Can I sue the builder personally for breach of contract?

oandjakre

Needed help to initiate the pre-action protocol and resolve the dispute with a builder and advice whether we can sue the Builder personally instead of his Limited Company.

 

Available with us:

 

1. Written Contract made on Builder's Ltd Company Name

2. Proof of every payment made - Initially paid into the Builder's Ltd Company and after that we were forced to pay (under threats that he will stop work on site and sue us for non adherenace to the contract) on his perosnal Bank Account.

3. Proof of non / poor performance from builder - He has broked down entire house and not even one of the contracted jobs has been finished, and whatever is near completion is sub-standard.

4. Details of damages and persoanl losses incurred due to Builder's negligence - entire house is uninhabitable and we have to stay in old accomodation - this is causing us a loss of £800 per week in mortgage payments alone. Plus the unfinsihed work has caused major damage to the front yard, garage (where goods worth £10,000 have been stored, master bedroom & bathroom (persistent leak).

5. Details of alternative quotes for work that will need to be carried out due to incomplete jobs left (as per the contract) by the builder.

 

Gist: Initial payments were made to the Builder's Company account - which was then apparently was frozen due to some issues he had with the bank. We were then coerced to transfer the rest of the funds into his personal account under threats of stoppage of works and suing us for breach of contract. Which we fell for and received receipts of all payments from the builder's Limited company. We have paid over and above the contracted amount, but the builder is not coming to the site anymore - the property is entirely uninhabitable and there are leaks which are damaging 3 rooms. The builder is refusing to cooperate and has stopped answering the phone calls.

Your guidance  on this matter will be very helpful.

DullGreyGuy

What does your contract with them say? Did you include any clause in it making the directors of the company personally liable?

Your claim would be against the limited company. Who you paid the money to is generally broadly irrelevant from a contract law perspective... I could owe a prior client a load of money, I could ask you to pay them directly rather than pay my company and I just bounce it straight along. 

Obviously the risk of dealing with a small limited company is what funds it has to meet its liabilities or if it will just fold meaning you've spent more money and still dont get a resolution. 

tightauldgit

The short answer is no you can't sue an individual for breach of contract by their limited company (there's of course complications to that but that's the basic rule anyway)

With regards any claim your mortgage payments wouldn't be considered a loss in any case only, if anything, the interest portion. 

I'm sure paying money into the personal account is all kinds of wrong but I'm not quite sure what legal implications it would have - that's something as I'm sure you've learned now, that would be a major red flag.

bris

There is nothing wrong about paying into a personal account, the builder would have to account for it the LTD co accounts as drawings or dividends though. But that's between him and the tax man.

If theirs any assets in the LTD co? you could ask the courts to freeze the account until the case is settled.

oandjakre

I understand.

RE: Your claim would be against the limited company. Who you paid the money to is generally broadly irrelevant from a contract law perspective... I could owe a prior client a load of money, I could ask you to pay them directly rather than pay my company and I just bounce it straight along. 

Obviously the risk of dealing with a small limited company is what funds it has to meet its liabilities or if it will just fold meaning you've spent more money and still dont get a resolution.  Report Quote

=======> The Builder has entered the contract with his Limited Company as the Contractor. The contract states ' In providing the Services under this contract it is expressly agreed that the Contractor is acting as an independent contractor and not as an employee'.

It seems like a small fly by night limited company - so do not think it has any assets under it's wings. Easily foldable I guess.

oandjakre

Also, will the acts of the Builder getting money in his persoanl account not surmise to Wrongful Trading if it was done with the intention of folding the company and illicity redirecting the funds?

tightauldgit

bris said:

There is nothing wrong about paying into a personal account, the builder would have to account for it the LTD co accounts as drawings or dividends though. But that's between him and the tax man.

If theirs any assets in the LTD co? you could ask the courts to freeze the account until the case is settled.

The question would be WHY they want you to pay into a personal account. As I said, it's a red flag. HMRC advice is that there is a legal requirement to keep your business and personal finances separate as a LTD company and a LTD company cannot operate through a director's personal bank account. 

I'd also question if the Ltd company directors could say you haven't paid them, which you technically haven't, but that's probably more complicated. 

tightauldgit

oandjakre said:

Also, will the acts of the Builder getting money in his persoanl account not surmise to Wrongful Trading if it was done with the intention of folding the company and illicity redirecting the funds?

If he's diverted funds to his personal account in order for them not to show in the business accounts then yes he'd potentially be in trouble. Whether you would be able to go after him personally because of that i think really is a question for a solicitor rather than the forum. 

born_again

Have you checked companies house to see the company status?

oandjakre

Re: Have you checked companies house to see the company status?

===> Yes, Company number 14719840. Still live.

oandjakre

tightauldgit said:

bris said:

There is nothing wrong about paying into a personal account, the builder would have to account for it the LTD co accounts as drawings or dividends though. But that's between him and the tax man.

If theirs any assets in the LTD co? you could ask the courts to freeze the account until the case is settled.

The question would be WHY they want you to pay into a personal account. As I said, it's a red flag. HMRC advice is that there is a legal requirement to keep your business and personal finances separate as a LTD company and a LTD company cannot operate through a director's personal bank account. 

I'd also question if the Ltd company directors could say you haven't paid them, which you technically haven't, but that's probably more complicated. 

Typical Payment Procedure with the Contractor: We used to get an Invoice from his Limited Company for the 'work carried out on xyz week' - we used to transfer amount in his bussiness account initially and then his personal account  - this followed by a receipt of payment - again issued from his Limited Compnay.

We have all receipts and Invoices from his Limited Company (with the reducing balance mentioned from Actual contract value) against the payments we have made to his personal account. This would be proof enough for payments to his limited company I guess?

We had no intention of paying him in his perosnal account - as mentioned we were coerced into paying him in the personal account after we had already made payments over £10,000-£12,000 in his business account - at that point he had just left us with 2 options - either we transfer to his personal account or he moves his tradespeople from the site and sue us for not adhering to the contract. So the remaining £30,000 odd was transfered in his personal account in weekly payments against the Invoices he raised from his Limited Company Account.

Also, there was work carried out over and above the ones mentioned in the job pack in the contract - he said that work has to be carried out before he can start / finish the work in the job pack (contract). These jobs were not in the contract but we have paid in full through the bank (his personal account)  and these jobs too have been left unfinished. Can we sue him personally for this part of unfinished jobwork?