Non Paying Customer (Help Needed Please!)

[AppDeveloperHampshire]

Hi,

I am hoping you can help me understand my options with a non paying customer.

We were recently asked to look into improving video performance on a clients’s specialist machine.

We explained that we could offer no guarantees of success as it will largely be down to the machine but we had a few ideas we could try.

They agreed in writing that they knew the work was experimental.

We agreed through email that we would spend 5 days working on it for X amount.

For the first few days of work it turned out there was a slight misunderstanding on our part, so we ended up spending 8 days working instead of the agreed 5. As the confusion was on our side we didn’t charge any extra.

Fast forward after the 8 days and it became apparent the machine just wasn’t going to perform any better. I visited the customer’s office and showed them our set up in person and sent them the files showing the various methods we tried. This was a very friendly meeting and it ended amicably.

Later the same day my developer got an email saying they had been disappointed by the confusion on the project. To which shocked me considering I had just left from their office and nothing was mentioned....and the fact we worked 3 extra days to make up for it.

A few days later I sent our invoice for the work, which would be due in 14 days.

A few days before the invoice became due I sent a reminder, which we do always.

The deadline came and went so I emailed again with no reply.

I phoned their offices and the client said I should ‘relax’ and that payment would be made that week.

That week then passed with no payment yet again, so this time I sent an email explaining that although it’s not the way I would like things to pan out I would take legal action should I continue to be ignored.

I was just hoping for some more opinions here if possible about what I should do next?

Any help you can give would be greatly appreciated.

Many thanks!

 

[Gingerbreadmen]

Are we talking hundreds, thousands, tens of thousands, hundreds of thousands or more?

Your options are dependent on the amount owed and how much you are willing to pay (risk) to get the money recovered (or at least attempt recovery)

 

[AppDeveloperHampshire]

It’s just under 2.5k

In my head I’m thinking I need to go down the small claims route. I just worry that I don’t have a contract per say. Just written emails stating the agreed amount and scope.

I am a bit clueless when it comes to the law side, and just didn’t expect them to be so ignorant towards both payment and the emails we’ve sent asking why it wasn’t made.

 

[Gingerbreadmen]

I would try a statutory demand first - Its free lots of info on Gov website you can just send it yourself. The company maybe having cash flow problems you could maybe give them an opportunity to pay in two parts etc. as part of the demand. It will show you have tried to be reasonable in the process. Try and keep the comms going the process is a lot harder if you don't talk (not always possible)

Small Claims your most likely route, there was a guy on here that done it all for you for a small fee. However you can apply yourself on the gov website - money claim online. Its going to cost you just over £100 to claim. Don't worry about the contract the emails are normally enough to prove agreement / engagement and terms. You can claim interest on amount owed plus your fees you have paid for the claim.

Its not a quick win be prepared for a long drawn out process. Don't count on having the money to pay any bills this year!

I took a customer to the small claims court a couple of years ago he admitted he owed the money and agreed to pay by the end of the following month (he bought himself another two months) when he didn't pay I paid extra for the bailiffs to recover the amount turns out he didn't have any possessions so he ended up paying £50 a month for what felt like a lifetime missing in the odd payment here and there.

Good luck!

 

[obscure]

When someone doesn't respond, keeping on talking is unlikely to suddenly result in a response. You need start the legal process in order to force some sort of response.

What will most likely happen is that they ignore you until you start legal action, at which point they will inform you that they aren't paying/will defend themselves based on the fact that the service was sub standard and/or there was a delay that caused them damage and they are going to counter sue. These threats can be safely ignored.

The communications/documents you have prove that a contract existed and that the client clearly understood that there was no guarantee of success (they were just paying you to try). Unless they can demonstrate to the court that the machine will actually do what you say it couldn't they don't have a leg to stand on. As for the delay that was dealt with by working the extra time for free to remedy the problem.

 

[Lisa Thomas]

You shouldn't issue a Sta. demand when you know the debt is disputed - it's an abuse of process (although I have seen people in the past play ignorant and withdraw if/when it is challenged).

It can help to flush them out but could backfire if you rely on the Stat. Demand to take further.

Really I think small claims is appropriate here.

 

[Lisa Thomas]

https://www.gov.uk/make-court-claim-for-money

 

[Paul Kelly ICHYB]

Start with a Letter Before Action giving them 14 days to pay or you will take it further.

BTW, the fact that you worked 8 days instead of 5 is irrelevant - that is your issue.

 

[Lovetts Solicitors]

I'd second what consultant said above - start with a Letter Before Action saying what they owe and giving them 7 days to pay (we'd tend to say 7 days is best as that gives a reasonable amount of time but without dragging things on too much). Assuming you don't have a contract that says otherwise you can also add interest of 8.5% and compensation of between £40-£100 per invoice under the Late Payment Act.

