Company withholding payment - freelance issue

[DRC1]

Hello

I wonder if anyone could give me some initial advice.

I work freelance (sole trader) as a internet developer/designer in London. I have been working in this capacity for the last 10 years.

In July of last year I completed and invoiced for some work for a (Limited) company. Two months later the company still hadn't paid me and notified me that they were going out of business.

The boss/owner of the company phoned me (we are on reasonable terms) and basically said that they were winding up the old company but starting a new company with the same name. They would be putting the letters LLP (Limited Liability Partnership) after the old name which apparently is perfectly legal. This meant they could more or less walk away from their old debts and start afresh.

The owner said that they would like to continue working with me - they appreciated the quality of my work and would consider trying to repay the amount they owed me (£2500+VAT) if I would still work for them on future jobs. Any new work would be paid immediately on completion of the work.

I was told that If I didn't wish to continue working for them he had no obligation to pay the £2500 owed. This job was part of the previous company's business.

The offer, although not ideal sounded reasonable enough in principle. This was in October (2012). I have since carried out various small jobs (£100 - £300 in range) and been paid for those jobs - albeit days, then weeks late and after a number of emails regarding payment.

In the meantime, the company have avoided any moves to begin paying off the original job. I have sent emails and had discussions with the owner suggesting instalments (£4-500 a month) and this has not been agreed to. He will not commit to any repayment scheme so far, stating that the company cashflow will not cope with the added expenditure.

The original work that I carried out (the build of a web site) is still being used as an example of the company's work. They have retained the client that they did the work for and continue to work for that client on other (non internet based) jobs.

This is a small company - 2 full-time employees.

Despite continuing to use my work as an example of what the company can do, the owner still hints in conversation that he has no legal obligation to pay any of the £2500 owed.

I am on speaking terms with the owner - no animosity shown, but I actually have no confidence in him and my patience is wearing thin. It seems to me now that he has no intention of paying for the original job but is happy to use my skills on additional work as and when it suits the company.

If I really have no options in terms of recovering this money I would rather not work for the company at all. Do I have any recourse at all to legal action or am I certain to lose the money owed if he simply doesn't want to pay?

I hope I have been clear in the explanation above and any advice would be gratefully received.

[wales01man]

Re: Company withholding payment - freelance issue

As an ex LTD company director we went bust all the debts were wiped no doubt this new company is not liable,

[Eloise01]

Re: Company withholding payment - freelance issue

Your contract for service was with the old company. That company no longer exists. You therefore have no legal redress to recover that money from an entirely separate legal entity. I doubt you will ever see that money.

[MissFM]

Re: Company withholding payment - freelance issue

Is it worth considering redress through the "intellectual property" route? If your design is being used by the new company with whom you have no agreement for it's use and the old one didn't pay you for it anyway then perhaps this is an infringement of your copyright? http://www.ipo.gov.uk/ http://www.copyrightservice.co.uk/co..._copyright_law

[enquirer]

Re: Company withholding payment - freelance issue

If a case can be made that a previous company was trading fraudulently (the directors knew it was bust but kept it going long after it should have been wound up), then it is possible to hold the directors personally liable.

Similarly, if the new company acquired significant assets from the old company (usually for a song, and just before it was wound up), then it is possible to get the change of ownership reversed. The assets can then be targeted by the old company's creditors.

Both processes are likely to be expensive.

[DRC1]

Re: Company withholding payment - freelance issue

Thank you for your replies.

As suspected, it sounds like there are no options to legally pursue the money owed.

Trying to prove that the company acted fraudulently, even if true (which would be difficult to prove) would as you suggest be prohibitively expensive.

As I can ill afford to lose this money, it seems I have only one other option open to me which I have to consider carefully and would appreciate advice on.

I have the means to take down the entire web site in question. I still have access to the server that the site runs from, the company in question have simply forgotten to change the username and password of the site. This is also the case with the web site's domain name.

If I have no other option available in recovering the money owed and don't wish to work for the company any more, what do I have to lose in carrying this action out?

This option would involve taking down the web site which would (I hope) immediately put pressure on the company from their client who presumably own the web site. They still work with this client. I would request the money owed is paid immediately and on payment I would re-instate the web site - a 'best case' scenario.

I realise that this is an unprofessional (and perhaps desperate move) which I am not comfortable with however can anyone actually advise how illegal this course of action is?

I haven't signed any contractual agreement regarding ownership of material with this company, it rarely happens in my industry. Who actually owns the work?

This forum exists to advise on legal matters so if this post is not appropriate, I apologise in advance. However as we all seem to agree, the legal route offers me no real alternative other than to walk away.

[MissFM]

Re: Company withholding payment - freelance issue

From very recent experience - and I hope this may help:

I am involved in a community project which had a website. The website featured my designs, photographed by another. As a result of a dispute over artistic integrity, the website designer pulled the site overnight and refused to hand over his photographs of my designs, or the website. So there are three seperate copyrights, or intellectual properties involved - ie my copyright for my designs and their derivatives, the copyright to the website and the copyright to the photography itself (although neither of these is useable without my permission).

The legal advice we had on this is that all three are absolute and enforceable (probably put in different language) - but in effect it means that the holder of the intellectual property has control over it and the website designer was completely within his rights to "pull" the site, as I would have been completely within mine to "pull" the designs.

I wonder if the company were made aware of your right to do this it might galvanise them into paying you?

As I have said, I have no legal expertise at all but the copyright issue is a real bugbear for any originator as people don't seem to understand that it remains with the designer unless specifically signed away - and there are huge powers in this if you are able to enforce them.

There are more knowledgeable and legally trained people on this site who will no doubt come along if this is incorrect - or put it better if it's unclear - but do look at the links posted above and consult a solicitor for a dfinitive answer.

