Most small business owners in Brampton can tell you the name of the customer who still owes them money. A trucking company waiting 120 days on a broker. A print shop that delivered a full order to a retailer who has gone quiet. A landscaper or an IT consultant who has politely sent the same invoice for the fifth time. The sums may look manageable on paper, but they have a way of deciding whether you can cover payroll this month.
The hard part is usually not the law. Claims for unpaid invoices are among the most straightforward in civil litigation. The hard part is deciding when to stop being patient, without burning a useful relationship and without letting a limitation period slip by while you wait.
Think of what follows as general information on Ontario law, written for owners without legal training. It does not replace legal advice on a particular debt.
Before You Chase: Check the File
Spend an hour on the paperwork first. A strong file makes every later step easier, and a weak one tells you what you need to fix.
Pull together:
- The signed contract, purchase order, quote, or the email in which the customer accepted your terms.
- Every invoice, with payment terms and dates.
- Proof of delivery or completion, such as signed bills of lading, delivery confirmations, sign-off sheets, or photographs.
- All correspondence on the account, especially anything in which the customer admits owing the money or complains about quality.
- A running statement showing payments, credits, and the balance.
Then ask a question that many business owners skip: who exactly is your customer? “Raj from Metro Renovations” is not a legal entity. The invoice might be to a numbered company, a sole proprietor, or a partnership. Run a corporate search and check the name on the contract. If a principal signed a personal guarantee, you may have someone else to pursue, but section 4 of the Statute of Frauds requires a promise to answer for another’s debt to be in writing and signed. A verbal “don’t worry, I’ll personally make sure you get paid” will generally not be enough.
Also check your own name. If you operate under a business name that should be registered and is not, section 7 of the Business Names Act can prevent you from maintaining a proceeding in connection with that business without the court’s permission. It is a simple problem to correct, and best corrected before you sue.
Know Your Clock
The basic limitation period in Ontario’s Limitations Act, 2002 is two years from the date a claim is discovered. On an invoice, that often means two years from the date payment was due, not from the last time you asked for it. Sending reminders does not, by itself, restart the time.
Two provisions can help a creditor, though. Under section 13, a person’s acknowledgment of liability for a claim for a liquidated sum, which is a fixed amount such as an invoice balance, effectively restarts the clock from the date of the acknowledgment. To count, it generally must be in writing and signed by the debtor or their agent. Under subsection 13(11), a part payment has the same effect. So a short email in which your customer says “yes, we owe you the $14,200 and will pay next month” could be more valuable than it appears. Keep such messages. A lawyer can tell you whether a particular message meets the test.
Different rules can apply to loans payable on demand, or if your contract is a “business agreement” that validly changes the period. Do not count on those without checking.
A Sensible Escalation
There is no single required path, but this sequence works for most commercial accounts.
A friendly nudge. Call the accounts payable person when the invoice first goes overdue. Sometimes the invoice is sitting in the wrong inbox or needs a purchase order number.
A firm reminder. After a further two or three weeks, send a dated email attaching the invoice and asking for a payment date. Ask directly whether there is a dispute. If there is, you want to find out now.
A payment plan. A customer in real difficulty may be able to pay over time. Put the plan in writing, have it signed, include an acknowledgment of the full amount owing, and state that the full balance comes due upon any missed payment. That document may be more useful in court than the original invoice.
A demand letter. This is the formal last step before suing. It should state the exact amount, the basis for the debt, any interest, a firm deadline, and that you will start a claim without further notice if the amount remains unpaid. A letter on law firm letterhead can have an effect, and writing it yourself is also perfectly acceptable. Keep the tone professional, and avoid threats to report someone to the police or to tell their other customers. Threats can create their own legal trouble.
A claim. If the deadline passes, follow through. A demand that is ignored and then not acted upon teaches a customer that your deadlines mean nothing.
Interest: What You Can Actually Claim
Interest can add meaningfully to an older debt, but it needs a proper basis.
If your contract or invoice terms clearly provide a rate, you can generally claim it. Watch how the rate is expressed. Section 4 of the federal Interest Act says that if interest is payable at a rate for a period of less than a year, such as “2% per month,” and the contract does not state the yearly equivalent, the rate recoverable is limited to 5 per cent per year. So “2% per month (24% per year)” is a meaningful improvement on your invoice template.
If there is no agreed rate, section 128 of the Courts of Justice Act lets a person entitled to a money order claim prejudgment interest at a rate set under the Act, which can be modest. Post-judgment interest also applies once you have a judgment.
