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Self Employed IT Contractor – Recruitment Agency Withholding Payment - want to issue a court claim

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I applied to a job Ad from a Recruitment Agency (XYZ) to work for a big IT Consultancy firm (ABC). I got interviewed by ABC and got selected.


The job contract was signed between Myself and the XYZ.


I started the new contract with ABC on 12th September and they asked me to work for a Government client.


After 3 weeks of working, one day (3rd Oct) when I was at Gov client office, I overstayed and worked till 8.30pm and I was alone in the office after everybody left.


On 4th Oct, when I went to office as usual, Gov client asked me to leave their office immediately as I had breached their security.


I was on visitors badge and as per the rule I was not supposed to be alone and one of the regular badge holders should have been with me always. This was not briefed to me before I started at Gov office by the ABC or ABC staff instructed me leave the office on time.


On 5th Oct, ABC called to their office and informed me that they are not happy with my work performance and they are terminating the contract with immediate effect. They did not mention anything about incident happened at the Gov office. ABC said they would pay for all the work till date and additional 1 week for the notice period.


After the termination, I sent the invoice for the number of days worked to the XYZ.


On 17th Oct, I received letter from XYZ saying that,


The reason XYZ was unable to continue its contract with the Client (ABC) was due to the services not being performed by the Consultant Company (myself) to the required standard.


As a result of this breach XYZ has incurred losses, such losses amount to £xxxx.xx + VAT. In accordance with clause 3(f) and 10 of the contract, XZY shall deduct this sum from outstanding invoices.


I totally disagree with XYZ because,


- There is no defined performance standards or metrics mentioned in the contract

- When ABC is happy to pay for the work done and for the additional 1 week notice, XYZ should not have any hand in this.

- I don’t think ABC would have sent a letter to XYZ with the reason for terminating the contract


I won’t let XYZ to go ahead with their claims at any cost. They have provoked me with this unethical and unfair business practise and won’t let them carry on.


In responding to XYZ’s claim, I am including the following points in my letter:


- How am I responsible for the loss

- In what way I failed to perform the contract work

- How did they arrive at the cost


I need your help please to fight against this rogue XYZ agency and for them to pay the full amount for the work I did.


Please advice on how I can respond to XYZ claim.


Thank you


PS: I have extracted section 3(f) and 10 from the contract and shown below.


3 (f)

Whenever under this Contract or otherwise arising from the relationship between XYZ and the Consultant Company any sum of money shall be recoverable from or payable by the Consultant Company, the same may be deducted from any sum then due, or which thereafter may become due, to the Consultant Company under this Contract, or any other contract between XYZ and the Consultant Company (or any of its affiliates).


10 Indemnity

The Consultant Company shall indemnify and hold harmless XYZ against any and all claims costs expenses losses or damages whether direct or consequential arising from the Consultant Company's breach of any provision of this Contract including all administration costs and all claims costs expenses losses or damages arising from the negligence or acts or omissions of the Consultant Company or its employees agents or subcontractors.

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How were you paid ?. Via your own Ltd Company or via an Umbrella Company ?


i would of thought if its the former then this would be a civil dispute which you could just file a court claim, if the latter then it may involve the Employment Tribunal.


Do you know if you were in or outside of IR35 ?


Do you hold any liabilty insurance ? (I do IT contract roles and am required to hold liability insurance, obviously in case I cock up and blow up a server or something, not sure if it covers the "losses" alleged in your case)



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Hi Andy,


I operate via my Ltd Company.

I have PL insurance but it does not cover in this case.

I spoke to employment solicitor and they said it is a civil recover case and does not come under employment law as I am self employed.


I am just seeking help to write the first letter in response to the agency claim and to disagree that I don't accept that I under performed.

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The facts it would be a normal civil claim makes it easier, its easy to start a claim on MCOL online, should be about £25-£35 to start.


You need to send a Letter Before Action first to see if you can sort out the issues.. there is an example template here > https://www.citizensadvice.org.uk/law-and-courts/legal-system/taking-legal-action/small-claims/Problems-with-goods---letter-before-court-action/


The official court version of the Pre Action Protocol is here > https://www.justice.gov.uk/courts/procedure-rules/civil/pdf/protocols/debt-pap.pdf although it assumes its business suing individual so its not 100% relevant but best to try and roughly follow it.


You need to point out the money you are owed and ask them to explain how they incurred the alleged losses. Normally the Company will pay the Recruitment Agency (lets say £250 a day) and then they pay you (lets say £200 a day), so it could be the C hasnt paid RA but thats their problem..your contract is with RA.


Im just about to have a look through some of my contracts to see if they say anything about witholding money..its never happened to me *touch wood*



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  • 2 weeks later...

Hi Andy,


Thanks for your advise.


With help from friends and like you, I have written a letter to respond to the agency's claim.


Any suggestions would be greatly appreciated. Please let me know how do you find the letter.



XYZ Agency

Address 1st Line






Re: Contract number 12345



Dear Mr ABC,


I am writing in response to the letter from XYZ (Agency name) Dated 17th Oct 2018 regarding breach of contract by my company (name).


After discussing with you over the phone on 31st Oct and your offer to reduce the claim amount from £5000 to £2500 is looked into carefully.


As per my legal adviser and consideration, I cannot accept your offer and don’t take any responsibility for your claim i.e. service not being performed to the required standard by myself.


