The New Pre-Action Protocol For Construction And Engineering Disputes Which Came Into Force On 14 November 2016.
When Does The Protocol Apply?
It applies to all construction and engineering disputes (including professional negligence claims against architects, engineers and quantity surveyors) save for those proceedings:
- For the enforcement of an adjudicator’s decision;
- That include a claim for injunctive relief;
- That will be the subject of a claim for summary judgment; or
- That relate to the same, or substantially the same, issues as have been the subject of a recent adjudication or other alternative dispute resolution (“ADR”) procedure.
As such, the protocol for Construction and Engineering Disputes applies to a significant proportion of disputes that, if court proceedings were commenced, would be issued in the Technology and Construction Court (the “TCC”).
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The Protocol for Construction and Engineering Disputes
Whilst the Protocol is not voluntary, the parties expressly agree in writing can now agree to opt out. It means that The Claimant is no longer required to comply with the Protocol before commencing proceedings if all parties expressly agree in writing.
What Are The Requirements Of The Protocol?
Prepare A Letter Of Claim
The first thing you need to do in any building dispute is to send a detailed Letter of Claim to the other side.
Top Tip: However, it is important that you act in accordance with your contract. The contract may have specific terms about raising issues during the course of a project which would override the protocol for Construction and Engineering disputes.
What The Letter Of Claim Should Contain?
Content of the Letter
In absence of anything in the contract to the contrary, the letter must contain the following information:
- Your name (or that of your business) and address
- The full name and address of the building firm/company you are claiming from
- A brief summary of the claim or complaint that you are bringing
- Details of what you are claiming for supported by evidence and any issues in dispute
- Type of compensation or relief (with breakdown of the claim)
- Names of any experts whose evidence will be called on during the case.
- When you wish to have a response by – (this is usually 14 days to acknowledge receipt and 28 days for a substantive response.)
Top Tip: It will no longer be a requirement that full information regarding the nature of the dispute must be given. Merely that sufficient information is given such that the outlines of the parties’ cases are known.
Top Tip: The letter of claim is not confidential, and can be referred to in any subsequent litigation.
Top Tip: It is no longer required or expected that expert reports should be provided. Where they are provided, they should be succinct and central to the claim. Central to the claim in any protocol for Construction and Engineering disputes.
Top Tip: The Claimant must confirm whether it wishes the PRP to apply.
Claim Receipt by Defendant
The defendant must acknowledge his receipt of the letter of claim. Must confirm whether it wishes to use the PRP within 14 calendar days of its receipt.
This is done by way of a letter of acknowledgement. In which they should state when a formal response will be sent. If they fail to do this then the claimant is free to commence court action. They will no longer be bound by the terms of the pre-action protocol for Construction and Engineering disputes.
The Defendant should provide a full written response to the claim within 28 days. In its response, that it should state whether the claim is accepted in full or in part. Or indicate, that it is not accepted.
Top Tip: The defendant could ask for an extension rather than sending a response within the 28 days period. The response period can be extended by further 28 days. It should be brief and proportionate summary. Any counterclaim must identify the names of any third parties. The defendant intends to, or is considering submitting to a pre-action process.
Top Tip: The defendant’s acknowledgement should also confirm whether it wishes the protocol referee procedure to apply. The procedure involves the appointment, of an independent referee. Thus from TECBAR or TeCSA at a fixed cost of £3500 plus VAT, to regulate compliance with the pre-action process. This is an entirely contractual procedure which the parties will need to agree to adhere to. The Protocol Referee seems only appropriate for higher value disputes. Where the Court fee would be in excess of £3500 plus VAT. Or where there is a cost benefit of resolving, or narrowing the issues. This to be prior to the commencement of proceedings.
Top Tip: Has the defendant provided the name and address of its insurers? The builder should be insured against the work. If the builder does not provide details of insurance policy, you will not know how to contact the insurer. Further to claim on the policy.
The Defendant May Object To The Claim On Any Of Three Grounds:
- The court lacks jurisdiction on the matter.
