Reply to: Who owes what whan an agency goes bust?

[expat]

No - you wouldn't ....

If you persuade the client to pay you 10K then you owe the agency nothing but the client still owes the agency 10K

Yes, that's clear, and disposes of my question.

[TheFaQQer]

No - you wouldn't ....

If you persuade the client to pay you 10K then you owe the agency nothing but the client still owes the agency 10K - the fact they have given you the money is irrelevant to what they owe the agency it is not the same debt in law ... which is why the client wouldn't ever pay you the money if he had any sense. The agency (or their administrators) will go after the client for the 10K but not go after you for anything (they might try to scare you a bit but their issue will always be with the client).

I would be VERY surprised if any client agrees to pay the contractor direct as it does not mean they have cleared the debt, the debt still exists they have just been crazy enough to double their exposure.

Windy

And bear in mind, WA has more experience than most in agencies and umbrellas going bust...

[WindyAnna]

clearly you would owe the agency some money

No - you wouldn't ....

If you persuade the client to pay you 10K then you owe the agency nothing but the client still owes the agency 10K - the fact they have given you the money is irrelevant to what they owe the agency it is not the same debt in law ... which is why the client wouldn't ever pay you the money if he had any sense. The agency (or their administrators) will go after the client for the 10K but not go after you for anything (they might try to scare you a bit but their issue will always be with the client).

I would be VERY surprised if any client agrees to pay the contractor direct as it does not mean they have cleared the debt, the debt still exists they have just been crazy enough to double their exposure.

Windy

[expat]

It has kind of veered off my original question (doubtless for good reason).

I know (or believe) that the official position is that the client owes the agency 10k and the agency owes you 8.5k and they are separate transactions. Obviously if you claim 8.5k from the agency, you aren't going to get it.

I was asking a different question: if by some means you did persuade the client to give you the 10k, then clearly you would owe the agency some money. My question was, you having current possession of the dosh, how much could the agency claim? Couldn't you counter-claim that the agency's actual loss was limited to the 1.5k that they were contrtacted to make? And so they couldn't claim for more than their actual loss?

I do think that I know the answer, but it does seem to me to be logically a quite different question from the normal one about extracting 8.5k from the corpse.

[WindyAnna]

Deckster is totally right ... been through all this when Futuro went into administration.

As for a clause in the contract - unlikely - tehre may be one on insolvency but I have never seen one that covers administration ... and even the insolvency clause only says that the contract becomes invalid rather than the contractor being able to get any money from anywhere!

It's a nightmare if it happens, limit your exposure and get credit insurance if you can - but if the agency's credit rating is in the gutter you won't be able to get that.

Windy (history: 2 agencies in administration, 1 umbrella and was on the verge of taking a contract with Woolworths!!)

[expat]

it depends on your contract. There will be a clause in the contract that will stipulate what happens in the event of the client or agency going bust. Best advice is to keep harassing the agency to pay.

Really? Not that I have ever seen.

[YasminHuegilll]

it depends on your contract. There will be a clause in the contract that will stipulate what happens in the event of the client or agency going bust. Best advice is to keep harassing the agency to pay.

[VectraMan]

I can live with long payment terms. I don't want to live with not being paid at all, and I would have REAL trouble with doing the work and having the client pay for my work, but none of that come to me.

Maybe, but I'm paid weekly and on Friday if I invoice by Tuesday. So my maximum exposure is 2 weeks before I realise something is up. Long payment terms and you'll be even more screwed if the client goes bust.

[expat]

...
There's a problem with your seperate payments idea: payment terms. You'd probably be stuck with the same long payment terms that the agent has with the client.

I can live with long payment terms. I don't want to live with not being paid at all, and I would have REAL trouble with doing the work and having the client pay for my work, but none of that come to me.

[VectraMan]

The agency owes you £8.5K, where it comes from is none of your business. Having said that there is the thing you can do (is it a garnishee order? I forget) where you can have a debtors income directed straight to you.

But if they're in administration, then all bets are off and there's little you can do other than talk to the administrators. If they really are going bust, then just because the administrators manage to get the £10K doesn't mean it will be in any way assigned to you because it relates to your contract. Chances are an agency going bust will have a big overdraft, and other debts too, and you'll be at the end of a long list.

