Our client’s client hasn’t paid their bill so I haven’t been paid! What happens now?

Hi Aunty B,

We have rendered services to a client who then on-sold them to their client and the finished product did not meet our client’s (or their client’s) expectations.

Our client has told their client that they don’t have to pay and are now refusing to pay us for this bill. We have offered a 50% discount to alleviate some of the misunderstandings but they categorically refuse to accept anything other than a complete wipeout of the bill.

We explained that it was not their service to discount so whilst they can offer a 100% reduction to their client, they should not just expect us to do the same. What would stop them in the future from doing the same again???

I want them to pay and then take up the dispute legally or by presenting a case where we would feel that we were properly remunerated for the services that worked perfectly. Although at times when one item fails to work, the success of an entire event can hinge on this, that wasn’t the case on this occasion.

Can they just refuse to pay on the grounds that they did not receive the services as per their expectations and the onus is on me to recoup legally? Surely, they have no grounds until they actually pay for the services to try and get their money back?

Appreciate your advice…

All the best, 


Dear All the best,

Look, these types of legal disputes are at the heart of multimillion and billion dollar disputes across the country, particularly on major construction projects. But do you really want to go there?

Let’s look at your options. Legal advisor Peter Vitale says you can sue them for the price of the contract and they can sue you for damages for not delivering. The legal argument may end up being about what constitutes a “quantum meruit” or fair compensation for the parts of the contract that actually went OK.

The fact that they waived the charge voluntarily for their client (presumably because they managed to eke out a profit on other aspects of the work) may be galling to you, but you don’t have a contract with their customer. This may impact on their ability to claim they met their legal duty to do everything reasonable to minimise their loss.

But I doubt it will make much difference to the end result.

If I was you? At this point I would get your lawyers to send them letters demanding payment, but be prepared to make a commercial judgment when you get to the point where only the lawyers lived happily ever after.

You are better spending your time on making sure it doesn’t happen again.

In future, the best way to stop this is by:

  • not dealing with people who don’t pay their bills; or
  • asking for a deposit up front; or
  • only dealing with the end client; or
  • asking the end client to guarantee payment by direct contract (then you have two people to sue!)

No one likes knocking back work, but what’s the point if you know there’s a significant risk that you won’t get paid at all.

Be smart,

Your Aunty B

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