- The matter should be referred to arbitration.
- The wrong defendant(s) is named in the letter of claim.
If anyone of these applies, the defendant must give reasons for the objection.
If there is no objection, the defendant must still send their letter of substantive response within 28 days of receiving the letter of claim.
The Defendant’s response should now contain a brief and proportionate summary of the response. Any counterclaim and must identify the names of any third parties the defendant intends to, or is considering submitting to a pre-action process.
The time limit for a Claimant to respond to any counterclaim has been shortened from 28 to 21 days and such a response should be brief and proportionate summary.
The aim of the protocol is for the parties to meet without prejudice. This is to be at least once before formal court proceedings begin. An expectation that the parties should usually meet on, a without prejudice basis.
The time limit for holding a pre-action meeting has been shortened from 28 days to 21 days. This is after the receipt of the defendant’s letter of response (or after the claimant’s response to the counterclaim).
The aim of the pre-action meeting was to see if the matter can be settled and/or to reduce the issues between the parties. If the parties cannot resolve the dispute they must try to agree the main issues. Identify the root cause of disagreement, in respect of each issue.
Top Tip: Since the parties are taking steps to resolve the dispute without litigation. The meeting can now take the form of an Alternative Dispute Resolution process e.g mediation.
Parties need to consider whether expert evidence is likely to be required at the pre-action stage. This may be from an Architect, Surveyor or building professional.
Expert evidence can be obtained solely or jointly basis. If the dispute concerns complex issues then an expert may be relevant. Otherwise it may not be appropriate to disclose the identity of such experts to the opposing party.
Top Tip: Expert report is no longer expected or required. Where they are provided, they should be succinct and central to the claim. The Claimant must confirm whether it wishes the PRP to apply.
The New Protocol no longer contains a direction that the parties should consider. Whether some form of ADR may be more appropriate than litigation. This may be as a result of the change to allow the pre-action meeting to take the form of an ADR process.
If the parties cannot agree on a resolution of the dispute at the pre-action meeting. They then they are no longer required to simply use best endeavours to agree evidential and procedural matters. Must now seek to agree the same. They no longer have to agree how the relevant issues are to be defined at this stage. However do have to agree whether they will use the e-disclosure protocol.
The New Protocol now provides that the pre-action process. This will automatically conclude at the completion of the pre-action meeting. Or, should no meeting take place, 14 days after the expiry of the deadline. By which the meeting should have been held.
- If the parties agree that the PRP applies, they must apply to the TeCSA Chairman and pay the relevant application fee (at the time of writing the fee is currently set at £3,500 plus VAT).
- The application can be made at any time during the pre-action process but cannot be made once court proceedings have commenced.
- The application form should set out details of the directions sought and the nature of non-compliance. With any supporting documents and a copy should be sent to the responding party.
- The TeCSA Chairman will seek to appoint a referee within two working days of the application.
- TeCSA will acknowledge receipt of the application form and email the the next five referees on the relevant TeCSA or TECBAR list.
- TeCSA will then decide on the nomination and issue it to the parties copying the same to the referee. Such decision is at the TeCSA Chairman’s sole discretion.
- The responding party has to provide a response to the application. This is accompanied by supporting documents.
- The applicant is then entitled to submit a reply to the response.
- The referee should reach a decision no later than 10 working days after receipt of the notice of appointment. The parties can agree to extend this period.
- The decision should set out any appropriate directions for future conduct. To whether there has been any non-compliance with the Protocol.
- This decision is binding on the parties until the dispute’s determination. In later legal proceedings the court should give due weight to the decision. However it is not bound by it.
- The referee has jurisdiction to direct that the responding party. Reimburses the applicant for the application fee.
Considering whether a party has complied with the Protocol. The Court would normally expect substantial compliance from a party. This has changed.
Top Tip: It is now clear that the Court can only impose cost sanctions for non-compliance in exceptional circumstances. These are where there is a flagrant or very significant disregard for the terms of the Protocol.
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