How do I avoid being stung by Phoenix company fraud?

[Ali]

Not sure I've got the right title to explain this, but how do you avoid doing business with companies that are here today and gone tomorrow, sometimes to find they have opened business with a new name?

It's a business lesson I have never learnt, and almost got stung by a supplier this year. By looking at their facilities and all their equipment I would never have thought they were struggling and literally just as I was about to start using them for some trade supply they went into administration only for the MD to go and "work" for another company registered 35miles away with different directors officially at the helm. The New business (the "newco") is pretty much identical in setup, even in the website but for a name change.

I know of another joinery business that one minute was ordering huge equipment, seemingly doing well only the next month to go into insolvency. The owner of the joinery business is still operating under a different business name so can work both ways.

I learnt a lot of business lessons from older guys who taught me to pay debts, try your hardest to be solvent and honest but don't understand how or why these guys seem to abuse the process and get away with it?

 

[Harbo]

It seems to be a common problem going by the many tv programmes featuring such frauds.
The law needs to be changed.

I got stung a few years ago by a builder I knew
I agreed to pay for materials when delivered, which I duly did when my garage became full of stuff. The same day the builder’s wife came to collect a cheque for £4K
The builder failed to turn up on the agreed start date but a representative of the builders merchant turned up demanding payment for the goods or the return of them. The builder hadn’t paid the supplier. I phoned the builder to be told by his wife that he was injured and in hospital.
Anyway to cut a long story short, my money had gone to pay the builder’s VAT bill and he had tried to commit suicide.
I never got my money back and several months later the builder actually succeeded in taking his life.


Rod

 

[doctor Bob]

Try and set up accounts and on 30 day terms.

 

[Newbie_Neil]

Hi Rod, if you had an invoice for the goods and you have paid for them, then they are yours. Even though the merchant hasn't been paid, you have good title.
Neil

 

[Phil Pascoe]

He didn't pay the merchant - he paid the builder, whom he thought was paying the merchant.

 

[Newbie_Neil]

He didn't pay the merchant - he paid the builder, whom he thought was paying the merchant.

Yes, I realise he paid the builder. But as long as he has an invoice for the goods, and he paid the invoice, then he has good title.

 

[Noel]

He didn't pay the merchant - he paid the builder, whom he thought was paying the merchant.

Yes, I realise he paid the builder. But as long as he has an invoice for the goods, and he paid the invoice, then he has good title.

Not sure that's correct Neil.
Got a delivery of oil the other day. Invoice put though the letterbox. Now if I met a guy in the pub next week who I vaguely know who said he'd drop the money in with the oil supplier next time he was passing and I gave him the funds, only to later find out he had gone straight to the bookies and blew the lot I've a bit of a feeling I'd still owe the oil man.

The invoice for the goods in Rod's case will have said that title does not pass until supplier is paid in full, which did not happen. The supplier was not paid. What should've happened is that the invoice should have been made out to the builder and delivery specified as Rod's place.

 

[Harbo]

I never got the invoice, the builder had ordered the materials with delivery to me. I wasn’t a party to that transaction I only took delivery.
Having received the goods I thought it was perfectly in order to pay the builder, I had no reason to think anything dodgy was about to take place. He’d done lots of work for my neighbours and had a good reputation.
When the builder eventually came out of hospital he offered to repay the money by carrying out any future works I might undertake free of charge, which I accepted. But sadly a few months later he drove off to Salisbury Plain and gassed himself in his car. Very sad, he was in his forties and left a wife and kids.

Rod

 

[Noel]

Hi Rod, was mainly replying to Neil and his comments on title etc.
Unfortunate turn of affairs with your late builder.

 

[Newbie_Neil]

Hi Noel,

He didn't pay the merchant - he paid the builder, whom he thought was paying the merchant.

Yes, I realise he paid the builder. But as long as he has an invoice for the goods, and he paid the invoice, then he has good title.

Not sure that's correct Neil.
Got a delivery of oil the other day. Invoice put though the letterbox. Now if I met a guy in the pub next week who I vaguely know who said he'd drop the money in with the oil supplier next time he was passing and I gave him the funds, only to later find out he had gone straight to the bookies and blew the lot I've a bit of a feeling I'd still owe the oil man.

The invoice for the goods in Rod's case will have said that title does not pass until supplier is paid in full, which did not happen. The supplier was not paid. What should've happened is that the invoice should have been made out to the builder and delivery specified as Rod's place.

Your example is not the situation that I was describing. If Rod had been invoiced for the goods, and paid the invoice, he would have good title irrespective of whether his supplier had paid for the goods.

As Rod only took delivery of the goods, he was not a party to the sale and therefore he does not have title to the goods.

Neil

 

[Noel]

Rod, if you ever need further legal advice, you know not to come here..: )

 

[Harbo]

I know that all too well Noel

What really got me is that I’ve had many years dealing with builders and contractors and I thought I was safe holding onto monies until the goods had been delivered.
I suppose the only sure way was to order and pay for the items direct or to pay on completion by way of stage payments. The latter is a bit hard on a small firm.

Rod

 

[marcros]

Or get a separate invoice from the builder for the materials and pay that invoice.

 

[Harbo]

Yes that would work too.

Rod