Company Closure & very very old invoice payable

Company Closure & very very old invoice payable

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Good afternoon all

We're in the process of closing a group company which has been dormant for several years.  We put our notice in the gazette and, inevitably, a creditor has 'appeared'!

The electricity company supplying our factory for a period of time has sent in an sizeable invoice for electricity alledgedly supplied in 2004 and with an invoice date in 2009!  It's perfectly possible that it's a valid bill but, strangely enough, we really don't want to have to dig through all of the archived records to find out!  We actually left the supplier due to their inability to get an invoice right.

So I have a couple of questions:

  1. Does the six year statute of limitations apply to business to business transactions (I assume so)?
  2. Is there any limitation on how long a supplier can wait to issue the invoice?
  3. Does the six year rule commence from the date of supply or the date of invoice?

Basically I'm looking to challenge our liability to pay.  I've tried googling but have struggled to get the right keywords, and looking at http://www.legislation.gov.uk/ukpga/1980/58 is all french to me!

Many thanks for your help

Pat

Replies (13)

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By bernard michael bayly
24th Mar 2011 17:01

Company dissolution

Did you not receive the 2009 invoice?

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By patvanaalst
24th Mar 2011 17:12

Response

Funnily enough we didn't receive the invoice, any reminders, any statements, any calls or anything!  We honestly and genuinely knew nothing about it.  I'm going to try and resist naming them, but the admin service was a complete nightmare...

Cheers

Pat

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By bernard michael bayly
24th Mar 2011 19:23

Dissolution of Company

Surely you must have been aware that in 2004 you hadn't paid for your electricity or is that this was totally missed by your bookkeeper and also your accountants. Have you asked them if they can check their records because you will be in difficulty if you attempt to proceed with the dissolution when an obvious creditor is around and likely to issue legal proceedings to stop you. Also any judge is going to ask the same question as the electricity company will evidence their case by producing the invoice and just saying you didn't receive it will not work

 

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Stepurhan
By stepurhan
25th Mar 2011 09:40

Looking at a different angle

To approach bernard's query from a different angle, did you have reason to believe you had paid your electricity in 2004? If you had paid something back then and it wasn't obviously under-charged then you might be in a position to argue that you believed in good faith that your electricity payments were not up to date. If not then it begins to look like you are trying to avoid a legitimate business debt, though I appreciate your problems with getting accurate billing from this company in the first place.

I'm afraid I don't know any more than you about whether the six year limit applies. Difficult as it might be to go back through the records, I'd suggest your best move is to do so to at least allow you to dispute the figure based on accurate historical information.

 

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By patvanaalst
25th Mar 2011 10:05

Nightmare

I recall being tasked to reconcile the account shortly after I started working here.  The record was 4 credit notes and re-issued invoices for the same period, which included one invoice spanning an 18 month period...  I've moved on from that role since, but I'm told we have recently received fourteen credit notes and twelve invoices in one day's post (on a new contract for a different site)!

I'm sure you can understand my reluctance to endorse anyone being drawn into such a reconciliation!!!  This is why I'm trying to find a way to avoid a very time-consuming excercise.  It's not my department so no impact on me, but just trying to help as a long-standing employee (who was there at the time!).

 

Thanks all

Pat

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By bernard michael bayly
25th Mar 2011 10:25

Dissolution of company

I cannot believe that reconciliation of an account that would have so few transactions is a cause of major difficulty for any trained accounting staff

What do your external accountants records for the year show as being the charge included in the accounts and how did they arrive at it? Everything you've said tells me that you would have no proper sustainable defence were this to go to court.(which it most certainly will if you attempt to proceed with the dissolution) I suggest you ask the electricity company for a detailed transaction record showing copy invoices,credit notes and payments made covering the year in question

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By patvanaalst
25th Mar 2011 15:37

Hold your horses! :-)

No offence meant Bernard, but I've never said that anyone couldn't carry out a reconciliation, just that we are very reluctant!  I did, however, point out that there were not just a few transactions - because they were unable to bill correctly throughout the contract...  From memory we sometimes noted upward of 8 separate transactions for one billing month, compounded by the fact that the records are now hitting the seven year mark (so will be the really dusty archive bags at the back of the warehouse!).  If we have to do the rec then it will get done, though the supplier has already (most unhelpfully) stated that they won't provide any copies of the paid invoices, statements or other records (transaction prints etc) to assist us.

