DON’T HATE WHEN A CUSTOMER IS LATE (IN PAYING YOUR INVOICE)

If you have a customer who is tardy with paying your invoices then you’ll need to be careful you don’t SHOUT when demanding that they pay.  The recent decision of Trenfield v HAG Import Corporation (Australia) Pty Limited (No. 2) in the Queensland District Court involved the question of whether a creditor reasonably suspected that a debtor was insolvent.  The creditor wrote in an email to the debtor that they were unable to pay their debts and in a follow up email the creditor demanded payment “in a much larger font, which I suspect is the email equivalent of shouting”, so said Justice McGill in his judgment.  In this case the shouting email worked against the creditor.

One of the most common ways for a creditor to defeat an unfair preference payment claim by a liquidator is to show that when you received payment from the debtor you “had no reasonable grounds for suspecting that the company was insolvent at that time or would become insolvent”.  The risk for creditors when making demands for repayment is that they inadvertently reveal that they think the debtor is insolvent by either saying as much in an email or questioning their ability to pay.

The lesson to be learnt is that when a customer is having trouble paying your invoice you need to be careful about the manner in which you demand repayment and avoid prompting a liquidator to use it against you at a later date. It is always difficult to bite your tongue when a customer is late in paying your invoices but sometimes it is in your best interests to communicate calmly and simply.

Esplins Solicitors is always willing to help in this regard.

Hamish Esplin

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