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Outstanding Debt

Nightmare Client

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I have a client who I have acted for over many years, I complete his and his wifes personal returns and they currently dont owe anything on their personal account. 

He however has two comapanies that i act for the first owes me approximately 8k. This company hasnt traded now for a couple of years so the debt is quite old. He has a second company which i am in the middle of completing the final accounts for. I have issued the accounts and a invoice for 2.5k. Several changes to the accounts due to invoices being brought in late and stories of sales being made on behalf of third parties we are still in the process of getting a set of accounts together that he is happy with.

The outstanding amount is large but despite not having the best (or any ) records he has always previously paid a large chunk of his account which has kept both me and him happy to continue on this basis.

The last couple of weeks however have been hard work and very time consuming due to the poor records and number of changes i have had to make it really has left me wondering if he is worth having as a client.

This morning I arrive at the office to find a letter from another accountant stating that they have been approached by him to act at his accountant. The letter makes no reference to the companies only him personally. At this point im really not sure I want to continue my work with the second comapany but I also would like to recover some of the debt. Any ideas or experience of which might be the best way for me to approach this one?

I have tried ringing him to clarify the situation but he is not answering my calls. excellent.

 

 

Jonathan

 

 

Replies (16)

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RLI
By lionofludesch
16th Oct 2017 11:30

I don't think you can resolve this without "clarifying" the situation.

If he continues to avoid you, you'll need to nudge him with a "Letter Before Action".

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By ireallyshouldknowthisbut
16th Oct 2017 11:43

I would stop work immediately, and work out what is going on.

If he doesn't return your calls, then you certainly don't want to be working for him.

Speak to the incoming accountant about his instructions, and state you cant do anything anyway as you have not have instruction from your client to release any data, and you are awaiting their call.

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By Red Leader
16th Oct 2017 11:54

Mate, the writing's on the wall in CAPITAL LETTERS. Letter Before Action NOW.

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By I'msorryIhaven'taclue
16th Oct 2017 11:55

Does your letter of engagement / contractual document(s) contain anything in the way of a director's personal guarantee for (i) Company #1 ; or (ii) Company #2?

If not, do you have anything within past correspondence between you and your client which might amount to an undertaking on his part to personally pay or guarantee his companies' fees?

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Replying to I'msorryIhaven'taclue:
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By jonibarnes
16th Oct 2017 12:37

Unfortunately not a great point/idea though and i may well be adding that into engagement letters from now on

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By I'msorryIhaven'taclue
16th Oct 2017 12:49

Ok, does Company 1 (that owes you £8k) have anything left in its pot? If so, get a statement emailed and posted (recorded delivery) to its registered office today.

I'd take the precaution of doing something similar with Company 2. The new accountant's regime might just have the director drawing down the remainder of the company's funds, and you need to pre-empt that by bringing into play the possibility that, were he to do so, he could be "defrauding" the company's (or companies') creditor (ie you).

Come to that, send a copy of such statements to the new accountant too (belt and braces to prevent the director denying he received any notice of the amounts owed to you).

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Replying to I'msorryIhaven'taclue:
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By thevaliant
17th Oct 2017 13:24

Personal guarantees are not something you can just slide into engagement letters.

They are a commitment by a third party (yes, yes, you may think a company owned by someone is basically the same, but they aren't) to guarantee the debts of another. There is no consideration by the third party, so there can be no contract. You need a DEED, and a witness.

That said, I've seen them before, and they've been used to get payment because the mere threat of them (people think they are enforceable - they're not) is enough.

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Replying to thevaliant:
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By legerman
18th Oct 2017 15:58

thevaliant wrote:

Personal guarantees are not something you can just slide into engagement letters.

They are a commitment by a third party (yes, yes, you may think a company owned by someone is basically the same, but they aren't) to guarantee the debts of another. There is no consideration by the third party, so there can be no contract. You need a DEED, and a witness.

That said, I've seen them before, and they've been used to get payment because the mere threat of them (people think they are enforceable - they're not) is enough.

I disagree. One of my (ex) clients signed a personal guarantee to a trade supplier. It was part of an application form and wasn't a separate deed. That's all she did, sign it. They completed the rest of it afterwards and got her name wrong. Never explained she had signed a personal guarantee and never advised her to seek legal advice. Later Company ran into difficulty and supplier wound the Company up. The suppliers then issued bankruptcy proceedings based on the PG and I acted as a McKenzie friend when we tried to get it set aside. Despite all this being explained to the judge she lost and the bankruptcy went ahead.

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By jonibarnes
16th Oct 2017 12:40

Thanks for the input, such a frustrating situation. To top it off just had the old manager in the office (who the owner has left in charge of the accounts) He brought with him a list of products that were taken off the shelves and used for the business! apparently these were recorded in the till as sales. Give me strength

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By jonibarnes
16th Oct 2017 12:43

oh and hes got these records going back three years! along with other products put through the till for another shop (which they did to increase foot-fall)

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Replying to jonibarnes:
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By I'msorryIhaven'taclue
16th Oct 2017 12:55

So is that indicative that you are to continue as the companies' accountant?

Late edit: You now have a pretext by which to email or visit the manager - ostensibly to clarify that new list - and drop off an up to date statement(s) of account.

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Replying to I'msorryIhaven'taclue:
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By jonibarnes
16th Oct 2017 13:42

Right now i am not sure I want to carry on as his accountant!

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Replying to jonibarnes:
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By I'msorryIhaven'taclue
16th Oct 2017 14:53

You should go through the motions of continuing to act for the company (even if you perform no further work, but put the company on "stop" until such time as your fees are paid up to date). Otherwise you won't be paid per se, and would even run the risk of a damages claim against you for not carrying out your side of the contract.

It's statement, then "stop" letter until paid £2,500 ; then go from there. You have to go through the motions of advising the company that it is they, not you, who have failed to perform their side of the contract (ie by not paying you); and that as a consequence you are halting work / resigning / asking for payment in advance.

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Replying to jonibarnes:
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By I'msorryIhaven'taclue
16th Oct 2017 15:17

Whoops - Duplicated Post

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By andy.partridge
16th Oct 2017 15:04

How does a company that hasn't traded for two years owe you £8k? This appears to be a problem that you have created by your own inertia.

Stop work now and make sure you have sent interim bills and up to date statements. Do no more work on this client unless this is resolved to your satisfaction.

Do not furnish the new accountants with information a) if you have not been given express authority by the client and b) pending a resolution of the financial situation. In the meantime if a) has been satisfied send the the new firm a courteous but brief letter diplomatically explaining why there might be a delay in providing information.

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By ohgoodgodno
17th Oct 2017 11:28

This does seem to be a situation largely of your own making

if you have fees outstanding of this value then why have you continued to work for this client??

from your post's this client sounds completely untrustworthy and it sounds like he's really mugged you off - they clearly don't value the work you have done or consider there to be working relationship in place

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