Hi

I am looking for some help/advice regarding how to proceed with a CCJ I have obtained against a Limited Company I undertook some work for and have not been paid. The background is that a workmate and I are owed £2915 (total) from a one man band building company whose company address is registered at his Accountants. The CCJ is against the company at the Accountants address which obviously will not have any assets there belonging to the building company so there seems no point in sending bailiffs/sheriffs to that address to enforce the judgement. The owner of the building company made a personal promise (on his daughters life believe it or not) to pay us and has also confirmed that statement to 2 directors of the main contractor he was sub-contracting the work from. Can anyone advise how I can best proceed to recover the debt?

thanks

Welcome to CAG Colin.

I have moved your thread to the appropriate forum.

Regards

Andy

What kind of company are we talking about? Before you can enforce the judgment, you first need to identify assets belonging to the company - that can be a shop, bank account, equipment ...

The company is a formwork subcontractor that had only been up and running for less then a year with no company van, premises and very little equipemt or tools of any value, his wife was also the company secretary working from the home address. I do know he (the company) was paid in excess of the money owed to my workmate and I by the main contractor 2 months after we began chasing our money and just prior to the small claims process beginning but am sure this money is now long gone. I am not sure what other assets the company has if any, how would I find that out or even if say he has bought a car for personal use on the company?

OK. Do you know if he is still likely to receive payment from the main contractor? If so, you can think about a third party debt order.

No, that was his full and final payment from the main contractor. I have heard that the company is no longer trading/operating as that was his only contract of works/job and he himself is now back out working on the tools for other companies. Can he be held personally responsible in any way for this debt given his promise to pay, his his actions to avoid payment etc and the companies inability to pay/cover the debt?

Hi

 

I am looking for some help/advice regarding how to proceed with a CCJ I have obtained against a Limited Company I undertook some work for and have not been paid. The background is that a workmate and I are owed £2915 (total) from a one man band building company whose company address is registered at his Accountants. The CCJ is against the company at the Accountants address which obviously will not have any assets there belonging to the building company so there seems no point in sending bailiffs/sheriffs to that address to enforce the judgement. The owner of the building company made a personal promise (on his daughters life believe it or not) to pay us and has also confirmed that statement to 2 directors of the main contractor he was sub-contracting the work from. Can anyone advise how I can best proceed to recover the debt?

 

thanks

Speak to the court about this. You may be able to apply to the court for them to require the directors of the company to attend the court for a hearing about why they have so far not paid the CCJ. Whether this is an option against a limited company, I am not sure, even if the directors names were on the original claim.

This should really be in the legal section on CAG, as you want to know what options you have as bailiffs may not be the best option.

If you want this thread moved to the legal section click on the triangle and ask the site team to do this.

There are really three options here. The first option is to seek an order that he attend court for questioning about the company's assets. This adds pressure but may or may not get you anywhere.

The second option is to serve a statutory demand. This is free but it may be ignored if he doesn't care about the company being made insolvent. You can make the company insolvent and have a liquidator investigate its affairs, but that is an expensive business.

The third option is to try and claim against the director/shareholder personally. This is very difficult because you are supposed to claim against the company. If the company genuinely cannot pay because it is insolvent, you have no remedy. If he just paid the money to himself without paying creditors, that would be an unlawful dividend and you can try to have the payment reversed. The problem is that this kind of claim can only be pursued by a liquidator ... but you could perhaps have a go at pursuing the director personally using this, if you think there was an attempt to defraud creditors: http://www.legislation.gov.uk/ukpga/1986/45/section/423

Either way, I would start by getting a court order against the company and go from there.

You cannot sue on the basis of his verbal guarantees ... guarantees must be in signed writing to be legally enforceable.

The 'Judgement for the claimant' letter was sent to him on the 20 Aug 2014 ordering him to pay immediately but I was told to allow 28 days for any payment to be made. If he hasnt paid by then I will seek an order that he attend court for questioning about his assets and then try pursing him personally as that sounds like the best options. Thanks for all you advice, has been very helpful.

My thoughts too, UB.

Thread merged with the existing thread in Legal.

HB

The 'Judgement for the claimant' letter was sent to him on the 20 Aug 2014 ordering him to pay immediately but I was told to allow 28 days for any payment to be made. If he hasnt paid by then I will seek an order that he attend court for questioning about his assets and then try pursing him personally as that sounds like the best options. Thanks for all you advice, has been very helpful.

