[LRUG] To be paid or not to be paid, that is the question (sort of)

[Paul Robinson]

On 7 Jan 2013, at 14:56, Andrew Stewart <boss at airbladesoftware.com> wrote:

> One of my customers, Customer A, has three months' unpaid invoices.  Customer A recently went into liquidation and their staff was employed by another company, Customer B.  The employees from Customer A who now work at Customer B are continuing to use their account in my webapp.


You need to be absolutely clear about this point.

Is the account that of the employees of Customer B, or is it Customer A's account?

If it's the employees' account, they are in default and you should pursue the matter accordingly. Explain to Customer B that whilst their employees' accounts were being paid for by Customer A, that situation can not continue and that their employees' accounts are in default. Insist on wanting to find a clear solution to this and don't do this in a way that is likely to make Customer B want to walk.

If it is Customer A's account, why on earth you are you still allowing access to it? The company is in administration and you should freeze the account and seek payment through the administrator, which although unlikely, as a creditor, you are entitled to *some* money if there are any assets being liquidated.


> Customer B is happy to pay invoices henceforward but they refuse to pay Customer A's invoices because they did not take over Customer A's liabilities.  


The question is whether this actually Customer A's liability or Customer B's employees'... the detail in this difference is considerable.

This however is a pointed lesson in why you should always get payment in advance of service where possible. There's no excuse for being stiffed on invoices, and you should be expecting monthly invoices paid in advance, ideally via recurring card payments or direct debit. Anything less, and you end up in horrible situations like this.


> I spoke to the administrator of Customer A's liquidation and they said that realistically there's no prospect of my unpaid invoices being paid out of the liquidation.


That's a very odd thing for the administrator to state. Was the basis of this that Customer A had no assets left? I find that hard to believe because they managed to appoint an administrator!

Even if there were just a few assets - laptops, desks, whatever - they should be sold and the monies distributed *equally* to all creditors. There is no such thing as a preferential creditor any more, and the law changed a few years ago to prevent HMRC being able to hoover up assets in lieu of unpaid tax like the bad old days where all other creditors were left out in the cold. 

You are entitled to cash.

Given it costs at least £5k minimum to appoint an administrator it would suggest there are assets within the company, and you should do this: https://www.gov.uk/register-creditor-bankruptcy

If the administrator did not tell you to do this, they have acted most unusually. Possibly even unlawfully.


> Here's my question: should I press Customer B for Customer A's unpaid invoices on the grounds that they are using an account which has unpaid invoices?  


Only if the account is actually Customer B's because the account is their employee's and there was some form of agreement that Customer A would pay for it for some reason.

Customer B has absolutely no responsibility for Customer A's liabilities. At all. Ever. Never, ever, ever.

If however the account belonged to the employees, then you're in a bit of a mess. I think the best way to get out of it is probably to keep their custom and don't rock the boat.

You should be pursuing Customer A's debts via the normal liquidation route however.


> After all Customer B may not have taken on Customer A's liabilities but they have taken on A's data.  Or should I let it go?


Customer B should not have access to Customer A's data. It's Customer A's, and you need to explain this to Customer B. If you have T&Cs that allow Customer B to make use of Customer A's data without Customer A's express permission, you have a very weird set of T&Cs! And if they are allowed to keep it for some reason, and wish to keep it, and it's data that was collected/entered during the time for which the invoices are unpaid, you might want to explain that given storage of that data has never been paid for you might need to remove that specific data.

But how you got into a situation where they are allowed to see that data is unclear to me. It seems like a bit of a mess - as well as sorting out your invoice runs in future, you also need to think about whose data belongs to who and how there needs to be a difference between a billable account belonging to a company (to which data belongs), and a user account that is allowed access to a customer's data - that way in future, it's explicitly clear how you handle this situation:

* Suspend access to Customer A's data
* Keep Customer B's account going
* Employees of Customer B who did have access to Customer A's data no longer do, but still have access to other data which they are entitled to see
* Customer A can then negotiate sale of data to Customer B if deemed a suitable/valuable transaction and once your invoices have been paid

Your existing model might mean there is no opportunity for Customer A to sell their data because the only buyer who would want it - Customer B - already has it. In that you have a potentially valuable asset of Customer A that is unsellable, your account model might actually be a *cause* of the insolvency!

One to think about anyway... Good luck!

Paul