Recovering money doesn’t necessarily involve civil litigation but is likely to do so if mediation is unsuccessful and the quality of arrangements and legal documents between the parties is less than ideal.
It is far better to manage “credit” with a discipline relevant to your industry, profession or trade. For example, Solicitors and law firms rarely give credit because we have learned the hard way, that it is almost impossible to recover money from a former client where the outcome of the services doesn’t warrant the cost of civil legal proceedings.
Unfortunately, the subcontracting and construction industry is rife with subcontractors being obliged to carry out work and wait indefinitely for payment.
The strongest message that we can give is that all subcontractors should have a financial limit for their work and disbursements, and to tell their head contractor or principal about this limit when entering into a subcontract. A subcontractor should rigidly adhere to this limit to protects his, her or its credibility with the head contractor or principal (and their bank balance). And of course, ensure it is in align with any legislative or authorities requirements.
Where the subcontractor doesn’t win the work because it has insisted on there being a limit to the amount of credit the subcontractor will provide, then the subcontractor is better off because it is far more likely than not that a head contractor or principal who isn’t prepared to adhere to the limit and pay on time will not do so. The result will be that the subcontractor will eventually be out of pocket for the cost of the initial work and all further work until such time as the subcontractor realises he, she or it will never be paid. It is at that time that the subcontractor realises the cost of civil legal proceedings is prohibitive and gives up its legitimate claims.
These lessons and disciplines take time to learn but once learned should be strictly adhered to, to ensure the financial viability of the subcontractor’s business and income.
If you need help with any of these matters, please contact Carley Ronan or Richard Holt for practical and timely advice.
Disclaimer: This advice is general in nature and is not intended to be legal advice. If you would like legal advice, please call our office on (07) 5619 0440 and we would be pleased to assist you.