The second edition of the Pre-Action Protocol for Construction and Engineering Disputes came into force in November 2016. In summary, the amendments address concerns that compliance with the previous Protocol could lead to front-loading of costs.
The first point to note is that the parties can expressly agree to opt out of the Protocol procedure.
The objective of the revised Protocol is for the parties to exchange “sufficient information” so that the parties “broadly” understand each other’s positions and can make informed decisions about settlement and how to proceed. This contrasts with one of the previous objectives to encourage the exchange of “full information”.
In line with the objectives and the need to provide sufficient information, the Protocol recognises that the costs incurred at the Protocol stage should be proportionate to the complexity of the case and the amount of money which is at stake. The changes introduced are aimed at ensuring that the costs incurred at the pre-action stage are reduced.
The Letter of Claim and Response should now contain a “brief and proportionate summary” in contrast to the previous requirement to provide a “clear summary of the facts” and the “basis” of each claim. Similarly, if the defendant wishes to make a counterclaim this should be a “brief summary” and the response to the counterclaim should contain a “brief and proportionate summary.”
Expert reports are no longer expected or required unless they are succinct and are central to the claim.
It will now only be in exceptional circumstances, such as a flagrant or very substantial disregard of the Protocol that the Court will impose costs penalties for non-compliance. This contrasts to the “substantial compliance” wording required under the previous version of the Protocol.
The parties should now normally meet 21 days (rather than 28 days) after the letter of response or the response to counterclaim. Provision is added for the meeting to take the form of an ADR process, such as mediation.
The parties can agree an extension for any of the pre-action steps but the maximum extension for any step is not to exceed 28 days in the aggregate. There is also a new provision for the Protocol action to be concluded automatically at the completion of the pre-action meeting, or 14 days after expiry of the period within which the meeting should have taken place.
A notable change is the introduction of a new Protocol Referee Procedure designed to guide the parties in the pre-action process and help regulate compliance.
The Protocol Referee Procedure is consensual and envisages that the Protocol Referee will be a senior member of TecBAR or TeCSA, appointed for a fee of £3,500 plus VAT, a cost borne initially by the applicant.
Once appointed, the Protocol Referee will be able to make directions concerning the future conduct of the Protocol process, determine whether or not there has been non-compliance with the Protocol and can direct that one party reimburse the other for the Protocol Referee fee.
Any decision of the Protocol Referee is to be made no later than 10 working days from his appointment, and the decision will be binding on the parties until the dispute is determined. The court shall give “due weight” to the decision but will not be bound by it.
An attempt to encourage early settlement of disputes is to be welcomed but time will tell how the parties will approach the use of the revised Protocol.
The Protocol Referee is a novel concept and whether parties will be persuaded by its merits remains to be seen, particularly as its use depends on co-operation between the parties. An unwilling participant in the pre-action process may not be the most likely candidate to co-operate in the appointment of a Protocol Referee.
The revised Protocol and Protocol Referee Procedure can be accessed here.