Here is a long story about getting stiffed by a client. If you're an independent consultant, it's worth taking the time to read it all the way to the end. If you're one of these people that is always on the lookout for ammunition to use against the current Liberal government of BC, it's worth reading the last page.
I hung out my shingle as a free-lancer over four years ago, and am always on the lookout for more clients. I responded to a notice in the van.jobs newsgroup for a PHP/MySQL programmer in February, 2004.
The ad was placed by Mark Pratley, who has a company called Coast Internet Publishing. When I got together with him, the story was that he had a client named Wayne Stripp, who had a company called Empery Software, and a product called Sales Sniper. Sales Sniper is advertised as a “contact management” program. A more accurate tag would be “tracking of email advertising campaigns”. It does email broadcasts, and tracks who has read the emails, and visits to advertised web sites. I wouldn't classify it as a spamming program, because there isn't anything in it to hide the identity or location of the sender, and a user of Sales Sniper is responsible for acquiring his own list of email addresses.
I worked up an itemized estimate of how much the improvements would cost. It was about two months of work, which, of course, Stripp wanted done a month ago. Pratley reduced the estimate a bit, a contract was signed, I got an advance for $805 (Pratley got an advance, too), and I started programming.
The biggest problem that came up at this stage was, although most of the product was written in PHP, there was also a Windows desktop program that the email broadcaster runs, that gives him real-time notification of when an email is read or a web site is accessed. This program was written in Visual Basic. When I told Stripp that I needed the VB source code to do any work on it, neither he nor Pratley had a very good idea of what I was talking about, but the bottom line was, the source code wasn't there. Pratley suggested disassembling the program, a technique that worked 20 years ago, but is no longer practical.
So, the program had to be written from scratch using C++ Builder; not a huge job, but this obviously blew the original estimate out the window. However, a much more serious problem soon manifested itself. I received another $500 from Pratley, which meant that I had received $1,305 for about $7,500 worth of work. I took the attitude that no more development would be happening until I started seeing money. This led to a conversation with Stripp, who said that Empery Software had given about $5,000 to Pratley, and he had pocketed most of it. Stripp said that I could cut a new deal with Empery Software, and I would get paid what I was owed.
The specifications I had been getting from Stripp were pretty good, and I thought this project could go somewhere, so I agreed to this, and received $1,500 from him at the end of April 2004.
It was after that when things started going seriously off the rails. I started putting some long hours into this project because of an upcoming demo that Stripp had told me about. I made a raft of changes that he requested, but when I asked him about keeping the financial commitment he made, I kept getting told, “tomorrow”, or “as soon as this big demo for investors happens.” The date for the “big demo” came and went, and still no money. I dropped this effort to spend time on clients who pay me. After a while, I sent Stripp an invoice by registered mail. The invoice was returned by Canada Post. It was time to go to small claims court.
The first couple of things I will tell you about
small claims court is, the maximum claim is $10,000. Part of the idea
of small claims court is to keep lawyers out of the process, and the
fact is, it isn't worthwhile for lawyers to be involved with amounts
of money this small. The Provincial Court of B.C. Provides some
useful pamphlets on small claims that can be obtained at your local
courthouse. You can even get them online at
http://www.ag.gov.bc.ca/courts/civil/smallclaims/index.htm.
Since I still needed some help with this, I phoned UBC's Law Students
Legal Advice program at (604) 822-5791. They set me up with Douglas
King. I met with him, and he reviewed the forms that I had picked up
at the local courthouse and filled in.
In addition to turning in the paperwork at the courthouse, it is your responsibility to “serve” the person or company you were trying to collect from. In this case, I was trying to collect from a registered company named Empery Software. In order to serve Empery Software, I had to determine their registered location. To do this, you have to go to a company that does corporate title searches, such as West Coast Title Search. You have to pay about $35 for this service.
The registered location of Empery Software turned out to be an accounting firm in Langley. This particular paperwork can be served by anyone, including yourself. I arranged for my son-in-law to do the servicing. When he did this job, I took a document certifying that the servicing had happened back to the courthouse.
What happens next at this point is, the defendant
has 14 days to respond to the claim. What often happens is, no
response takes place. In this case, you just apply for a default
order. (More on this later.) What happened instead was, on the
afternoon of the 13th day, I got a phone call from Gord
Martin.
