Reclaiming overpayment from builder on extension

steve589

Hi,

So we were about to pay the final bill for our extension, but then realised that the 5th of the 7 payments we made, included an overpayment of £20,000! This wasn’t spotted originally as the numbers in the invoice itself were correct; the issue is the payment from invoice 4 hadn’t been included in invoice 5. 

Setting aside us being rubbish for not realising this earlier, we can only deal with the future and the builder has confirmed in writing that they do indeed owe us £20,000 (they have actually had this additional money for 12 months)…

Anyway we have two questions now, as the builder has said they don’t have the money right now, as they have recently purchased a new plot of land, so will propose a ‘plan’ to pay us back. Something we are chasing up on but to date getting no response

Q1, if they don’t end up paying us back all (or any)?! Of the money, what are our rights? It’s clear they have overpaid, they have admitted to this in writing, but if we do not agree with their payment proposal, have we any legal recourse to challenge? Our concern is that we will be at the bottom of their list of people to pay, as they have a £20,000 interest free loan from us at the moment…

Q2, we want to use this money to pay off our mortgage. Setting aside the fact that they have used £20k of our money effectively as an interest free loan to support purchasing a new property, we do not accept continuing to lose money, so do we have a legal claim
for continuing lost funds? Paying £20k off our mortgage now results in £106 savings each month. In the meantime, we are clearly losing money every day…

[Deleted User]

The next step would be to send a letter before action demanding immediate repayment but the danger will be how much legal costs will go and how long they drag it on for, plus how far you want to go e.g. taking it to the high courts, getting bailiffs in etc

You should seek a 30 minute free legal session with a solicitor who deals with this sort of area particularly if you are trying to claim  money on top

macman

Above the limit to use the small claims process unfortunately. 
First thing to do is send an LBA insisting on receipt of their proposed plan, in say 14 days, after which you will commence legal action. If they have already admitted liability in writing, then you've effectively won the case already.
Is the money owed by the limited company, or a sole trader?

steve589

So the money is owed by a limited company. After an email last week
saying they would put a plan together for repayment, despite us chasing up, no further reply has been received. We want to keep things as amicable as possible, but if we do not receive any reply by the end of today then we will send an LBA on Monday. 

One further question - What is an appropriate timescale to accept the repayment by? I did see 3 months mentioned in a separate article, for the repayment of unjust enrichment? I’m wondering if, when asking for their plan to repay, we should upfront request payment within a certain timeframe?

The reason for asking, is the builders have already indicated that they do not currently have the funds and of course they have our £20k as an interest free loan right now, so  they are very unlikely to be incentivised to pay this off in any rush…

lincroft1710

Steve, several points spring to mind.


You are dealing with a limited company who have taken your money and say they no longer have it  so if this is the case,  how are they going to be able to repay it? From your position it would be better for the company to get a loan, either directly or via the directors, to pay you off in one go.rather than in instalments (which may be late or tail off).


More worrying is if they dissolve the company, so you have no entity to sue. 7hey close "Weowesteve Builders Ltd" ans a few weeks later "Weowesteve Construction Ltd" appears,  a company which you have no claim against.


I would concentrate on getting just the £20,000 back and not worry about any interest etc. as adding to the debt could incentivise them to close the company.

steve589

Thanks for this feedback. I have also wondered about the company being dissolved, surely there remains a legal recourse though, companies shouldn’t be able to just close down every time they owe someone money and then be fine to pop up as a new company a few weeks later with the debt just disappeared?

regarding the repayments, I’ve looked at their accounts at companies house and they have had retained reserves of close to £100,000 the last couple of years and have a high cash flow, so even without taking out any loans, I would expect they should be receiving money soon. I’m not really sure it’s our problem though, where they get the funds from? Note, throughout the contract, if we didn’t pay each bill within 14 days we would be charged daily interest. Obviously there is nothing contractually in reverse, but this isn’t something I think we should just happily wait forever for.

lincroft1710

Only under a limited number of circumstances can a director be held liable for the debts of a dissolved company, and I don't think your case fits any of these. 


One important aspect you appear to be overlooking is that you are in no position to force anything. Even if you take the matter to court (which will take time and money) and obtain a favourable judgement, the company may still be allowed to pay you back in instalments. If they default on payments then sending in bailiffs or High Court Enforcement Officers may not get you your money as the company may not have assets which can be seized. 


I would suggest you politely remind them you haven't had an answer before you send an LBA. At the moment they are "on side", sending an LBA may make them decline to cooperate. 

macman

steve589 said:

Thanks for this feedback. I have also wondered about the company being dissolved, surely there remains a legal recourse though, companies shouldn’t be able to just close down every time they owe someone money and then be fine to pop up as a new company a few weeks later with the debt just disappeared?

regarding the repayments, I’ve looked at their accounts at companies house and they have had retained reserves of close to £100,000 the last couple of years and have a high cash flow, so even without taking out any loans, I would expect they should be receiving money soon. I’m not really sure it’s our problem though, where they get the funds from? Note, throughout the contract, if we didn’t pay each bill within 14 days we would be charged daily interest. Obviously there is nothing contractually in reverse, but this isn’t something I think we should just happily wait forever for.

Yes they can: that's the whole point of  a limited liability company. Obviously they can't illicitly dispose of assets of the company and then just declare it insolvent, but a company that fails to notice that it's received £20k that it wasn't owed is clearly chaotically run from a financial point of view, and may already be on the rocks anyway.
Many builders seem to work in a constant state of cashflow crisis and use an advance on the next job to finance the current one.
At the end of the day, unless the company has seizeable assets (plant, vehicles etc), then it's impossible to recover money that isn't there.
The best you can hope for is an agreement to pay a fixed monthly sum back  over an agreed timescale.

lincroft1710

macman said:

steve589 said:

Thanks for this feedback. I have also wondered about the company being dissolved, surely there remains a legal recourse though, companies shouldn’t be able to just close down every time they owe someone money and then be fine to pop up as a new company a few weeks later with the debt just disappeared?

regarding the repayments, I’ve looked at their accounts at companies house and they have had retained reserves of close to £100,000 the last couple of years and have a high cash flow, so even without taking out any loans, I would expect they should be receiving money soon. I’m not really sure it’s our problem though, where they get the funds from? Note, throughout the contract, if we didn’t pay each bill within 14 days we would be charged daily interest. Obviously there is nothing contractually in reverse, but this isn’t something I think we should just happily wait forever for.

but a company that fails to notice that it's received £20k that it wasn't owed is clearly chaotically run from a financial point of view
.

I wonder if the builder knew they shouldn't have received the £20K but decided to keep quiet and use it to their advantage until the OP realised he had overpaid

macman

Either way, it doesn't give me much confidence in the OP's prospects for recovery.

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