Interest clauses printed only on an invoice, after the deal was made, can be challenged on the basis that the customer never agreed to them. Adding your terms to your quote or credit application avoids that argument.
Construction and Supply Businesses: Lien Rights Move Fast
If you supplied services or materials to an improvement to land, you may have rights under the Construction Act that are much stronger than an ordinary debt claim, including a lien on the property. Those rights expire on short timelines, often around 60 days from specific triggering events, and they can vanish while you are still sending reminders. Talk to a lawyer at the first sign of trouble. Our page on construction and general liens gives an overview.
Small Claims Court in Brampton
For debts up to $50,000, not including interest and costs, the Small Claims Court is usually the right place to go. The court in Brampton is located at 7755 Hurontario St., and claims can be filed online if eligible, in person, or by mail. A claim is normally filed where the debt arose or where the defendant lives or carries on business.
Your claim form should tell a short, clear story, with your contract and invoices attached. The steps usually run as follows:
- Issue the claim and pay the filing fee. Fees are higher for frequent claimants, meaning those filing 10 or more claims a year at the same location. The province’s website lists current amounts.
- Serve the defendant within six months of the date the claim is issued.
- Wait for a response. The defendant has 20 days after service to file a defence.
- Default judgment. If no defence is filed, you can ask the clerk to note the defendant in default. Where the claim is for a debt or liquidated demand, the clerk can sign default judgment without any hearing, which is one reason clean invoices are so valuable.
- Settlement conference. If a defence is filed, a settlement conference will be held, and you must serve and file your documents and witness list at least 14 days beforehand.
- Trial. A judge decides any issues that remain.
A business owner can often handle a straightforward claim on their own, though it pays to get advice if the file is contested, the amount is large, or the defendant raises a counterclaim. Costs recoveries in Small Claims Court are limited, so a lawyer or paralegal’s fees should be weighed against the amount at stake. Our small claim matters page has more detail.
Debts above $50,000 can be pursued in the Superior Court of Justice, or you can waive the excess. Simplified procedure is designed for claims up to $200,000, while larger or more complex disputes follow the ordinary procedure. Commercial disputes with partners or between shareholders may raise other questions.
Expect These Defences
Silence is common. When customers do respond, it is often with one of a few familiar arguments:
- “The work was defective.” Bring your sign-offs and any evidence that the customer used the goods or accepted the work without complaint. Complaints that first appeared after your demand letter carry less weight.
- “We never agreed to that price.” Bring the quote and the emails.
- “You owe us money.” The customer may file a defendant’s claim for alleged losses. Consider whether it has any merit and whether settling makes sense.
- “That was my company, not me.” The person may be right. This is why you check the legal entity at the start, and ideally before you extend credit.
A written offer to settle can be useful here. In Small Claims Court, a plaintiff who offers to settle and later obtains a judgment as good or better may receive up to twice the costs of the action, other than disbursements, if the conditions in Rule 14.07 are met.
Winning Is Not Yet Getting Paid
A judgment is a powerful document, but the court will not collect the money for you. Enforcement tools under Rule 20 of the Small Claims Court rules include:
- Examination hearing. The debtor can be required to come to court and answer questions under oath about income, assets, and debts.
- Garnishment. You can direct money owed to the debtor, such as receivables or bank balances, to be paid into court instead.
- Writ of seizure and sale of personal property. A bailiff may be able to seize and sell non-exempt assets.
- Writ of seizure and sale of land. Filed with the sheriff, this can affect the debtor’s ability to sell or refinance real estate.
The best enforcement often begins before you sue. A debtor with active receivables, a known bank account, and a commercial vehicle is more likely to pay than a company that has already closed its doors. If the customer may be insolvent, and particularly if bankruptcy or a proposal has been filed, stop and get advice. Those proceedings generally restrict collection and may require you to file a proof of claim instead.
Preventing the Next One
After dealing with a bad account, it is worth tightening your process. Consider a credit application with personal guarantees for new customers, deposits on larger jobs, clear written terms that state an annual interest rate, prompt invoicing with proof of delivery, and an internal rule on when accounts go to escalation. Our contracts page covers the kinds of terms that make a later dispute easier to resolve.
If you have an overdue account and want to know whether it is worth pursuing, our office can review your paperwork and walk you through the numbers. A short conversation can often tell you whether to send a letter, file a claim, or write the balance off and move on.