The Arch

Pre Action Protocols – Comply or Die?

In modern litigation practice the emphasis is on settling disputes without going to court wherever possible. The Court Rules state that:

‘the Courts take the view that litigation should be a last resort and that claims should not be issued prematurely when a settlement is still being actively explored’

To promote this principle and to develop consistency in the approach to pre-action correspondence, a number of Pre-Action Protocols have been published covering specific areas of law.

The Pre-Action Protocol for Construction and Engineering Disputes (‘the Protocol’) came into force in October 2000. The Protocol encourages an early exchange of information and documents relevant to the claim and stresses the desirability of agreeing a settlement before the commencement of proceedings.

A common misconception is that the parties have a choice of whether or not to comply with the Protocol. The following cases highlight the pro-Protocol approach taken by the courts and the serious sanctions that will be imposed for non-compliance.

Adverse costs order
There will, of course, be cases where either or both parties fail to comply with the requirements of a protocol. If the court determines that the failure to follow the protocol was avoidable, the guilty party may find it is faced with an adverse costs order at a later stage in the proceedings.

This approach was taken by Ramsey J in the recent case of Charles Church Developments Limited -v- Stent & Mason Limited and another (2007).

Charles Church made a claim against two other businesses, issuing and serving proceedings without first considering the Protocol. After the defences were filed, Charles Church applied for the proceedings to be stayed in an attempt to pursue a settlement.

Ramsey J accepted the Defendants argument that it if the pre-action protocol had been adhered to it was likely that a settlement would have been reached. The Claimants non-compliance had led to costs being incurred in the proceedings that might otherwise have been avoided.

The court ruled, therefore, that Charles Church should pay 50% of the Defendants’ costs, as well as its own, up to the start of the stay for settlement.

Stay of proceedings
In addition to adverse cost orders, the courts can also take non compliance into account when making case management directions. This was highlighted in the recent case of Cundall Johnson & Partners LLP –v- Whipps Cross University NHS Trust (2007).

The Defendant had engaged the Claimant, a firm of consulting engineers, in respect of two construction projects. The Claimant then sued the hospital trust for fees that were alleged to be outstanding.

There had been pre-action correspondence between the Claimant and the Defendant. However, the Defendant argued that the Claimant had failed to set out its case in sufficient detail and applied to the court to have the proceedings halted to allow the pre-action protocol to be complied with.

The court held that the Claimant had not complied with the requirements of the Protocol and allowed the application for the proceedings to be stayed. In his judgement Jackson J stated that ‘it is unfair on the defendant to proceed immediately with litigation, when a proper summary of the claim has not been notified in advance’.

Summary
These cases emphasise the growing importance of partie’s conduct in the pre-action stage of a dispute. They also highlight the strict approach that courts will take towards parties who issue proceedings without first making genuine attempts to settle.

If you require any further information on this, please contact Matthew Duckworth of the Construction & Engineering team on matthew.duckworth@harveyingram.com or 0116 257 6155.