New Pre-Action Protocol for Construction and Engineering Disputes: what you need to know

This article was produced by Nabarro LLP, which joined CMS on 1 May 2017.

Summary and implications

The Pre-Action Protocol for Construction and Engineering Disputes (the Protocol) was reviewed in 2015 due to long-held concerns about its effectiveness. It was often felt that the use of the Protocol led to a time-consuming process and the front loading of costs, which was far from its intended aim.

The outcome of the review by Mr Justice Coulson, the Technology and Construction Solicitors’ Association (TeCSA) and the Technology and Construction Bar Association (TECBAR) has led to a number of amendments, with the new Protocol coming into force on 14 November 2016. The new Protocol introduces the following key changes:

Proportionality

Parties may now consent not to use the Protocol.

For parties using the Protocol, there is a shift towards proportionality, with less information required to be provided at the pre-action stage, as parties must now simply provide sufficient information to allow an understanding of each other’s position. The new Protocol also expressly provides that expert reports are not required. This is in contrast to the previous requirement to provide full information.

Similarly, the letter of response is now only required to be a brief and proportionate summary of the defence, and a brief summary of any counterclaim, if applicable. The defendant must also identify any third parties that the defendant is bringing into the process.

The aim of the changes is to ensure that parties can settle cases not just early and fairly, but inexpensively too. Only the outline of parties’ cases must be communicated, with parties only now usually meeting. The meeting stage is, therefore, no longer a mandatory requirement.

Time periods

Parties may now agree longer periods between stages, but this period should not exceed 28 days in the aggregate which is significantly shorter than the three-month extension under the pensions regime.

Save for this, parties should normally meet 21 days after receipt of the letter of response. This can take the form of mediation or some other ADR process. There is no longer a requirement to agree issues if parties are unable to agree a means of resolving the dispute other than by litigation.

The Protocol process will now conclude automatically at the completion of the pre-action meeting, or 14 days after the expiry of the period within which the meeting should have taken place.

Costs

Courts can now only impose cost consequences for non-compliance in exceptional circumstances, such as a flagrant disregard for the Protocol.

Protocol referee procedure

A new Protocol referee procedure has also been introduced. This is optional and if agreed, parties can apply to the Chairman of TeCSA for the appointment of a Protocol referee. The application fee for this is £3,500 plus VAT.

A party’s application to the Protocol referee must set out brief details of the directions sought in order to assist the parties in complying with the Protocol, and/ or to determine the nature of any non-compliance with the Protocol. The process is designed to provide a quick method of determining any issues relating to the Protocol process and, therefore, the application must be no longer than four sides of A4, along with any other documents the applicant intends to rely upon.

The Protocol referee is then required to reach a decision within 10 working days. The decision will be binding and must be complied with until the dispute is determined. A court will not, therefore, be bound by such a decision.

Conclusion

The new Protocol aims to make the pre-action process simpler and less expensive, with an emphasis on brief and proportionate summaries of each party’s case being provided, although this needs to be finely balanced against the need to provide sufficient information. The intention is that the shorter procedure will encourage earlier settlement at a more proportionate cost. Parties are also importantly now given the option to contract out of the Protocol, although how frequently parties will look to agree not to use the Protocol process remains to be seen.

At last, the Protocol confirms the current position on adverse costs orders – courts will only impose cost consequences in exceptional circumstances. However, there is still no clear guidance relating to pre-action disclosure.

How much use parties will make of the new Protocol referee procedure also remains to be seen. It will be interesting to see whether this will be used only in high value and/or complex cases, or whether the Protocol referee procedure will have a wider use.

This article was also prepared by trainee solicitor Georgina Swift.