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Liquidation and the gothic kitchen gargoyle. Who pays?

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legal matters

After reading the sorry tale of my badly finished kitchen (aj 7.l0.99) you may be glad to hear that, following a short discussion about the relative merits of oil-based and water-based paint work in a kitchen environment and my producing, with a forensic flourish, a large, but nearly empty, tin of 'estate' emulsion with my name on it, the kitchen company agreed to repaint the cabinets with a wipe-clean finish.

If only this had been an end to it. So burdened were they, it seems, by the task of employing an out-of-work art student to spend a happy week rubbing down and finishing off the paint work, that the kitchen company promptly went into liquidation. The good news was that the work was nearly finished. Apart from some glaringly obvious omissions (such as no cork on the notice board) most of the snagging items were those things which can never really be sorted out to one's satisfaction, but will continue to annoy one, as one eats one's breakfast, for ever more.

The bad news was that along with the marble supplier and the kitchen fitter, the company had left the art student, and worse, the gargoyle girl (or should I say, the fiend female, the demon damsel, the wyvern woman...) unpaid. The kitchen, you will recall, is gothic in style, and, as the design developed it became clear that the parapet would be incomplete without some grotesquery. The unhappy couple are now in place, one poking its (pierced) tongue out at the other who (understandably) looks rather cross. As a sign of their efficacy, the baby burst into tears when he first saw them. But the talented woman who has shaped them from the very earth has not been paid for her efforts.

The kitchen company's suggestion that I pay her direct from the outstanding balance due to it, although flawless in terms of logic, in fact is very fraught. Most contracts are brought to an end by the liquidation or bankruptcy of one of the parties. No monies are payable until the contract has been completed, usually by another contractor, and the extra overcost of so doing reckoned up and deducted from sums otherwise due. So, point one, nothing is due to the company until the cork is on the notice board.

Secondly, shortly before it called in the liquidator, the company sent out a statement of account showing what sums would be due to the company on completion. This figure cannot be reduced by payments to anyone other than the company. The liquidator will be unmoved by my pleading that I have already paid a large chunk of the balance to a supplier. As far as he is concerned I might just as well have paid it to my next-door neighbour: importantly, I have not paid the company. So, point two, paying the sculptor will not prevent the liquidator from pursuing me for the whole balance unless the gargoyles are omitted from the contract.

Thirdly, the reason why paying suppliers direct is so difficult is because it is unfair. Everyone who is owed money by the company is now waiting in a queue to be paid. Some creditors, such as the Inland Revenue, come first and are paid in full before what ever is left over is divided between the remainder. Typically, creditors get twenty pence for every pound they are owed, if they are lucky. So, point three, by receiving a direct payment, a supplier would be jumping the queue.

Despite the undoubted correctness of all this, I would like to put the young sculptor and art student in funds for Christmas. In the meantime the moral of episode two of this unhappy tale is that suppliers can reduce their exposure to the consequences of insolvency if they are paid some money when the order is placed and include an express term in their contract that title in the goods is retained until full payment is received: better still, do what the arbitrators do with their awards, and do not let the goods out of your sight until you have been paid.

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