Problem: Offered to settle at a largely discounted rate. What should I do?
I came to Leicester in 2005 from Ukraine and started up a building business, which has become very successful. All of my work is repeat business, referrals or recommendations, which reflects the excellent name the company has. Most of the referrals I receive come via architects. One of these architects, ‘Ron’, is also a part-time property developer. From time-to-time, and depending on market conditions, Ron will seek out a suitable dwelling, refurbish it and then put it straight back on the market. He does this independently from his practice.
Early in 2014, Ron purchased a large house in Oadby and asked me to carry out a complete refurbishment of the property on a cost-plus basis. Ron wanted the house refurbished to a very high standard, and spent a fortune fitting out the kitchen and the two bathrooms and also on external works. Towards the end of the project, Ron realised that he had over-capitalised and his venture would just about break-even. Under extreme pressure from Ron, I agreed to heavily discount my account and wrote to him stating my agreement providing I was paid within seven days, which he replied back saying yes.
However, payment was not forthcoming and I made repeated demands over many months to try and secure payment, without success. Eventually, Ron sent me an email and offered to settle my account at a greater discount than agreed, stating that if I did not accept the revised offer, his practice would seek to claim against my company for its supposed losses on another job I was working where Ron’s practice (which is an LLP) was employed as the Contract Administrator, and I would not see a penny from his job. What can I do? Needless to say, I have no intention to ever work with Ron or his practice again.
Response: The most appropriate route is to serve a statutory demand
This is a very unsatisfactory situation, particularly as your client is a construction professional and should know better.
From the details you have provided, there is an agreement between your company and ‘Ron’ regarding the level of the final account, the residual amount of which was to be paid to your company within seven days of your acceptance of the final account. This did not happen and I, therefore, suggest that the most appropriate route is to serve a statutory demand on Ron for the amount that was agreed.
A statutory demand can be a very powerful tool against a debtor. However, it must only be issued where there is a debt that is both liquidated and undisputed. If the debt is disputed, a statutory demand is not appropriate. Although Ron said that his practice would set-off its losses against the debt if you did not agree to a further reduction, it would appear to me that his practice has no cause of action against your company as the contract is between your company and Ron (as an individual), as opposed to Ron’s practice.
Alternatively, you could accept the revised offer under protest, and once you are in receipt of the monies, pursue Ron for the remaining sum on the basis of economic duress.
I would also recommend that once you have concluded this matter, you consider making a complaint to Ron’s professional body, which if he is an architect would be the Royal Institute of British Architects.
© Michael Gerard 2015
The advice provided is intended to be of a general guide only and should not be viewed as providing a definitive legal analysis.