We won't (as I'm sure you can understand) simply pay on faith as it is so old, and are also somewhat doubtful of it's legitimacy as we haven't heard a peep from them about it in all this time, however we also don't want to spend hours/days trying to figure out whether it's genuine - including confirming that the standing & unit charges are correct (bearing in mind the history of errors)...

This burden, I believe, is entirely what the statute of limitations was intended to remedy (not whether the claim is legitimate, but whether the creditor has any right to maintain the claim) which was why I am asking for advice on whether we could rely on it or not.

 

This is the part of the Limitation Act 1980 that I think applies:

5 Time limit for actions founded on simple contract.

An action founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued.

And the way I read it is that it's therefore six years from the date of supply?  However I've also noted, on other sites, references to 6 years from the date of the last transaction on the account, which could be some time after this particular invoice.

Many thanks for your help

Pat

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By Roland195
25th Mar 2011 16:10

Not an expert but

Assuming it got as far as a court, I would expect the judge to question why the electricity company has not pursued this debt before, particularly in light of it's age. The date of invoice in 2009 seems very convienient (5 years after the supply in 2004 so just within the limitation period).

They may also have to explain just how it took 5 years to calculate the invoice then a further 2 to tell you about it.

I would also have expected them to raise objections when you changed supplier if they believed you owed them money.

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By bernard michael bayly
25th Mar 2011 16:48

Old invoice

Another approach might be not to dissolve what you state is a dormant company and let the electriciy supplier sue and get nothing.

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By Mouse007
27th Mar 2011 14:04

Tell them they are out of TIME and to get stuffed

The Key words are “from the date on which the cause of action accrued”. That surely means when they could have first made a claim (2004) not when they finally got around to it (2009).

See http://www.brewerconsulting.co.uk/cases/CJ0537RR.htm for some helpful "French translations" (commentary) arising in the case of Birse Construction Ltd v McCormick (UK) plc.

"The term 'cause of action' broadly refers to the right of a party to bring legal proceedings, for example to be paid monies due under a contract. The date of accrual of the cause of action for sums due under a contract will usually depend upon the terms of the contract itself. However, the starting point for any consideration of this question is the established principle that, in the absence of any contractual provision to the contrary, a cause of action for payment for work performed or services provided will accrue when that work or those services have been performed or provided. In such circumstances, the cause of action does not depend on the making of a claim for payment by the party who has provided the work or services."

If the services were provided in 2004 then they are clearly out of time.

 

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By rockallj
28th Mar 2011 13:24

Coming across this a lot now

Hi Pat,

I have found recently that numbers of clients either attempting to dossolve their own company under what was s652s CA or those being struck off by Companies House have had old debts from electricity & gas companies suddenly appear. They have then proceeeded to suspend the process, as is their right, and then often magiced up an invoice, despite clients not being aware of these debts on the past. 

 

I have yet to follow the whole process through about appealing these debts which appear apparantly out of nowhere, but of course tt means that for companies struggling with other "genuine" debts, it prolongs the company unnecessarily.

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By patvanaalst
28th Mar 2011 16:45

Thanks all

Thanks everyone for your feedback.

We may well pay the supplier in the end, but will definately ensure that they jump through the hoops to earn the money.  We're not understaffed, but don't have the surplus hours to reconstruct a seven year old account!

It's good to know that, if they won't play ball, they will find it very difficult to collect.

This particular company is the last of eight companies in the UK group that have been closed down, after consolidation and accounting 'house-keeping', so it will be good to get to the end of the project.  It's also the one with the most recent trading history, hence the others went through without any issues.

 

Thanks again

Pat

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By amraezk
15th May 2013 10:37

Thanks for your help

Mouse007 & patvanaalst thank you for the advice you posted, I received an invoice from my university relating to fees for 2003/2004, as I had graduated and received my certificate etc. I was 100% sure all my fees had been paid. As I received the invoice 11 years after the event and having received no previous correspondence regarding this (I have received other alumuni related correspondence) I did a quick search and came across your posts. I phoned credit control at the university and quoted the statue of limitations info that Pat had posted and the cause of action stuff mouse had put and was told that any debt was now going to be written off (not that I owed anything in the first place) and I had the law on my side. Thank you for your invaluable information.

 

 

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