Problem: I would really appreciate any advice you can give to me regarding a client not making payment.
Back in 2019, I done some painting work for a main contractor. This April, the same contractor contacted me again, asking if I could urgently assist on a large hotel project: I said I would. We subsequently agreed a price (approximately £29,000), and I commenced the work, finishing in late June.
I issued 2 applications for payment – one mid-way through the work and one just after completion. When I started chasing payment, I got the run-around. Then in mid-August, I received an email from the client stating that my applications for payment were being reduced ‘for putting work right’. I did not accept this and after a further couple of weeks, I was eventually paid £7,000 – nowhere near the £29,000 owed to me.
On 10 September, I received another email which proposed a final settlement of £11,500. This was not acceptable.
What can I do? Can I issue a statutory demand, or do I have to make a money claim online? Surely, if the client only started complaining two months after the last application, it has no case?
Response: From your outline of the problem, serving a statutory demand would not be appropriate. A statutory demand should only be used when there is a debt outstanding that is not in dispute.
Since you are in the construction industry, you can refer the matter to adjudication, which is a very quick process (28-day process).
If your most recent payment application has been issued correctly (i.e., in accordance with the payment mechanism under the contract – and that can be either written terms or implied terms), and your client has not served a valid and / or timeous payment notice and / or a pay less notice, then you have a good chance of obtaining an adjudicator’s decision for the entire amount (this is called a ‘smash and grab’ adjudication). Alternatively, you can refer the body of the dispute if either if both notices have been issued.
That said, the first step is to engage a professional that specialises in construction disputes, including construction adjudication, to see if you have a good case.
If your case is assessed in a positive way, I suggest that the specialist that you engage prepares for the adjudication, and just before you formally serve, send a draft copy [of the Notice of Adjudication] over to your client (with a very firm letter pointing out you are about to adjudicate and the chance is that you will win), and make a without prejudice offer to settle before you make the referral to adjudication, and give your client say 48 hours to accept – this tactic can be very effective.
Failing that (and subject to any arbitration clause in the contract), you will need to draft and issue a Letter of Claim pursuant to the CPR Pre-Action Protocol for Construction and Engineering Disputes – do NOT file and serve a Claim Form before you go though the Pre-Action Protocol, otherwise you will face cost consequences.
© Michael Gerard 2021
The advice provided is intended to be of a general guide only and should not be viewed as providing a definitive legal analysis.
Michael is a Solicitor, Chartered Builder & Registered Construction Adjudicator, and is a director at Michael Gerard Law Limited, a solicitors practice regulated by the SRA.