The Pre-Action Protocols are a central plank of the Civil Procedure Rules (CPR) that set out basic procedures to be followed in the event that a party wishes to have its dispute resolved through litigation.  With a few exceptions (listed in paragraph 1.2), the Pre-Action Protocol for Construction and Engineering Disputes (“the Construction Protocol”) must be observed in relation to matters that are likely to come before the TCC.

The overriding objectives of the Protocol are stated at paragraph 1.3 of the Protocol as follows:
(i)         to encourage the exchange of early and full information about the prospective legal claim;
(ii)         to enable parties to avoid litigation by agreeing a settlement of the claim before commencement of proceedings; and
(iii)        to support the efficient management of proceedings where litigation cannot be avoided.
The principal objective is therefore to avoid, as far as possible, the need for litigation.  This is expected to be achieved by ensuring that the case is properly made out, so that the other party can understand the case being made against it, that there is early disclosure so that the parties can properly engage with the case early on and for the parties to have the opportunity to attempt to settle the case before the proceedings are heard in court.

In accordance with the CPR, the court may take into account any compliance or non-compliance with the applicable protocol when issuing directions for the management of proceedings and when making orders for costs.

The Construction Protocol was implemented on 2 October 2000 and requires the claimant to prepare a letter of claim which must include a statement of the basis of the claim and the relief sought.  The Construction Protocol then defines the procedure and the form of the defendant’s response following which a pre-action meeting must be held, the purpose of which includes the requirement to agree the main issues and to consider, in relation to each issue, the scope for using a form of alternative dispute resolution to resolve the issue.

In 2002 the question of costs was considered in the Court of Appeal decision in the case of Susan Jane Dunnett -v- Railtrack plc.  Although Railtrack won its case at Appeal, it did not succeed in recovering its costs of the appeal, because it had flatly refused a request by the claimant to attempt to resolve the dispute in issue though ADR before proceeding to trial.

The Construction Protocol has since been updated, in April of this year, to include the following:

“1.5       Proportionality

The overriding objective (CPR rule 1.1) applies to the pre-action period. The Protocol must not be used as a tactical device to secure advantage for one party or to generate unnecessary costs. In lower value claims (such as those likely to proceed in the county court), the letter of claim and the response should be simple and the costs of both sides should be kept to a modest level. In all cases 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 Protocol does not impose a requirement on the parties to marshal and disclose all the supporting details and evidence that may ultimately be required if the case proceeds to litigation.”

This is no doubt directed at preventing unreasonable and disproportionate requests being made by recalcitrant defendants.  However, as can be seen from the recent case of Cundall v Whipps Cross University Hospital, this provision does not enable the claimant to escape from the requirement to comply with the detailed requirements of the Protocol.   As the judge said in this case:

“If both the letter and the spirit of the Protocol are complied with, many disputes can be resolved at proportionate cost without the need for proceedings.  Furthermore, disputes which are litigated can be more sharply focused at the outset".

In this case, Cundall was a firm of consulting engineers who had carried out engineering consultancy services in relation to some works that were carried out at Whipps Cross University Hospital.  Cundall had submitted invoices between July 2005 and March 2006 amounting to £305,571, which had not been paid by the Hospital Trust.

The Trust had responded to the application for payment by stating that the person who had been familiar with the work carried out had left and that the Trust was unable to locate the relevant papers to establish that the sums claimed were properly payable.  The Trust made various requests for further information and sought clarity as to the contractual basis of the claim.  These requests were not responded to with any clarity by Cundall, who then made a further claim for additional fees for another related part of the work.  Cundall then issued proceedings on 17 August 2007, for the first time setting out clearly the contractual basis of its claim.

The Trust was aggrieved that Cundall had not clearly set out its claim in pre-action correspondence and made an application for a stay of proceedings to enable the parties to address the case now advanced.

Judge Jackson, decided that the Construction Protocol did apply to this case and considered its objectives as well as the court’s discretion to grant a stay in such circumstances.  He decided that in the circumstances of this case it was appropriate to grant a stay for three reasons: (1) in light of the correspondence and counsel’s submissions he believed that there was the real possibility of settlement if the protocol process was observed; (2) this could save both parties in incurring unnecessary litigation costs; and (3) it is unfair on the defendant to proceed immediately to litigation when a proper summary of the claim has not been notified in advance.    

- Rob Palles-Clark