Delayed Invoicing Practices May Result In Expiry of Limitation Periods With Loss of Litigation RightsPage last modified: July 19 2022
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What Happens If a Business Delays Issuing An Invoice?
Generally, In Ontario, There Is a Two Year Period Allowed Within Which to Bring a Lawsuit. Wait Too Long and Right to Sue Is Lost. This Risk of Losing Rights Can Occur If Invoicing Is Unduly Delayed.
Understanding How Long Is Too Long For a Business to Delay Issuing of An Invoice For Goods or Services
It can happen that a business will wait too long prior to issuing of an invoice for goods sold or services rendered and due to the delay the business may lose the right to collect the amounts due for the goods sold or services rendered; and accordingly, invoices should be issued promptly so to avoid the loss of rights.
Generally, per section 4 of the Limitations Act, 2002, S.O. 2002, Chapter 24, Schedule B, the period in which to sue for monies owed, among other things, is two years from the date that the debt arose whereas such states:
4 Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.
Of course, this then raises the question of when is a claim discovered and perhaps also raises the question of what is a claim? In particular, a question arises in circumstances where goods or services were provided without invoice and thus when a claim for failure of payment was discovered or was discoverable.
How Soon After Goods Are Sold or Services Are Rendered Should An Invoice Be Issued?
The question as to how long after goods are delivered or services are rendered that an invoice should be generated and provided to the debtor was answered within the cases of Hugh Munro Construction Ltd. v. Donald Moschuk (also known as Don), 2011 ONSC 3271, and Licata Disability Management Paralegal Professional Corporation v. Triluc Enterprises Limited, 2014 ONSC 7470, which state respectively:
 I accept the plaintiff’s submission that the principle of discoverability applies, pursuant to s. 5(1) of the Limitations Act. However, in my view, this does not assist the plaintiff’s position on this motion. In G.J. White Construction Ltd. v. Palermo (1999), 2C.P.C. (5th) 110 (S.C.J), Nordheimer J. dealt with the issue of when the limitation period would begin to run in relation to a claim for services performed. In that case, the defendant contracted with the plaintiff to build a cottage and a tennis court on the defendant’s island property. Commencing at paragraph 19, Nordheimer J, stated:
19. When did the plaintiff know, or ought to have known, the material facts giving rise to the cause of action in the case?
20. In my view it is neither the time that the work was done nor is it the time when the invoice was delivered. To select the latter date would allow the plaintiff to effectively toll the limitation period for as long as it wished by simply withholding delivery of an invoice – not an unrealistic event as is evidenced by the very fact that the invoice for the July and August 1989 work in this case was not sent out until December 30, 1994.
21. I also do not believe that the appropriate date is the time when the work was done. If this is the date when the cause of action arose, and taken to its extreme, the plaintiff would have been in a position to demand payment from the defendants as each piece of work was done or, taken even more literally, when each nail was hammered in or each screw turned. This would obviously lead to an absurd result. Further at the point in time when the work was done, the plaintiff would have no reason to know or expect that the defendants were not going to pay him such than an action would have to be instituted. Rather it would have reasonably been expected that payment would be forthcoming once an invoice was delivered for the work.
22. I have therefore concluded that the cause of action in this particular case arose from the time after two events took place – the expiration of a reasonable period of time for the plaintiff to deliver an invoice to the defendants, and the expiration of a reasonable time for the defendants to pay that invoice. This conclusion accords with the practice that had developed between the plaintiff and the defendants regarding payments for this project. In each case after a reasonable period of time from the completion of a segment of the work, the plaintiff delivered an invoice and in each case after a reasonable period of time from receiving the invoice the defendant would make payment. What then is a reasonable period for these two events?
 Nordheimer J. looked at the parties’ past practices and concluded that the invoice for the work completed in June 1989 should have been delivered during the first part of July 1989 and payment should have been made by the end of July 1989. Accordingly, the limitation period began to run at the end of July 1989.
 In East-West Disposal Service Ltd. v. Jerudan Developments Ltd. 2003 Carswell Ont 855 (S.C.J.) Greer J., at para 30 adopted the reasoning of Nordheimer J. in G.J. White Construction that the cause of action arose from the time after two events took place, namely, the expiration of a reasonable period of time for the plaintiff to deliver an invoice to the defendant and the expiration of a reasonable time for the defendant to pay that invoice. The reasoning of G.J. White Construction has also been followed in Delmar Construction Inc. v. Toronto (City),  O.J. No. 1623 (S.C.J.).
