Non-Paying Client - Individual or Company? (Web Design)

[Deleted member 260626]

Hi All, I am a sole-trading website designer who has a non-paying client. I was approached to complete the work by an individual who then set up a limited company based on the website I designed. Correspondence has been sent to him personally over the last year or so on this project however I have sent my invoices to his company address. upon the site going live.

In not paying me it looks like I will need to issue a Letter Before Action or a Late Payment Demand, however I am unsure whether I should pursue the individual or the company. So far, I have been emailing his personal email address and company email address, and text messaging on his personal phone.

Sadly, no contract or t&cs exist for our agreement (this is work I do outside of my full-time day job), just an initially approved quote, acceptance of costs and a very long email and text message trail throughout the entire process. The cost is not in dispute at this stage.

The website remains online as I am yet to seek legal advice on whether I can withdraw it without negative repercussions. I have paid for the hosting in my own name. The domain and hosting is in my name. This too is unpaid by my client.

The cost is over £10k.

Any help appreciated at this preliminary stage.

Mav3000

 

[Bob]

Is £10K the balance? Have any payments been made on account?
What type of website is it?
What would be the damage to the client's business if you took it down?

 

[fisicx]

Just switch it off. He hasn't paid for anything and it's registered in your name so you can do what you want with your site.

 

[soundengineeruk]

A new company with £10k owning, so based on the face value it would worry me from the start.

If in contact, maybe work out payment plan (especially as new company) rather than demanding lump sum; however this up to you on your tactic.

If no contact or response then you got no choice but to shut it down. Or if it is something that could be sold on; not the company, but the code as it seems you own the code; to another similar business.

Not to rub salt in the wounds, but agreements/T&C is a learning curve as taking legal action could be tricky potentially costly.

So do you do fight (try to get your money) or run (switch off and move on)? Food for thought

 

[Deleted member 260626]

Thanks for the reply,

£400 deposit was received on an original quote and spec. Since then the spec went out of the window due to a change in the name, re-branging, a large amount of amendments and the scope of the site increasing massively.

The balance is over £11k. The extended budget was agreed and costs were regularly confirmed throughout the process - which I have records of in emails. I've received over 2 dozen assurances of payment over 9 months but have received nothing - with varying excuses. Now he claims he has no money. and won't have until the website brings it in (which I firmly believe it won't).

The business is based entirely on the website - online paid advertising and online directory listings for other businesses in the sports and leisure industry. People pay to list their business and people pay to advertise on it. There's been no new listings for over 7 months.

I have kept the site and email accounts online with my delivered content, as taking the site offline would essentially prevent the business from operating any further, but I am essentially paying for this at the moment.

I have received threat of legal action against me for 'missing deadlines' (which I didn't set or agree to, and which were fixed despite additional requirements being made constantly to the scope) and 'loss of income' (presumably from the site being buggy or delayed due to the above) - but nothing official yet. This is just in reply to my requests for payment.

Our business relationship is basically over. I am faced with whether to decide to go through the legal process (based on realistic chances of recovering anything from him) and what to do with the site.

 

[Deleted member 260626]

I did offer a (without prejudice) repayment agreement for monthly installments, but stated I won't do any more work on the site until the balance is settled.

My client would only agree if I were to complete a long list of additional changes and feature additions to the site. I refused this stating I won't do any more work on the site until outstanding invoices have been paid.

I have since offered another without prejudice offer to settle the balance to avoid further action. This is how it sits at the moment. I've not heard anything since.

 

[soundengineeruk]

Seems like not much option really, it is fight or run.

Unless he has got assets (that belong to ltd company) then it maybe worth doing, but if no/little assets that would cover the bill + court expenses + debt recovery, then it would be paperless exercise. Harsh reality I'm afraid.

Up to you on your next step, but it seems like a potential win & lose case.

Win: Knowing you were owed for the work you did
Lose: Financially, still probably not get the money in the end.

 

[fisicx]

Don't faff about.

All you have to do is stop the site from working - don't delete it or anything, just display an error message and block admin access. Wait for him to contact you and suggest if he pays his bills you will investigate a fix.

 

[DavidWH]

I'd try and puruse him personally if he set up the Ltd co after you started work, then your original contract was with him, not the Ltd co, and could be easily proven I assume qith emails before the date they incorporated the company?

But if he's had no new listings in 7months sounds like it's not going to go anywhere so I would certainly try and get and judgement in their name not the company.

 

[Deleted member 260626]

Thanks everyone for your valuble help. This has been a great source of stress and anxiety for me.

Would my invoices being addressed to the company and not him be a possible issue? A large portion of the design and initial coding was done under a different branding, with the final compay set up a few months down the line.

Am I correct in thinking that to an individual I send a LBA, and to a company I would send a Late Payment Demand (with compensation and interest added)? I have read on Thomas Higgins that it is vital that you address these things to the correct person.

