My main contractor's counterclaim wipes out my final account
I put my account in expecting to be paid, and back came delay costs, defects and contra-charges that leave nothing owing, or say I owe them.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
What's happening?
A counterclaim usually arrives when you ask for money. Your final account goes in, and the reply sets costs against it. They might be your main contractor's own delay costs, other trades' disruption, defects, damage or cleaning contra-charges (costs it says it covered for you). The total leaves nothing owing, or says you owe your main contractor.
Your account and the counterclaim are two separate questions, and each needs its own evidence. It is tempting to trade: concede part of the counterclaim to get part of your account paid. That leaves neither figure tested, and you can give away money the evidence would have kept. Until you answer the counterclaim, it is the reason given for paying you nothing more.
Whether a deduction was made on a valid notice depends on your subcontract and the notices actually sent. Any legal question on that belongs with your solicitor.
The solution
Keep your account and the counterclaim apart. Test each head of the counterclaim on its own. Check the arithmetic, quantities and rates, whether the cost was spent, and who caused it. Check that the notices it relies on were given. Rate each head supported, disputed or awaiting their evidence, with a document behind the reason. Then set what survives against your account and what has already been deducted.
Counterclaim Defence does this and builds your answer as a Scott schedule, a table setting each of their figures beside yours. We negotiate from it or answer it in adjudication, and what is conceded is your decision. Counterclaim Prevention then sets up the routine that would answer the next claim sooner.
Example
Illustrative example. The scenario and figures are invented.
The facts
A drylining subcontractor submits its final account at £480,000. It has been paid £410,000, so £70,000 is due. Its main contractor answers with a £95,000 counterclaim for delay costs, defects and cleaning contra-charges, and says the subcontractor owes it £25,000.
What happens
- The £70,000 balance and the £95,000 counterclaim are kept apart. The account is valued on its own evidence, and the counterclaim is tested head by head.
- The delay head of £48,000 prices 6 weeks at £8,000 a week. The allocation sheets and the main contractor's own progress reports show another trade's ceiling grid running late in 4 of those weeks. So £32,000 is disputed and £16,000 is supported.
- The defects head of £31,000 includes £9,000 already deducted in an earlier Payment Notice, which is disputed as claimed twice. The snagging records support £12,000, and £10,000 has no evidence behind it yet.
- The cleaning contra-charges of £16,000 are checked against the notice the subcontract requires. £4,000 was notified properly and is supported. £12,000 was not, and is disputed.
- The answer goes back with a Scott schedule setting each head beside the subcontractor's figure. Against the account, £70,000 less the £32,000 supported leaves £38,000 owed to the subcontractor, not £25,000 owed by it.
- The main contractor produces nothing for the £10,000. It withdraws the rest of the counterclaim when the director concedes one more week of delay, worth £8,000.
The account and the counterclaim
| Item | Amount |
|---|---|
| Final account | £480,000 |
| Paid to date | £410,000 |
| Balance claimed by the subcontractor | £70,000 |
| Counterclaim | £95,000 |
| Supported on the records | £32,000 |
| Disputed | £53,000 |
| Awaiting their evidence | £10,000 |
| Balance after the supported heads | £38,000 |
| Paid to the subcontractor on settlement | £30,000 |
The outcome
The account settles with £30,000 paid to the subcontractor, instead of £25,000 paid to the main contractor. That £55,000 difference came from testing the counterclaim rather than trading against it.