Dilemma 3:  Negotiating a contract claim - Answer

It is likely that the project manager and the project owner have both committed a criminal offence, in that the project manager has falsely claimed, on behalf of the project owner, that the defects were the contractor’s fault, with the intention of making a profit.  You have not personally been involved, and had no knowledge of this issue up until now, so it is very unlikely that at this moment you will be personally criminally liable.  However, if you now go into the meeting and endorse the false claim in the meeting, then you will personally become complicit in the claim.  You are in a position of seniority in the company.  You now know or suspect that the company is committing a criminal offence.  You have an obligation to act so as to prevent the criminal offence from continuing.  Every moment that the company wrongfully continues to refuse to pay the contractor’s retention is a continuation of the criminal offence, and you would probably be complicit in the offence by not exercising your managerial responsibility to stop it.  The fact that you may personally benefit from the crime (through a bonus) probably does not change the underlying criminal position (as you could still be liable even if you did not personally benefit).  However, the performance bonus situation probably makes the position worse from your point of view, and may make it more likely that the authorities will prosecute you personally, and that you would get a heavier sentence.  There are three issues to deal with:  (1) how to prevent you becoming personally criminally liable; (2) how to stop the company continuing to commit a criminal offence; and (3) what to do about the fact that the company has already committed a criminal offence. 

 

You should take the following actions:

• Do not do anything which could associate you personally with the crime (e.g. by telling the contractor that you believe that the project owner is entitled not to pay the contractor). 
  
  
• If you are certain that the project owner is wrongfully withholding the payment, inform the contractor at the meeting that the money will be paid immediately together with any interest for late payment.  Do not make any admission about the reason. 
  
  
• If you are not certain about the facts, and need to verify them, tell the contractor in the meeting that you have only just become involved, and that you will look into it urgently, and will get back to him in a few days time.  Then urgently verify the facts, and pay the contractor as soon as possible if it is clear that the money should have been paid.  Also pay the contractor interest in relation to the late payment, so that the project owner has not made any profit on the late payment.
  
  
• Get legal advice in relation to whether the project owner has actually committed a crime by previously refusing to pay, and as to whether this fact should be disclosed to the criminal authorities, or whether it is justifiable (now that the money has been paid in full to the contractor), to let the matter rest without disclosing it.