Regarding the website being online, I have twice stated via email that no payment before 2 seperate deadlines will result in the website being taken offline, but I have not chosen to yet do so to avoid any possible legal repercussions. Would you suggest I get bonefide legal approval to terminate the site before doing so? Would legal approval from a legal professional essentially confirm it is 'ok' for me to do this?

As you may guess, this is my first time on this merry-go-round.

 

[fisicx]

Would you suggest I get bonefide legal approval to terminate the site before doing so?

NO!

It's registered in your name on your hosting account. There is no contract between you and the company. So turn it off today. Right now.

This conman isn't going to pay you. Even the threat of legal action isn't going to get you your money. In fact I'd put money on him dissolving the company before it even gets to court.

 

[Steve Thornbury]

Feel free to give us a call to go through your options.

 

[Deleted member 260626]

Hi Everyone, Would it be OK for me to issue a Late Payment Demand with interest and compensation against all 4 invoices I am due to the individual, rather than a Letter Before Action?

Would I then be able to take this through Money Claim Online should this be ignored or disputed?

I imagine it will be disputed as this various shortcomings on my part (ungrounded) have already been communicated to me at the mention of pursuing payment.

 

[Charlie B ACS]

I'm studying contract law at the moment, and this came up last night.

You cannot contract with a Limited company before it is formed (Kelner v Baxter) Therefore I'd be looking at the individual, rather than the new Limited company.

 

[Deleted member 260626]

Thanks Charlie this confirms who I should pursue and address my correspondence to. This should also be supported by me using their personal email address, phone number and meetings at his home and not his registered company address.

Am I correct in thinking I can issue a Final Demand Letter to the individual with compensation and interest (8.5%) calculated from 30 days of the invoice date?

If he doesn't pay my latest settlement offer (deadline is tomorrow) then I will be pursuing him for as much as possible and will be taking the website offline.

 

[fisicx]

Why is the website still online? This individual is not going to pay you. Take the site offline and wait for them to squeal.

 

[Deleted member 260626]

It's only online due to the fear of threatened legal action against me (however unfounded) which I would have to pay to defend - in time, stress and money. Although I appreciate I will get the costs back when I win.

Although I've threatened taking the site offline in the past, I have not done so basically out of personal good-will. Living close-by to the client and hearing his excuses has sucked me in. Should payment not be received tomorrow, good-will will have run out entirely.

PS As I am paying for the hosting of the unpaid website, I presume there is also no problem in disabling the email addresses set up on the domain too.

 

[Paul Murray]

PS As I am paying for the hosting of the unpaid website, I presume there is also no problem in disabling the email addresses set up on the domain too.

If he hasn't paid then you haven't completed the transaction, and therefore is not entitled to anything. In future, stipulate this in your contract, and only hand over IP rights when the full amount has been paid.

 

[fisicx]

Disable everything. Do it right now. There is no legal action he can take as the site is registered in your name under your hosting. He will not pay you. He may threaten but he will not take you to court. Turn the site off right now.and see how long it takes before he picks up the phone. Be strong and tell him the site is broken.

 

[Deleted member 260626]

If I turn the site off I wouldn't lie and state the site is broken - I'd say I turned it off as I did not receive payment for it and therefore the client isn't entitled to it.

 

[fisicx]

Good ethics. Still turn it off though. Right now, before you reply to this thread. You will feel so much better for doing so.

 

[Big G]

Your money is definitely due from him personally.

It is clear you are reluctant to turn off the website, so i would suggest that you use this as a last resort.

 

[fisicx]

Pointless. The business owner has no intention of paying a penny. He gone past the last resort, reached the end of the pier, jumped into the sea and his on his way to France while sticking two fingers up at Mav

 

[Newchodge]

Invoice him personally in full. Include with the invoice a letter before action stating that unless payment in full is made within 14 days you will commence legal action.

In 14 days time turn off the website.

If he has not contacted you with full payment within 15 days issue a claim against him personally.

If you had not issued the invoices to the company you should turn off the website and issue a letter before action, in that order.

 

[Deleted member 260626]

You may have gathered that all of this in unknown territory for me (the lessons learned are already invaluable).

I was going to issue a LBA via Thomas Higgins regarding the 4 existing invoices should I not receive payment by tomorrow (my final deadline).

Am I right in thinking that as I am pursuing the individual that I cannot add late payment compensation or interest to my invoices?

Could the client specifically pay some of the invoices (for example one invoice is purely for the renewal of the domain and hosting fee) in order to keep the email accounts active? I.E. Cherry-pick this to secure the email functionality instead of paying off the oldest invoice first?

If I take the website offline before issuing the LBA would I risk having to defend a claim for loss of business incurred from taking it offline? Surely his solicitor would not advice him to attempt this?

 

[fisicx]

Just take it offline. You won't have to defend anything as there are no documents anywhere that say the site even belongs to him.

I've done this a number of times and they all get angry and they all pay up up without getting anywhere near to a court.

Refuse to renew to hosting - tell them you are no longer prepared to offer this service. Even if they pay the bills, tell them to go find another host.

