contractor not paying up. thoughts please

[bimandbam]

We own our own construction company.

We took on a contract early last summer for a schedule of works to a contractor who was subcontracting to the main developer. The subcontractor went into administration in December owing us around 10k.

Because the work was so close to completion the developer contacted us and asked us to continue with the schedule of works. Anticipated to take 4 weeks and we quoted around 8k for each week.

The developer also made an undertaking to us to pay the outstanding amount of 10k in exchange for us completing the works as we were reluctant to do so given that we had no working relationship with him.

We agreed a schedule of payments.

First payment was late. But eventually paid.

Job was completed and we had a text message saying all works had passed building control.

At this point we were owed 16k plus the outstanding 10k.

Long story as short as possible this money was not paid.

Contacted a solicitor and instructed them to proceed with recovery. Bill stood at 26k.

Developer offered 5k 3 weeks ago which we declined. We requested 20k in full and final settlement.

They have just come back and offered 10k as part of a Part 36 offer. They have at no point defended our claim other than saying that they didn't think they owed us 16k for the final invoice. We then brought the Construction Industries Act to their attention which is when they offered the first amount.

We don't want to accept 10k. Are we being silly? Realistically we couldn't afford to take it to court via the solicitors we would have to do it ourselves. But I think that 10k is an absolute insult considering they haven't defended our claim and that they owed significantly more.

Wwyd in our situation? Thanks in advance.

Do you think they are betting on you not being able to afford to take them to court?

Do you think they have the full £20k?

If all they have to their name is £10k, no amount of court action will help.

If they have the money and are simply counting on you settling low to avoid hassle/cost, then with your next move you need to show them you're serious about the court action. I am assuming solicitors are involved already? If not a stern letter from one warning that next step is High court.

Tricky. As they say, a bird in the hand.... The £10k is better than nothing however they owe double this and ought to pay of they can.

Also consider how long with court action/further action would will have to wait for the rest of the money.

Perhaps do you think if you issued a writ against them, they would settle to avoid court action?

Thanks for replying MrsFlorrick.

We have solicitors involved and I will speak to them Monday morning. I think they probably know that we would struggle to take them to court. However I do have a little legal knowledge having been in this position in the past and being in a job role a few years ago that involved submiting court claims. So I think he is a little unsure how far I would take it.

My first thoughts are to tell him to jog right in but I am trying not to take it personally. 10k is 10k at the end of the day. But I can't see how they would win if it did go to court and I am pretty sure he is good for the money. His company has been trading 15 years and he made around a million pounds profit from the project we worked on. I can't see him risking losing in court or even settling before court for what is relatively a small amount.

I think he is perhaps trying to bully us into backing down. He has said he will take a charge over our company to cover his costs as he isn't confident we could or would pay his costs in the event we lost.

Vile little man.

Does the fact he has yet to defend our claim count in our favour in court? What would a writt involve?

If you look here, there is a standard process against a company which has failed to pay an invoice of over £750. You effectively make a claim, which is free and if this remains unpaid apply to the court to make them bankrupt - costs c.£1k. all the detail and steps to take is in the word doc in the link above.

You believe he is good for the money and from what you describe it looks that way.

He is probably trying to bully you into settle for less. This would be extra cash staying in his pocket.

You could have one last try writing to him stating your claim and that his derisory offer isn't acceptable as you're owed the full amount. And that you believe he knows this as he hasn't contested this.

This may not get his to pay up but may get him to respond contesting the amount. That way you would get an idea of whether he would contest it if it came to court.

Or as someone else suggested, just go ahead and make the claim. He may just pay up in full as soon as the paperwork lands on his desk.

What has your solicitor advised you so far?

We have already sent a letter stating that as he hasn't defended anything going forward we would assume that he owes the full amount and that we would rely on this statement in court.

I would accept in the region of 16k. Purely because the 10k we were owed by the original contractor would have been lost anyway so would settle for the work being paid for.

Our solicitor thinks he is stalling for time. Possibly in the hope we will just back off. It has taken nearly 6 months to get any offer on the table. It is wrong that a company can do this and get away with it. Luckily we had a decent balance in our business account to carry on trading but I know another contractor went into administration because he owed them money too.

But as I said I am trying not to take it personally and view it as a business issue hence posting here for unbiased views.

