Pre-action protocols are there to resolve conflicts before they end up in court, but there are other reasons for following them too. Adam Harris and Sanjeev Ahuja examine what happens if you don’t

Since their introduction in 1999, pre-action protocols have increasingly become part of the dispute resolution landscape. There are now nine protocols governing claims across a broad spectrum, from construction to clinical negligence.

The objective of protocols is for exchanges between parties to occur before proceedings commence, in the hope that a settlement will be achieved and proceedings avoided.

The court expects parties to comply with the relevant protocol, but what happens if they do not? The recent case of Charles Church Developments vs Stent Foundations and Peter Dann shows the serious consequences that may follow.

Charles Church undertook a complex development of a site in London and engaged Stent as its specialist piling contractor and Peter Dann as its engineer. In the summer of 2000, during the course of the piling, the site flooded and a neighbouring property was, allegedly, seriously damaged. All in all, the problem amounted to about £10m.

Over the next six years, which was the relevant period of limitation, Church wrote to Stent and Dann sporadically, intimating an intention to make a claim. There were gaps in the correspondence and, in particular, complete silence between September 2004 and the summer of 2006. Then, out of the blue as far as the defendants were concerned, Church served a claim form, which had been issued four months before in February 2006.

The defendants raised the matter of compliance with the relevant protocol and reserved their position. Defences were served, a case management conference held and a stay ordered for the purpose of mediation, but to take effect only after there had been disclosure, expert meetings and reports. Insurers were involved. The matter was complex. Substantial costs were incurred.

Nine months into the litigation, Stent applied to the court for an order that, whatever the outcome of the litigation, Church should pay all of Stent’s costs up to the date of the mediation and meet its own costs. Church admitted it had failed to comply with the protocol, but sought to rely on paragraph 6, which permits a party to commence proceedings without complying, where limitation is an issue.

The protocol goes on to state that, in such circumstances, a claimant must apply to the court for directions and a stay may be ordered at that stage to enable the parties to comply. Church, however, had made no such application.

Surprisingly perhaps, the judge felt there was every likelihood that proceedings would not have been necessary if the protocol had been followed

Stent relied on paragraph 2.3 of the Practice Direction on Protocols, which says that if non-compliance leads to proceedings or costs that might otherwise have been avoided, the court may order the party at fault to pay the costs.

None of the matters raised by Church’s lawyers in opposition to Stent’s application convinced the judge. Church was up against a limitation problem largely because of inactivity on its part, said the judge. Offering to go through a process akin to the protocol while the proceedings were continuing (as Church did) was no substitute, nor would the judge await the outcome of the litigation before making any order on the basis that he might then be better able to assess the effect of the failure to comply.

The fact that Stent could have made an early application for a stay rather than plead its defence was rejected as a ground for refusing Stent the relief it sought; there was a right but no obligation on a defendant to apply for a stay in such circumstances.

The judge found there had been a serious breach of the protocol which had resulted in the issue of proceedings. Surprisingly perhaps, he felt there was every likelihood that proceedings would not have been necessary if the protocol had been followed.

As no application for directions had been made at the time the proceedings were issued, the judge ordered that regardless of the outcome of the litigation, Stent should be entitled to recover 50% of its costs, in effect, of the litigation to date and Church should bear 50% of its own costs.

The litigation was settled before Church’s appeal was heard. If not, perhaps the Court of Appeal would have reviewed the parts of the decision that Church argued strayed beyond the compensatory and were penal. We shall never know.

The consequences of Church’s failings are obvious: adverse costs orders, negligence actions against solicitors (and the conflicts that may arise, mid-litigation, as a consequence) and a claimant’s strategic position hugely damaged.

The message is clear. Protocols must be complied with. If they are not, judges are prepared to impose significant sanctions.