On 2 November 2016 the new Pre-action Protocol for Construction and Engineering Disputes (“the Protocol”) was launched. Applying to all construction and engineering disputes (including professional negligence claims against architects, engineers and quantity surveyors), the Protocol has been in place for a number of years but the amended version came into force on 14 November 2016 with a number of significant changes. Many of these appear designed to reduce criticism of the Protocol that it could be over-burdensome on parties with limited resources facing larger opposition – a fairly frequent occurrence in the construction supply chain.
The key changes can be summarised as follows:
The Protocol now includes a new provision allowing the parties to agree in writing before commencing court proceedings that they are not required to comply with the Protocol.
The objective of the Protocol has been changed so that it now requires the parties to exchange sufficient information about the proceedings broadly so that they understand each other’s position and can make informed decisions about settlement and how to proceed. This replaces the previous objective of exchanging “early and full information”.
The amended wording highlights that it is now only likely to be in exceptional circumstances such as “flagrant and very significant disregard” of the Protocol that the court will impose costs sanctions for non-compliance.
Previously the wording of the Protocol indicated that for lower value claims the letter of claim and response should be kept simple. It now indicates that this is to apply “to many cases, including those of modest value”.
Rather than needing to know the nature of each other’s cases the parties now only need to have sufficient “outline” information of their opponent’s case. The parties are no longer required to meet but will “usually have met formally”. As well as seeking to settle cases early and fairly the aim now also refers to doing so “inexpensively”.
Letter of claim
The requirement for a letter of claim remains. However, it now requires a “brief” summary of the claim which should be proportionate to the value of the claim. It’s not expected or required that expert reports will be provided, although they can be where they are succinct and central to the claim. The letter must also state whether the claimant wishes the Protocol referee procedure to apply – see further below.
Letter of response
The defendant has to acknowledge the letter of claim within 14 days as previously but must now also confirm whether it wishes the Protocol referee procedure to apply. Many of the previous detailed requirements for the letter of response have now been removed. A brief and proportionate response is required which includes confirmation of the names of any third parties the defendant intends to or is considering to submit to a pre-action protocol process.
This should now take place within 21 days of receipt of the response (or the claimant’s letter of response to any counterclaim) rather than the previous 28 day period. The Protocol now also makes clear that the meeting can take the form of an ADR process such as mediation. There is no longer a requirement that the parties should use their best endeavours to agree how the issues should be defined if they are unable to agree a means of resolving the dispute other than by litigation.
The parties can extend time for compliance with any of the steps but no extension in respect of any step is to exceed 28 days in aggregate. The Protocol process will be concluded after the pre-action meeting or 14 days after when the meeting would otherwise have taken place if there is no meeting.
Protocol referee procedure
A brand new procedure has been incorporated, the details of which are published on the TeCSA and TECBAR websites. The Protocol referee is appointed by application to the Chairman of TeCSA and is a senior member of either TeCSA or TECBAR. The application requires a fee of £3,500 plus VAT.
Where the parties have agreed the procedure will apply, the process allows the parties to apply to the referee to give directions on non-compliance with the Protocol and to say if there has been flagrant or significant disregard of the Protocol. The decision is binding and the parties must comply with it.
It remains to be seen the extent to which the Protocol referee procedure will be used, particularly bearing in mind the fee to be incurred and the subsequent significant court fees parties will incur if they need to issue court proceedings. The remainder of the amendments should assist in preventing parties using the Protocol for tactical advantage. Again we will have to wait to see whether this happens in practice.
For more information about the issues raised in this article or to find out more about how the Construction team can help you please contact Rowan Turrall on 0118 952 7206 or email [email protected].
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.