Reply to: Unpaid invoice, suspended services possible legal action against me

[Vurso]

Hello, I have been directed here by reddit's /r/legaladviceuk I hope someone could advise me.

I have had an issue on going with a client since the 10th of September 2015. Keeping to the facts, I am a 3 month old startup company registered as a sole trader in the UK.

I raised an invoice to a client who approached me after creating and finishing the project from their brief. The clients company is a father and son operation with both registered as directors with companies house....

Wow sounds like my first freelance work! I about to wash my hands with a similar father/son business who have an ageing POS Property Management web application that they asked me to do "a few bits" but dragged the work out and now they are trying to delay paying me.

I learn't an important lesson, record everything you do, on paper, verbal conversations (legitimately as meeting records) and if you agree to anything get it (or put it) in writing.

Good luck.

[piotrkula]

Doing work like that requires down payment.
I am a contractor but do allot of private work. (basically work contract, get back to my home office and carry on working.. yea, some days I get £1000 a day, some days £250 a day but I filter out time wasters like this)
My initial investment is 5-10 hours doing a specification, mock ups and timeline of estimates and then present it to the client. I don't count it as expense, I don't want to get into that accounting legal issue, I just want to make sure I can recoup this cost at the end.

The terms are 50% upfront cost for beta. Functional "thing" within the specification guidelines but with bugs that the client has some room to adjust things (also worked into my plan)
They sign of the beta and they need to pay the next 25% and I carry on working to final draft with no changes.
Upon paying the remain 25% I make it go live or give them the software (ah, never give them source code! This is your honey pot, if they want the source code, it costs 10k! but that rarely happens - needs to be highlighted in contract/agreements in a nice way, like you providing them software, or functional website, this automatically excludes source code.)

about 75% I get NO upfront payments, the clients avoid me. Nah, another time waster. It only cost me some hours of my time to make a spec and mock but didn't waste many man hours and other resources for a total no pay and nice product that is useless to me.

If you have someobdy to spec things for you, you quickly make a estimate plan, request a downpyament for specification first. If client pays you got them on the hook and no time wasters, you make a nice spec, sign it off with them and do similar payment plans.

Saved me ooooodles of pain with cowboy companies that want it all but wont bring out the cheque book.

These are the pains of "running your dev house" and my advice is from tens of years of prooven track record form other successfull dev houses. I kind of made a hybrid system for my self, works well and keep me out of IR35 by million miles due to this. Ie, some days I dont go into my "contract" role but go and do onsite visits with my private clients.

I am somewhat of a workoholic and I love developing, so once I got the good clients in.. they keep comming back and now I can cherry pick the big boys.

Good luck.

[Boney M]

Cheers guys, I had no time to reply to the OP so sent him here from Reddit

[clearedforlanding]

Only their old website is live, I have not provided this for them I do not know if I am obligated to forward the DNS to their old server.

I would just send them a tarball of the work that they have indisputably paid for, and offer to facilitate transferring the domain from your side. 7 days would be reasonable.

Make no admissions to anything, be polite & firm, and move on. Judging by the CR posted here I wouldn't worry.

[anonymousseeker]

Reinstate the hosting, but remove all the web content that hasn't been paid for so everyone just gets a 404.

That way you are providing the service that he has paid for and not providing the website content he hasn't paid for.

Only their old website is live, I have not provided this for them I do not know if I am obligated to forward the DNS to their old server.

[Dylan]

Reinstate the hosting, but remove all the web content that hasn't been paid for so everyone just gets a 404.

That way you are providing the service that he has paid for and not providing the website content he hasn't paid for.

[Safe Collections]

For those interested in the financial standing of the client in question:

Score: 0
Risk: Serious Adverse Information
Credit Limit: £0
Credit Rating: £0

Company incorporated in September 2013. No accounts filed. Two £1 shares issued in the company owned by the directors.

Notice of dissolution issued by CH on the 22nd of September 2015, presumably due to the failure to file any accounts.

[Safe Collections]

Hi anonymousseeker,

Thanks for the further details, just making sure we know what the situation is so we can try and give you the best advice possible.

Currently their emails and name servers are pointed to my server

Stopping the emails will certainly get his attention, no doubt about that. But similarly it does make a case for potential damages stronger...

On the 19th of October client never explicitly stated I am not paying for this he said he would be in touch soon, I have not heard from him since the 19th of october until yesterday 20th December which is an unacceptable time to leave someone you owe money to.

OK. This isn't the same as the client saying they wont pay the invoice so we take your point as far as that goes. However the fact remains you did issue a further two further invoices, so you have split the original fee in to two distinct parts.

I can raise many invoices but if they refuse at every stage to not reply to any of my correspondence and say "this is for Invoice X" and do not put any reference in the bank transfer how am I to know what they are paying for.

