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All change? The New Pre-Action Protocol for Construction & Engineering

14 Nov 2016

Contractors, employers, construction professionals and solicitors will all, by now, be familiar with the 16-year-old Pre-Action Protocol for Construction and Engineering Disputes. It was designed to head off claims before they entered the court system thereby saving time and expense, and, according to the Technology and Construction Solicitors Association, it has succeeded in 40% of cases.

The Protocol has not been without its flaws, however, and Judges and barristers, in particular, feared that it impeded cash flow, front loaded costs, prolonged the process of dispute resolution and hindered access to justice. In other words, it did exactly what the industry has been trying to avoid since the Construction Act 1996 came into force.

Following review by a Technology and Construction Court working party over the last few years, a revised Protocol was introduced and came into force on 9 November 2016.

So what’s new or different?

  • More succinct: Perhaps most importantly, the general aim of the Protocol has been modified ­­so now only an outline of the Claimant’s case needs to be given. The letter of claim and letter of response can be much more succinct. Both letters should now only contain a brief and proportionate summary of the party’s position.
  • Fairer settlement costs: There is now an aim to settle disputes inexpensively, to go along with the aims of settling disputes fairly and early.
  • Parties can agree to entirely dispense with the need to comply.
  • 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 28 days.
  • Automatic conclusion: Protocol action will be concluded automatically after the meeting, or 14 days after the 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 course of the Protocol procedure. As the intended application fee for appointment of a referee is presently £3,500 plus VAT it is expected that it will only be used in the highest value and most technical of cases, where parties wish to ensure compliance with the Protocol and to avoid the likelihood of judicial sanctions.

In brief, the new protocol is designed to be less onerous and less costly but whether it has relaxed matters too far is a question to be seen. 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 be back in the “bad old days” of 7 day letters before action.

For further information or advice, please contact Jan Rzedzian, Associate Solicitor

Call: 0191 232 8345

Email: Jan.Rzedzian@hay-kilner.co.uk