Warehouse Defects, Retention, and a Late Counterclaim

Rule and purpose. A counterclaim is a procedural defence and a separate claim arising from the same relationship. Courts should decide related claims together to avoid inconsistent judgments and repeated litigation. Lateness is a factor, not an automatic bar. Application. The counterclaim concerns the same construction contract and the same retention money that Munkh is suing for. Refusing it would force Tavan to bring a second action and could produce conflicting findings on the same defects. The delay is only six days, and no prejudice is shown; Munkh already knows the retention issue because it sued for that sum. The court can accept the counterclaim and adjourn briefly for preparation. Conclusion. The court should accept the counterclaim, or at minimum treat the retention claim as a set-off defence. A peremptory deadline does not override the court's duty to resolve the whole dispute fairly.

Employer's burden. Munkh must prove that a defect existed, that it appeared within the 12-month defects liability period, that notice was given within 14 days of discovery, and the amount of loss. The acceptance protocol saying 'no visible defects' does not waive latent defects; it only records the visible condition on 15 March 2024. Contractor's burden. Once a defect appears within the defects period, Tavan is presumed responsible unless it proves an exempting cause, such as employer misuse, normal wear, or a design change imposed by Munkh. Tavan's allegations about snow clearing and design change are affirmative defences, so Tavan must prove causation. Application. Notice on 22 November was two days after discovery and within 12 months of acceptance. Munkh has met the threshold notice burden. Tavan must now show that the leak came from Munkh's failure to clear snow or from the design change; if it proves only part, liability may be apportioned. The court should order an expert examination if the evidence conflicts.

Limitation. The general limitation period is three years from when the claimant knew or should have known of the violation. Munkh sued on 10 February 2025. The retention claim arose on or after acceptance on 15 March 2024, so it is well within three years. The defect damages arose on 20 November 2024 when the leak was discovered, also within three years. Defects period. The 12-month defects liability period expired on 15 March 2025, but the defect appeared and notice was given in November 2024, so the claim was preserved. The 14-day notice clause is a contractual condition; notice two days after discovery satisfies it. Conclusion. The claim is not time-barred. The retention is not a penalty but security for performance; Munkh may set it off against proven repair costs and damages. Tavan's limitation defence should fail, though the court must still decide causation and quantum.