Make hay, but make a record of it also
There are a lot of reasons to keep good business records, as Farmer Farmer soon discovers.
Farmer Freddy is feeling pretty happy with himself. The grass is still growing, the cows are producing well and he now has great farm workers who keep the farm in great shape.
This has given Freddy more time to spend doing contracting, which he loves, and the contracting business is ticking along nicely.
One afternoon, Freddy decides to have a post-lunch snooze on the couch after the rain had put paid to the scheduled job of resowing his neighbour's paddock. No sooner has he lain back to contemplate his happy lot than the phone rings. Freddy slowly sits up, and ambles across to pick it up.
The caller complains that some hay that Freddy harvested for him and stacked in the shed is now all mouldy and smells terrrible. The hay is now of no use and he is off to see his lawyer about it.
Freddy is stunned by the call - he doesn't even remember doing any work for this person, so he goes and frantically rummages through his business records. After a panicked search has revealed nothing, he decides to call his daughter Pebbles, a lawyer, for advice.
"You sound a bit frazzled, Dad," says Pebbles. "What's the story?"
Freddy explains what the caller had said, says he can't remember working for him and that he has no record of doing so.
"Knowing your memory, Dad, and your record-keeping, I wouldn't be surprised if you had done the work," says Pebbles.
"There are a lot of reasons to keep good business records - tax purposes not being the least of them. And in the context of defending a civil claim like this, you might need records going back 15 years.
"Under the Limitation Act, you can stop a claim by proving that it was filed after the limitation period. For claims where the remedy sought is money, that limitation period is usually six years after the event. But if the claimant did not know of the problem, and couldn't reasonably know about it, he or she could file a claim up to 15 years after you actually did the work."
"Well," says Freddy, mournfully, "it clearly wouldn't have been 15 years ago, not even six. After all, I've only been contracting for a couple of years now. What can I do?"
"Well, I'd keep looking," advises Pebbles. "You might also want to talk to your accountant. After all, presumably you sent this guy an invoice? And accounted for the GST on it? And then, depending on what you find, you might just want to sit tight and see what happens next.
"But whatever else you do, if you hear anything, or receive any papers about the claim in the post, call me straightaway."
Freddy hangs up the phone, rather glumly. "I think I need a cup of tea and a lie down after all of that" he says to himself.