An invoice is a legal business document and must be treated as such and by splitting the original invoice in to two parts (with no contact from the client in the intervening period) you have weakened your claim. Had you pursued the full original balance you would, in our opinion, be in a much stronger position than you are now.

This man I have since found out over the past few months has a reputation for not paying people and lives pay cheque to pay cheque so as such I seriously doubt he has the financial ability to take this anywhere above a few solicitor letters

This news does not come as a shock to us and that being the case have you checked to see if the company has the money or the intention to pay you if you do pursue a court claim? If you haven't already done so we would recommend you secure a credit report on this company and ascertain the following:

1. Do they have the financial means to pay you?
2. Will they pay you if you subsequently secure a County Court Judgment?

If the company itself has a poor credit rating or worse, a string of unsatisfied County Court Judgments, then it is likely any time or money you spend pursuing this will only serve to increase your existing losses as securing a CCJ is often not enough to secure payment.

it is also worth noting that I am 23 years of age in university and as such have no assets of value above my £500 car and laptop - no savings and a very sizeable student overdraft to pay back very shortly

Duly noted, we only make the point in regard to your personal assets as some sole traders are unaware of their liabilities.

normally I would write off this £420 and walk away from the whole situation but to be honest I feel like he has taken advantage of the services I provided to him and his son in good faith and he is intent on making this whole situation a lot worse than it needs to be.

We agree, this company sounds like it is making every effort to be as awkward and unfair to you as possible. Our concern remains that ultimately this amount may prove uneconomical for you to pursue and we would hate to see you lose more time and money on this.

To be honest I do not think I will gain anything but he seems bent on not paying me and trying to cause me additional unnecessary stress, he has a full-time business to run so it would be of more annoyance to him. Probably not worth it but I don’t feel he should be able to get away with what he has done without some form of repercussion.

If a limited company is committed to non-payment and is aware of the law (as it would appear your client is) then there isn't much you can do about it. The limited company system in this country is so open to abuse that many fraudsters now use the system to insulate themselves from criminal investigations; as in most cases the police will not involve themselves in what they see as "a civil matter".

Even if you do secure a CCJ we doubt the client will pay, in that instance are you then prepared to spend even more in trying to enforce the judgment?

Could it not be argued that it is not clear what they have paid for as they have included no references and not had the decency to answer the phone or reply to my emails. I had to suspend the hosting as a last resort to get some form of communication which was completely absent for 7 and a half weeks.

It could well be argued that you had no choice, but it isn't something we would recommend unless you have the contractual right to do so for all the reasons previously outlined.

If you would like to DM us the name of the Ltd company we would be more than happy to have a look at the directors and offer our opinion on their current financial standing.

[SueEllen]

Yes lesson learnt the hard way. Unfortunately at this stage he is stating that he has paid for 12 months hosting however there is still is an outstanding amount. It is at this stage I just wish for the remaining amount to be paid and having to suspend his hosting was the only way I could get communication from him.

Before you run away you need to do as Scruff said. That way he can't sneakily send you a legal letter and start action against you.

Then keep a copy of everything for 6 years as he has that time to chase you. This means keep a copy of the special delivery receipts and the letters. (I would keep both an electronic version and a paper version. )

You need to use special delivery to send the letters because people like him, and even companies you should be able to trust, frequently lie when they are found to have done wrong and claim that they didn't receive the letters. Of course the letter can be returned to you but if it is keep the envelope and the letter inside it.

[anonymousseeker]

To be honest if this chap has a reputation for messing people around then the last thing you want is to get tied into an agreement to host something for 12 months.

I've been where you are and my honest advice is take the money you've received so far as some recompense for your time and effort and walk (run) away from this deal as quickly as you can. The lesson you've already learned is never do business without a clear written contract, and don't assume because you're friends with someone that things can't (and won't) go wrong.

Yes lesson learnt the hard way. Unfortunately at this stage he is stating that he has paid for 12 months hosting however there is still is an outstanding amount. It is at this stage I just wish for the remaining amount to be paid and having to suspend his hosting was the only way I could get communication from him.

[Willapp]

To be honest if this chap has a reputation for messing people around then the last thing you want is to get tied into an agreement to host something for 12 months.

I've been where you are and my honest advice is take the money you've received so far as some recompense for your time and effort and walk (run) away from this deal as quickly as you can. The lesson you've already learned is never do business without a clear written contract, and don't assume because you're friends with someone that things can't (and won't) go wrong.

[Scruff]

Thanks Scruff, if they paid the outstanding debts that will cover the 12 months hosting so how can I legally revoke this saying I am not going to host them? Or have I misunderstood

Inform them that you can no longer host for them, and you offer them 14 days to transfer their website to alternate hosts. Issue a credit note for the months that you are not going to be hosting and include this with your reconciliation, so it is separately deducted from the invoice.

