Monthly Archives

November 2016

My Private Apple

By | news

Privacy is becoming something of a new dogma. There is a growing belief that we are entitled to our “privacy” and it must always be respected.This is the type of argument used by Apple when it refused to try and develop a programme to assist the FBI unlocking the cell phone of the terrorist

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Sloppy Restrictive Covenants

By | news

Restrictive covenants are only enforceable if they are only as wide as they need to be to protect a legitimate business interest in regard to that employee.They should be carefully considered when being agreed to and reconsidered whenever an employee

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Trade Supplier and Court Action

By | Problem Solved
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I am a timed-served bricklayer and in 2014 I set-up a limited company to do a job for a main contractor.

Once the limited company was set-up, I opened a trade account with a well-known chain of builders’ merchants. However, the trade account that I opened was not a business account but a personal account, and I used my own UTR number for tax purposes, although I did not provide a personal guarantee.

The merchant gave my account a £20,000.00 credit limit and I always paid on time for 8 months while the job was on going. I have now reached the end of the job and the main contractor is stalling on paying the final account. I currently owe approximately £16,500.00 to the merchant, but I have no way of paying this personally. The merchant has now closed my account and has issued a winding up order. The main contractor will pay but I don’t know when. I was wondering where I stand on paying back the merchant or will the company just fold and they will get nothing.

Any help on this would be great.

Mustafa, Blaby
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Hello Mustafa. You certainly have a problem, and you will need to act as soon as possible.

There is some important information which I would need to know to be able to give you specific advice. For example, have you been issued with a winding up application or order? An order will be from the Court whilst an application will be made by the builder’s merchant to the Court for the winding up. Are the proceedings in the limited company name or your personal name?

From your outline of the matter, as the trade account is in your name I fully expect that the proceedings will be against you personally and you will be personally liable for the debt, not the limited company and hence, proceedings to secure the monies will be against you personally, not the limited company. I am however, bemused about your reference to a winding up order. Limited companies are subject to winding up orders whereas someone who has personal liability is subject to bankruptcy proceedings.

The builder’s merchant may have issued a statutory demand for the debt, and if you failed to pay the amount claimed or remained silent, then a petition would be issued for your bankruptcy. A bankruptcy petition is an application to the court for an individual’s assets to be taken and sold to pay the debt and it has nothing to do with the company.

If the proceedings are against your limited company, then the builder’s merchant would have issued a winding up petition against the limited company but if the application is successful, it is only the limited company that is affected, not you personally.

All that said, why are you not attempting the secure the monies owed from the main contractor, as surely this would solve all of the problems? You will need to look at your terms and conditions of contract in relation to payment, but the Housing Grants, Construction and Regeneration Act 1996, as amended by the Local Democracy, Economic Development and Construction Act 2009 requires all construction contracts to have an adequate payment mechanism and failing that, a payment mechanism will be implied into the contract.

Good luck.
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Over-valuation of building works

By | Problem Solved
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Having read the Leicestershire Builder for the past year or so (which I find is an excellent read), your column has always caught my eye, and although I am a client as opposed to a contractor or builder, I was hoping that you may be able to give me some guidance on a problem I believe I have.

I purchased a house in 2014 and then set about instigating plans for a major refurb. My lack of expertise on such a project meant that I employed an experienced Architect from the outset, and when I engaged the builder, a JCT Intermediate Form of Contract, 2011 with contractors design was executed. However, I have become increasingly concerned that the Architect is over-valuing the work carried out by the builder. I did seek professional advice from a quantity surveyor who said that the work may be over-valued, although the advice was not specific and lacked detail.

I have poured a lot of money into this project and want to ensure that I get value for money. Any suggestions?

Benje, south Leicestershire
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Hello Benje. You appear to have procured your project correctly, and in theory your Architect should be a pair of safe hands when it comes to administering the Contract. However, where an Architect has issued his interim certificate for payment, you maintain the right under the Contract to pay a lesser amount than certified providing you have issued a valid and effective pay less notice.