Martin wanted me to meet with him for coffee, with the idea that this dispute could be settled. I met with him, and his story was that he had taken over Empery Software from Stripp. He said that his primary business was raising venture capital, and at the time, he had a site for it, raisingcapital.ca. I learned later that he is also in the business of buying lapsed domain names and re-selling them; you can read more about this at http://www.domainstate.com/showthread.php3?s=&threadid=50247. Although he operates this business as dropwizard.com, dropwizard.com itself is a lapsed domain. His inventory as of August 2005 included domains like accountpayables.com and bargainautomotive.com, but it also included some names like blackcocks.ca.
Anyway, what Martin proposed was to draw up a a new agreement that would pay about two-thirds of the money owed to me, but he also wanted some more work done on the project. I agreed to consider such an agreement. He sent it over a day or two later, and it was certainly the most unusual such document I've ever seen. It said that I would get paid $8,000 as capital becomes available. Well, my reaction to this is, “this guy must think I'm extremely stupid.” However, I showed it to Doug King. His suggestion was that, on balance, I had a better chance of collecting through an agreement like this as opposed to continuing through the small claims route. For one thing, having Martin's signature on such a document was a written acknowledgment that I was owed the money. So, I went back to Martin with the removal of the “when capital becomes available” phrase and some other changes suggested by King. We came up with a document that was mutually acceptable, and it was signed by both of us.
A couple of weeks later, I received the first of what was supposed to the three installments from Martin. It was $2,667.66. This was the only payment I got from him. Our agreement was that there were some things in Sales Sniper that were to be fixed after this first installment. I did this, working with Stripp. Then I waited for the rest of the money to come in. A 180-day deadline in the agreement came and went. A month after the 180 days had expired, I got a call from Martin, asking me to do some more work. I told him, “sure, as soon as you pay me the $5,332.34 plus interest that you owe me.” Martin didn't like this idea; his response was, “Do we have to come over and break both of your legs to get this done?”
I sent Martin an email
reminding him of the terms of our agreement, and asked him to pay up.
Then I made another trip to the local courthouse. The story I got
there was, they had never gotten any sort of response to my statement
of claim. Since the 14-day time limit had expired months ago, I could
apply to a judge for a default order. That's what I did. I had a
hearing in front of a judge on May 26, 2005. Nobody from Empery
Software showed up. I had my written and signed agreement with Martin
with me, but the judge didn't want to see it. Instead, he subtracted
the amount I had been paid from the $10,000 claim, and came up with a
judgment of $6,500. The judge concluded with this warning: “Your
battle is just beginning”.
Once you get a judgment, you can start taking steps to collect. You could send the debtor a letter along the lines of “you lost; pay up”. Given Martin's record so far, I didn't bother with this. Instead, I got a court date for a payment hearing. Since the corporate registration I had gotten a year earlier showed that Stripp was the sole director of Empery Software, I got the Dye & Durham Company to service him with a summons. This costs about $80, and, as with the notice of claim mentioned earlier, it's your job to make the servicing happen, not the court's.
The first payment hearing
took place on June 30, before Judge Alexander. Stripp showed up. He
acknowledged that I was owed the money for the work that I did, but
he couldn't speak for Empery Software because he was no longer a
director of the company. Since the corporate search I did was a year
old, I had no reason to dispute this, and the judge didn't ask for
any evidence from Stripp to support his statement. The session was
adjourned, and I got another court date for Sept. 26. I then went to
West Coast Title Search to determine who was now in charge of Empery
Software. Surprise: the title search showed that as of June 9, 2005,
the sole director was still Wayne Stripp.
I didn't see much point in hauling Stripp into court again to tell the same story. So, I wrote a letter to the judge with the result of the title search, and asked for direction from the court on what to do next. The letter resulted in a phone call from a court employee, who said, in so many words, “no, you can't do this”. The rules are, you can't present evidence to a judge unless it's done in court.
So, I contacted a local lawyer, Terry Hewitt, and spent some time with him. He had on-line access to corporate records, and learned that Empery Software had not filed any annual reports since the original registration in 2003. He took this to mean that Empery Software probably doesn't have any assets. If I want to collect anything, the best course of action is to try and locate assets, such as a bank account with money left in it.
At about the same time, I got a phone call from Stripp. I told him that he wouldn't have to show up in court on Sept. 26 if he could fax whatever documentation he had about the transfer of ownership to Hewitt's office. He said he would do this right away. I waited a couple of days, and no fax arrived. (It arrived about a week later.) So, I went to Dye & Durham, and arranged summonses to both Stripp and Martin.