Then if they don't pay, issue a Claim through Money Claim Online - just google for it and make sure you're using the gov.uk link as opposed to any third party site. The court fee for a £2.5k debt should be £105 which you'll get back if the debtor pays.

They may defend your claim in which case it would go into what is called the Small Claims Track; the good thing about Small Claims is that if you lose you won't have to pay the other side's costs (but equally if you win you won't be able to claim back your costs other than the court fees).

The only thing that could complicate things would be if they counter-claim to say you caused damage with your repair, in which case you'd have to defend their claim even if you dropped yours. However that's pretty unlikely.

 

[Michael Loveridge]

"you can also add interest of 8.5% ..." A small point, but since 2 August the rate's been 8.75%. This is because the rate is 8% above base rate.

"You shouldn't issue a Sta. demand when you know the debt is disputed - it's an abuse of process ..." This is quite true - but in this case the debt isn't disputed. The customer has said that the invoice will be paid.

However, you don't need to bother with a Statutory Demand anyway when it's a limited company.

"Then if they don't pay, issue a Claim through Money Claim Online ..."

Yes, if you don't mind waiting several months, being put to a load of hassle filling in forms, preparing bundles of paperwork and then having to sit in a miserable County Court waiting room for hours, only to be told they've lost the file or that they've forgotten to notify your opponent of the hearing so it'll have to be adjourned for another couple of months. And even if you finally manage to obtain judgment you still have to enforce it when the debtor fails to pay up, which means still more court fees and delays.

The small claims system is rubbish. For an undisputed debt the best solution by far is the nuclear weapon of litigation, the winding up petition. Yes, it's expensive to issue, but I've used them on dozens of occasions for debts as small as £1,000, and their success rate is incredible.

Many companies are used to receiving County Court claims and know they can spin them out for months to assist their cash flow at minimal cost. But believe me, they don't treat a winding up petition with the same contempt. You'll suddenly find you're dealing with one of the directors, not some numpty in the payments department, and you will have his full attention.

Payment in full is often received within a few days of the petition being issued, and what's more you can employ a solicitor to deal with it and they will be able to recover their legal costs so that with the right firm it will cost you nothing at all.

The only caveat is that you need to be reasonably confident that the debtor company is capable of paying, but with a small amount such as this it's unlikely to be an issue.

 

[Lovetts Solicitors]

"you can also add interest of 8.5% ..." A small point, but since 2 August the rate's been 8.75%. This is because the rate is 8% above base rate.

An oddity of the Late Payment of Commercial Debts Act is that the interest rate is 8% above base, but the base rate is taken from a six month fixed window set on the 1st January and the 1st July each year. So for second half of 2018 the base rate you use is actually the rate as it was on the 1st July 2018 (which was 0.5%). Assuming there are no further rate changes, then on the 1st January 2019 the base rate for Late Payment purposes will change to 0.75% .

It's completely bonkers, but that's what they wrote into the legislation!

 

[Lisa Thomas]

[QUOTE="M

"You shouldn't issue a Stat. demand when you know the debt is disputed - it's an abuse of process ..." This is quite true - but in this case the debt isn't disputed. The customer has said that the invoice will be paid.

Having re-read the OPs post I agree with you - I originally read it as the customer now disputed it.

 

[Lisa Thomas]

Note a petition can only be issued if you debt is over £750 owed from a Ltd Company or £5k if serving a BKY petition against an individual.

 

[tony84]

I have had a couple of customers not pay.
Usually we send a Letter Before action which basically gives an overview of the situation, ie we did x for you as agreed I have invoiced you for £x on the xx/xx/xxxx and followed this up via email/phone on the following dates.

Next steps:
If payment is not made within the next 7/14/28 days (5/11/2018 or whatever date it will be), court proceedings will be issued against you (or in yoru case the company) where this letter along with any other evidence we hold will be provided to the courts.

No further correspondence will be sent prior to court proceedings being initiated.

Important information:
It is important to note that should a CCJ be issued, this can affect your credit rating which in turn can cause problems when trying to obtain credit in the future.

We will be applying to have our costs added to the balance of your invoice and interest added at that statutory rate of 8% should your invoice not be paid by 5/11/2018 (or whatever date)

I have included a copy of your invoice with account details in which to make payment.
Should you need to discuss anything, my number is xxxx and email address is xxxx.

----
This is just an overview of what we use, not an exact copy.

Some pay, others wait until the court papers hit their doorstep (which is foolish as it means they are paying an extra £70-80 to see if you will blink first). We have never actually gone to court so I have no idea how watertight our process is.

 

[Glen Wheeler]

I really think @Lisa Thomas's advice here is excellent I would definitely take this route! Good luck!

 

[Lisa Thomas]

Thanks Glen.