A study for TeCSA revealed an appetite for change in the pre-action protocol for construction and engineering disputes. That change came into effect towards the end of last year

Daniel Hutchings

Perhaps it is not quite “liberty, equality, fraternity”, but a revolution has nonetheless taken place in the aims and objectives of the pre-action protocol for construction and engineering disputes. The original protocol was introduced in October 2000. It was designed to encourage frank and early exchange of information about a claim and any defence to it in an effort to avoid litigation, agree a settlement before proceedings or, if a claim could not be avoided, to support efficient management of the claim.

One of the key causes of this particular revolution lies in a report commissioned for the Technology and Construction Solicitors’ Association (TeCSA) on the perceived value of the protocol. The report sought the opinions of contractors, consultants, specialist subcontractors, and employers, as well as lawyers and firms (those parties most likely to actually use the protocol) to gain an insight into its effectiveness in disputes. One of the objectives of the study was to see if it would be helpful to make any changes: 56% of responding construction clients thought the protocol should be amended in some way. Approximately half of all respondents agreed. Ultimately, this resulted in the second edition of the pre-action protocol for construction and engineering disputes, which came into force on 15 November 2016.

The revised protocol shows a clear change in emphasis. The amendments broadly address the concern that the protocol created work, to be duplicated if proceedings were issued, resulting in increased cost and time. The main changes to address this include:

  • There is now an opt-out provision if parties expressly agree there is no need to comply. Bearing in mind nearly 70% of respondents to the survey felt the protocol enables parties to avoid litigation it seems likely there may be a reluctance to disregard the protocol completely in favour of the expense of litigation.
  • Only in “exceptional circumstances”, where there is a “flagrant” or “very significant disregard” of the protocol’s terms, will the court impose cost consequences for non-compliance. Arguably the most sweeping change, this clarity will allow the parties to take a more liberal approach than in the past, without fear of cost sanctions being imposed.
  • The objectives of the protocol now refer to an “exchange of sufficient information” to “broadly” allow the parties to understand each other’s positions. The general aims have changed too, revised to make clear that the parties need only know the “outline” nature of each other’s case. There is also express reference in the aims of the protocol to ensure that the parties are in a position where they may be able to settle cases “inexpensively” without the need for recourse to litigation.
  • The letter of claim now requires a “brief” summary of the claim only, which may include a “proportionate level of breakdown” of the monetary value of the claim. The extent of this summary must be “proportionate” to the claim. The use of expert reports are “not expected or required” unless “succinct” and “central to the claim”. In a similar vein, the defendant’s response should contain “brief” and “proportionate” summary of the response to the claim. While the time for service has been kept at 28 days there is a shorter longstop date for the response; the period can be extended by 28 days only (reduced from three months).
  • The parties should now normally meet 21 days after the letter of response (reduced from 28 days). Provision has been added for the meeting to take the form of an alternative dispute resolution process such as mediation.
  • The parties can by consent agree longer periods for any step in the protocol, but the maximum extension is not to exceed 28 days in aggregate. There is also a new provision for the protocol phase to be concluded automatically at the completion of the pre-action meeting, or 14 days after the period when the meeting should have taken place.
  • Finally, a protocol referee procedure has been added which allows the parties to regulate compliance with the pre-action process. This is a consensual process and involves the appointment of an independent referee from TeSCA or the Technology and Construction Bar Association (TeCBAR) with a fee of £3,500 plus VAT. The referee is there if needed to avoid parties becoming entrenched or uncooperative and to lend a hand in resolving any non-compliance issues. The referee procedure is a somewhat curious introduction, designed to address the lack of access to, and guidance from, Technology and Construction Court judges in the pre-action. As it requires both parties’ agreement it will be interesting to see whether there is a great deal of appetite for its use.

The long-term impact of the new protocol’s effect on the dynamics of the pre-litigation process, will only be felt in the months and years ahead. While there is unlikely to be a mass of people flooding out into the streets, that’s not to say the less demanding nature of the protocol together with the prospect of savings on pre-action time and money won’t result in a few shouts of “vive la réforme!”

Daniel Hutchings is a senior associate in the construction and engineering group at Taylor Wessing