[Season 2] Ep 4: What to Do When Clients Don’t Pay

“I’ll pay you next month,” the client says. And then next month becomes next month and before you know it, a year has passed. Perhaps you eventually write it off as a loss and tell yourself it’s a lesson learned. But you don’t always have to do that.

In today’s episode, we talk to Justin Wong a super solopreneur who founded Write Handed Communications and Kinidia, a streaming platform featuring Malaysian movies. He shares his experiences of taking legal action against clients who delayed payment and refused to pay. Hopefully things never go this far with your client, but it helps to know that even if it does, you have options!  

Show Notes

Read more about the Small Claim Court and how to file a case at this PDF link.

Let us know what you think of this episode in the comments section! If you have any questions, ask away in this form.

Transcript

[Prologue]

Jean 00:01

I think it’s just good to know that there are things we can actually do.

Justin 00:04

At the end of the day, yes, you have rights. Someone doesn’t pay you, even if it’s like half not your fault, money owed is money owed, you know. So I waited until the money was in my bank. So it’s not just a word from finance, not just a acknowledgement or a receipt or anything like that. No, no, I got to see that number. Next station.

Sarah  00:33

Hi, there. It’s Sarah.

Jean  00:34

And Jeannette.

Sarah  00:35

And this is Solo Sync, a podcast for the curious solopreneur where we discover simple solutions to keep enjoying what we do together.

[Start]

Jean  00:43

So one thing that super annoying for me about freelancing is when clients don’t pay or they pay late. Over the years, I figured out some ways to deal with that, for example, taking an upfront payment, collecting a deposit and so on. When clients pay late, I’ve learned to be thick-skinned enough to keep hounding them for payment. And it’s a really painful process. And I try as far as I can to avoid it.

Sarah  01:06

I completely agree with you. To be honest, it sometimes isn’t something that I follow up with either because it gets tiring to keep asking, but what else can you do when nothing else works.

Jean  01:18

So what I’ve heard is that if the amount you’re owed is less than 5000 ringgit, you can go to the small claims court. The thing is, I’ve never done that, mostly because I’ve been quite lucky with clients so far, but partly also because I’m lazy. And I don’t even know where to begin to be honest

Sarah  01:38

I hear you.

Jean  01:39

But a few months ago, a friend Justin sent me a message about going to small claims court. And he really went through with it. So today he is going to be talking to us about his experience. Just a quick intro. Justin Wong is the founder of Write Handed Communications, a digital marketing and content creation company. He’s also the creator and producer of Kinidia, which I’m sure he’ll tell us more about during our chat today. Okay, hi Justin! Nice to have you with us here today. We’ve already told everyone that you’re going to be talking to us about your small claims court adventure.

Justin  02:12

Hi, good to be here.

Jean  02:13

Tell us about how that happened.

Justin  02:15

Okay, I guess everyone’s nightmare is when someone owes you money, and that person decides not to pay. So that’s why the justice system has this thing called a small claims court. Now this court is for pretty much almost any situation where someone owes you money. It doesn’t have to be a freelancer-client relationship, doesn’t have to be agency and client. It can be returning a defective product or landlord and tenant kind of relationships or like in pretty much almost any case that someone owes you money. And they handle cases up to 5000 ringgit of claims. And the beauty of it is that you don’t need a lawyer. Both you and the defendant.

Sarah 02:56

That’s super useful to know, lawyers cost a lot.

Jean  02:58

Because lawyers are the biggest hassle of like going to court, right?

Justin  03:02

It depends. Because in some situations, you will want to let your lawyer handle everything, you know, my house or whatever it is, just handle the paperwork for me, you know. But so in this case, you get to do all this without the help of a lawyer, and that will save you mone. You need to do the application procedure on your own. So here is how you do it. You ready for this?

Sarah 03:26

Go for it.

Justin  03:27

Okay, step one, you go to a magistrate court, you go to any magistrate court. You can go to either the KL one if your defendent is in KL, or you can go to the Shah Alam one, if your defendant is in Selangor. It doesn’t matter where you are based, it matters where your defendant is based. So in my case, it was it was for PJ, so that was fine. So I just had to go to the Shah Alam one. You cannot go to the PJ court because for some reason they don’t do this. So you have to go to the Shah Alam one. You go there, and then you pick up the form. And that form is really, really simple. You just need to fill out who you are, and who you’re claiming money from. So if it’s a company, it’s going to be name of company, registration number, address, phone number, plus the amount that you’re trying to get. That’s it. It’s a very simple form. And then, the procedure also asks for supporting documents. You put in things like a quotation, invoice. Or screencaps of the conversations that you had, whether it’s email or WhatsApp. It’s important that if you did some work for a client, it will be super helpful if you can get like black and white even back when the project was starting. Right. So at that moment, if you can get a in black and white that they say, “Oh, please start work”. That’s important. Because otherwise, they might have that wiggle room of saying that, “Oh, we didn’t ask you to start work. You just did it for us.”

