As anyone who has been involved in a construction case knows, it can take months, or even years, before a claim is actually issued at court. This is because it was mandatory for the parties to comply with the Pre-Action Protocol for construction and engineering disputes (the Protocol).
The Protocol involves three main stages:
- The Letter of Claim;
- The Letter of Response; and
- The Pre Action Meeting.
The purpose of the Protocol is to encourage the parties to exchange full information about their positions, so that they can understand each other’s positions. The ultimate aim of this is to enable the parties to reach an early settlement of the claim, before it is ever kicked off at court.
The Protocol had teeth too, as parties that failed to comply with it would be penalised on costs, and the amount of those costs could be very substantial indeed.
There is no doubt that encouraging parties to settle a claim before it ever reaches court is a good thing. The costs of litigating a claim all the way to trial are nearly always very substantial and in cases where the sum claimed is modest costs will outstrip the amounts in dispute.
However, in order to enable the parties to be in a position to consider settling a claim, they need as much information about the claim in front of them as possible. So although the Letter of Claim and Letter of Response are only supposed to be ‘clear summaries’ of the parties’ respective positions, in practice the parties will include as much detail as possible. Often, this will include expert evidence. This is known as ‘frontloading’ because it means that the parties do much of the groundwork for the claim before the claim is kicked off at court.
Although this meant that the parties had full information about the claim at an early stage, it did have the disadvantage of making the Protocol much longer and more expensive than it was intended to be.
With this in mind, the court has introduced a new Pre Action Protocol for Construction and Engineering Disputes (the New Protocol), which seeks to streamline the Protocol process. The New Protocol came into force yesterday (9 November 2016), and introduces the following changes:
- the parties can now contract out of the New Protocol (provided that they all agree). This is a major step as it makes the New Protocol optional, whereas before it was mandatory;
- the Letter of Claim and Letter of Response now only have to be ‘brief summaries’ and it is not expect that expert reports are provided (unless they are succinct and central to the claim);
- the Pre Action Meeting should be within 21 days of receipt of the Letter of Response rather than the previous 28 days. The Pre Action Meeting can itself take the form of mediation; and
- the Court will only impose cost sanctions for failure to comply with the New Protocol in exceptional circumstances, such as flagrant disregard for the New
In addition, the New Protocol introduces a ‘Protocol Referee Procedure’ where an independent third party can be appointed to resolve any disputes about the implementation of the New Protocol.
Is this a step in the right direction?
So the Courts are telling us to ‘Get on with it’. But is this a good thing?
There is no doubt that in some cases the old protocol process was far too long and costly. In particular, defendants often used the old protocol to stall the claim by requesting more and more information from the claimant. The New Protocol may well help to stop this.
On the other hand, the ‘frontloading’ of cases can be a good thing. It is unlikely that parties will settle a case if they only have the brief summaries of their positions in front of them. They will need as much information as possible, often including expert evidence to be able to assess the relative merits of a claim / defence. So the streamlining of the process may not help parties settle disputes prior to Court proceedings being started. Whilst parties who are serious about settling cases at an early stage may still choose to exchange information fully before proceedings are commenced, parties who are not, will not. The likely outcome is therefore probably going to be that fewer cases will settle before being issued at court.
And this cannot be a good thing. Claims are more expensive than ever to kick off at the court (for claims of between £10,000 and £150,000 the court fee for starting a claim is 5% of the value of the claim, whilst claims of more than £200,000 have a fee of £10,000), and they are also more expensive to litigate through to trial (partly due to the increased burden of new case and costs management procedures and electronic disclosure obligations).
No doubt some parties will take advantage of the New Protocol and start court proceedings more quickly. However, given the very substantial costs involved in court proceedings this is a high risk strategy. Arguably, it is much better to wait until you have as much information as possible in front of you before deciding to start a court claim. Provision of such full information may not now be mandatory, but it is undoubtedly sensible, and could save a lot of time and expense in the long run. So whilst the courts seem to be saying: “Get On With It!”, our message is : “Don’t Rush It!”