| Date | 12 September 2001 |
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| Judgment | Paul Thomas Construction Limited -v- Hyland TCC 8 March 2000 |
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| The Issue | General discussion of the Civil Procedure Rules and pre-action protocol. |
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| Implication |
Compliance with the construction and engineering pre-action protocol is now mandatory before commencing litigation against heavy sanctions imposable by the courts in relation to costs and interest. |
printNew Civil Procedure Rules came into effect in April 1999. The aims of the reform set out by Lord Wolfe were to modernise court procedures to create a fairer, cheaper and more efficient dispute resolution process. The overriding objective of the Civil Procedure Rules is stated to be the provision of a new procedural code, which will enable the court to deal with cases justly. Dealing with a case justly includes, so far as is practicable, ensuring that the parties are on an equal footing, saving expense, and dealing with the case in ways which are proportionate to the amount of money involved and to the financial position of each party. Under the Rules, the court has an obligation to actively manage cases. Thus the court will encourage parties to cooperate with each other in the conduct of the proceedings, identifying the issues at an early stage. The parties are also encouraged to use alternative dispute resolution procedures, such as mediation, where appropriate. As a component of the Civil Procedure Rules, "Pre-Action Protocols" have been approved in respect of certain classes of action, including personal injury, clinical negligence, defamation and professional negligence. A pre-action protocol for construction and engineering disputes came into force in October 2000. The protocol aims to avoid the premature commencement of proceedings by requiring the parties to exchange full information as early as possible, to narrow the issues in dispute and to better understand each other's position. This is achieved by imposing requirements for the exchange of information about each party's case and by encouraging meetings between the parties prior to the commencement of proceedings. If, despite these requirements, litigation continues, the steps outlined in the pre-action protocol are aimed to assist in the management of the proceedings. The construction and engineering protocol applies to all disputes typically managed by the Technology and Construction Court, including professional negligence claims against architects, engineers and quantity surveyors. The protocol would not apply to an action for an enforcement of an adjudicator's decision. In essence, the pre-action protocol requires that the claimant party must submit a detailed "letter of claim", setting out a summary of the facts on which the case is based. The letter of claim must identify the basis on which the claim is made, including the principal contractual terms and the nature of the relief claimed, giving a breakdown of how the claims have been quantified. If the claim has previously been rejected, the letter must set out the claimant party's understanding as to why, in its opinion, the claim was wrongly rejected. The defendant must acknowledge receipt of the letter of claim within fourteen days and within twenty-eight days must send a letter of response. This must set out agreed and disputed facts and reasons for the rejection of the claim. The letter of response should also set out whether there will be any counterclaim. As soon as possible after receipt of the letter of response, the parties must arrange at least one "without prejudice" meeting. The parties are required to use their best endeavours to identify the root cause of any disagreements and the protocol seeks to guide the parties as to who should attend such meetings. The sanctions for failure to comply with the pre-action protocol can be quite far reaching. The Civil Procedure Rules allow the court to order a party to pay money into court if that party has, without good reason, failed to comply with the pre-action protocol. The monies paid in to court will act as security for any sum subsequently found payable by the defaulting party in the proceedings, including costs. The courts can also penalise parties in exercising its discretion to award costs and interest following court proceedings. For example, if the court considers that non-compliance with the protocol has led to the commencement of proceedings which might otherwise have been avoided, or costs being incurred unnecessarily, it can order the defaulting party to pay the other party's costs on an indemnity basis. This will mean a full recovery of the legal and other costs incurred by the other party. The Civil Procedure Rules and the pre-action protocol were discussed in the case of Paul Thomas Construction Ltd -v- Hyland. The case preceded the coming in to force of the pre-action protocol for construction and engineering disputes. Nevertheless, His Honour Judge Wilcox considered that Paul Thomas Construction had conducted the litigation in a heavy handed manner, which was very much at odds with the Civil Procedure Rules. A dispute had arisen concerning the contractor's submission of its final account. Hyland, the employer, pressed the contractor, Paul Thomas, to provide further information to support the account, which was not forthcoming. Hyland appointed an independent quantity surveyor, but progress could not be made without the further information requested. Despite this, Paul Thomas pressed for an interim payment and, when adjudication was suggested (the contract was not caught by the provisions of the construction Act), indicated it would agree only on the basis that Hyland meet the entire costs of the adjudication. Within a month of submitting its final account, Paul Thomas was demanding a substantial payment on account and indicating that it would be prepared to talk only if that sum was paid. Proceedings were then commenced without any reference to the pre-action protocol. Judge Wilcox concluded that it had been wholly unnecessary to commence the litigation. In his opinion, it was clear that alternative dispute resolution should have been explored. That may have taken the form of sensible discussions between the parties, not necessarily involving a third party. As a consequence, Judge Wilcox ordered that Paul Thomas Construction should pay the costs incurred by Hyland on an indemnity basis.
CJ-0136
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