The cheque’s not in the post: what happens when a client refuses to pay and then countersues?
January 27th, 2016
The latest in our ‘PR: What’s the worst that can happen?’ series – Hiscox customer Maria Boyle shares her experience of a client refusing to pay and then counter-suing.
A high-profile client, experiencing difficulties with an ex-employee which subsequently made headline news and tarnished their reputation, wanted to redress the negative media coverage already printed and get their side of the story across. So they turned to a highly-experienced and seasoned PR consultant for crisis communications help.
The PR consultant, having already worked for the client before, was asked to help manage the media circus and worked for them solely during a two-day intensive period. After the job was complete, the PR consultant invoiced for the work, but the client, despite repeated requests, refused to pay.
After eventually deciding to bring a fee claim in the small claims court, the PR consultant was then surprised to receive a counterclaim of alleged negligence from their client…
What happened next?
This was the unwelcome scenario that Maria Boyle, PR consultant and owner of MB Communications Ltd, found herself in last year. So, with the prospect of a court appearance looming, she contacted Hiscox, as her professional indemnity (PI) insurance provider, for advice and support.
“From very early on in running my own business, I’ve had professional indemnity cover but never thought I’d use it,” said Maria. “But then I had this issue over an unpaid invoice with the client in question who did not want to pay the invoice. I clearly outlined all the work conducted and they still refused. To try and settle matters quickly and amicably before having to refer this issue to lawyers, I even offered to reduce the invoice amount slightly. Although it wasn’t a business changing amount, I just wanted to get paid for the work I had done as per their instructions.”
The legal last resort
Maria initially tried to settle the case amicably but then pursued it through the small claims court when it was clear that she wasn’t going to be paid. “Before I filed the claim,” said Maria, “I contacted Hiscox. I wanted to get a steer as to when I should involve them and how they would support me.”
Hannah Newman, a solicitor for legal firm Triton Global Limited, was appointed by Hiscox to look after Maria’s case: “If this had purely been a claim for lost fees, Maria wouldn’t have been covered under the terms of her professional indemnity policy, but because she had received a counterclaim for alleged professional negligence, Hiscox could see that Maria’s case for fees was justified and was happy to defend her and support her in pursuing the fees she was owed. We see a lot of these types of claims when a client, for whatever reason, chooses not to pay fees and countersues.”
‘M’lud’ or should it be ‘your honour’?
The experience of attending court was slightly daunting for Maria, particularly as the case was held at the small claims court within the Royal Courts of Justice in London, but she was reassured by the support from Hannah’s legal team: “People can represent themselves,” said Maria, “but there is a whole process and formula to follow which makes it clear for the judge.” He was impressed with the way Maria presented herself in the witness box and had no doubt that the work she had done was to a high standard and that she was entitled to be paid for it.
Despite the case lasting most of the day due largely to the approach of the client who represented themselves in court, the judge found in Maria’s favour and awarded her the outstanding fees plus interest, travel expenses and her day rate capped.
“Having someone to help prepare the particulars of the claim is really important because it helped the judge understand the situation very quickly. If I’d attempted to do it myself, it would have taken a lot longer and impacted my day job and my business. That’s where you need specialist help and where Hiscox really helped.”
Advise your insurer early
“Counter legal claims often arise when businesses try to recover unpaid fees,” said Hannah. “I’d advise those in a position where a client refuses to pay legitimate fees to stand their ground and don’t be daunted if a client threatens to counterclaim. If you have professional indemnity insurance, you should let your insurer know at an early stage as they can help advise you on ways to prevent the matter going to court, or on preventing you prejudicing your position should the matter go to court.”
“It also helps to have a formal contract in place, or at least an email, before you start any job setting out the position on fees to try and minimise the likelihood of a problem.”
As for Maria, she’s glad to put the matter behind her: “Hannah and Hiscox were very supportive and diffused an emotionally charged situation. A lot of my fellow business owners and friends were surprised that I hadn’t had this problem earlier [non-payment of fees] as most businesses do have it at some point. You always expect your clients to operate like you operate in terms of paying bills on time for example, but some, albeit very rarely, aren’t like that which is disappointing to say the least.”
If you think your business, like Maria’s, could benefit from comprehensive indemnity cover, then check out our insurance FAQs. Find out if you need professional indemnity and get a start quote in the same day.
About MB Communications: Celebrating ten years in business
Maria Boyle set up MB Communications Ltd after leaving her post as a Board Director and Director of Media at public relations firm Hill & Knowlton. With a desire to run her own business and work with a range of interesting and high profile clients, MBCommunications Ltd was launched in 1996. This year, Maria will celebrate ten years, working with a range of large, international brands in London, Paris, New York and Hong Kong.
More details can be found at www.mbcomms.co.uk (external link)
Read more in our series ‘PR: What’s the worst that could happen?’