'We are prepared to pay the remaining sums due…'
So began the letter my Contractor Client received from his (former) agency last week. Let's look at what had happened:
He had worked through an agency for a client in the Netherlands. The client company was the Netherlands 'arm' of a multinational group. After his contract expired, he continued to work for the Client and invoice the Agency for another few months, until the project ended. Then, he took a new direct contract, doing different work, with a company in Finland, which happened to be another 'arm' of the same multinational.
At the point where I was brought into the picture, the agency had decided to claim that providing services to the Finnish company was in breach of a restriction in his contract; not content with the substantial amount of money they had already made whilst the Contractor has been working in the Netherlands, they had demanded that the Netherlands company make a further payment to them to compensate them for the Contractor's engagement by the Finnish company, and when their (now former!) client sent them away with fleas in their ears, they then refused to pay the Contractor's outstanding invoices (well over £10,000).
When I looked further into it, I found that the original contract contained nothing which might have operated to prevent the Contractor from providing services to anyone after it had ended; the Agency claimed that an extension to the contract (including a restriction) had been signed at the end of the original contract period, but when challenged to produce a signed copy of this they were unable to do so, and the unsigned 'soft' copy they came up with bore a file creation date and time only 2 hours before the mail sending it to my Client!
So under what contractual terms did the Contractor work during the extension? No extension had been sent by the agency to the Contractor, nothing had been signed by either party, and since both parties acquiesced in the Contractor continuing to work as if the original contract remained in force, those original terms were the only terms that could have continued to apply.
I also took the view that, even if the 'new' contract terms (remember these were unseen by the Contractor until after the extension had finished) had applied to the extension, the wording of the restriction in there would only have prevented the Contractor from providing services to a third party to whom his services had been supplied by the Client - even if the Courts had held the restriction enforceable, about which I have my doubts,. But since the Netherlands company had at no point ever supplied the Contractor's services to the Finnish company, his doing so afterwards could not possibly have been in breach of that term.
So essentially what we were faced with was bully-boy tactics from an agency, seeking to take advantage of the fact that it was big and the Contractor was small, making up rules as it went along, and claiming to be entitled to withhold from a Contractor a substantial amount of money which he had earned, on the basis of a 'restriction' which (1) was 'contained' in a contract that had never existed, and (2) even if it had applied, could not have operated so as to prevent what the Contractor had done.
We wrote to the agency, carefully and politely spelling out the legal position, and also making clear that even if they had been right to claim that the Contractor had been in breach of contract by working for the Finnish company, that did not give them any rights whatsoever to withhold money which had already been earned and had fallen due for payment.
We had no reply, although my client continued to get emails from the individual agent inviting him to agree to pay them some £3,500, 'so that they could then pay the balance'. Unsurprisingly, that was of no particular interest to my client, and so a few days later the company secretary of the agency received formal notice under the Companies Acts, making clear that unless payment was made in full and within a specified period, we would start winding up proceedings against the agency, on the grounds that their non-payment of this debt amounted to sufficient evidence of insolvency to justify winding them up.
That resulted in payment of all but £3,500 of the debt, together with a letter from the agency's in-house solicitor demanding that we ourselves withdraw the Companies Acts notice, because 'the debt was disputed'. Now it is clear that, had there been any genuine grounds for dispute, it would not have been appropriate to take these preliminary steps towards winding up. So we replied once more, and politely invited them to produce (1) a copy of the contract which they claimed the Contractor was in breach of, signed by him, and (2) some actual evidence that there had been a breach of the terms of that contract. Knowing, of course, that they would be unable to do either.
And that was the point at which they backed down and paid the balance. Mind you, they were still protesting that they had a right to retain the money!
I see a lot of bad behaviour on the part of some agencies. But I have to say that I found this agency's behaviour quite astonishing, to the point that I still feel some twinges of disappointment that, by paying, they prevented us from proceeding further to wind them up.
21st January 2000
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