The Woolf reforms have ushered in a new era in construction law. What they have done, in effect, is legislate for virtue – and, as a couple of recent cases show, after a few fingers have been burned it might just work.
You know the feeling. You’ve been looking forward to a party for weeks. When you turn up in casual gear, everybody else is in evening dress, and you feel about as at home as Monet at the Abracadabra contemporary art exhibition.

Executives of mighty corporations who have been heavy-handed in starting court proceedings against smaller fry may have similar feelings when the judges apply the new rules about recovering legal costs.

A few weeks ago in the Chancery Division, Mr Justice Jacob made some interesting orders following a hearing in which the claimant had succeeded in its copyright claim (which had taken up two-thirds of the trial) but failed on its secondary claim for breach of confidence.1 Should the partly successful claimant be given an immediate award of costs? This would be something “on account” pending a detailed assessment later.

The new rules give no guidance as to when such interim orders should be made, so the judge went back to first principles. In general, he said, the court should make such an order, requiring payment of a lesser amount than the sum the claimant would eventually recover. That approach was a closer approximation to justice than to give no immediate award at all.

In deciding the amount to be awarded, the judge took into account the pre-action conduct of both parties. The defendant had been trying to co-operate and negotiate. But the claimant had been heavy-handed in starting proceedings, and such conduct should be taken into account to reduce their reasonable costs. The claimant would probably recover no more than 40% of its total costs, which would be about £200 000.

The interim award given was therefore £80 000, and even this was payable over a six-month period.

Once the message sinks in that pre-trial behaviour is important, not only the lawyers but chief executives and finance directors will be falling over themselves to show that they have behaved reasonably, knowing that courts will reward them for good behaviour.

In the world of construction, it is often said that there are only two eras – pre-Broadgate and post-Broadgate. In the world of litigation, the equivalent will be pre-and post-Woolf.

In the pre-Woolf era, one party often knew that if only it could get hold of certain documents from the other side, legal proceedings would probably be avoided. But the “discovery” of such documents was only allowed long after proceedings had been launched. Now that legal prefabrication is encouraged, Woolf has stood the old rule on its head. If proceedings are on the cards and early disclosure of documents is desirable in order to assist resolution of the dispute, the court has the power to require it – even before proceedings have begun.

Mr Justice Dyson made such an order in a case a few weeks ago in the Technology and Construction Court.2 The owners of 11 blocks of flats on the Isle of Dogs had sued their vendors after discovering defects. In order to compile a schedule of defects, the claimant’s expert said he needed access to documents in the possession of the defendant. These would show how the building control officers had interpreted the fire-related requirements of the Building Regulations. Up to £75 000 in costs could be saved if he could see the documents in question. The application was granted.

In the world of construction, it is often said there are only two eras – pre-Broadgate and post-Broadgate. In the world of litigation, the equivalent will be pre-and post-Woolf

Construction practitioners will read the judgment with interest as it highlights the new emphasis on deterring litigation in the post-Woolf era.

The case also emphasises once more the importance of litigants behaving reasonably. While the claimant argued that costs would be saved by granting the application, the defendant too sought the moral high ground. Litigation was not likely, it said, because once a proper schedule of defects had been served, the defendant would meet its liabilities without the need for litigation.

The judge did not agree, noting that the hostility generated by the application “bodes ill for the future resolution of the dispute – hardly a good example of the brave new world of co-operation and affordable litigation supposed to have been ushered in by the Woolf reforms”.

But the point to note is the parties’ desire to show the court how reasonable they had been. Whereas in the past solicitors’ letters seem to have been written in the trenches, they will now be the essence of sweet reasonableness. Claimants will offer (as in this case) some form of alternative dispute resolution process to resolve the dispute once the documentation has been disclosed. A new game is being played.

The judge should have the final word. As a postscript to his judgment, he added that, in his opinion, the application did not justify the voluminous affidavits and prolix correspondence that had been generated by the parties. The new rules required the parties to help the court to further “the overriding objective of enabling the court to deal with cases justly”. That included saving expense by dealing with the case in ways proportionate to the complexity of the issues. These important principles, he said, had clearly been overlooked in the present case.

The implication? Someone will shortly be on the receiving end of an unwelcome costs order.

1. Mars UK vs Teknowledge Ltd (no 2).

The Times 8799.