 

[AG Consult]

Seriously take the website offline immediately. You own everything. No issues or comebacks.

Guaranteed he will be in touch as soon as he realises its offline

 

[Deleted member 260626]

I don't know if my client would care if the website is offline or not (i.e. cut his losses what he has spent on - advertising, time etc.)

At risk of asking a stupid question, it I withdraw the site and the hosting, can I still demand payment even though I would not be supplying the promised product any more?

 

[Scalloway]

You can demand payment up to the point you pull the plug. You have been providing a service.

Just go ahead and do it.

 

[smallclaimsassistance]

There are two ways to deal with this.

As Fisicx says, kill the site and wait for him to contact you. Or leave it online and sue him. Both routes will force him to engage, so either is worth a shot.

Dealing with your direct question about who to sue, you sue whoever initially instructed you - him. Reading between the lines, enforcement against him sounds a better prospect than against the company anyway, as it sounds like it's not exactly thriving.

Dean

 

[paulears]

If switching it off is something for the future, what you could do is set up some forwarding so that you get copies of any emails going through so you can keep an eye on the level of business - it could give you an idea if the site is actually generating an income stream. If it is, then legal action could work, if it's not and they've really given up, then you pulling the plug could be the only solution.

 

[Deleted member 260626]

Thanks for the continued help everybody who has bothered helping me out here.

The way I see it I can either pursue payment with a LBA and then court procedings (court costs will be several hundred pounds due to the costs involved) and see this through until judgement and enforcement, and possibly end up with an order against his property and lots of costs to pay,

Or, I take the website offline (which seems to be the consensus here) - but if I do this I will not be able to pursue any outstanding money as I will have withdrawn my half of the deal, and will just have to cut my losses - correct?

The reason I am hesitant about taking the website offline (thanks for patience those keen for me to do this immediately!) is because the costs I seek to recover are over £11k. This is a lot to write off to me.

 

[Deleted member 260626]

Extended post from that above (Can't edit the old one above - sorry)

Thanks for the continued help everybody who has bothered helping me out.

The way I see it based on help on here, I can either:

1) Pursue payment with a LBA and then court procedings (court costs will be several hundred pounds due to the costs involved) and see this through until judgement and enforcement, and possibly end up with a Charging Order against his property and lots of costs to pay. Will I have to keep paying the hosting to keep the site online to withold my end of the agreement?

Or,

2) Take the website offline (which seems to be the consensus here) - but if I do this I will not be able to pursue any outstanding money as I will have withdrawn my half of the deal, and will just have to cut my losses - correct?

The reason I am hesitant about taking the website offline (thanks for the patience to those keen for me to do this immediately!) is because the costs I seek to recover are over £11k. This is a lot to write off to me. Client states he has no money and I do believe this. I also think as the site is essentially a lame duck, he must now have other employment (not sure) and isn't bothered about the site being online (willing to cut HIS losses). I therefore think if I turn the site off I will see nothing happen apart from him unable to operate this business (Which I don't care about and wonder if he does either). I see greater chance of any money by taking him to court, even if it's via a charging order or something should nothing be immediately available.

 

[paulears]

If it goes to court, the paperwork will show amount outstanding to date, won't it? So ceasing the arrangement won't have an impact - however, with 11K at stake, it's worth 30 minutes with a solicitor to get a professional opinion on how to proceed.

 

[Scalloway]

2) Take the website offline (which seems to be the consensus here) - but if I do this I will not be able to pursue any outstanding money as I will have withdrawn my half of the deal, and will just have to cut my losses - correct?

If everyone thought your way nobody would get evicted for rent arrears, no HP company would bother repossessing goods not paid for, nobody would pay their bills......

 

[Charlie B ACS]

Mav3000, you are merely suspending the service for Non-Payment, which would, of course be restored on full payment.

 

[Deleted member 260626]

Thanks Charlie - I am unfamiliar with law and don't want to ruin any chance of claim by withdrawing the site.

If I can still claim for my invoices while withdrawing the site, I will do so tonight. It's the confirmation that I am within my rights to do this and still proceed with LBA and court action for the outstanding invoices. I don't want to shoot myself in the foot.

 

[fisicx]

Of course you can claim when the website is offline. They haven't paid for the site so they aren't entitled to access.

But you did say he claims not to have any money and you believe him so going to court isn't going get you paid. If he is broke then you are going to get £10/month or whatever. And even then he can refuse to pay.

Why are you waiting? Turn the site off now.

 

[Charlie B ACS]

As Scaloway and others have said. Demand payment to the point you suspend services.

If you are going for him personally, he presumably has more to lose, so go for it.

 

[Deleted member 260626]

So long as I can still claim for the site and hosting after suspending delivery of the site then I am happy to remove it. Deadline for payment is tonight so I will honour the deadline I set (if only to appear fair to the court in the future) before doing anything (this is my second job).

If this went to court I would hope for a charging order against his house should he not be able to pay or have the assets to settle the payment through HCEO (I doubt he has the assets to cover the debt from my own visual assessment).