Will the new Protocol for Construction and Engineering Disputes save time and cost?

The genesis of the new Protocol for Construction and Engineering Disputes, which came into effect today, was widespread concern regarding the front-loading of costs. It is this concern that has led to the introduction of a quicker, less detailed and more proportionate Protocol procedure.

What does the new Protocol involve?

Streamlining the Protocol procedure includes:

  • Limiting the letter of claim to a “brief summary” of the claim.
  • Withdrawing the need for a detailed response and providing for a:

    “… brief and proportionate summary… and, if the Defendant intends to make a Counterclaim, a brief summary of the Counterclaim.”

  • Extending the requirement for a simple letter of claim and the costs of both sides to be modest from lower value claims to:

    “… many cases, including those of modest value.”

  • Stating that expert reports are not required unless they are “succinct and central” to the claim.
  • Removing the requirement to agree how unresolved issues are defined.

A cautious welcome?

The introduction of the new Protocol is likely to receive a cautious welcome from some because past procedural changes have not always produced the desired benefit. For example:

  • Recent analysis undertaken by JLT, who are construction insurance brokers, found that after the introduction of the Jackson reforms, the number of construction insurance claims rose sharply. More generally the analysis shows that the average time taken to settle a claim rose 11% from 916 days to 1,007 days.
  • TeCSA has also undertaken research that points to abuse of the previous Protocol by some parties, in particular through delaying tactics and deliberate building of costs.

Insurers welcomed the original Protocol because it required claimants to carefully evaluate the merits of their claim at an early stage. The perception of insurers was that this had a chilling effect on the commencement of claims, particularly those that were poorly prepared and ill considered.

Therefore, construction Insurers may be concerned that under the new Protocol parties no longer need to provide “full information”, but merely “sufficient information” to allow the parties to understand each other’s position. Also, the requirements of the letter of claim have been modified so that the letter only has to contain a “brief summary of the claim or claims” and expressly provides that experts reports are neither “expected or required”.

Recourse to the courts is usually expensive and therefore dispensing with requirements for the letter of claim and expert reports may lead to even more costs and increased work for the courts. The parties may, of course, expressly agree in writing not to comply with the Protocol. However if the Protocol is not followed, there is little that a party may be able to do, as the Protocol states that the court will only impose cost consequences on a party for non-compliance in:

“… exceptional circumstances, such as a flagrant or very significant disregard for the terms.”

Nevertheless, those insuring construction risks have given the new Protocol a cautious welcome in the hope, rather than the expectation, that it will bring about a pre-action procedure that is user-friendly and cost-effective and not the expensive and unwieldy procedure that has for so long been in place.

Even if the effect of the new Protocol is to change perceptions rather than reality, it may be counted as a success.

Hardwicke Paul Reed QC

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