Builder run off with the money - advice plz

Happened to a friend of mine last week. They paid a significant amount of money up front to a project manager to do some extension work to their house. The builders are part way through the job but have now disappeared with the cash. They are a registered co. at Companies House but may be filing for liquidation/administration (though nothing on Co House yet). My friends have reported them to the police to get a crime number, what else should they be doing? 

Ta. 

There is fvck all they can do other than try not to be such idiots next time around.

Harsh, but there it is.  If the company has gone bust, it has gone bust.

Write the cash off and look for someone else to come in...

What kind of lawyer are you catty?  this friend should be instructing Quinn Emanuel and Fountain court to mount a Quistclose trust claim excluding the funds from the insolvent estate.  Meanwhile pursue each director personally for fraud, all the economic torts including luring away another man's personal gentleman, habeaus corpus and piracy.

In what way have they been idiots? Builders won't start significant works without money up front. 

Yes, they will (if they are reputable builders).

You pay for materials up front (which are then left on site unless there is a bloody good reason not to) and pay them for their labour against progress (preferably certified by a PM/Architect).

They were recommended as a competent firm of builders/PM. This is on the South Coast. Money was paid up front for the work and materials, fairly usual I would have thought. 

So what I said then. They don't start work without money up front  

is there a paper invoice/quote?

sometimes if you are dealing with a cowboy firm that folds itself or name changes to dodge attention they will issue paperwork with the wrong name on it, if that is the case you have not contracted a company called Green builders trading as red builders but rather a sole trader/partnership called red builders, take that line against directors, summary judgment for money claim, tell the sheriffs to take the carpets, land registry charge, job's a good un without breaking the bank

lol @ builders starting without cash upfront.

I presume there is insurance you can take out against this sort of thing though.

As a customer it would be fair enough to pay say 5% of total quoted costs up front as float and sign of good faith, and then as DD says, only then pay at the end of each week against completed works.

If the builder isn't happy with that then they are probably cowboys.

Depressing, but familiar. I have done a few of these things, old house renovations and flipping mainly, and always use the same builders, tradespeople etc. who I have known personally for years. They are not going to go bust.

I wouldn't pick them out of the Yellow Pages or online.

Who recommended them to your mate.

 

Not a wind up and not paid full up front, but a good proportion of it and a lot of money. 

The on-site contractor recommended them and they had a good reputation. But they seem to have done a number on 3 or 4 people in the last month or two. 

 

The police will have zero interest. We had some people caught red-handed nicking tools off site (probably to assist the builder with an insurance job). Claimed a "mate" had told them to pick it up - insufficient evidence apparently.

In all likelihood they will protest that the money went on work and there was not enough money to complete the work. You will spend hours pursuing it, and in the end unless they are proper crooks they will not have cash. You will get a fraction back of what you have paid. I expect economic uncertainty means the e.g. 10 ongoing jobs they rely upon to maintain cashflow have turned into 5. If it makes you feel better you can try and hold the directors liable, pierce the corporate veil blah blah blah. My advice is that it will not make you feel any better. 

I don't understand this. The builder recommended a PM and then your friends paid a pile of money up front to that PM?  That is pretty weird and does sound like it may be actual fraud rather than them just going pop. What contract form was used? 

What sort of professional is the PM?  If they are an architect or surveyor you may have some sort of recourse to their professional indemnity insurance but them holding money due to the contractor is weird.

 

And on payment upfront more than 10% of total build cost upfront is madness unless maybe they are a big contractor with a genuine balance sheet, but even then...

 

If you paid by cash, then you have a claim (possibly Restitution/Ujust Enrichment or failing that, Breach of Contract) against the Project Manager as you have a contract with them (from the facts you've stated).

If you've paid by Bank Transfer, you can maybe get onto your bank to see if they can identify the destination bank details, this will be the party you would ordinarily go after

Good luck with piercing the corporate veil - unlikely to say the least.

> They paid a significant amount of money up front to a project manager to do some extension work to their house. The builders are part way through the job but have now disappeared with the cash.

 

So, just for clarity,

(i) your friends paid the cash to the PM,

(ii) who appointed (?) and passed on your friend's money on to the builder and

(iii) it is the builder appears to be going bump?

Who do your friends think they are in contract with for the actual physical building works?  

As diggers has pointed out, not enough facts here for legal analysis.   But in practice you just have to kiss the money goodbye and start again.   And it helps it to be so bloody silly as to pay a significant % upfront.  Maybe 5% plus materials which are kept on site.  

For clarity, and this is all second hand information that I got told at 6.30am FWIW, my friends appointed a builder from the recommendation of a friend. Having spoken to the guy who was going to be the on-site PM, a separate entity to the builder, he also recommended the builder. I believe that my friends paid one lump sum up front to the builder who has now progressed someway through the works. He then asked for a second lump sum and has now vanished, leaving behind a construction site. They have a contract in place but I haven't seen it. They paid the builder directly by bank transfer (rather than cash/credit card). 

I'm trying to help as much as I can but from a distance, just want to make sure we are doing as much as we can. 

 

You never pay for labour up front, only materials (and then only when they are delivered on site).  I suspect the Quistclose trust argument will get short shrift if they have robbed Peter to pay Paul (or more likely robbed everybody to pay themselves), but you never know.  It's worth a shot.

And if you friends have a bob or two, put an offer into the insolvency practitioner to assign the wrongful trading claims against the directors and then go after them personally. You need accounting information to be handed over to establish a prima facie case, but if you can get the cause assigned for a nominal sum, the threat alone may be enough to get the directors to do a deal 9although don't count on it).

What is a "significant amount"? Anything south of £50k and all this PgDL Trusts/Corporate law twaddle isn't going to help one iota unless the contractor is Handy Andy or Nick Knowles (sp?).

Can't see the wrongful trading thing being worthwhile (though it's an interesting idea, I didn't know insolvency practitioners could do that).

Steps to take:

1. Find the contract and do what you need to in order to be able to properly terminate for cause.  If it's a sensible contract your friends (or maybe their PM if the PM is acting as contract admin) can serve a notice for failure to make progress. After a period of time they should be able to serve a termination notice.

2. Get a couple of quotes to finish the work so your friends can assess the scale of their loss.  They can use a QS if they want, but most QS's don't want this type of work as its a ballsache and anyway a couple of quotes from other builders (and they are going to need another builder) should be easy enough to get.

3. Put a demand in and when they ignore it a letter before action.

4. When they don't pay put in a (slightly cheeky) statutory demand. 

5.  If nothing else you need to do all this so they or the administrator doesn't come along alleging some breach or that your friends owe them more money.  The big claim (backed up with some evidence) for breach will be enough to put them off.

6. Get their accounts from companies' house. It's probably a shell company for one or two guys doing one or two jobs at a time using sub-contractors in which case you are pretty much fvcked. If it's bigger then maybe, just maybe if they aren't actually bust yet, just struggling and you go in hard with a claim and a stat demand you might get some money out of them if they pay you first as the person shouting loudest (even though they probably shouldn't). 

Then get on with getting the house put back together and chalk it up to experience.

I speak from bitter experience here when I say that it won't be easy to find another builder to take it on and even harder to get them to give you sensible fixed price to finish.

It's over £50k. There is a ltd company registered at Co House but its only a year old with no accounts filed yet.