Non payment of invoice - web development

[calibra]

I am an IT contractor with my own Ltd company.

I started building web software for a client 2.5 years ago (lets call it Product 1).

There was never any written contract between us.

 

I would go in every month, demo what I'd built in the previous month, discuss what my client wanted in the following month, and get an invoice paid for £3000.

As I already have other clients I work for during the day, I worked on the stuff on evenings and weekends.

It was extra income for my company, rather than my main income.

Product 1 has been live for over 2 years, and my client has many of his customers using it.

I'd go as far as to say the software is now the backbone of his company.

In April, he asked me if I wanted to form a new company to build a Product 2, loosely based on Product 1.

I agreed and did 12-18 hour days throughout May on Product 2 (and some Product 1) in May, for which he paid me the standard £3000.

I estimate that at my standard day rate I did 9-12k's worth of work that month.

That was the last invoice I got paid,

During June and July I received many phone calls and emails off both my client, members of his staff and even his customers requesting work, which I then did.

There must be over 100 emails during this period.

I put in a £3k invoice for June at the end of June, and was planning to invoice for July now.

The company never got created.

We had a disagreement on how the company would work regarding salaries.

He then told me he was going to form a new company building Product 2 with another IT consultant.

He agreed verbally at that point to pay my 3k per month for June and July and still use me for support and maintenance going forward.

Yesterday he told me he is no longer paying me for June and July.

He used a throwaway comment I made about "sometimes work ends up being quicker than it was estimated at".

I currently host both sites in my hosting account, although Product 1 is paid for by his company credit card.

Product 2 is paid by my credit card.

He has no access to the hosting environment.

He owns the domain names for both sites.

I sent him an email last night demanding payment for June and July.

I laid out everything I have said above, and stated at the bottom that if payment was not made, I would immediately stop support and maintenance of the sites, and take any other action I deemed fit (both software and otherwise), after legal advice.

Today I received a letter from his solicitor stating the his client disagreed with my account, and that the last paragraph constitutes blackmail under Section 21 of the Theft Act 1968.

That's a bit heavy.

I have done 2 months worth of work for no payment, been removed from the potential new company I did all the extra effort for, and am now being told I am blackmailing him.

In reality, if I do not get paid then MY company has losses.

Also, Product 2 hosting is being paid for with my credit card, and both products are reliant on external services that I also pay for.

The last paragraph is not blackmail, but simply me trying to avoid further losses by having to support and maintain a site and pay for external services without recompense from my client.

I am then thinking I need to tackle the situation in 2 different ways.

Firstly - the unpaid work - I can go through MCOL and use all the emails sent to me requesting m to do work through June and July as evidence.

Secondly

- what happens in future

- I can offer to zip up and export the sites to him for a fixed one-off fee, which will be at my day rate for the amount of work required.

He can then take this and give it to another developer to host, install, support and maintain, I don't think he realises that another developer picking it up will take months and cost him more to pay that other person that he owes me.

The other option I can give him is that I continue supporting it for a new negotiated monthly fee, and then his problems disappear.

I just want anyone's advice on whether I'm doing the right thing.

The blackmail thing concerns me, and I am up against a solicitor here.

If I explain that the statement was not blackmail but me avoiding my own future losses, will that be ok?

And if I give my client the options to pay me to export the site, or carry on supporting it myself for a new fee, then do you feel that would be seen as me being reasonable if it escalated?

[slick132]

Hi Calibra,

 

In para 4 above you say, "he asked me if I wanted to form a new company to build a Product 2".  Were you involved at all in the company itself like a director or employee, or just in helping him form HIS new company and assisting with IT?

 

This is a lesson for future clients - have a written contact setting out at least the basics of the arrangements with your clients including hourly, daily or monthly rates, the services you offer in return, etc.

 

Given the threat from the solicitor re blackmail, I hope others will comment but sol'rs can be very quick to make scary accusations on their client's behalf !

[calibra]

There is still no new company. It was an idea, and we discussed equity share etc. I did the work on the product based on that equity share. Once the work was done, he used it for his other company. And then decided to not form the new company with me after a disagreement.

 

I guess there's not much I can do about that. Just chalk it off. Even though I don't really understand why HE owns the software and not me? I put much more of my professional time into it than he paid me for it.

 

However, the June and July work - where him and his staff have asked me to do work via email, and there is evidence I have done that work, I am hoping that is something I am able to claim for via MCOL. The history of 2.5 years of work for him, all paid the same amount every month. Along with over 100 emails sent to me over the last 2 months. Surely a court wouldn't expect me to do that work for free?

 

Regarding the blackmail issue if anyone qualified is able to let me know where I stand I'd be very grateful.

Edited July 31, 2020 by calibra

[BankFodder]

I don't have much time to give a full response to this but in terms of the blackmail, you shouldn't worry. Blackmail requires at least the element of dishonesty and I'm amazed that frankly he has a solicitor who is prepared to make these kinds of threats.

 

apart from the fact that the way you describe things it says to me as if you were in a partnership and therefore you each own part of the general effort, I also find myself asking who owns the intellectual property in the work you created

[BankFodder]

you also haven't told us what the value is of this dispute. This is a very important factor to know. Although you could bring a county court claim it seems to me that from what I understand so far, that this could easily go beyond the scope of the small claims limit of £10,000 .

also I think the issue of who owns the intellectual property is extremely important and you may well find that you are holding a trump card that they don't yet understand.

I wouldn't start firing off letters yet until we have a full understanding of what is happening.

 

 

 

[BankFodder]

And finally, I hope you don't mind me saying that I find it rather reckless to be doing this kind of work of this kind of value without any kind of written agreement. Especially this kind of work.

[AndyOrch]

Topic moved to General Legal Issues Forum.

[BazzaS]

I’d be inclined to write saying that you have no intent to extract an unreasonable sum under duress, but that you are entitled to payment for the work you have done.

 

Ask them to set out, in writing:

a) what they believe you are owed for the work so far, and

b) the basis on which they intend to pay you for future work.

 

if they come back with something unreasonable (for either / both) you can point that out as the reason why you can’t do any further work, and that you are happy for a court to decide if the contractual dispute can’t be otherwise resolved.

[BankFodder]

once again, before firing off letters I would come back here and engage with this thread and let us know exactly what the situation is so that it can be properly discussed and understood