Claiming on PI Insurance/being sued
Discussion
I have a friend (no, really) who sold some project services to a client of his. Payments were made in phases, 50% at the start of each phase, 50% at the end.
This project began over 2 years ago and was supposed to take 3-6 months. Fast forward to this year and the customer finally got fed up, gave my friend 2 months back in January to complete the project or they wanted a refund. The project hasn't been delivered yet and what has been done, some fundamental decisions were taken that weren't ideal. The client is now requesting a refund.
To complicate matters, my friend has begun winding the company down (not literally with Companies House) as he wants to stop what the company is doing, go travelling for a few months and come back and focus on something else. Therefore there is little left in the company, in terms of money or assets, certainly not any money to provide a refund.
Can this be the basis of a PI insurance claim?
If not, does anyone have any advice on what would likely happen in a small claims court? There is some work that has been done, but it amounts to maybe 50% of the original agreed proposal.
This project began over 2 years ago and was supposed to take 3-6 months. Fast forward to this year and the customer finally got fed up, gave my friend 2 months back in January to complete the project or they wanted a refund. The project hasn't been delivered yet and what has been done, some fundamental decisions were taken that weren't ideal. The client is now requesting a refund.
To complicate matters, my friend has begun winding the company down (not literally with Companies House) as he wants to stop what the company is doing, go travelling for a few months and come back and focus on something else. Therefore there is little left in the company, in terms of money or assets, certainly not any money to provide a refund.
Can this be the basis of a PI insurance claim?
If not, does anyone have any advice on what would likely happen in a small claims court? There is some work that has been done, but it amounts to maybe 50% of the original agreed proposal.
A little bit of both. So there were three main elements to the project.
- Element 1 is the main item which is 80-90% completed but it's using a fundamental part that is not suitable for the requirements. Like using a diesel engine when the client wanted a car that is quiet and environmentally friendly. It will still power the car, but an electric engine should have been used.
- Element 2 just hasn't been done.
- Element 3, parts are done but it needs integrating with element 1. None of this integration is complete.
If he specified something fundamentally incorrect then it's possible his insurers will defend the claim and pay if necessary.
They won't pay up simply for him not doing the job.
If he thinks he has a potential PI issue he should inform his insurers ASAP as doing anything could prejudice his position.
They won't pay up simply for him not doing the job.
If he thinks he has a potential PI issue he should inform his insurers ASAP as doing anything could prejudice his position.
t. Seems to me like you pal has bitten off more than he could chew and having failed to deliver in full, despite being over 18 months late on what he has delivered, will deserve everything he gets. It sounds harsh, maybe, but put yourself in his clients shoes.
His PI insurers should be informed, as mentioned above, as soon as possible. He probably shouldn't go away as he will have lots to do to manage the claim. He is likely to be sued for a lot more than the original fee as there could be loss of business in the claim too. The client has to pay someone else to undo the work he has done and put them in the situation that they should have been when they instructed you pal to act for them.
He probably also needs to look very carefully at his next career move!
JM
His PI insurers should be informed, as mentioned above, as soon as possible. He probably shouldn't go away as he will have lots to do to manage the claim. He is likely to be sued for a lot more than the original fee as there could be loss of business in the claim too. The client has to pay someone else to undo the work he has done and put them in the situation that they should have been when they instructed you pal to act for them.
He probably also needs to look very carefully at his next career move!
JM
So, my involvement in this is that the client is now mine and I have committed to delivering this project as I have bought said friends brand and projects/clients (but not company).
Friend has offered to pay around 35% of the original project cost towards delivering the new project (which reduces new project cost by 25%).
Client is pushing for full refund, 50% in cash directly back to client and 50% to me for delivery of new project.
Original project cost was high four figures.
Friend has offered to pay around 35% of the original project cost towards delivering the new project (which reduces new project cost by 25%).
Client is pushing for full refund, 50% in cash directly back to client and 50% to me for delivery of new project.
Original project cost was high four figures.
jammy-git said:
So, my involvement in this is that the client is now mine and I have committed to delivering this project as I have bought said friends brand and projects/clients (but not company).
Friend has offered to pay around 35% of the original project cost towards delivering the new project (which reduces new project cost by 25%).
Client is pushing for full refund, 50% in cash directly back to client and 50% to me for delivery of new project.
Original project cost was high four figures.
It will depend how the purchase contract is worded.Friend has offered to pay around 35% of the original project cost towards delivering the new project (which reduces new project cost by 25%).
Client is pushing for full refund, 50% in cash directly back to client and 50% to me for delivery of new project.
Original project cost was high four figures.
Sounds messy.
jammy-git said:
So, my involvement in this is that the client is now mine and I have committed to delivering this project as I have bought said friends brand and projects/clients (but not company).
Friend has offered to pay around 35% of the original project cost towards delivering the new project (which reduces new project cost by 25%).
Client is pushing for full refund, 50% in cash directly back to client and 50% to me for delivery of new project.
Original project cost was high four figures.
It seems to me like the best way forward is for you to separate yourself (if possible) from whatever has gone on in the past. Let the client agree a sum with you for providing the service which delivers the project (as originally intended), bearing in mind that some of the work can presumably remain as it is, subject to being checked and signed off by you?Friend has offered to pay around 35% of the original project cost towards delivering the new project (which reduces new project cost by 25%).
Client is pushing for full refund, 50% in cash directly back to client and 50% to me for delivery of new project.