Sarah  04:58

Yeah, good point.

Justin  04:59

I mean, that’s a very weak case. But you know, even the big agencies, you know, practice that line. Wait for the client to say, “Please start work.” So oh, yeah, sorry, I’ve glossed over my part. So in my case, why I did it right, in my particular case. So I did work for a client a couple of years ago. It’s really nothing. It was just 1000 bucks. But, you know, they delay me for so long. Weeks, and months and months, became a year. It came to a time when I’m like, “Okay, it’s not about the 1000 bucks. It’s more about the principle of it. I didn’t want them or anyone to disrespect my profession, you know?”

Sarah  05:37

Yeah. And just curious, has this happened before? Or was this the first time you decided to really take action?

Justin  05:44

That was the first time

Sarah  05:45

So this has happened before?

Justin  05:47

All my other clients have paid me eventually. All of them.

Sarah  05:51

So this was the first client that didn’t pay you?

Justin  05:54

Yes.

Sarah  05:55

Wow, don’t mess with Justin.

Justin  05:57

Don’t mess with me, man. At that point, I’m like, “Okay, this is a I saw it as a disrespect to freelancers and agencies and small agencies.” So I didn’t want them to be able to just think that they can just walk away. Yeah. So it’s not so much for the money. Just, you know, I didn’t want want that to happen to others. So if that can be a deterrent then I’ve done my job.

Jean  06:23

So you’re the superhero for all freelancers.

Justin  06:28

I am the night. I am justice. Yeah.

Sarah  06:32

So what happens next?

Justin  06:34

Okay, so I went into court, got my form, and I got my supporting documents as well. So on top of my supporting documents, of my quotation, my invoice, snapshots, I also wrote a cover letter, because I thought that will help the case. Right, and to clarify on what’s happening. So I just wrote like, there’s like no format, because I don’t think anyone asked for it. I just I just wrote it. And I so I, there’s no format, I just put in a block of text that says, I did so and so work for so and so company for this much. But at this date, but I haven’t been paid yet. And this is a list of attached documents. So this is for clarity purposes, I guess. So I did that. And so what you can do is prepare the supporting documents first and bring it to the court. And then when you get the form at the court, you fill in the form on the spot, and then you can submit on the spot.

Sarah  07:24

Okay, so you definitely have to do it in person. There’s no electronic way to do it.

Justin  07:28

No, not so far. No.

Sarah  07:30

Right. So you send me a form on the spot. And then how long do you have to wait for an answer? Or do you queue up on the spot?

Justin  07:37

Yeah, I queued up on the spot. Oh, wait a minute. Yeah, I got another form. I had to go home because when I looked it up, apparently they needed like four copies, like four sets of everything, four sets of the form and supporting documents. I went there twice. But the thing is, so that’s where the discrepancy lies because when I went there again, they only took one of my copies. So so I’m like, “What? I printed all this for nothing.” Anyways, that’s no problem. So yeah, I submitted one, then it goes into the system. And then I think I waited about a week. It’s pretty fast. So this is the important distinction here, right? When you submit that form and supporting documents, they will key it into their system. But that is not the point where they make a judgement. They’re just putting you in a system. That’s all at that point. And they will set a court date. I think, for me, it was a month plus from the time that I got the confirmation. You get a confirmation email. Okay, now, this is the fun part. This is the funnest part of the whole process. Okay, once you get a confirmation that you’ve received official documents through email, you will get a summons. Now you have to find a way to serve that summons to your client. There are two ways. Number one, you go to your client in person, hand over the summons to them, and then get them to sign a thing that says, okay, they received it. If your client and you are not good talking terms, they’re not going to sign right.

Sarah  09:08

I’m just picturing an episode of Suits right now. Where you coolly take that piece of paper out of your coat.

Justin  09:14

Yeah. And then the other guy will like throw it back in your face or something like that. Yeah. I think for them, it’s like subpoena. It’s just as good as handing it to them. It’s good enough, but, but for us, we need a signature.

Sarah  09:24

Okay. And the second one?

