If you're working with clients either as a freelancer or an agency, you're going to have to deal with what happens when someone doesn't pay you what they owe. In July, I did some work for an agency. I completed the work, they agreed that it was of a high standard, and we launched the site. They said they would pay me next week... week after week. It never arrived. Eventually I had to take the situation to the small claims court. I thought it would be useful to write up my experiences for others who need to do the same.
The major advantage I had in this entire process was that there was no disagreement. I had lots of evidence from the client that they were happy with my work and would pay me. The only problem was that they didn't. You may not have quite as straight forward an experience if your client disputes the claim.
There are a couple of things that you need to do to stop yourself getting into this situation in the first place. 1: Use a contract. 2: Only hand over your work and launch websites after you've been paid (and number 3: Learn to say 'no' to bad jobs).
When I work with clients I usually take a deposit of 40% before starting any development work. This does a few things; it breaks up the payments so the client doesn't have one large bill, it gives me the funds I need to buy any licences for the project and it commits the client to the work. However, because the site needed building immediately, I decided not to insist on the deposit - it was only two days' work anyway (first mistake).
The second thing I always do with clients is to obtain a signed contract from them. You can see my terms of work here - these are also always accompanied by a proposal, which I tailor to each job. It's vital that you have any work you do in a written agreement.
Before you take someone to court, the Practice Direction on Pre-action Conduct suggests you write to the defendant stating why you're taking them to court, for how much, what evidence you intend to rely on, and give them a chance to respond. I used a template from the Which Consumer Rights website and filled in all the details. You can see the template I used here.
At this stage, you may receive the money you're owed immediately; often the threat of court action is enough to get someone to pay up. In my case though I didn't get a response within 14 days, so I took it to the next stage. To take someone to the small claims court, you need to register on the government website Money Claim Online - don't let the title put you off, it's legitimate (if unoriginal). It's also ugly and outdated, but at least it works.
I found the site really straightforward to use. Once you've registered, you just need to fill in a short summary of the claim, the defendant's details and how much you're claiming for. When I filed the claim it took me about 20 minutes in total. If the claim isn't disputed, you never need to write more than a few sentences about the whole claim.
You have to pay the initial court fees, but these are added onto the costs of the defendant (if you win). A lot of people I spoke to had been put off the idea of taking someone to court because they thought it would be expensive. I was claiming for £460, so I thought it was worth the £35 it cost to file a claim. The fees at time of writing are below.
|Does not exceed £300.00||£25.00|
|Exceeds £300.00 but does not exceed £500.00||£35.00|
|Exceeds £500.00 but does not exceed £1,000.00||£60.00|
|Exceeds £1,000.00 but does not exceed £1,500.00||£70.00|
|Exceeds £1,500.00 but does not exceed £3,000.00||
|Exceeds £3,000.00 but does not exceed £5,000.00||
|Exceeds £5,000.00 but does not exceed £15,000.00||
|Exceeds £15,000.00 but does not exceed £50,000.00||
|Exceeds £50,000.00 but does not exceed £100,000.00||
At this stage, the court will write to the defendant with the details telling them you've filed a claim and they will be given a chance to respond. Again, at this stage they might just pay you what they owe and you can drop the case (If they pay you in full at any stage of the claim, you must tell the court and the case is dropped).
In my case, I didn't get my money and I didn't get a response either. If this happens, you can request a 'judgement by default' from the court. The defendant may also choose to defend the claim, which is outside the scope of this article. Once a judgement is filed by the court, it's legally binding and the defendant is required to pay you.
At this stage, a County Court Judgement (CCJ) is served on the defendant. This means that for the next 6 years, this judgement will show up on their account every time they try to take out a loan - it significantly affects their credit report and ability to get credit. You can double check this is the case by searching the
Trust Online database for £4.
Once you've been awarded a judgement, the defendant is bound by law to pay you. You can wait further, or immediately choose to request a warrant. In layman's terms, this means debt collection bailiffs. I emailed my client out of courtesy to let them know that I would be giving them one more month to pay; after that I would file for a warrant. If they pay the court what they owe within a month, the CCJ is marked on their record as "Satisfied". If they don't, the CCJ stays on their record for 6 years.
I waited a month and I requested a warrant. Unfortunately I can't find the table of fees for the scale of how much it costs to hire the Court's debt collection service - the amount I was claiming was £495 by this stage, and the fee was £70, bringing the original total from £420 to £565. Debt collection fees are also added onto the amount collected, so once the fees are collected, you're not out of pocket.
It was at this stage that I finally heard from the client. They emailed to let me know that they'd received the notification from the court, and had arranged to make payment. I finally received a cheque from the court on December 22nd 2014.
The client in question who owed me money didn't actually argue with me. Right from the start they insisted they would pay, and that I'd been a great developer to work with. The only problem was that they didn't pay, repeatedly, and instead of asking for more time, pretended they were going to pay over and over again.
I was actually really impressed with how straightforward and simple it was to make a claim. If you're owed money, don't just roll over and drop the case. If you're working as a freelancer like me, it's important you're paid what you're worth. If anything in this article has helped, I'd love to hear about it in the comments!
Also, if you find yourself on the receiving end of a claim that you know you should be paying, do the sensible thing and pay immediately. My initial invoice was for £420. After a £40 late fee, £35 court fee and £70 bailiff fee, the final amount the client had to pay was £565; 25% more than the original invoice and a County Court Judgement!
Disclaimer: None of the above is legal advice. I am not a lawyer. This is just an article about some of the things I learnt from my first experience of using the small claims service. If you need more details on your rights or legal advice about what action to take, I suggest you contact a solicitor.