When Sept. 26 arrived, Stripp showed up in court, and Martin didn't. Stripp was asked by Judge Alexander to testify under oath this time, and he entered as evidence some documents that showed that 4.5 million shares were transferred from him to Martin in August 2004, for a price of $1. After being given an affidavit of service from Dye & Durham proving that Martin had received the summons, Judge Alexander issued a warrant for Martin.
It turned out not to be
necessary to arrest Martin. Instead, he agreed to voluntarily appear
in court on October 17. He wasn't happy about it. There were seven
cases heard that morning. Ours was next-to-last, so he had to wait
more than two hours before our case came up. It's two bad that there
was only one spectator left in the court, because Martin was very
entertaining.
The presiding judge was Judge Hogan, who was a substitute judge from the Okanagan. Martin started off by threatening me with criminal charges over the warrant, but Judge Hogan patiently explained to him that the warrant came from a judge, not from me. Martin then threatened me with a counter-suit for $100,000, on the grounds that the software I wrote didn't work. Since Martin wasn't in court on June 30, he was perhaps unaware that Stripp had already admitted in court that the money was owed. I'm not holding my breath waiting for this counter-suit to happen; given Martin's track record, it's not likely that any lawyer in the Lower Mainland will do any work for him unless all costs are paid up front.
Martin also stated that he was unaware of the default hearing on May 26. He said that my original claim had been settled by the agreement we signed on August 25, 2004, and entered a copy of this agreement as evidence. Thanks, Gord.
It was then my turn to talk, and I immediately pointed out that the agreement that Martin just showed to the judge committed him, in writing, to pay me $8,000 plus interest, and he had paid only $2,667.66 of it. I also told the judge about the phone conversation that I had with Martin after the 180 days has expired, including the remark about breaking legs. (Martin immediately denied saying this.) I then read the first couple of sentences of the subsequent email that I sent to Martin asking him to pay up.
Martin asked to judge to remove the warrant from the court records, along with my statement about his leg-breaking threat. The judge wasn't having any of this. Unfortunately, the file he had on the case had very little information about the May 26 default hearing, and he gave some credence to Martin's claim that he didn't know about it. There was also some discussion of who, exactly, speaks for Empery Software. Martin claimed that there are actually 10 million shares out there for Empery Software, that Stripp still owns 15% of them, and that the president of Empery Software is Don Wilson, who is also involved with the National Credit Counsellors of Canada. What Judge Hogan decided to do was to bring this case back before Judge Alexander. Martin will have to appear again, but he is welcome to bring along anyone else who is willing to act on behalf of Empery Software. The date for this hearing hasn't been set yet.
This whole thing is an
experience in life that I could have done without. I made the mistake
of trusting people who simply cannot be trusted. I've written all
this down for the benefit of other independent consultants to help
them avoid the same problems. In that regard, the most important
piece of advice is, if you do work for a fly-by-night, insist that
any written agreements you make must be with them as individuals, not
as a company. If you don't do this, it's way too easy for them
to just strip the company of assets, then claim in court that there
are no assets to be turned over to you. If you make an agreement with
an individual, you have some options. You can get the court to
garnishee their wages, or seize their car or furniture. (It's legally
possible to seize real estate, but this is unusual for small claims
cases. The way it works is, the court can put a lien on the property,
but this won't actually be collected until the property changes
hands.)
It's also worth knowing about some changes that were made to the B.C. Business Corporations Act in 2003 by the Liberal government. One of the changes allows companies like Empery Software to waive the production and publication of financial statements, if there's a unanimous agreement of the shareholders to do this. Empery Software has obviously taken full advantage of this. The new Act also removed the requirement that at least one director of a company live in B.C., and that a majority of the directors live in Canada. There are now no residency requirements for directors at all. You've read about how difficult it was for me to get Empery Software into court. Imagine what it would have been like if these people lived in Hong Kong or Bermuda.
There are some additional provisions of the Business Corporations Act that make it pretty much a license to steal. I won't go into them here, but if you're interested, you can read an assessment by McCarthy Tétrault by clicking here. The changes didn't get much public attention at the time, but there is this former RCMP officer named Bruce Bowie who appeared on some talk radio shows (including Peter Warren's “Scam of the Month”) to warn people that the changes tie the hands of Revenue Canada, RCMP and those seeking civil restitution from accessing money/judgments/jail sentences from foreign registered companies. Bowie has a company called Investigative Solutions Inc. I don't have any creative ideas on what you can do about this, other than, if you're one of the people who has been burned, contact your MLA and the media.
