You the Unpaid Subcontractor

The story is heard more and more in South Africa, especially in the construction industry-

Your BEE score is definitely not even nearly right for you to be awarded the tender, but the contractor that did actually get it has given you your big break. You are now a subcontractor and in line for your slice of the pie...

Then comes the payday... or... it does not come...

You find out that your benefactor has already been paid by the government department that is his client, but he has conveniently forgotten to pay you.

So- what do you do?

Well... For many subcontractors the contract is still too big an opportunity to pass up and they stay on board- usually having received some promise of payment at a later stage or an arrangement with the client to pay them directly the next time.

Some wait for months on end for payment and pay their workers out of their pockets.

Others suffer huge losses and go out of business...

It is common knowledge by now that a large number of bidders who do get awarded tenders for government construction projects have absolutely no knowledge or experience of the work that they undertake to do. In cases like these the contractors rely on the expertise of their subcontractors to earn them the money that they pocket.

Some of these tenderpreneurs, however, care only about what the money paid by the Government can do for them and they have a habit of first spending this money on what they want before paying any of their business debts. This usually gets demonstrated very clearly and it is important from a legal point of view to take note hereof.

So- once you have found that your client, the Tenderpreneur or Government Contractor, has left you in the lurch- what can you do without involving the courts?

Well... the truth is- not much...

You may think that the signed undertaking to have the next payment go directly into your bank account instead of the main contractor's has solved the problem, but what you don't know is that the government department involved is not automatically bound by this arrangement between you and the Contractor- not even if that trusted contact at the government office is present when the arrangement has been made.

A government department's procurement and supply chain management policy is very strict about where public funds are to go during the course of a project and if your arrangement for direct payment is not approved by the government department in question you have a contractor that will defend himself with that the problem now lies between you and the Government and that trusted contact that stops answering your phone calls when the money does not come when it is expected.

So- you will most likely not get very far without an attorney when your mandator stops paying you.

So- what can your attorney do for you?

Here are the options that you can consider:


1. Business Rescue: 

No. Not for you! For the Mandator! Before this term had entered our law we used to have judicial management. Well- we still do, but it is called Business Rescue now. Not only the owner of a company, but also a creditor of such a company can approach the Court with an application for the company to be placed under Business Rescue when the creditor can demonstrate that the company has a steady enough cash flow, but that the money just does not go where it is supposed to, or, that the company does not have much of a cash flow, but that it SHALL improve if a competent person is placed in charge.


2. Anti-Dissipatory Order: 

You cannot get a garnishee order against an organ of state from your local Magistrates' Court. The High Court, however, can make sure that that retention money that is still lying with the government goes nowhere until the legal proceedings that you have instituted are finalised.


3. Winding- Up:

We may all know that winding-up is the automatic choice for a creditor when the debtor appears unable to pay his debts, but winding-up proceedings have another use as well.

Every now and then you find a crafty tenderpreneur who is the director of not just one company, but also a director of a couple of other companies, member of a close corporation or two or even a trustee or beneficiary of a family trust.

The moment you start looking for the money that was supposed to have come to you, you find that large amounts thereof have gone to all these different entities. A liquidator, however, is able to track down these lost funds and recover as much thereof as possible for the benefit of creditors.


4. Priovisional sentence:

Many learned colleagues can name a number of circumstances under which this remedy is appropriate. What these proceedings do is bypass the necessity of a full action procedure (which includes a trial) and jumps straight to the hearing of the matter. Instead of oral evidence, parties usually present their sides of the story in their affidavits and parties usually need not present oral evidence. Most of the time spent in court (besides waiting for the matter to get called, of course...) is spent on arguments presented by legal representatives of the parties. It is a much quicker way to get judgment in your favour than your normal action procedure that starts with a summons and that only reaches the trial stage after a lengthy process of exchanging all manners of paper.

Now- I have said that learned colleagues can name a number of circumstances under which you can apply for this relief, but I say your best bet is when you have the following:

1. A written acknowledgement by the debtor (who is of course the Mandadtor)

2. of the precise amount owed; 

3. that contains no conditions yet to be met by you (or which confirms that you have met all conditions for payment);

4. which can be a letter, email or a written undertaking to pay.


5. Action procedure:

This is really your last resort. This is your option when you have no such document that qualifies you for provisional sentence and your claim for payment is disputed.

Sure- it costs money and it takes time, but having proceedings like this on the court roll places you in a far better position than trying to phone people who have long since stopped answering your calls...


So- If you are a subcontractor that is experiencing non-payment by your mandator- don't just leave it to chance. Contact me and let us get something done about it!

Conspiracy Myth: You don't really need to appoint someone from out of town.

Every once in a while I get to chat with either a client of my own or some random stranger that feels the need to discuss his/ her case with me and end up hearing that they have appointed an attorney from out-of-town. If you live here in Mpumalanga you would usually hear about an attorney from Gauteng being appointed by a litigant here in your own area.

Now- I do admit that other reasons for this arrangement exist in some cases, but the one reason that I want to discuss is the following:

"Attorneys here in Nelspruit are all in each other's pockets and they arrange among themselves how matters are to be settled."

Well... hearing this does not sound so bad to me at first, but when clients start elaborating on what their problem with a situation like this, it becomes clear that some clients feel that we conspire against their best interests.

Apparently- not enough has been done to keep the public informed of how the different legal processes work and a statement of the above is usually the result of imagination filling the blanks to make up for what the clients do not see happening in their cases.

While I do everything in my power to ensure that clients' matters are handled in a transparent manner I still think it is necessary to bring the following to clients' attention:


1. We are colleagues, but not necessarily friends:

Believe me- with the amount of time that legal work takes out of your day there is not enough time to make friends. Sure- we have Attorneys' Association meetings once every quarter or so, but not all attorneys in my area show up for them.

And while we do maintain a fair level of collegiality amongst one another experience has taught us that no matter how nice any colleague may be at the meeting- his client comes first to him or her and you really have to be extra careful when litigating against any of them.

While we are normally very vocal about our victories in court there is a fair amount of defeats that we have also suffered against the very same colleagues with whom we are so civil.

As a practitioner whose been in this profession for a much shorter time than a number of my colleagues here in Mbombela I can also confirm that about only one out of twenty settlement proposals made by myself ever get accepted off the bat. Most of the cases I handle end up being litigious simply because the other side is unwilling to even consider what I have to say.

So- if you think that we meet in a bar and discuss who gets to win which case, you are seriously mistaken...


2. If matters really get settled out of court that easily it would actually be better for clients

While you might think it is a good sign to see attorneys battling it out at court the fact remains that litigation is risky and expensive. Sure- accepting a settlement may mean that you get less than what you actually want, but it puts an end to the stress and running up of legal costs right there and then.

I actually represent on a regular basis clients whose opponents try to litigate them out of pocket. Such opponents are never in a hurry to settle and think that they can bully you into accepting their terms just by dragging out the matter for as long as they can. The only solution is to structure bill payments according to the client's means and then do everything that is necessary to get a matter trial ready or otherwise ready to be finalised at court. In spite of all this it would still be much better if all this cost can be avoided by just settling out of court.


3. Litigation attorneys usually have a strong desire to win at all cost

Sure- they may deny it to your face, but I can't recall any litigious matter against any of my colleagues where I did not have to deal with some kind of clever strategy or cunning tactic to outwit me or my client. I guess that is just the way we are.


In any event- appointing an attorney from out of town is more expensive in the sense that it adds travelling costs and correspondent fees to your bill that would otherwise not have been there if had just supported one of the attorneys in your own town.