There's a problem with your seperate payments idea: payment terms. You'd probably be stuck with the same long payment terms that the agent has with the client.

[expat]

Er, no. No, no, and no again.

1) Nobody 'sues' anyone
2) You will certainly not be asked to pay your agency £10,000
3) A judge doesn't decide anything. If you apply for a CCJ then the court can force the agency to pay, but this can't happen if the agency is already in administration.

The courts have very little to do with this. The administrators will get as much money from the debtors (ie the client) and then distribute to the creditors (ie you) in strict order. As unsecured creditors we are at the bottom of the list and so the chances of seeing anything are generally slim.

Where are people getting these ideas of suing from? It just doesn't work that way.

I don't know how it works, that's why I was asking. My question was indeed prompted by a phrase (not by a specific misconception about how things work) from a different sphere, to the effect that you could only claim (sorry I said "sue") for an actual loss. My point in the question is that (at least in the normal course of business) the agency only stands to make 1.5k from this example month's invoice, so my question was, if someone brings it about that the agency doesn't get paid that invoice, isn't it true that their actual loss is only 1.5k, so might it not be that in this exact cisrcumstance, they could only claim 1.5k.

I suppose it is not now normal business: the agency's administrator claims the 10k, and you claim the 8.5k: trouble is, they succeed and you fail.

This does tempt me to look at a contract with separate payments client-me and client-agency. I suppose that agencies would refuse to do that, not on the grounds that I come last in the pecking order, but rather that "it just doesn't work that way".

[deckster]

Basically they sue you for 10000 but you sue them for 8500, so then a judge decides. The difference will only come if you settle or from a court decision.

Er, no. No, no, and no again.

1) Nobody 'sues' anyone
2) You will certainly not be asked to pay your agency £10,000
3) A judge doesn't decide anything. If you apply for a CCJ then the court can force the agency to pay, but this can't happen if the agency is already in administration.

The courts have very little to do with this. The administrators will get as much money from the debtors (ie the client) and then distribute to the creditors (ie you) in strict order. As unsecured creditors we are at the bottom of the list and so the chances of seeing anything are generally slim.

Where are people getting these ideas of suing from? It just doesn't work that way.

[BlasterBates]

Basically they sue you for 10000 but you sue them for 8500, so then a judge decides. The difference will only come if you settle or from a court decision.

[deckster]

I don't agree at all. There is no real connection between the client paying the agency, and the agency paying your. They are, legally speaking, entirely separate transactions.

So what really happens is that you invoice the agency for your £8,500 - you are then a creditor to the agency for that £8500. In turn the agency invoices the client £10,000; the client is now a debtor to the agency for that £10,000.

If the agency then goes bankrupt, the administrators will recover that £10,000 from the client as a debt owed to the agency. Whether or not the client has since paid you £8,500 or whatever is entirely irrelevant, and any client that did that would effectively be paying twice for your time as they are legally bound to pay the agency for your time.

If the agency was not bankrupt but instead wanted to recover the debt from the client then I'm at all sure that they could sue. IANAL but I believe the proper recourse is to seek a county court judgement against the client, and this would be for the full £10,000 owed. Again whether or not the client has paid you separately is entirely irrelevant.

Remember: you have no contract with the client. The client does not pay you. You have a contract with the agency, and the agency pays you.

[expat]

I would have thought that they would have to sue for the agreed amount, i.e. £10,000

But then I'm not a lawyer....

Of course, if you're opted in (probably wise in these times) they'd have to pay you anyway for work done, so in that case most of the above doesn't matter

Yeah, but my point is that the agency's actual loss might be taken as only the 1.5k that they are really supposed to keep, and not include the 8.5k that they are not supposed to keep.

AIUI this is an established principle: that you can only sue for what you really lost. E.g. by comparison, if you have 6 months left to run on a contract, with a 1-month notice period, and then you are canned today and marched out the door, you can only sue for 1 month's money at most, although you feel that you lost 6, because they could have just given you notice. So your real loss (that you can sue for) was only 1 month.

Similarly, the agency's real loss was only its commission. No?