Statute Barred Debt
Statute barred debt is a problem, as generally, you will not be able to recover it.
In our guide to cash flow, one of our key recommendations is to pursue unpaid invoices promptly. Statute barred debt will only happen, if debts are left too long.
What is statute barred debt?
We won’t get too technical here as it does involve particular legislation and each claim will turn on its own particular facts but as a rule of thumb, in claims for breach of contract (a failure to pay an invoice being a breach of the contract between supplier and customer), the supplier has 6 years from the date of the breach of contract, to bring the claim. This rule is set in s.5 of the Limitations Act 1980 which you can read here and which states:
“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.”
There are two phrases here which aren’t particularly clear:
A “cause of action accrued”. In the case of an invoice, the cause of action accruing would be the date the invoice fell due and was not paid.
“An action founded”. “Action” includes any proceeding in a court of law, so basically, it means a claim must be issued at court. If very last minute, such as the last day of limitation, make the most of the ability to issue a claim using money claim online.
Is it possible to pursue a claim for a debt which is outside limitation?
The courts will not stop you issuing a claim, so if the Defendant fails to respond to it, you will be able to request and obtain a CCJ. It is for a Defendant to raise limitation as a defence to a claim, if proceedings are commenced out of time.
Can limitation be extended?
Yes. The most common way limitation can be extended is by agreement. If the parties agree the claim can be brought outside the normal limitation period, it depends entirely upon the terms the parties agree.
Can a CCJ become a statute barred debt?
This is not a straight-forward question. Generally, if a CCJ is older than 6 years, the Limitation Act does not prevent its enforcement. However:
Other court rules mean that if you want to instruct a bailiff or Sheriff to enforce a CCJ older than 6 years, you need the court’s permission. The courts have said permission should only be granted in exceptional circumstances.
It is not possible to claim more than 6 years interest on a judgment.