Justin  09:26

That’s why I think we should just opt for the second thing, which is registered post. You send it to them by mail, and then when they receive the mail, they don’t know what’s inside the envelope. So they’ll just open it and realise later. Yeah, so the way it works is that now because this is not your normal Poslaju, this is called AR. There’s a yellow card involved. What you do is you just go to any post office and then say you want AR, you want registered post and then when they deliver it to your client for you, the deliverer will require a signature, the yellow card, and then the yellow card will be sent back to you. And then that yellow card will be proof to the court that the summons is served.

Sarah  10:10

Oh, wow. Okay.

Justin  10:12

So that is key here. Because if you cannot serve the summons, then you have no case. You can’t sue them at all, because they’re not even aware of it, you know. So that’s just fair to them, I guess.

Jean  10:24

How long do you have to serve them the summons?

Justin  10:27

To do that? Well, the court date was a month plus away from the time they received the confirmation. So I have that amount of time.

Jean 10:37

Did you have to write the summons yourself? Or like it’s something you get from the court?

Justin  10:39

No, no, no, no, you just send them what they emailed you? Just print out what they emailed you. And then that has like a chop and everything already. So that’s, that will act as a summons. So what it is to say is, you know, please come to Court. Unfortunately, in my case, that part did not go through for me, because the company was going through some troubles. It became a problem when their company office was closed. No one was in the office, because why? The company’s in trouble. So therefore, there’s nobody in the office to receive the summons. So therefore, the summons was not served.

Sarah  11:17

Would you know what would take place next, if the summons was successfully served.

Justin  11:23

If it were served, basically, they will be summoned to court. And then you just need both parties need to show up on the court appointed date. Then when your number gets called. Yeah, then you get to speak with judge.

Sarah  11:37

I have I’m just curious. Earlier, we talked about how, just the attitude behind you coming to this point to make this decision. You knew that company was going through some financial difficulty. And you decided to go ahead with it anyway. Because you’re right, they need to settle their own problems, and you need to get paid for the work that you’ve done. But were there any other thoughts that went through your mind? Like, were you concerned about burning bridges? What kind of repercussions did you consider that this action of yours would take? I’m just guessing you probably didn’t have a really tight personal relationship with them to begin with right. It was just like a business transaction.

Justin  12:15

Yes. I didn’t know them prior to that.

Sarah  12:18

Jeannette and I, we’ve had experiences with clients that don’t pay. And I think it gets really sticky when you already have a personal relationship with them.

Justin  12:28

Yeah, it might be.

Sarah  12:30

And, and sometimes I wonder, you know, for freelancers, it’s either you have a personal relationship with your client and that makes it difficult for you to even consider bringing things like this to court. Or you’re just I would imagine, I would be really concerned maybe that the world is so small. And by doing this, people will talk, you know, I would think, oh, is one client going to tell another, “Oh, watch out for this person.” You know, that kind of thing? Like, what would you say to thoughts like that?

Justin  12:59

Well, in my case, I’d be happy for that conversation to take place. You know, if my client was, was telling other people, hey, that this guy had legal action against me Oh, did you pay him? No? There you go. So I’m, yes, happy for that conversation to happen.

Jean 13:16

They’re helping you do some filtering as well, right? Because clients who are likely to default will be like, “Oh, maybe I shouldn’t hire him.”

Justin  13:24

Well, there you go.

Sarah  13:25

Alright, I think we have a lot to learn. Well, I have a lot to learn from your confidence.

Justin  13:29

Well, yeah, again, I wasn’t close to them at all. It just came to a point where, you know, I didn’t want them to do the same thing to others. So I just want to use that as a deterrent.

Jean  13:40

What was it about the way they delayed your payment that made you think that “Oh, it’s the principle of it, and I need to take them to small claims court.”

Justin 13:48

It was the fact that they did not pay me even after two years. And the excuses that they gave me was, the company is having some troubles, which is not my responsibility. And yeah, so I just took this opportunity to do it. And then if anything, learned how to do it so that I can do it properly the next time around. But you know, even though it didn’t work out for me, for you, as long as you can get your the summons in the hands of your client, then you’ll be able to do that. The small claims court way of doing things. Now, I happen to have experienced yet another case where a different client of mine decided not to pay me for work that I’ve done. So this was different. This one was a different scope of work. This was a higher amount. And because of that I cannot use the small claims court because the small claims court can only number one, handle claims of up to 5000 ringgit or below and number two the small claims court can only help you as an individual, but for me, I did the job for my client as a company. Well, let me just talk about how that went down. First, let me preface this by saying that okay, I cannot go into the details. And number two, I am not a lawyer. This is not legal advice. Please call a lawyer.

Jean  14:01

Yeah, all we want to know is that it’s possible to win these cases.

