REUTERS | Eric Thayer

Do you want to stay?

At the time of issuing proceedings, the parties may or may not have complied with the Pre-Action Protocol for Construction and Engineering Disputes (Protocol). Limitation issues, for example, may have prevented compliance. Alternatively, the parties may just not have entered into the spirit of the Protocol.

With costs mounting rapidly and the reality of the estimates of costs to trial, by the time of the first case management conference (CMC), parties often want to attempt some sort of alternative dispute resolution (ADR), such as mediation, in the hope that issues can be narrowed, or perhaps even resolved.

Therefore, a common request at the first CMC is that the timetable to trial should provide an opportunity for the parties to comply with the Protocol. As set out at paragraph 7.2.3 of the TCC Guide, this can be achieved by:

  • staying the proceedings for a short time; or
  • by providing a window in the timetable that the parties are encouraged to use to meet.

During a stay, no steps in the claim have to be taken. For some this is an obvious advantage, as the parties can concentrate on resolving the dispute, rather than spending time and money on, for example, preparing pleadings or formal disclosure. In contrast, an opportunity to settle within the timetable keeps the pressure on the parties by maintaining the reality of litigation. Without such pressure, proceedings can drift, sometimes to the tactical advantage of one party.

Roundstone Nurseries Ltd v Stephenson Holdings Ltd

A recent decision, which concerned a stay to give the parties time to comply with the Protocol, is Roundstone Nurseries Ltd v Stephenson Holdings Ltd. Proceedings were issued without any attempt to comply with the Protocol, seemingly for limitation reasons. Before a defence was served, the parties agreed to a stay. By agreement, the stay was extended to last just over seven months. During the initial stay, very little happened. A mediation was arranged for shortly after the expiry of the extended stay, but was then cancelled. Neither party sought to extend the stay further and within a week of the cancellation, the claimant entered judgment in default of defence.

By the time of the hearing to set aside the default judgment, the defendant had produced a defence and the claimant had agreed that judgment should be set aside. Both parties applied for their costs. To decide the costs consequences, the court examined the background.

As the stay had expired when judgment was entered, the judgment was regular. The court therefore had to consider whether, in its discretion, judgment should be set aside. By Civil Procedure Rule (CPR) Part 13.3, the court may set aside a default judgment if:

(a) the defendant has a real prospect of successfully defending the claim; or

(b) it appears to the court that there is some other good reason why:

(i) the judgment should be set aside; or

(ii) the defendant should be allowed to defend the claim.

The court held that both grounds under CPR Part 13.3 were made out by the defendant. On the second ground, the court held that there was good reason for the judgment to be set aside, namely that it was obtained in an improper manner and as a result of unreasonable conduct. Not only had neither party written to the court to inform it of any possible settlement, the claimant knew that the defendant was operating on the basis that a further stay was required. The court rejected the submission that if a judgment was entered regularly, then the claimant was entitled to enter it even if it knew that the defendant had a real prospect of defending it. That, the court held, was contrary to the entire basis of the CPR and if done, should carry with it cost consequences.

Therefore, although the parties in Roundstone did communicate during the stay and some steps were taken, for example the service of experts’ reports on a without prejudice basis, overall the court commented that there was little progress with the pre-action process or ADR, even during the extended stay. Notably as a result of the stay and entering default judgment, ten months passed between the service of proceedings (in August 2008) and the matter first coming before the court to set directions (in June 2009). Such a delay is of particular note when a claim relates to matters that happened in 2002.

What can we learn from this?

The message from this case therefore appears to be that parties should consider carefully the pros and cons of staying proceedings. A window of opportunity in the litigation timetable may be more advantageous. After all, the prospect of complying with a formal disclosure order that will involve sifting through tens of thousands of emails, may be enough to bring even the most belligerent party to the table.

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