I did try to issue the claim against both the company and the director together but the court told me I could only issue the claim against one of the other. How do I go about naming the director seperately, would I need to start another claim completely or can I amend the exisitng claim to name him?

I did try to issue the claim against both the company and the director together but the court told me I could only issue the claim against one of the other. How do I go about naming the director seperately, would I need to start another claim completely or can I amend the exisitng claim to name him?

What is the basis of your new claim against him if he says "Wasn't me, was the company, and they already have a CCJ against the (now insolvent) company "

One of the reasons to have a limited company is the limited liability : you can only "pierce the corporate veil" to make an individual liable for the companies debts in extreme circumstances (as a previous poster had highlighted). Do you have a provable "personal guarantee" from the director? (This would be enforceable against the individual)

(I doubt a court would view a verbal promise " on his daughter's life" to be as binding as a signed personal guarantee!)

But as the director of the company if he is requested to attend court to prove the companies finances/assets etc, would I not be able to pursue him personally then if the companies bank accounts show the company was paid more then enough money to cover the debt long after the debt was owed. Would that not show he has personally attempted to defraud/avoid paying the debt as suggested in the earlier link by 'steampowered'?

But as the director of the company if he is requested to attend court to prove the companies finances/assets etc, would I not be able to pursue him personally then if the companies bank accounts show the company was paid more then enough money to cover the debt long after the debt was owed. Would that not show he has personally attempted to defraud/avoid paying the debt as suggested in the earlier link by 'steampowered'?

See SP's previous post.

Is the company dissolved??

He is only personally liable if he allowed the company to continue to trade while insolvent.

If, instead, he paid himself dividends in preference to other creditors before declaring the company insolvent, the route is to get a liquidator appointed and the dividends reversed.

This is complicated if the company had been dissolved, and if any dissolution occurred prior to the court claim being served. What were the timings?

Getting a liquidator appointed could be costly, and in the end : does he have resources worth going after?

If he has taken the money as dividend and dissipated it : no point in trying to get blood from a stone.

If he took dividend and spent it so that he is sitting on recoverable assets : it MIGHT be worth considering.

No, the company hasnt dissolved as yet but I expect its probably if not already in the process of then will be soon.

It starting to sound like it is a lost cause then with any chance, even slim at that going to cost a lot of money and even then I may still get nothing back. Why does the law allow people to get away with this??

No, the company hasnt dissolved as yet but I expect its probably if not already in the process of then will be soon.

 

It starting to sound like it is a lost cause then with any chance, even slim at that going to cost a lot of money and even then I may still get nothing back. Why does the law allow people to get away with this??

Because you could have protected yourself with a personal guarantee? Or obtaining security over company property ?

Because there are public policy reasons to allow limited liability, not to encourage cheating but to encourage entrepreneurship - otherwise many people wouldn't take the chance of setting up companies , and the economy would be dire (/ more dire, depending on your viewpoint)

Sadly personal guarantees are non-existant in this line/field of work, although we are deemed to be 'self employed' more for tax reasons then anything its no different then an employee not being paid by an employer, no employee asks for a guarantee that they will be paid when the start a job do they. I believe as an 'employee' though which I am not seen as one by the law/government, there is a fund to reclaim any lost earnings etc which makes this situation even more of a bitter pill to swallow. The irony is that I did work for this company once before and got paid without any problems on that occasion but unfortunately this time when he realised (after 2 weeks) that he had underpriced the job he walked away cutting his loses so to speak.

Surely this proves that limited companies/its directors are doing just that, using the public policy reason to cheat for their own benefit, they can take a gamble off the back of my hard work without any worry of it coming back to them personally, if they make money thats great for them but if they think they will lose money, pack up shop and dotn bother about paying those you owe because your safe, thats not fair. Sorry, rant over!!

What effect, if any will the CCJ against the company have on the director personally?

But as the director of the company if he is requested to attend court to prove the companies finances/assets etc, would I not be able to pursue him personally then if the companies bank accounts show the company was paid more then enough money to cover the debt long after the debt was owed. Would that not show he has personally attempted to defraud/avoid paying the debt as suggested in the earlier link by 'steampowered'?

The situation is not straightforward so allow me to break it down.

