How to Respond to a Builder’s Claim
Here’s what to do if you receive a letter of claim or claim form and particulars of claim. It cannot be a complete guide because no two disputes are alike. It should serve as a guide to awareness.
Check To See if You Have Insurance Against the Claim or the Legal Cost of Defending the Claim
Many insurance policies can cover you for claims and legal expenses. Often, you are not aware you have this cover. Therefore, job number one is to check with all your insurers and/or your insurance broker.
Take Legal Advice as Soon as Possible
Before you launch into a defence, and maybe a counterclaim, you should understand what you are getting yourself into. The claims process is complex and there are lots of things to know and consider before you make your first move.
Being right is not enough. You have to know what you are doing and what is possible. There is not much time to do this.
The court process and the Insolvency Rules may mean it could cost you more to win a case than to lose. Alternatively, because you don’t understand the process and make mistakes, you could lose a case you should have won.
The First Questions You Need Answers To
- Do I have enough money to pay for my legal costs, and theirs if I lose?
- Do I have enough money to pay for my legal costs if I win but the builder cannot pay what it is ordered to pay? Even if you have a No Win No Fee you still have to pay court fees and expert witness fees.
- Is the builder likely to be able to pay if I win?
- What are the costs and benefits of instructing a specialist solicitor?
- Do I know what the best move is when I receive a letter of claim?
- Will you be able to tolerate the work and stress of a claim that may go on for up to 2 years?
- Do I need early input from an experienced construction law solicitor to assess the questions above?
We get lots of enquiries where innocent people have embarked on a defence and counterclaim without specialist advice. They believe it is obvious they are right, and the system will deal with it fairly. The system does deal with it fairly but that does not mean you will get a fair result. People representing themselves need to follow complex rules and concepts to succeed.
After a while, there will be some steps in the process they don’t understand. They will reach out to a solicitor and ask for some ‘quick advice’. All too often, we find the innocent homeowner has made fundamental errors and incurred a liability for the builder’s costs when they need not have. Litigation is very much an area where it is difficult to know what you don’t know.
The number one error is drafting the letter of response and/or the defence and counterclaim themselves. Very often, this will fail to adequately frame their defence and/or counterclaim, and it will need to be amended. The homeowner will have to pay the builder’s costs arising out of the amendment, even if the builder ultimately loses.
Sometimes, the smart move may be to make a low offer to settle as soon as possible, because that will be cheaper than winning and not recovering any or all of your costs. It is very hard to do this unless you have clear advice on how the case might play out.
You need to consider the non-obvious professional solutions an experienced solicitor will be aware of that you may not. That could be an early negotiation, staying the dispute to appoint an expert or bringing in a third party that may have contributed to the dispute.
Typically, a solicitor ought to be able to review a letter of claim, advise on strategy, and the strength of your case and draft a letter of response for a fee in the region of PS800- PS1,500 plus VAT. If you need a defence and counterclaim, that may cost a further PS1,500 plus VAT. Obviously, these costs can be higher or lower depending on the size and complexity of the case.
This will set you on your way on the right foot, even if you decide to represent yourself after that point. Just taking this step may save tens of thousands of pounds and may bring the dispute to an end quickly.
If friends or family asked for one sentence advice about how to respond to a claim, it would be:
‘Take initial advice from a construction solicitor asap’
I would not advise you to do it yourself without getting the initial advice. If you do, here are some things you need to do. This is not a complete guide.
Work Out the Economics of the Case
Domestic building disputes can be very personal and emotions will run high. However, you should look at whether you have enough money to fund the case. If the builder claims a figure of PS30,000 and you defend it with a counterclaim for PS40,000 on a No Win No Fee, you will need to find the following disbursements:
- Counterclaim fee PS2,000
- Expert fee PS3,000
- Barrister’s fees PS10,000
If you lose, you would also need to pay the builder’s costs, which could be PS40,000.
If you win and the court awards you a net figure of PS10,000 but only orders the builder to pay PS40,000 of your costs of PS50,000, then your net position will be PS0 if the builder can pay but negative PS50,000 (your costs) if the builder can’t pay.
Can the Builder Pay Your Costs and Damages
You will see from the example above that the ability of the builder to be able to pay is fundamental. If the builder is a company, you can look at its accounts at Companies House and check its accounts. Often you will have a short trading history and little or no assets. If you litigate against an insolvent company, it is heads the builder wins, tails you lose. You’re on a hiding to nothing.
How To Respond to a Letter of Claim and the Protocol
The letter of claim should be sent under the Pre-action protocol for construction and engineering disputes. This can be found on the web. If you or the claimant fail to follow it, the defaulting party may be subject to costs sanctions later. Very often, costs meet or exceed the sums in dispute.
If you decide not to take professional advice, then you should acknowledge the letter of claim within 14 days under the protocol and give your substantive reply within 28 days. If you will struggle to meet this deadline, ask for a reasonable extension as soon as possible.
You will need to consider the nature of their claim, your defence and counterclaim and whether you need expert evidence. You may need an expert to give an opinion on defects, delay or the reasonable cost of work for which no fixed price was agreed. You might need to consider whether it is better to get the claimant’s agreement to a joint expert to reduce the cost and complexity of the claim.
In responding to the letter of claim, you will need to consider and respond to each of the legal and factual allegations made in the letter. Read it carefully and make sure you cover everything that is alleged.
If you make a counterclaim in your response then the builder will have 21 days to respond to that.
The parties will then have 21 days to have a meeting under the protocol. I would advise litigants in person to make this a without prejudice protocol meeting to allow a free discussion of how best to resolve the case without litigation.
Drafting a Defence or Counterclaim
Unless the case is almost certain to be allocated to the Small Claims Track, we would not advise you to draft your own defence and counterclaim–it’s just a false economy when the consequences of failure start at around PS50,000.
Final Thoughts
Choosing not to get help with a letter of claim or claim is penny-wise and pound-foolish. If litigation cannot be avoided, you are locked into a process that could cost you tens of thousands of pounds or more.
At Helix Law, we can quickly find your best options and put your best case forward. Speak to an experienced construction law solicitor today.