Original project cost was high four figures.
The client should then sue the backside off the numptie who didn't perform. You do the work to move the project forward; at a fixed cost and to completion, and the costs are then crystallised for the purposes of a claim (except for any other costs that may relate to business loss or interruption - these are not your concern and are a more difficult thing to estimate).
Keep clear of taking responsibility for what has gone on with the previous work, unless you feel 100% certain that it has been done and designed effectively. Also make sure that your contract with the client covers all bases, such as no guarantee for work done by others etc.
JM
Unless it’s a really small business, for under £10k, I can’t see them kicking up too much of a fuss for too long over this, especially if the other company closes.
If they are really small, I don’t see them ending up in court as they likely won’t be able to afford it.
I guess your risk is they screw you for the final payment.
If they are really small, I don’t see them ending up in court as they likely won’t be able to afford it.
I guess your risk is they screw you for the final payment.
Johnniem said:
It seems to me like the best way forward is for you to separate yourself (if possible) from whatever has gone on in the past. Let the client agree a sum with you for providing the service which delivers the project (as originally intended), bearing in mind that some of the work can presumably remain as it is, subject to being checked and signed off by you?
The client should then sue the backside off the numptie who didn't perform. You do the work to move the project forward; at a fixed cost and to completion, and the costs are then crystallised for the purposes of a claim (except for any other costs that may relate to business loss or interruption - these are not your concern and are a more difficult thing to estimate).
Keep clear of taking responsibility for what has gone on with the previous work, unless you feel 100% certain that it has been done and designed effectively. Also make sure that your contract with the client covers all bases, such as no guarantee for work done by others etc.
JM
This is pretty much what I've done. Given them a fixed cost for a new project. There's not really anything from the old stuff that can be re-used, mainly because element 2 is upgrading something they already have - which is something that have to do anyway, and by upgrading element 2 we can provide most of what they need from element 1 and 3 anyway.The client should then sue the backside off the numptie who didn't perform. You do the work to move the project forward; at a fixed cost and to completion, and the costs are then crystallised for the purposes of a claim (except for any other costs that may relate to business loss or interruption - these are not your concern and are a more difficult thing to estimate).
Keep clear of taking responsibility for what has gone on with the previous work, unless you feel 100% certain that it has been done and designed effectively. Also make sure that your contract with the client covers all bases, such as no guarantee for work done by others etc.
JM
The client knows I wasn't involved in the original project and they know exactly what has happened with tregards to the transfer of assets/clients.
Countdown said:
jammy-git said:
So, my involvement in this is that the client is now mine and I have committed to delivering this project as I have bought said friends brand and projects/clients (but not company).
That sounds a lot like "Phoenix"-ing. The Moose said:
Unless it’s a really small business, for under £10k, I can’t see them kicking up too much of a fuss for too long over this, especially if the other company closes.
If they are really small, I don’t see them ending up in court as they likely won’t be able to afford it.
I guess your risk is they screw you for the final payment.
The client has a very high six figure turnover. I believe this is partly motivated by principal, not just financial motivations.If they are really small, I don’t see them ending up in court as they likely won’t be able to afford it.
I guess your risk is they screw you for the final payment.
jammy-git said:
The Moose said:
Unless it’s a really small business, for under £10k, I can’t see them kicking up too much of a fuss for too long over this, especially if the other company closes.
If they are really small, I don’t see them ending up in court as they likely won’t be able to afford it.
I guess your risk is they screw you for the final payment.
The client has a very high six figure turnover. I believe this is partly motivated by principal, not just financial motivations.If they are really small, I don’t see them ending up in court as they likely won’t be able to afford it.
I guess your risk is they screw you for the final payment.
If it were me in this particular situation, I would wind up the company, give them a copy of the PI policy and tell them to have at it.
There's no point just throwing good money after bad. There's no point having a judgment against an entity that has no assets to pay you back! No matter how diametrically opposed your principals may be.
I agree and that's what I've told the client. They've mentioned about going after the director personally, but I believe the director has acted in good faith, he's just not technically experienced enough to know that the developers he put on the job weren't making the right decisions.
Since I'm mediating I've told the client that he can expect the director to liquidate the company if there is a judgement made against it and I've told the director to up his offer to save everyone the hassle of a court case. For such a relatively small amount of money (compared to going to court), a court case doesn't seem worth the bother.
Since I'm mediating I've told the client that he can expect the director to liquidate the company if there is a judgement made against it and I've told the director to up his offer to save everyone the hassle of a court case. For such a relatively small amount of money (compared to going to court), a court case doesn't seem worth the bother.
jammy-git said:
I agree and that's what I've told the client. They've mentioned about going after the director personally, but I believe the director has acted in good faith, he's just not technically experienced enough to know that the developers he put on the job weren't making the right decisions.
Since I'm mediating I've told the client that he can expect the director to liquidate the company if there is a judgement made against it and I've told the director to up his offer to save everyone the hassle of a court case. For such a relatively small amount of money (compared to going to court), a court case doesn't seem worth the bother.
If he has any kind of morals he'll use his 'holiday' money to pay what is owed and move on.Since I'm mediating I've told the client that he can expect the director to liquidate the company if there is a judgement made against it and I've told the director to up his offer to save everyone the hassle of a court case. For such a relatively small amount of money (compared to going to court), a court case doesn't seem worth the bother.
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