If you are going to issue a pay less notice, it is of paramount importance that it is issued on time and is effective. If the payment provisions of the Contract are un-amended (section 4), the builder is required to receive payment within 14 days from the due date unless it is in receipt of a pay less notice no later than 5 days before the final date for payment. If you issue the pay less notice late, even by one minute, no monies can be with-held. In addition, the pay less notice must also include a) the sum that you consider to be due on the date that the notice is served; and b) the basis on which that sum is calculated. It is also imperative that the pay less notice comes from you as the employer named in the Contract or a duly authorised person on behalf of you providing you have notified the builder in advance (see clause 4.12.1.1 of the Contract).

However, if you do issue a pay less notice, there is a risk that the builder will issue a notice of its intention to suspend performance under clause 4.13, followed by a notice to suspend. If the builder does suspend performance, you will need to consider your options under clause 8.4.1 of the Contract, and in particular sub-clause .1, although you must be absolutely certain of your position and the validity / effectiveness of any pay less notice issued prior to invoking clause 8.4 and the sub-clauses. You must also realise that in agreeing to the JCT IFC, the contractor has a right to refer any dispute to adjudication (unless the relevant clause has been omitted).

My suggestion is to have a meeting with your Architect and discuss your concerns. Your Architect is well experienced and should be able to explain how and why the costs have been evaluated. However, it is vital that you do not attempt to interfere or influence the Architect otherwise this could be considered a repudiatory breach of contract, which would allow the builder to accept the breach, bring his employment under the Contract to an end and pursue you for damages.

I wish you good luck with your project.
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Automatically Renewable Contract

By | Problem Solved

The article below illustrates how a person, acting in the course of their business, can easily get caught by an automatically renewable contract. For information on possible arguments to end an automatically renewable contract please see John Cato’s article “What can your company do if you have signed up to a contract which automatically renews itself?”

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I am the Managing Director of a small building company and just over 2 years ago I agreed with a national health and safety company for it to provide a health and safety service to my company. The contract was for 2 years, with a set [and expensive] yearly fee. When I signed the contract, I thought that my company was going to get a bespoke service and the sites would receive individual attention. However, the service that was actually supplied was nothing like I thought I had signed up for!

On closer inspection of the contract, the service provided was what I signed for (the written terms are cleverly written), and I fully acknowledge that my company is liable for 2 years of fees. However, in September I received an invoice from the H&S company which invoiced for a third consecutive year. I wrote back stating that the agreement was for only 2 years which had an end date of 30 September 2015. They responded by referring to a clause in the contract, stating that we had agreed to roll-over the contract for a further 2 years, unless we terminated the contract by giving six months written notice by recorded delivery – surely this is not legal?

Name and address withheld
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You have entered into an auto-renewal contract, which over the years has become very popular from a service provider, especially large corporations; why? Simply because it is a very successful technique that retains customers and produces profit.

Auto-renewal in business-to-consumer contracts is well regulated. There are various acts and regulations that give protection to the consumer such as the Unfair Contract Terms Act 1977 (“UCTA”), the Unfair Terms in Consumer Contract Regulations 1999 and the Distance Selling Regulations. In addition, certain contracts that involve the supply of energy have outlawed auto-renewal terms.

Unfortunately, an auto-renewal term in in business-to-business contract is valid. In b2b contracts, businesses are assumed to be free to enter into whatever contracts they agree between themselves (there is no relief from a hard bargain), so it is imperative that a business ensures it is happy with the terms of a particular contract – the law considers that businesses are in a position to decide whether it wishes to enter into a contract on the terms presented or not. That said, some parts of UCTA do apply to B2B contracts, although despite its name, UCTA does not apply to unfair terms per se, but affects clauses which limit liability, or have a similar effect (i.e. it is only concerned with exclusion clauses and does not examine whether a contract is unfair generally). For example, where a contract excludes liability for death or injury which will be void, and reference is made to sections 6 & 7 (contractual performance), section 8 (misrepresentation) and section 13 (restriction of contractual remedies).

The only ways that you could possibly bring the contract to a premature end is by mutual agreement or the H&S company commits a serious enough breach of a condition which would entitle you to bring the contract to an end.