Justin  15:30

Yes, it is possible. There is light at the end of the tunnel. So what happened to me, I did some work with this particular client, and it went all the way to the end, I submitted the final delivery based on what they asked for, and then after that they straight up didn’t want to pay me. It’s not a matter of, “Oh, I’ll pay soon, soon, soon” and soon became two years, three years, five years. No, no, no, no, that is not the case. These guys straight up said, “We don’t want to pay you.”

Jean  16:06

Oh, my God. That’s crazy.

Justin  16:08

Yeah, I can’t get into the details. But it is definitely not my fault. I know, it’s my biased opinion. But believe me. It’s not my fault. So because I know, objectively, that it’s not my fault that I decided to take the leap and call my lawyers to help. This is the first phase. This is probably not the term that lawyers are using – phases. But okay, it starts off with a letter of demand. So my lawyers helped me write a letter of demand to send to my client on my behalf to say that, “Hey, you owe my client this much money, please pay.” It’s just a letter and the client can respond in one of two ways. Number one, this is just a piece of paper, these people can’t make me do anything. Or number two, wow these guys mean business. Well, in my case, it was number one. So we moved on to phase two. What my lawyers did was to file a claim to the magistrate court, on this case, on my behalf, and in order to generate a summons to my client. Now, how these summons are served? As lawyers, they are able to do it and do it properly. As opposed to me doing it on my own in the first case. But what happened to me is that they got their own lawyers involved. And then that’s when they decided to pay.

Jean  17:50

Their lawyers must have told them to.

Justin  17:54

I would like to imagine that. I go to sleep at night and picture that scenario happening with their lawyers at the time saying that you got to pay this guy. Yes.

Jean  18:08

Were you intimidated at all when they got their lawyers involved?

Justin  18:12

No, because I found out about their lawyers involvement at the same time when I found out that they decided to pay.

Jean  18:18

I see.

Justin  18:20

Yeah, so in my head was like as per what you said, like, oh, it must be their advice to pay me then. So what happens after that is they said, Okay, we’ll pay you. We’re going to rush our finance department to process this as fast as possible. Please, please retract the case. Yeah. So that was important for them – for us to retract the case from the court. So I waited until the money is in my bank. So it’s not just a word from finance, not just an acknowledgement or a receipt or anything like that. Nope, nope, I got to see that number, on my bank. It’s in my hands, then then. Then only I’ll inform my client and lawyer and say, “Hey, I got paid. Thanks.” Yeah.

Jean  19:14

That’s amazing, man.

Justin  19:16

Yeah. So to add on to all that. Of course, I gotta pay my lawyer’s legal fees, and not just the legal fees, but also the court filing fees and things like that. So you have to ensure that the amount that you’re suing for is substantial enough.

Jean  19:35

I think it’s just good to know that there are things we can actually do.

Justi  19:39

At the end of the day, yes, you you have rights. Someone doesn’t pay you, even if it’s like half not your fault, which is but you know, money owed is money owed. You know the metaphor I like to use, the analogy I like to use is that you know, if you pay a contractor to build a shitty house but the shitty house is as per instructions. You know, you still you still gotta pay the contractor.

Jean  20:10

Yeah, totally man. Well, I’m glad that’s over for you. You’ve moved on to better things. I understand that you’re doing some exciting things now.

Justin  20:20

Yes, yes. So somewhere in the middle of last year, I had a little time on my hands and I stumbled upon an opportunity and I jumped on it. Long story short, I’m trying to give an opportunity for a Malaysian-made films to be exhibited online because there isn’t another avenue otherwise. Then I decided to jump in that I built it. I spent like weeks in my own cave coding the thing.

Jean  20:46

Wow.

Justin  20:47

And there it is. Kinidia. So it is a movie streaming platform featuring local films. And yes, if you want to check out some local films, or some recent films, some Afdlin Shauki films, please check out Kinidia.com.

Jean  21:01

Wow, amazing. You’re definitely one of those super solopreneurs that I really look up to.

Justin  21:08

That’s, that’s high praise coming from you, Jeannette.

Jean  21:11

Thank you so much for being with us here today and sharing your experience. I hope we have you on again sometime.

Justin  21:17

I’d be happy to come back. Yes, this is so much fun.

Jean  21:20

Thank you for listening today. Show notes for this episode will be on our website, http://www.solosync.xyz. If you’d like to get in touch with us for any reason – ask some questions, if you want to suggest some topic, feel free to drop us a line at hello@solosync.xyz.

Sarah  21:42

You can also follow us on Instagram for more updates too! Our handle is @solosyncpodcast.

Featured photo by Tingey Injury Law Firm on Unsplash