I think I will instruct the solicitors to reject the 10k. Go back at 18k as a final offer and take it from there. My solicitor is actually away until the end of the month and its the senior commercial litigation partner that is dealing with it so will also have a chat with him and get his thoughts.

I better also find out about costs of taking it to court. The developer has been very aggressive about the threat of court. Will apparently raise a counter claim. For what I have no idea and will also seek his fees.

If it did go to court and for whatever reason we lost paying 2 lots of solicitors would likely bankrupt us and he knows that. However his solicitor is primarily a conveyancing solicitor rather than debt recovery solicitors which is what ours is so I do think that some of the advice he is getting might not be the best. Or he may be ignoring the advice he is been given as he is an arrogant little toad.

He referred to us and another company as 'Northern Monkeys'. And was extremely arrogant and aggressive when I called to chase the money up. Luckily it didn't faze me having had those conversations before. But my dp was shocked and upset by the way he spoke to him.

Schoolyard bully in a sharp suit. No wonder he is worth millions in property if he carries on like this.

He will get his comeuppance one day. The construction industry is actually pretty small and he will run out of contractors. Or not pay someone who uses fists to recover rather than solicitors.

Thank you for taking the time to reply. It has helped just getting it down in a factual way. And that is how it would be presented in court and I am pretty sure we would win.

Also is there a written contract? Lots of building contract are on JCT terms. If so you need to read what it says about disputes - it may refer to JCT terms. You may have to go to adjudication not court so don't assume you necessarily have the right to sue in the court or to threaten to put his company into liquidation. The latter route if you are not tied to adjudication can work well if there is no defence. You can only issue the statutory demand against his company (him if a sole trader) if there is no defence to the dispute. It sounds like there is no defence. If you issue a statutory demand then he has 21 days to respond I think.

The other complication here is any first contract with the bust company may have been transferred to the new one who took over the obligations and your lawyers will have checked that.

PS
If you go to court and win less than they have offered (this is what this part 36 stuff is about) and it is over £10k (small claims limit) you have to pay both side's costs. If you win more than they offered then you recover about 2/3rds of your costs from the other side never all of them which is another thing to consider. Does their part 36 offer not set out why the sum they offered is right and fair? They often do and that would give you details of their defence if they did that.

Ask the solicitor what would have to happen for the 10k to be withdrawn. I don't have the rules here to check and I know some aspects of Part 36 have changed fairly recently but there used to be case law to say that the offer stays on the table once made. So you don't have to make your mind up right now.

Is there anything he can use to argue the full amount shouldn't be payable?

There was no written contract just a series of emails between us. That is where he made the undertaking to pay the 10k previously owed.

Our solicitor didn't really know anything about the Construction Industries Act. In fact none of the 3 big firms I talked to did which is probably why so many construction companies are owed so much money.

Having looked at it our solicitor doesn't think it would go to adjudication as they are not disputing the invoice. And didn't do in the prescribed time limit. As far as I know adjudication is designed to step in when contractors can't decide the value of works rather than just won't pay. We have relied on it before and been successful in recovering monies by quoting the Act which seems to shake non paying companies into finding the money from somewhere.

The Part 36 counter offer hasn't come through properly just the first page as it looks like a page hasnt been scanned by my sols and it was after 7 before I read the email so not sure what the rest of it says until Tuesday.

Will update then.

Eurochick nothing to argue the full amount shouldn't be paid.

He made in writing and cc'd his solicitor an undertaking to pay the 10k owed.

We received emails confirming the work was satisfactory. I covered off any snagging issues by offering to go back on site should it be necessary. He wrote back confirming this wouldn't be required as the work was passed by his QS and by building inspectors.

The value of the work was quoted at 8k per week. This was accepted by him. We took instructions only by email to attend site each week. We submitted a breakdown each week of the work we had done plus any issues we had.

I didn't trust him to start with so was as careful as I could be. It was a difficult time personally for us. We were in the middle of moving house. I had my dp in hospital when the contractor went bust. I was at home with an 11 month old and a dd in school 10 miles away and not much family support but I think I covered our backs as much as I could. And because I replied to his original email ccing his solicitor into everything his solicitor has been informed at all times. So its as tight as I could get it.

Part 36 appears to be irrelevant - this relates to claims. The amount owed does not appear to be disputed. This appears to be simply an unpaid invoice, and as such my link above would work.
If he is disputing the value of the work, then it may be different.

