Pre-Action Protocols, tailored for specific types of dispute, have been a feature of the litigation landscape for many years. They represent good practice and compliance is mandatory. A party runs the risk of costs sanctions if it fails to observe an applicable Protocol.

One of the main objectives of Protocols is to encourage an early resolution of disputes by parties being required to explain and discuss their positions in some detail, at the outset. The intention here is to avoid a dispute drifting into the time and costs of proceedings simply because the key points of a case or defence (legally and evidentially) were unknown or not understood by the other party. Where a dispute is not resolvable before the commencement of proceedings, the fact that a Protocol has been followed can still produce tangible benefits. Those can include the narrowing of the questions to be determined by the Court. Further, a consensus on what procedure should be adopted to ensure that the action is run in a cost efficient manner. Pre-Action Protocols sit alongside, therefore, a range of measures, such as Costs Budgets, that are designed to control and reduce the costs of access to the Courts.

Last month the second edition of the Pre-Action Protocol for Construction and Engineering Disputes came into force. At one level the main planks of the first edition have largely been left intact. However, a detailed compare and contrast between the 2 editions reveals numerous beneficial amendments that are of real practical relevance. This note summarises the provisions which remain unaltered before focusing on the differences.

What Remains Unchanged

The scope of the Protocol continues to be all construction and engineering disputes, including professional negligence claims against architects, engineers and quantity surveyors. A Claimant is still required to issue a Letter of Claim and a Defendant a Letter of Response, with any Counterclaim having also to be responded to, before any action is commenced. The contents of such correspondence is prescribed. It continues to be expected that the parties will normally have at least one Protocol meeting.

The new Protocol retains the express proviso that it is not required to be adopted where a party would be at risk of issuing proceedings outside a limitation period. It still is stated expressly that the Protocol must not be used as a tactical device, with the costs of compliance to be proportionate to the complexity of the case and the amount of money which is at stake.

As before, if the Defendant intends to object to the Court’s jurisdiction or take the position that the Defendant named in the Letter of Claim is the wrong Defendant, that objection must be raised within 28 days of the Letter of Claim.

Contracting Out and the Protocol Referee

Many of the changes introduced relate to reducing the costs and time of complying with the Protocol. Two striking features are that parties can agree that the Protocol will not apply at all and that where the Protocol does apply, it can be agreed that compliance should be policed by a Referee.

Where the parties to a construction or engineering dispute, that would be tried by a Court, wish to take themselves outside the ambit of the Protocol, they must record that agreement in writing. The ability to do so is a helpful exception for situations where the parties have already exchanged extensive correspondence on a dispute and met on a Without Prejudice basis to try and find a way forward and perhaps even participated in a mediation. Here it would be an unnecessary expense to have to collate and distil their positions into Protocol correspondence if there is genuinely nothing new to say or to prompt fresh risk assessments.

The Protocol Referee Procedure might be engaged only by parties in more complex and high value litigation, but this is not inevitably the case. It would be of utility in any event if the parties’ relationship is fractious and there is a lack of confidence as to whether the Protocol is going to be respected. Further, the costs of a Referee will be a modest outlay for many disputes compared to the costs of full blown proceedings involving a trial, and where a pre-action stage, involving adherence to the Protocol is a real opportunity to save costs, if not by a settlement then by  narrowing  differences.

The Protocol Referee Procedure is published jointly by TeCSA and TECBAR on their respective websites. It is only senior members of either organisation that are to be appointed as Referees. The application fee to TeCSA or TECBAR is £3,500 plus Vat and this is used to fund payment of the Referee’s fees which must not exceed that amount.

Protocol Meeting(s)

The earlier Protocol provision applies that the parties should normally meet following their exchange of Protocol correspondence. However, there has been added flexibility as to how that meeting requirement can be satisfied. It is now provided that the meeting could take the form of an ADR process such as mediation.

If the parties are unable to resolve their dispute the Protocol continues to provide that they should consider whether expert evidence is going to be required (and if so the nature of that evidence and whether any joint expert should be appointed), the extent of disclosure and generally how to conduct the litigation with the aim of minimising costs and delay. The second edition Protocol contains a new reference to the parties being obliged to consider the use of the e-disclosure protocol.

Time Limits

Previously a Defendant had a minimum of 28 days and up to 3 months (where the complexity of the dispute justified this) to prepare its Letter of Response. This term was open to abuse – it being by no means unusual for a Defendant to say that they required more than 28 days to respond to a relatively straightforward claim, leaving the Claimant to run the risk of incurring costs sanctions if it rejected such request and pressed on with issuing proceedings. Such maximum 3 month response period was driven by the fact that for high value and complex claims, the original Protocol required significantly greater detail to be included in all Protocol correspondence.

Now the time limits are that the Letter of Response must be issued in all cases within 28 days of the Letter of Claim, and the Claimant must provide a response to any Counterclaim within 21 days of the Letter of Response (the prior period having been between 28 days and 3 months). The Protocol Pre-Action Meeting used to be required to be convened within 28 days of the Letter of Response (or the response to any Counterclaim).  It is now within 21 days of those 2 events.

Level of Detail of Protocol Correspondence

A significant amendment that has been introduced relates to reducing the level of detail that must be set out by the parties in their Protocol correspondence. The first edition’s provisions concerning proportionality were somewhat undermined by the requirements that the information contained in the Letter of Claim had to include a clear summary of the facts on which “each claim” was based, and the basis on which each claim was made, identifying the principal contractual terms and statutory provisions relied on, with the Letter of Response needing to address such detail in the Defendant’s response. Those requirements resulted in a heavy burden for say final account disputes where the Claimant’s overall claim will often break down into claims for multiple Variations, delay and disruption costs and an extension of time.

The present Protocol demands instead that there is provided in the Letter of Claim a “brief summary” of the claim or claims including a list of principal contractual or statutory provisions relied on. As before the relief sought needs to be identified in the Letter of Claim but this requirement is now expressed as a summary of the relief claimed. The Protocol paragraphs dealing with the contents of the Letter of Response prescribe that the Defendant’s response to the claim or claims must be a brief and proportionate summary. The Protocol makes plain that it is “the outline” of a party’s case that is to be the subject matter of the Protocol process.

The reduced level of detail required in Protocol correspondence sits under revised wording as to the objectives of the Protocol. Before it was stated that the Claimant and Defendant must have provided at a pre-action stage “sufficient information for each party to know the nature of the other’s case”. This is to be contrasted with the objectives now including “to exchange sufficient information about the proposed proceedings broadly to allow the parties to understand each other’s positon and make informed decisions about settlement and how to proceed”.

Costs Sanctions

In the Protocol section titled Compliance it is still provided that the Court will be able to treat the Protocol standards as the normal and reasonable approach to pre-action conduct (and to normal and reasonable there has been added “proportionate”). A significant shift has taken place however as to defining the circumstances in which non compliance will attract a costs sanction. Before it was stated that the Court would be concerned with substantial compliance, but there was added the warning that minor departures from the Protocol would not exempt the “innocent” party from following the Protocol. It is now provided that costs sanctions for Protocol non compliance will be the exception not the norm, such as where there has been “a flagrant or very significant disregard” for the Protocol.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice.  If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.