The Pre-Action Protocol for Construction and Engineering Disputes: traps for the unwary and how to avoid them (Part 1)

The Technology and Construction Court (TCC) celebrates its 20th anniversary in its current guise this month. The TCC is a specialist court recognised globally as dealing with some of the most technically complex civil claims concerning construction and technology.

Generally, the TCC will expect the parties to have undertaken a series of steps prescribed by the Pre-Action Protocol for Construction and Engineering Disputes (the Protocol) before commencing TCC proceedings.

The Protocol aims to facilitate an amicable solution of disputes before escalating to the TCC but there are some issues which can cause a party to trip up. Avoiding such pitfalls is particularly important given that failure to comply with the requirements of the Protocol can lead to the TCC imposing significant costs sanctions. However, the Protocol should not to be used tactically or as a weapon and parties should not concern the court with minor procedural deviations.

In this first in a series of articles on the Protocol we address four key issues: whether the Protocol should apply, time limits, proportionality and insurance requirements.

Application of the Protocol

The Protocol sets out pragmatic steps which the parties should take in order to avoid costly litigation and it is generally in both parties’ interests to comply with these steps. There will be some instances, however, where its application is not appropriate. The Protocol sets out the specific types of dispute in which the claimant will not be expected to comply with the Protocol before issuing proceedings:

  • Enforcement of an adjudicator’s decision
  • Interim injunctions
  • Summary judgment
  • Claims concerning issues previously decided by adjudication or other form of ADR.

Additionally, if all of the parties to the dispute agree that the Protocol should not apply, they can express this in writing to the court.

Time limits

As a defendant, it is important to keep an eye on the clock as the Protocol requires strict compliance with the prescribed time limits:

  • The defendant must acknowledge a letter of claim within 14 days of receipt and provide a substantive letter of response within 28 days of receipt.
  • The parties must meet within 21 days after receipt of the letter of response, or (if the claimant intends to respond to a counterclaim) 21 days after receipt of the claimant’s letter of response to the counterclaim.

The parties may agree longer periods of time for compliance with any of the prescribed steps, however no extension can exceed 28 days in the aggregate.

There may be good reasons why the parties cannot comply with the prescribed time limits, for example in document-heavy matters or in multi-party disputes where convening a meeting at short notice is impossible. If this is the case, the parties can agree in writing that the Protocol should not apply (agree to ‘opt out’), with an agreement to ‘opt back in’ at a later date.

Proportionality

The costs incurred at the Protocol stage should be proportionate to the complexity of the case and the amount of money at stake.

The Protocol requires pre-action correspondence to include a brief summary of the claim/s, including a list of principal contractual or statutory provisions relied on. This is to allow the parties to consider their own position and to consider the next stages in potential amicable resolution.

However, the level of detail needs to reflect the complexity of the case and the amounts claimed and so in, for example, a small value defects claim, the pre-action correspondence will require far fewer details than a significant final account dispute.

Unnecessary and disproportionate costs incurred during the pre-action stage will be frowned upon by the court, so keep it proportionate.

Insurance requirements

Receiving a letter of claim might be the first indication that a claim will be made, although invariably there will be some build up prior to this being issued. Either way, it is important to ensure compliance with your insurance policy’s notification requirements.

  • Typically, insurers will require notification not only of a claim being made but also any circumstances which might give rise to a claim in the future.
  • The policy will also prescribe how and when you must notify insurers. Failure to give adequate and timely notice (which could be “immediately”, “as soon as possible” or “as soon as reasonably practicable” – all of which have differing requirements) could result in insurers declining policy cover or to a claim by insurers for damages for breach of a notification provision.

One thing is clear: whether you have notified your insurers of circumstances prior to receiving a letter of claim or not, as soon as a letter of claim does arrive, notify your insurers.

The next article in this series will consider contractual requirements, document management and jurisdiction.

Read other items in the Construction and Engineering Brief - November 2018