The Pre-Action Protocol for Construction and Engineering Disputes sets certain standards which the parties to a construction dispute or an engineering dispute are expected to observe before Court proceedings are issued. The Protocol encourages the parties to exchange information at an early stage and to consider using a form of alternative dispute resolution.
When does the Pre-Action Protocol for Construction and Engineering Disputes apply?
The Protocol applies to all construction and engineering disputes, including professional negligence claims against architects, engineers and quantity surveyors. However, a Claimant is not required to comply with the Protocol in the following circumstances:
- Where Court proceedings are for the enforcement of the decision of an adjudicator to whom a dispute has been referred pursuant to section 108 of the Housing Grants, Construction and Regeneration Act 1996;
- Where Court proceedings include a claim for an interim injunction;
- Where the Claimant seeks summary judgment pursuant to Part 24 of the Civil Procedure Rules; or
- Where the dispute relates to the same or substantially the same issues as have been the subject of a recent adjudication under the Housing Grants, Construction and Regeneration Act 1996, or some other formal alternative dispute resolution procedure.
A Claimant is permitted to commence Court proceedings without complying with the Protocol if, by reason of complying with it, their claim may be time-barred. In such circumstances the Claimant is required to apply to the Court for directions when he asks the Court to issue proceedings. The Court may in such cases order a stay of the proceedings pending compliance with the Protocol.
What are the requirements of the Pre-Action Protocol for Construction and Engineering Disputes?
The letter of claim
The Claimant is expected to notify the Defendant of his claim by sending to each proposed Defendant (if appropriate to his registered office) a letter of claim prior to commencing Court proceedings.
The Protocol specifies what information the letter of claim should contain.
The Defendant’s acknowledgment of the letter of claim
The Defendant should acknowledge receipt of the letter of claim in writing within 14 calendar days of receiving the letter of claim. If the Defendant is insured he may provide the name and address of his insurer to the Claimant at this stage.
If the Defendant fails to acknowledge receipt of the letter of claim within 14 days the Claimant is entitled to commence Court proceedings without further compliance with the Protocol.
Objections to the Court’s jurisdiction or the named Defendant
The Defendant has 28 days from receipt of the letter of claim to raise an objection on the following grounds:
- That the Court lacks jurisdiction;
- That the matter should be referred to arbitration; or
- That the Defendant named in the letter of claim is the wrong Defendant.
The objection should be made in writing and should specify the parts of the claim to which the objection relates. It should also set out the grounds relied on and, where appropriate, should identify the correct Defendant, if known.
If the Defendant fails to raise an objection at this stage, he is not precluded from raising an objection at a later stage. However, the Court may take such failure into account when deciding the question of costs.
If the Defendant raises an objection he is not required to send a letter of response in relation to the claim or those parts of it to which the objection relates.
The Defendant can withdraw any objection made by him at any stage. Any withdrawal should be in writing. If the Defendant does withdraw an objection before Court proceedings are commenced the parties are required to comply with the Protocol. In such circumstances the letter of claim will be treated as having been received on the date on which the Defendant withdraws his objection.
The Defendant’s response to the letter of claim
The Defendant has 28 days from the date of receipt of the letter of claim to respond in full to it. This period of time can be extended by the consent of the parties up to a maximum of 3 months.
The letter of response should contain the following information:
Which facts set out in the letter of claim are agreed and which are not agreed. Where the Defendant does not agree with the facts set out in the letter of claim, he should explain why he does not agree with them;
Which claims are accepted by the Defendant and which are rejected by him. If the Defendant rejects a claim he should explain why he rejects it;
If the Defendant accepts a claim in whole or part, the letter of response should state whether the damages, sums or extensions of time claimed are accepted or rejected. If they are rejected the Defendant should explain why he rejects them;
If the Defendant alleges contributory negligence against the Claimant, the letter of response should contain a summary of the facts relied on by the Defendant;
Whether the Defendant intends to make a counterclaim. If he does he is required to provide the information required to be given in a letter of claim;
The names of any experts already instructed by the Defendant and on whose evidence he intends to rely, identifying the issues to which that expert’s evidence will be directed.
If the Defendant fails to respond to the letter of claim within 28 days (or such other period as has been agreed between the parties) the Claimant is entitled to commence Court proceedings without having to comply with the remainder of the Protocol.
The Claimant’s response to any counterclaim raised
The Claimant has 28 days from the date of receipt of the Defendant’s response to respond to any counterclaim raised by the Defendant in such response. This period of time can be extended by the consent of the parties up to a maximum of 3 months.
The parties are normally required to meet within 28 days after receipt by the Claimant of the Defendant’s letter of response, or after the Claimant’s response to the Counterclaim, where there is one.
The purpose of the meeting is for the parties to reach an agreement as to what are the main issues in the case, to identify the root cause of disagreement in respect of each issue, and to consider whether, and if so how, the issues might be resolved without the need for Court proceedings. If Court proceedings are unavoidable the parties are expected to consider what steps should be taken to ensure that the Court proceedings are conducted in accordance with the “overriding objective”. The “overriding objective” is defined in rule 1.1 of the Civil Procedure Rules.
In some cases it may be necessary to have more than one meeting.
The Court will normally expect the following people to attend the meeting:
- Where the party is an individual, that individual;
- Where the party is a corporate body, a representative of that body who has authority to settle or recommend settlement of the dispute;
- The legal representatives of each party, where legal representatives have been instructed;
- Where insurers are involved and their involvement has been disclosed, a representative of the insurer or its legal representative; and
- Where a claim is made or defended on behalf of another party, for example where a claim is made by a main contractor who has a contractual obligation to pass on the claims of its subcontractors, the party on whose behalf the claim is made or defendant and/ or his legal representatives.
The parties are required to consider whether some form of alternative dispute resolution procedure would be more suitable than the commencement of Court proceedings, and if so, they should try to agree which form to adopt. The protocol does, however, recognise that parties cannot and should not be forced to enter into any form of alternative dispute resolution procedure.
If the parties are unable to resolve the dispute they are expected to try to reach an agreement on the following matters:
Where expert evidence is likely to be required, how the relevant issues are to be defined and how expert evidence is to be dealt with. Where expert evidence is required the parties should consider the appointment of a jointly instructed expert and, if possible, reach an agreement as to who that should be;
The extent of disclosure of documents with a view to saving costs; and
The conduct of the Court proceedings with a view to minimising cost and delay.
The Protocol provides that everything said at a pre-action meeting shall be treated as “without prejudice”. However, any party who attended such a meeting is free to disclose to the Court and may be required to do so the following matters:
- That a meeting took place, when and who attended;
- The identity of any party who refused to attend, and their reasons for refusing to attend;
- If the meeting did not take place, why not;
- Any agreements made between the parties; and
- Whether alternative means of resolving the dispute were considered or agreed.
Proportionality of costs
The Protocol expects the parties to act reasonably to keep costs proportionate to the complexity of the case and the amount of money at stake. The Protocol must not be used as a tactical device to secure an advantage for one of the parties or to generate unnecessary costs.
What happens if a party does not act in accordance with the Protocol?
The Court has a very wide discretion when it comes to awarding costs. When determining costs the Court will take into account the conduct of the parties including whether the parties have complied with the Protocol.
When considering whether a party has complied with the Protocol the Court will be concerned about whether the parties have complied in substance and is unlikely to be concerned with minor or technical shortcomings. The Court will also consider the proportionality of the steps taken compared to the size and importance of the matter, will take account of the urgency of the matter and will look at the effect of non-compliance on the other party.
A single minor breach by one party will not exempt the other party from following the Protocol.