Man of Straw - Building Disputes
One of the most common reasons I am unable to take cases on has nothing to do with the legal merits of the case. Unfortunately, all too often the problem is that the proposed defendant does not have the means to pay even if we win the case. It’s always a big disappointment and sometimes hard to take.
A difficult situation
I had one such case this week. My prospective client had engaged a timber frame specialist to design, build and deliver a timber frame for their new cottage. Unfortunately, when the structure was brought over to the site it didn’t fit as the calculations were incorrect. The company’s workmen on the site tried to modify the frame . This was not a success and when the building regulations inspector visited he condemned the building as unsafe; the frame was not sturdy enough to hold up the construction. The whole building would have to be taken down, at great cost. The client came to us for help as specialist building dispute solicitors.
My initial optimism was dampened when enquiries revealed that the proposed defendant company was in financial difficulty. The company had 3 unpaid County Court Judgements against it, as well as applications to strike the company off. I had to explain to my client that the case could not get off the ground because the defendant did not have the means to pay even if my client won.
Can your building company afford to pay?
The sad fact was that my client had entered into a contract with a company who were unlikely to be able to pay out if things went wrong. It’s always worth checking the financial background of builders or suppliers, in case anything goes badly wrong. It’s one thing having a legal right to be compensated for breach of contract or negligence in a building dispute, but quite another to be able to enforce that right if the defendant is ‘a man of straw’ and can’t pay.
In addition to asking for references from recent clients, I would suggest asking for either proof of insurance or evidence of the company’s financial position. If you do business with a Limited Company, remember the company’s liabilities are limited to its assets and, if those are insufficient, it’s generally not possible to sue directors or shareholders individually.
A way to try and avoid the pitfalls of contracting with a company that hasn’t the means to pay compensation, is to obtain personal guarantees from directors of the company. Such personal guarantees need very careful wording and will only be enforceable if they comply with certain legal requirements. If you are looking to pay a company a considerable amount of money for its services, it is best practice to seek legal advice or the advice of another appropriate professional, before proceeding.
By Maria Kalirai
