Problem: I would be grateful if you could give me some advice please.
We are a carpentry company and have carried out labour only carpentry work for a house builder under an agreed contract. However, they are holding back quite a large amount of retention monies, which is now due, claiming that there are various issues like doors and floors not being fitted correctly.
When this work was originally carried out, there were no issues and we were paid in full (less the retention). But after completion, they verbally admitted to us that there were design and manufacturing faults with the products supplied which resulted in remedial works being needed. We advised that the defects were chargeable, but they didn’t agree with this and instructed a third party contractor to complete the work.
They are now contra-charging us for the costs to make good, including materials and the cost of using the third-party labour, and then keep on adding on random costs, like admin charges, travel, supervision, overheads and profit.
What can we do? I would like to start county court proceedings, but I am apprehensive about the potential claim against us. There is no way they can have any credible evidence against us – we have asked for manufacturers’ reports, copies of orders placed with product suppliers, photos etc – but they have not given us anything! What do you think of our chance in court is?
Response:
You have not said what the value of your claim is. This is important as any amount below £10,000 will be allocated to the small claims track and above this value gets allocated either to the fast track or multi track: the 2 main differences between the small claims track and the fast and multi tracks is a) recovery of costs in small claims are limited and nominal; and b) the parties are required to go through the Pre-Action Protocol for Construction and Engineering Disputes (‘PAP’) prior to issuing proceedings where the matter will be allocated to either the fast track or multi track. That said, in deciding the amount of your claim and what track it will be allocated to, the court will also take into account the amount of any counter-claim, so bear this in mind.
It would be however, both good practice and grab the attention of your client if you were to issue a Letter of Claim pursuant to the PAP, even where your claim is below £10,000. It will give you an opportunity to sit down and set out your own position including the contract’s terms and conditions as regards to standard of your work and the evidence that will underpin that the standard has been reached. A well drafted Letter of Claim can have a positive impact on settlement when received by the other side, especially as you can also formally set out the information you require to see, which in your case, will include any reports and copies of orders (this is when you find out what evidence, if any, your client actually has).
In your Letter of Claim, you do not have to bring in the arguments from your client, as this will be set out as a counter claim in the response, which you will be given the opportunity to reply.
Where your client asserts that you are responsible for the defects, they need to adduce persuasive evidence – it cannot be what is termed as a bare-faced denial. From your brief, I would have thought that it would be fairly easy to show that the defects complained of are either the result of the manufacturing process or a site problem. For example, timber doors can warp, bow, crack, swell and expand, the cause of which has nothing to do with the fixing on site (albeit it could be to do with how the doors were stored), and such defects should be easy to identify and culpability determined.
From your brief outline of the matter, I cannot determine your chance of being successful. But providing you are confident that the defects were not caused by your work and you have the necessary level of evidence that will support your assertions, you will give yourself a good chance of being successful should the matter progress to court. That said, use the PAP to try and get the matter settled – even if you have to offer a discount on the retention monies, as it is still better than going to court.
© Michael Gerard 2022
The advice provided is intended to be of a general guide only and should not be viewed as providing a definitive legal analysis.
Author background
Michael is a Solicitor, Chartered Builder & Registered Construction Adjudicator, and is a director at Michael Gerard Law Limited, a solicitors practice regulated by the SRA.