There is one other possibility and that is under UCTA. If there are any terms varied over what would allow the H&S company to render a contractual performance substantially different from that which was reasonably expected of it, it would thus be subject to the reasonableness test under section 3(2)(b)(i) of UCTA. For example, if there was a specific service that was only required from the outset and that the omission of this service from the auto-renewal contract renders performance to be substantially different.

Failing that, I can only suggest that you now give notice of termination – and ensure you send it by recorded delivery.
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Judgement in Default

By | Problem Solved
[ultimate_heading main_heading=”Problem” main_heading_color=”#101010″ sub_heading_color=”#666666″ alignment=”left” main_heading_font_size=”desktop:18px;” margin_design_tab_text=”” main_heading_margin=”margin-bottom:15px;” sub_heading_font_size=”desktop:13px;” sub_heading_line_height=”desktop:20px;”]I am the Company Secretary for a main contractor and hope that you may be able to assist with a problem. I am not quite sure how we got into this situation, but we have just received through the post a Judgement against us.

Early in 2015, we were working on a retail development in Leicester, and had just engaged a painting contractor. At the time, the project was due for completion in July 2015, but it ended up being delayed by 9 weeks. The delay was solely the fault of the painting contractor, and we set-off a sum of monies against the painting contractor’s account for the cost of the delay, including liquidated damages.

In December 2015, we received a claim via the Court from the painting contractor. The claim was for the monies that was unpaid on its invoices, but made no allowance for the cost of the delay. We filed an acknowledgement of service but, due to an oversight, we did not file a defence and / or counterclaim. Do we have to pay the judgement now?

Kim, Kibworth[/ultimate_heading][ultimate_heading main_heading=”Response” main_heading_color=”#101010″ sub_heading_color=”#666666″ alignment=”left” main_heading_font_size=”desktop:18px;” margin_design_tab_text=”” main_heading_margin=”margin-bottom:15px;” sub_heading_font_size=”desktop:13px;” sub_heading_line_height=”desktop:20px;”]Hello Kim. The judgement that you received is known as a judgement in default. Essentially, the painting contractor obtained the judgement in default of your company failing to file a defence and / or counterclaim. You are able to challenge this, but you must act quickly, showing the court that you acted once you became aware of the judgement.

You will need to make an application to the court to set aside (cancel) or vary the default judgement. Accompanying the application must be a witness statement (which sets out the supporting evidence) and a draft order (saying what you want the court to do). Your application must also outline what grounds you have to set aside the judgement.

There are mandatory and discretionary grounds. The mandatory grounds are found at Part 13.2 of the Civil Procedure Rules (“CPR”) and include where a defence has actually been filed, the defendant has made an application for the claim to be struck out or the whole of the claim has been satisfied before judgement was entered. The discretionary grounds include if the applicant can show that it has a real prospect of successfully defending the claim or, it appears to the court that there is some other good reason why the defendant should be allowed to defend the claim.

From your outline, the ground for making the application would be a discretionary one. However, you will have more of a chance of being successful with your application if you can show, via your witness statement, that you have a real prospect of defending the claim (ie, you have a defence). That said, from your outline, it appears that you do not have a defence but a counter-claim. If you are therefore unsuccessful with your application, you can always commence a new claim for the damages of the delay.

The possible outcomes are that a) the judgement is set aside; b) the application is refused; and c) the court makes a conditional order. A conditional order will usually be made if, for example, the application was made late but the court is satisfied that there is a bona fide defence, and the applicant will be made to pay the amount of the judgement into court.

Also you must remember that if your application is not successful, you will be responsible for paying the other side its costs.

© Michael P. Gerard
February 2016

The advice provided is intended to be of a general guide only and should not be viewed as providing a definitive legal analysis.

Author background

Michael is a Solicitor, Chartered Builder, Registered Construction Adjudicator & Accredited Expert in quantum and planning matters. He is Managing Director of Michael Gerard & Co., and a Director of Cato Solicitors.[/ultimate_heading]

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