18th November Journal Column

HK Logo - smallBy Jan Rzedzian, Associate Solicitor, Hay & Kilner

Contractors, employers, construction professionals and solicitors should all be familiar with the 16-year-old Pre-Action Protocol for Construction and Engineering Disputes. The protocol sets standards which the parties to a dispute are expected to observe before court proceedings are issued – the idea behind it being to save time and money by avoiding litigation. It applies to all construction and engineering disputes, including professional negligence claims against architects, engineers and quantity surveyors. So far it seems to be working as, according to the Technology and Construction Solicitors Association, it’s succeeded in 40 per cent of cases.

However, as with everything, it hasn’t been without its problems. Judges and barristers feared that it impeded cash flow, front loaded costs, prolonged the process of dispute resolution and hindered access to justice – basically, it’s done exactly what the industry has been trying to avoid since the Construction Act 1996 came into force.

Following a review by a Technology and Construction Court working party, a revised Protocol was introduced and came into force last week (9 November 2016).
So, what’s changed?
• More concise: The general aim has been modified ¬¬so now only an outline of the case needs to be given. The letter of claim and response should now only contain a brief and balanced summary of the party’s position meaning it should take up even less time.
• Fairer settlement costs: There is now an aim to settle disputes inexpensively, to go along with the original Protocol aims of settling disputes fairly and quickly.
• Voluntary meeting: A meeting is now optional, and may take the form of mediation.
• Timeframes are tighter: Parties now meet within 21 days after the letter of response and a maximum extension for any step of the process is now 28 days.
• Automatic conclusion: Protocol action will be concluded automatically after the meeting, or 14 days after expiry of the period within which it should have taken place.
• Non-compliance penalty changes: Only in exceptional circumstances will the court impose cost consequences for non-compliance.
• Referee procedure: A new consensual referee system has been added, with the intention of enabling directions to be given by a qualified third party during the procedure. As the intended application fee for appointment of a referee is currently £3,500 plus VAT, it is expected that it will only be used in the highest value and most technical cases, where parties wish to ensure compliance with the Protocol and avoid the likelihood of judicial sanctions.
• Although the Protocol is not voluntary, parties can also opt out of using the Protocol altogether, providing they all consent to this.
The new Protocol is designed to be less onerous and less costly but has it relaxed matters too far? If courts are going to be reluctant to impose sanctions such as cost consequences for non-compliance, this may encourage parties to run that risk and we could find ourselves back in the “bad old days” of seven day letters before action.