 Applying this approach, and taking into consideration only the plaintiff’s evidence, the plaintiff, if it had acted in accordance with its usual practices, would have sent out an invoice on the completion of the work in March 2007 and payment would have been due within 30 days of the invoice having been sent out. I believe that it is reasonable to expect that an invoice would be sent out within at least two months of the work having been completed, i.e. by at least the end of May 2007 and that in accordance with the plaintiff’s practices, payment would be due in 30 days, i.e. by the end of June 2007. Even if one concluded that the invoice should have been sent out as late as six months after the work was completed (and I do not believe it would be reasonable to so conclude), the plaintiff’s action would still be out of time. Under any reasonable view of the plaintiff’s established practices, the two year limitation expired before the statement of claim was issued on November 24, 2009.
 Although the respondent admits that its invoices were payable within thirty days, and that an action could have been commenced at any time following the expiry of the thirty-day period, respondent’s counsel submits that the limitation period did not begin to run until after the expiration of a reasonable time for the payment of the invoice. In support of that argument, he relies on G.J. White Construction Ltd. v. Palermo (1999), 2 C.P.C. (5th) 110 (Ont. S.C.) and Hugh Munro Construction Ltd. v. Moschuk, 2011 ONSC 3271 (CanLII). He says that because the earlier invoice had been paid 23 months late, the limitation period with respect to the June 2, 2010 invoice did not begin to run until 23 months after its date. I disagree.
 In Palermo, the invoice in question was for work up until June 30, 1989, and was dated July 27, 1989. The action was commenced on July 18, 1995. At the time, the limitation period for an action in debt was six years. Apparently, the defendants argued that the limitation period began to run upon the completion of the work for which the invoice was issued.
 The court addressed the issue of when the plaintiff knew, or ought to have known, the material facts giving rise to the cause of action. In doing so, the court held that it was not the time when the work was done, because it could not reasonably be expected that payment would be forthcoming until an invoice had been delivered. The court held also that a plaintiff could not indefinitely delay the start of a limitation period by unreasonably delaying delivery of an invoice.
 The court concluded, on the basis of the practice that had developed between the parties, “that the cause of action in this particular case arose from the time after two events took place – the expiration of a reasonable period of time for the plaintiff to deliver an invoice to the defendants, and the expiration of a reasonable period of time for the defendants to pay that invoice.”
 In determining how the court’s reasoning in Palermo ought to be applied in subsequent cases, two points must be noted. First, on the facts of the case, it was only necessary for the court to consider whether the cause of action arose on the day following the completion of the work for which the invoice was delivered, or on some later date. And second, it would appear that the invoice delivered by the plaintiff did not specify a due date, from which the limitation period would run.
 In Moschuk, the work in question had been completed in March of 2007, but was not invoiced until June 22, 2009. The action was commenced on November 24, 2009. The applicable limitation period was two years.
 Based upon the plaintiff’s evidence as to its “usual practices”, the court found that it would have been reasonable to expect an invoice to have been delivered within two months of the completion of the work (by the end of May 2007), and that payment would be made within 30 days of the date of the invoice (by the end of June 2007). The court therefore concluded that: “Under any reasonable view of the plaintiff’s established practices, the two-year limitation period expired before the statement of claim was issued on November 24, 2009.” This case is therefore an illustration of the point made in Palermo to the effect that a plaintiff should not be allowed to indefinitely delay the start of a limitation period by unreasonably delaying the delivery of an invoice.
 The effect of the reasoning in Palermo and Moschuk is to allow a defendant to argue that the limitation period has expired, prior to the expiry of the applicable number of years from the date of the invoice, where the plaintiff has unreasonably delayed delivery of the invoice. The reasoning in those cases does not support the argument made by the respondent in this case that commencement of the limitation period should be delayed based upon the prior delinquency of the defendant, particularly when the invoice in question was delivered within a reasonable period of time, and provided that payment was due within thirty days from its date.
Per the various case decisions, it appears that the requirement to issue an invoice without undue delay imposes a deadline of usual practices or a deadline of reasonableness. Wait too long to issue the invoice and rights to pursue monies owed per the invoice may be lost.