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!