that the public interest requires that disputes be settled as quickly as possible
Collecting a statute-barred debt
The State of New South Wales is the only jurisdiction in which a debt is completely cancelled after the limitation period expires. In other jurisdiction, the debt still exists, it is just unenforceable. This means that you can still make attempts to recover the debt, but you need to be cautious how you go about this.
Once statute-barred, all you can really do (subject to your jurisdiction of course) is ask for the debt to be paid. You have no rights, however, to threaten the institution of a proceeding. You also cannot mislead or deceive the the entity who owes the debt, which can lead to more trouble than it’s worth! It could even lead to you getting into hot water and burning your own fingers! In the event you follow the rules though and the entity who owes you money denies liability, you may be obligated to cease your collection activities.
Unfortunately, leaving it too late is a load of trouble and generally recovery is very difficult.
At Richard Hoare & Co Solicitors, we know the debt recovery process very well. We understand the law and how it could affect you and why it’s important.
Our experience has proven time and time again why we are industry leaders and why our recovery process almost always leads to a good outcome.
Trust that we are industry professionals and want the best result for you.
Disclaimer: This publication is not intended to be comprehensive nor does it constitute legal advice. We are unable to ensure the information is current and there is no guarantee in relation to accuracy. You should seek legal or other professional advice before acting or relying on any of the content of this publication.
© Scott A. Green, Associate Solicitor
 Subject to the type of matter; accrued on the right of accrual: Equuscorp Pty Ltd v Rigert & Anor  VSC 343
 Busch v Stevens  1 QB 1, Lawton J at 6;
 Brisbane South Regional Health Authority v Taylor 186 CLR 541 per McHugh J at 553-553. See also Handford P, Limitation of Actions: The Australian Law (Lawbook Co, 2004) page 1, and New South Wales Law Reform Commission, Limitation of Actions for Personal Injury Claims, (1986) LRC 50 at 3.