Carol, why is a part 36 offer irrelevant? I thought it would be - that if they offer one sum and we fight on and win less then we pay both side's costs? That is why those part 36 offers can be really important as it becomes a kind of gamble - do we think we can win more than was offered or not and getting the figure in the offer just right is quite an art form in terms of tempting people to accept it.

So it sounds like the new company had no written contract and did not pass on any earlier contract terms so the agreement was just that the work done for them would be on the very few terms set out in the emails - that they would pay the sums owed by the previous company which had gone bust plus pay for the new work. If that was clearly agreed then that seems quite clear to me.

I don't know much about the construction industry except that usually there are very long contracts which refer to JCT terms and set out how you deal with the disputes. It sounds like here there is no written contract or implied JCT contract to apply or anything and so you fall back to the general law in which case the work was done at the fees agreed and they are not paying so you can either go to court or petition to wind them up (but I don't know if that construction act changes this?)

I agree with carol that issuing a statutory demand on the company (is it a limited company which took over the work or a sole trader?) might well result in their paying. However do look at the full part 36 as they often go on and on about why the other side might well win (i.e. setting out their defence) and how generous they are in making any offer at all.

Thanks for the help everyone.

Carol would I not need a judgement entered against him ie go to court before I can serve a bankruptcy order?

I do believe he won't let it get to court. It is a limited company rather than an individual so it would be against his company rather than him personally. His company has been trading for years and presumably he relies on his credit and trading history to secure funding so I do not think he would risk that. I wouldn't in his position.

I will see what the rest of his offer states. I suspect it will fill me with rage so am glad it hasn't come through just before the bank holiday lol.

Part 36 is only relevant if he is arguing the value of the work. If the amount is agreed, then you serve him with a statutory demand (see link above) and he has 21 days to pay or apply for it to be set-aside. If he applies for it to be set-asidei, he must show why it is not a valid debt on him. If he fails to pay or get it set-aside, you can then petition for bankruptcy and he has no argument.

Also with a statutory demand (by the way it would be liquidation not bankruptcy as it's against a company) against a company if you do not withdraw the demand the petition to wind up his company is then published and that spoils his credit rating - however you can only use that procedure if there is no defence and I bet they come up with some defence once you start that process like there was no clear agreement they would pay the old company's charges and these or something.

The statutory demand procedure and suing are totally separate. People usually choose which one to use. The statutory demand must be only for debts over £750. Suing is another root. People use one or the other. Of course they may not pay up and you might advertise the petition and then apply to have the company wound up and then you need a barrister in court and all the rest so just like issuing a court claim sometimes just the threat or issuing it works but whether whether with statutory demand or suing you might end up in a court hearing (80%+ of cases settle before that).

I'm a solicitor, although this is not my area of law. Just had to come on and say please ignore the advice about the Part 36 offer being irrelevant. This is really bad advice. It is important that you deal with the offer within the time constraints in order to avoid the risk of you having to pay the defendant's costs. Please speak to your solicitor directly rather than take the word of unqualified people on an Internet forum.

Primrose I will be speaking to my solicitor on Tuesday. It's what I am paying them for after all. Just wanted to get any other opinions before I spoke to him. But thanks for the advice and we will in all likelihood agree at some point via the 36s. It was my solicitor that served the first 36 notice so I would be foolish to ignore any subsequent offers from it even if I don't want to accept.

I suspect the rest of the paperwork that hasn't come through deals with the reasons why he shouldn't pay the full amount so will update once I have all of that.

Indeed. You never ignore part 36s because if you win but win lses than a part 36 in litigation you pay both side's legal costs which usually means you get not a penny with these smallish disputes. So do go and read the part 36 because I think it might well contain a bit of a defence in there. It is certainly unusual that the other side have not said why they dispute it eg they might be arguing these emails weren't sufficient to amount to a contract or they agreed the £8k but not to pay the previous company's debt to you but we don't know that.

Part 36s are a good idea when you're in dispute as both sides get the chance to see what the other will settle for and you can settle somewhere down the middle but do ask your solicitor if it is worth threatening to or actually serving a "statutory demand" on the company too as that does put companies under pressure just like suing does.

Well the rest of the paperwork came through and there is still no defence. Just standard terms of a part 36 offer.

Going to instruct solicitors to request the 20k again I think as it is clear they have no defence so therefore the full amount is technically due. If they won't pay that I will take solicitors advice on serving a statutory demand for the full amount.