Invoice000043

£1200.00

Credit Note 01

£ 420.00

Total Amount outstanding

£780.00

[anonymousseeker]

Once the debt has been cleared, do yourself a favour and send them an email informing them that you are no longer hosting for them, giving them 14 days notice to find another hosting company, from the date of the email, and a copy, again by Special Delivery, containing the email.

Happy Chrismukkah

Thanks Scruff, if they paid the outstanding debts that will cover the 12 months hosting so how can I legally revoke this saying I am not going to host them? Or have I misunderstood

[Scruff]

Do yourself a favour and stop generating more/different invoices.

Every invoice that you raise, generates a demand for payment, for services.

My advice to you is to take all of the invoices that you have so far generated, and if the first one covers all of the work that you have done, use that as your document of record, since it will be the earliest dated invoice. Don't alter it, but send a reminder letter, Special Delivery, to the offices of the customer including a copy of the original invoice, a separate explanatory note of what it contains and your reconciliation as to what is outstanding and the due date, explaining what is overdue. IIRC, by default the payment made so far will be applied to the oldest debt first, unless they send you a payment reconciliation, disputing any outstanding items. Inform them that since they have not paid for the Web Hosting services, that they have been suspended with immediate effect and will not be resumed until the debt has been cleared.

You need to remove any doubts as to which invoice you are referring to, since theoretically, each of them is a separate claim for payment.

Once the debt has been cleared, do yourself a favour and send them an email informing them that you are no longer hosting for them, giving them 14 days notice to find another hosting company, from the date of the emai, and a copy, again by Special Delivery, containing the email.

At least this way you are minimising your risk and formally going on record. I am sure that the the collection agency will offer similar advice, however, IANAL and IANYA.

Happy Chrismukkah

[anonymousseeker]

Hi Safe Collections,

On their request I initiated a server move. Currently their emails and name servers are pointed to my server and the “www.” part of their domain was pointing to their old host due to a rather messy CMS system install. Someone they previously worked with set this up on their old host which is nothing to do with me. I merely forwarded their domain name from my server to their old website while the new website was being developed. Once the new website was given the go ahead to go live it would then entirely be hosted on my server.

Wait a second, in your original post you stated:


Quote Originally Posted by anonymousseeker:
“The father had a disagreement and as such decided when the project was about to go live that it needed to be started again from scratch and they were not paying invoice #1.

The client has told you they are not paying invoice #1 already so why would you assume this payment is now a part payment for this invoice?”

On the 19th of October client never explicitly stated I am not paying for this he said he would be in touch soon, I have not heard from him since the 19th of october until yesterday 20th December which is an unacceptable time to leave someone you owe money to.

I can raise many invoices but if they refuse at every stage to not reply to any of my correspondence and say "this is for Invoice X" and do not put any reference in the bank transfer how am I to know what they are paying for.

Damages have to be demonstrable yes, but it is worth remembering that if you are a sole trader your personal assets are at risk. Plus if you issue proceedings and they defend and counterclaim you will either have to refute the damages claim yourself or hire a solicitor at your own cost to refute the claim.

This man I have since found out over the past few months has a reputation for not paying people and lives pay cheque to pay cheque so as such I seriously doubt he has the financial ability to take this anywhere above a few solicitor letters, it is also worth noting that I am 23 years of age in university and as such have no assets of value above my £500 car and laptop - no savings and a very sizeable student overdraft to pay back very shortly - normally I would write off this £420 and walk away from the whole situation but to be honest I feel like he has taken advantage of the services I provided to him and his son in good faith and he is intent on making this whole situation a lot worse than it needs to be.

The financial cost is £60, what is your hourly rate and how much time are you prepared to spend on this? At what point has it cost you more in lost time than the amount you hope to recover?

To be honest I do not think I will gain anything but he seems bent on not paying me and trying to cause me additional unnecessary stress, he has a full-time business to run so it would be of more annoyance to him. Probably not worth it but I don’t feel he should be able to get away with what he has done without some form of repercussion.

No. The client told you they were not going to pay invoice #1. You issued invoice #2 and they paid this.

Now you want to ignore the fact you issued a further invoice and act like you only ever issued invoice #1 as this supports your decision to suspend the services.

This is what CAB have instructed me to do.

If you stick to your guns the client may well pay just to get the hosting restored, but they may issue a claim for the fees already paid; on the basis that you have now failed to provide the services they have already paid for.

Could it not be argued that it is not clear what they have paid for as they have included no references and not had the decency to answer the phone or reply to my emails. I had to suspend the hosting as a last resort to get some form of communication which was completely absent for 7 and a half weeks.

Many thanks for your input - greatly appreciated.