The law has a wide number of different protections against directors who seek to use the company structure to avoid payment. For example, companies are only allowed to pay a dividend to their shareholders if they have sufficient profits to do so. Another example, continuing to trade while insolvent is known as 'wrongful trading'. Another example, directors of insolvent companies essentially have a duty to act in the best interests of the company's creditors and they are personally liable for breach of this duty

The problem is that creditors do not have standing to bring any of the claims I have just described to you against a director. They can generally only be brought by a liquidator or administrator. This works fine in the case of a large-ish company with multiple creditors which has gone insolvent, and it will be easy for you to make the company declared insolvent and have a liquidator appointed. But realistically the liquidator will not want to act unless you agree to be liable for his fees, and the fees of the liquidator suing the director can easily exceed the 3k debt we are talking about. Unlike the Official Receiver who acts at public expense in individual bankruptcies, there is no publicly funded office which undertakes the work in company insolvencies.

There is one type of claim which creditors do have the right to bring against the direcftor personally. That is a transaction defrauding creditors as per the link I posted. You would essentially argue that the payment made by the company to its shareholders is an unlawful dividend contrary to a specific provision in the Companies Act 2006; and the Director did this with the specific fraudulent purpose of defrauding the company's creditors (i.e. you). The starting position is that the appropriate remedy would be for the transaction to be reversed and the remaining money split among the company's creditors, but if you seem to be the company's only creditor you ask the court to instead make an order that the director is personally liable to pay you the money directly without messing around with routing the money through the company. The court has the express power to do this under the legislation I linked. This aspect of the legislation is very powerful but actually not that well known and in my opinion underused.

It sounds like the route I suggested might be a possibility, but it is not a slam dunk and it will be more difficult if it seems that the company actually has other creditors.

Most people would just tell you to get legal advice, but if we are only talking about 3k, hiring a lawyer will eat up a big chunk of that. It is therefore an option to just give it a go through the small claims court. I will help you do this if you want but there is no guarantee of success.

What effect, if any will the CCJ against the company have on the director personally?

I think none.

I would be more then grateful for your help, to be honest I am a bit lost as this is obviously not a field I am familiar with so am unsure if the actions I am taking are right, wrong or a waste of time.

What action/steps do you recommend I should take next? As it stands, the 'Judgement for the claimant' has been sent out ordering that the debt be paid immediately. If he doesnt pay, should my next step be to seek an order that he attend court for questioning about the company's assets as you stated earlier, what if he doesnt attend?

You can apply for an order that he attend court for questioning about the company's assets using form N316A, available on the HMCTS website.

I would start with this. Applying is relatively painless and it can be pretty effective. Receiving a court order saying that he must attend court with the company's financial statements, and that he will be guilty of contempt of court if he does not, is quite intimidating to someone who is just tacking the mickey.

Ultimately, if he simply ignores the order to attend for questioning, there is not much you can do about it. In this situation you would need to think about whether you try to go down the road of having a liquidator appointed to investigate the company's affairs, or whether you want to have a go at suing him personally if you think you can persuade a judge that he fraudulently removed the money from the company and that you are the company's only significant creditor.

Note that none of this will help you if the company is genuinely insolvent ... all of the above only works if this is a case of him receiving money from the head contractor, paying it to himself and not paying you.

I have justed checked with Companies House and the company is still active and there are no notices in the London Gazette of any intent to close/wind-up or make the company insolvent.

I have completed the N316A form as you suggested requesting he attend court for questioning, hopefully as you said that will be enough to scare him.

Thanks again for all your help/advice, will keep you informed of any progress.

No worries, do let us know how you get on good or bad!

The 'order to attend court for questioning' is now with the process server which hopefully will be done within the next week sometime. The date of 'questioning' will take place on the 12 Nov 2014, so have a good few weeks to wait for that. I did speak to one of the court officers regarding what would happen if the defendant didnt turn up, the first order does state they will be in contempt of court if the dont attend. Should they not attend a second order will be issued informing then to attend otherwise the will be sent to prison and it even names the prison they will be sent to, thats got to be enough to scare anyone to attend surely!!

Am just wondering, is there anything I could be doing/preparing for when I get the information on the company accounts. When I do get them and they do show he had the money to pay us and has paid himself etc instead, how do I get a judge to see/agree with this and make a ruling in my favour?