[Eloise01]

Re: Company withholding payment - freelance issue

Thank you for your replies.

As suspected, it sounds like there are no options to legally pursue the money owed.

Trying to prove that the company acted fraudulently, even if true (which would be difficult to prove) would as you suggest be prohibitively expensive.

As I can ill afford to lose this money, it seems I have only one other option open to me which I have to consider carefully and would appreciate advice on.

I have the means to take down the entire web site in question. I still have access to the server that the site runs from, the company in question have simply forgotten to change the username and password of the site. This is also the case with the web site's domain name.

If I have no other option available in recovering the money owed and don't wish to work for the company any more, what do I have to lose in carrying this action out?

This option would involve taking down the web site which would (I hope) immediately put pressure on the company from their client who presumably own the web site. They still work with this client. I would request the money owed is paid immediately and on payment I would re-instate the web site - a 'best case' scenario.

I realise that this is an unprofessional (and perhaps desperate move) which I am not comfortable with however can anyone actually advise how illegal this course of action is?

I haven't signed any contractual agreement regarding ownership of material with this company, it rarely happens in my industry. Who actually owns the work?

This forum exists to advise on legal matters so if this post is not appropriate, I apologise in advance. However as we all seem to agree, the legal route offers me no real alternative other than to walk away.

Uh oh - you are talking about pulling down the site of a third party - a client of the people who owe you money? That would not be unprofessional - it would be illegal! This client is not part of your dispute over a payment owed to you by a company that no longer exists.

[CleverClogs]

Re: Company withholding payment - freelance issue

Uh oh - you are talking about pulling down the site of a third party - a client of the people who owe you money? That would not be unprofessional - it would be illegal! This client is not part of your dispute over a payment owed to you by a company that no longer exists.

How about altering the text on that site to include the warning that Simon Legree Ltd (or whoever commissioned the work) are a bunch of twisters, cheats and scoundrels?

[MissFM]

Re: Company withholding payment - freelance issue

Uh oh - you are talking about pulling down the site of a third party - a client of the people who owe you money? That would not be unprofessional - it would be illegal! This client is not part of your dispute over a payment owed to you by a company that no longer exists.

Are you absolutely sure? If it's the OP's intellectual property being used without his consent (ie he wasn't paid for its use despite that being the agreement), even if the third party is acting in good faith, wouldn't the OP still have rights as the designer?:confused2:

[Eloise01]

Re: Company withholding payment - freelance issue

He isn't discussing asserting his legal rights - if he has any, which we do not know whether he has or not. He is talking about entering a third parties website without authority ( and having the password does not give authority) and damaging it or pulling it down. That's a criminal offence! The clients contract is with the company who they commissioned to do the work. The OPs dispute with that company is not their concern or their business. Just because you have a key to the house doesn't mean you aren't a burglar!

What the OP is suggesting is illegal. Even if they own the copyright - and that much is far from certain, because insolvency may mean you don't get paid but it does not break contracts just like that - they MUST pursue this lawfully.

[MissFM]

Re: Company withholding payment - freelance issue

Many thanks Eloise. Do you have any idea how the OP could pursue this lawfully without incurring absurd personal cost? (Must admit to a stake in this, too). Can people really commission your ideas, not pay you, sell them on and you have no redress? Doesn't seem fair but then maybe the law isn't?:crazy:

[CleverClogs]

Re: Company withholding payment - freelance issue

The comparison with a house may be more than merely moot. Consider, if you will, a person A who gets builder B (a limited company) to construct a dwelling. B gets the bricks from company C but, before B has paid for all the bricks, B goes bust. Company C would appear to have no valid claim against A, who now resides in the dwelling constructed from C's bricks and, as C is an unsecured creditor of B, C stands bugger all chance of getting paid.

It hardly needs to be said that company C cannot lawfully take the bricks from A's house, but could C reasonably inform A of B's antics?

[CleverClogs]

Re: Company withholding payment - freelance issue

Do you have any idea how the OP could pursue this lawfully without incurring absurd personal cost?

Sell the debt to those world famous debt recovery specialists, MacKenzie Hall? msl:

[Eloise01]

Re: Company withholding payment - freelance issue

Many thanks Eloise. Do you have any idea how the OP could pursue this lawfully without incurring absurd personal cost? (Must admit to a stake in this, too). Can people really commission your ideas, not pay you, sell them on and you have no redress? Doesn't seem fair but then maybe the law isn't?:crazy:

As you earlier pointed out, the question would be the terms of the original contract. Creating something does not give you copyright automatically. The law on intellectual property is much more complex, but unfortunately I only have a very broad understanding of it, since - and here it comes, it isn't my area. Barristers specialise. I pick up some other areas out of need or interest, but not to this level of detail. Very broadly, based on what the OP has said, they had a contract for services with the former company. Unless otherwise specified, I think reasonable implied terms would be that they were creating something FOR SOMEONE ELSE, and therefore did not own the copyright.

I think where people are getting "emotional" is that the DIRECTOR of the two companies is the same person. But this is irrelevant. I wish it wasn't. Company law in this area is in serious need of a sledge hammer. But the legal entity is the company, not the people. So you have to understand that the OPs relationship is, in people terms, with someone who is dead. The new company is someone else - say, the next door neighbour.

So to borrow upon Cleverclogs analogy, if you built a wall for the dead person, the fact that half the wall faces the neighbour doesn't entitle you to demand the money from the neighbour.

We have had a few debates about copyright, but it isn't my expertise. Even if it were, I couldn't possibly say who had it. That would take an expert in that area of law. And they don't come cheap or with legal aid. Sorry. Not a clue where to take this.