A new Pre-Action Protocol for Construction and Engineering Disputes came into force on 9 November 2016. Its intention is to simplify the pre-action process and to reduce the costs of complying with it.

The original Protocol came into force in October 2000, and in more recent years has been criticised for the level of information required, leading to a disproportionate level of costs being incurred, particularly in small value claims.  Secondary disputes could develop over whether parties had adequately complied with the Protcol or not.

The following are the principal changes in the new Protocol:

  1. The parties can agree not to follow the Protocol
  2. The parties no longer need to provide "full" information but only sufficient information to broadly allow the parties to understand each other's position and make informed decisions about settlement and how to proceed (including ADR). An expert report is no longer a requirement.
  3. The parties can agree to extend the periods for the relevant steps in the Protocol save that the maximum extension for any steps cannot exceed 28 days in the aggregate. This will have the most impact on the deadline for issue of the letter of response to a letter of claim.  It was previously possible to extended the 28 days required for this step to up to 3 months, and that extension was often given in complex cases.
  4. The parties should now normally meet within 21 days after the Letter of Response (reduced from the previous 28 days), and the Protocol process is concluded automatically after the pre-action meeting, or 14 days after expiry of the period within which the meeting should have taken place.
  5. The court will only impose cost consequences for non-compliance where there has been a "flagrant" or "very significant" disregard for the Protocol.

The most significant change is the introduction of a new "Protocol Referee Procedure".  As part of the Letter of Claim and Letter of Response, each party has the opportunity to say whether they wish the Protocol Referee Procedure to apply.  Both parties must agree for it to apply.

If the Protocol Referee Procedure is to apply then either party may apply to the Chairman of TeCSA for the nomination and appointment of a Protocol Referee, who will be a senior member of TECBAR or TeCSA and a fee of £3,500 plus VAT is payable.

The application is to set out brief details of the directions sought by the Applicant in order to assist the parties in participating in and complying with the Protocol; and/or the nature of the non-compliance (no more than 4 sides of A4 pages) together with such other documents as the Applicant intends to rely upon (no more than 1 lever arch folder, single sided copying).  Provision is made for a response within 5 working days of the notice of appointment, and a reply within 2 working days thereafter.

The Protocol Referee reaches a written decision no later than 10 working days after receipt of the notice of appointment (unless extended) setting out any appropriate directions for future conduct of the Protocol process; and/or whether there has been non-compliance with the Protocol and, if so, whether the non-compliance demonstrated a flagrant or significant disregard for the terms of the Protocol and, if so, to what extent. The decision is binding and must be complied with until the dispute is determined by legal proceedings or by agreement.

As part of his decision the Referee is able to order the Respondent to reimburse the Applicant for the £3,500 application fee and in subsequent proceedings the costs of the application will be costs in the case, which means that the losing party is most likely to pick up the final cost.

The new Protocol Referee Procedure is voluntary and so it remains to be seen whether parties will adopt it.  Given the fee involved, and the general changes within the Protocol aimed at simplify the process and reducing costs, it is likely that it will only apply in the most complex and high value cases.

For more information or to discuss this article any further please contact Louise Robling

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