Non payment of invoice - web development

[calibra11]

I am an IT contractor with my own Ltd company.

I started building web software for a client 2.5 years ago (lets call it Product 1). There was never any written contract between us. Basically I would go in every month, demo what I'd built in the previous month, discuss what my client wanted in the following month, and get an invoice paid for £3000. As I already have other clients I work for during the day, I worked on the stuff on evenings and weekends. It was extra income for my company, rather than my main income.

Product 1 has been live for over 2 years, and my client has many of his customers using it. I'd go as far as to say the software is now the backbone of his company.

In April, he asked me if I wanted to form a new company to build a Product 2, loosely based on Product 1. I agreed and did 12-18 hour days throughout May on Product 2 (and some Product 1) in May, for which he paid me the standard £3000. I estimate that at my standard day rate I did 9-12k's worth of work that month. That was the last invoice I got paid,

During June and July I received many phone calls and emails off both my client, members of his staff and even his customers requesting work, which I then did. There must be over 100 emails during this period. I put in a £3k invoice for June at the end of June, and was planning to invoice for July now.

The company never got created. We had a disagreement on how the company would work regarding salaries. He then told me he was going to form a new company building Product 2 with another IT consultant. He agreed verbally at that point to pay my 3k per month for June and July and still use me for support and maintenance going forward.

Yesterday he told me he is no longer paying me for June and July. He used a throwaway comment I made about "sometimes work ends up being quicker than it was estimated at".

I currently host both sites in my hosting account, although Product 1 is paid for by his company credit card. Product 2 is paid by my credit card. He has no access to the hosting envionment. He owns the domain names for both sites.

I sent him an email last night demanding payment for June and July. I laid out everything I have said above, and stated at the bottom that if payment was not made, I would immediately stop support and maintenance of the sites, and take any other action I deemed fit (both software and otherwise), after legal advice.

Today I received a letter from his solicitor stating the his client disagreed with my account, and that the last paragraph constitutes blackmail under Section 21 of the Theft Act 1968.

That's a bit heavy. I have done 2 months worth of work for no payment, been removed from the potential new company I did all the extra effort for, and am now being told I am blackmailing him.

In reality, if I do not get paid then MY company has losses. Also, Product 2 hosting is being paid for with my credit card, and both products are reliant on external services that I also pay for. The last paragraph is not blackmail, but simply me trying to avoid further losses by having to support and maintain a site and pay for external services without recompense from my client.

I am then thinking I need to tackle the situation in 2 different ways.

Firstly - the unpaid work - I can go through MCOL and use all the emails sent to me requesting m to do work through June and July as evidence.

Secondly - what happens in future - I can offer to zip up and export the sites to him for a fixed one-off fee, which will be at my day rate for the amount of work required. He can then take this and give it to another developer to host, install, support and maintain, I don't think he realises that another developer picking it up will take months and cost him more to pay that other person that he owes me.

The other option I can give him is that I continue supporting it for a new negotiated monthly fee, and then his problems disappear.

I just want anyone's advice on whether I'm doing the right thing. The blackmail thing concerns me, and I am up against a solicitor here.

If I explain that the statement was not blackmail but me avoiding my own future losses, will that be ok?

And if I give my client the options to pay me to export the site, or carry on supporting it myself for a new fee, then do you feel that would be seen as me being reasonable if it escalated?

 

[Red Wood]

The blackmails a bluff IMO.

If what you say is true, you should most certainly stop doing any work for the client. For the hosting of the site that you pay for, turn off the tap.

It's a simple case of he no longer wants your services, there is no contract so he is within his rights to terminate the relationship, but that is a two way street.

Swallow the loss for June/July, move on and put it down to experience so next time you have a firm contract.

If you want to get back at him a little, let him throw some money at the problem by instructing his solicitor to send you empty threats by post.

 

[calibra11]

If I turn off the tap, does that leave me open to a claim from him for his losses from the site not being operational?

 

[Red Wood]

Not your problem, he terminated your services by not paying you.

The rest is him just trying to stone roll you into an outcome he wants. Don't be phased by it.

Ask him to show you the part of the contract where you would continue to host his product after your services were no longer required.

 

[Red Wood]

I'll also add a note from cold hard experience.

Sometimes even contracts are mostly unenforceable. Especially when you are the little guy and they are the big one.

Don't lose sleep over this.

 

[Chris Ashdown]

With earnings of £3000 per month , why can you not afford to spend a couple of hundred to get professional assistance from your own solicitor. the initial meeting to discuss things will even be free

 

[Darren_Ssc]

Ask him to show you the part of the contract where you would continue to host his product after your services were no longer required.

This is a good point and maybe turning off the tap will bring about the opportunity of an amicable settlement, or all out war. Who knows?

If it does go to court you'll likely be pushed towards mediation as a first step and this may yield your best outcome since all emotion is removed from the process.

 

[Ian J]

Not your problem, he terminated your services by not paying you.

I'm not sure that's correct and he needs to take legal advice

 

[Stas Lawicki]

You'll no doubt have Corp insurance... Give them a call, get the panel solicitor under your policy and let them start the preaction protocol or fire a letter back to test them. Doesn't sound like it's a fight worth having.

You can't keep paying for a client's service on your own card and not get paid for it (unless you agreed to). I would stop that right away.

One thing is obvious, kick them into touch ASAP, get your head down and into something else. Move on. In a couple of months you'll look back and wonder why you ever got so het up by it. Make money whilst you can, millions are about to be forced into huge debt, defaults, arrears and homelessness... Just be grateful for what you have.

Good luck

 

[Mark T Jones]

Beware barroom barristers!

Take professional advice before you stat damaging their business.

if it was me, I'd go down the MCOL route (always mindful of the fact that odd things happen in court). I certainly wouldn't be looking to work together in future, but might consider bundling a dignified handover as part of the agreed settlement.

 

[Porky]

@calibra11

Unfortunately, it’s all rather vague as it sounds like you don’t have a proper agreement in place with cancellation clauses? The work on product 2 could be deemed as you entering into a business venture that didn't work out. He has lost confidence in you anyhow now so you don’t really want him as a client and his last comment made tells me he doubts you regarding your billed invoiced hours. That being said you need to draw a line under it.

The solicitor letter re blackmail is nonsense, if it’s blackmail the police would be involved, this is a contractural dispute.

Before you chuck money at Solicitors, I would go back to the client and say (this is what I would do) :-

1. We need to reach agreement regarding my invoices for June and July which total £6,000 as I intend to launch a money claim for the amount due. You agreed these fees and the invoices are due.

2. You have confirmed that you are appointing a new IT provider and no longer require my services. My business has costs associated with the ongoing hosting and support of product 1 and as I’m no longer being paid for my services in 14 days from today’s date (midnight x) I intend to suspend hosting hence this is notice of cancellation.

3. If my invoices are paid in full, to support further there will be no further charge between 1st August and 14th August (cancellation) whilst you make alternative arrangements.

4 i can supply all IP and code relating to the projects in a zip file to any new provider you so wish. There will be no charge for doing this providing the invoices for my work are settled.

5. If you wish for me to continue hosting and support after 14th August we would need to enter into a new supply contract and my terms would be Hosting only x per month, Hosting and Support £3k per month.

In doing the above you are providing total clarity. If you end up sending the files and they can’t get them to work that’s there problem.

If you launch a money claim through the small claims court costs will be relatively low, guessing £200. In these cases normally both parties select the free mediation service and in that event, not always but often, you reach 50/50 on the dispute. Ie you would get £3k

If you enter a new agreement you need to button it down properly regarding cancellation.

Good luck

 

[calibra11]

Thats great. Thanks!