The reason for not agreeing to the claim is because, it is not specified;


- Why and what services are said to be below standards

- How am I responsible for the loss

- In what way I failed to perform the contract work below standard

- Do XYZ (agency) have written confirmation from the client stating that the work performed by myself was below standard

- How and where is the Standard stated, defined and measured as per the claim


With all due respect, I stand by what I have said and seek further clarification as per the above.


As the payment is past the due date, I would kindly request you to make the full payment for the two invoices totalling £xxxxx.xx immediately.


Failure to make the payment within the next two weeks, I would have no choice other than to make a legal claim for the payment.


Any cost associated with the legal claim and/or other costs associated or occurred towards claiming the invoice payment of £xxxxx.xx would have to be bearable by XYZ (agency).



Yours sincerely


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that's not a letter before action...


moved to the general legal section the experts are there in a greater number.

please don't hit Quote...just type we know what we said earlier..

DCA's view debtors as suckers, marks and mugs

NO DCA has ANY legal powers whatsoever on ANY debt no matter what it's Type

and they

are NOT and can NEVER  be BAILIFFS. even if a debt has been to court..

If everyone stopped blindly paying DCA's Tomorrow, their industry would collapse overnight... 

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That letter although good seems to be more of an explanation of your complaint than a Letter Before Action / Letter Before Claim.


I'm not an expert by any stretch of the imagination, However I have written a few LBA's before surrounding IT matters and there are some good examples out there on the Which website and CAB website too to look at. If it were me writing this I'd go for something along the lines of:


Dear Sirs,


Letter Before Claim


It is with regret that it seems we will not be able to resolve this matter amicably and that Legal Action will be necessary. This letters serves to comply with the Practice Direction on Pre Action Conduct.


Our claim consists of X Amount which we have calculated as the amount overdue from Invoices 1, 2 and 3 for work carried out under contract with you.


Delete if necessary

We are willing to consider mediation within this claim and would be happy to look into proposals for Alternative Dispute Resolution (ADR) in order to save Court Action being necessary. Please put forward any proposals for such actions for us to consider within this regard


We respectfully draw your attention to Paragraphs 15 and 16 of the Practice Direction to make you aware of the sanctions the Courts can impose on parties for failure to follow Directions, Including not responding to this Letter before Claim.


If we do not receive full payment or a response within 28 days, we will begin legal action in the County Courts without further notice to you.


Yours Sincerely


Having looked into this a bit further, I'm not sure how much you are suing for. I think from one of your posts it's £5,000 so your court fee through MCOL will be £185 as per - https://www.gov.uk/make-court-claim-for-money/court-fees


Should the defendants settle then you can insist they pay the costs of the claim form. If you are unlucky enough for this to go to a hearing, then you're going to be adding a further £355 - https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/728133/ex50-eng.pdf But this will payable by the defendant if you win the case.


Only you can decide if it's worth it, But if you do send the LBA then you MUST be willing to follow it up with a Court Claim if they still insist they are not going to pay.


If you wanted to charge interest on your invoices when you make the claim then I'd look at https://www.gov.uk/late-commercial-payments-interest-debt-recovery/charging-interest-commercial-debt


As you can charge a rate of 8.75% Annually (At the time of writing) if you wish. I'd add it into your LBA if that is your intention with something like.


Should a Court Claim need to be made, I will also be seeking interest under Late Payment of Commercial Debts (Amendment) Regulations 2018 at the current rate of 8.75% Annually


As this is a Business to Business matter, you should write anything as we, us etc rather than I, me


Good luck and let us know how you get on.

This is how I spend most of my life :ranger:

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Hi nuclearshark,


In summary,


The recruitment agency is withholding the payment. The client ended the contract stating that they are not happy with my performance (but other reason in my original post) and paid for the all work done plus one week additional for the notice period. The recruitment agency saying that they shall deduct from my payment because I breached the contract by not performing to the required standard and they incurred losses. Please advise what can be done to get my payment.


In the first stage, my intention at the moment is to write to them in response to their letter. Not to write threatening legal letter at first. I can ignore the letter I have drafted earlier.


There was some moment in this dispute, on 31st Oct, I had to speak to the agency's Finance Director regarding the payment, as he is the person claiming and holding the payment.


I took no responsibility for his claim regarding not performing to standards. After lengthy discussion, I refused to pay the agency claimed amount of £5000 and said I cannot give up and ready to flight.


The Director said he can consider waiving off some amount and came down to £3000. Still I disagreed and refused to pay £3000.


After some further talks, the Director said he can agree to £2500 and not less than this amount. He said I have to pay some amount towards their loss and cannot go without paying and asked what's my thoughts.


After some thinking, I agreed to pay £1000 and no more that. But the Director did not agree to £1000 and said he cannot accept this amount and he said £2500 is his finally amount.


So now, either I have accept to pay £2500 or respond to their initial claim.


I would like to respond instead of agreeing to pay £2500 or £1000. In my response to their claim, I would like to highlight the following points,


- Why and what services are said to be below standards

- How am I responsible for the loss

- In what way I failed to perform the contract work below standard

- Do XYZ (agency) have written confirmation from the client stating that the work performed by myself was below standard

- How and where is the Standard stated, defined and measured as per the claim


It would be of great help if you could please advise how I can write back to the agency covering the above points and/or if you think of any additional points.


If this fails or the agency responds to my letter instead of giving my full payment, then we have to take different course of action.


Thank you in anticipation

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