REUTERS | Ricardo Moraes

More change at the TCC: abolition of the Pre-Action Protocol?

With all aspects of court proceedings coming under scrutiny and reform to ensure they are cost effective, it is perhaps not surprising that the Technology and Construction Court (TCC) is looking at the Pre-Action Protocol for Construction and Engineering Disputes.

Is it a waste of time and money, or does the upfront investment lead the parties to settlement?

The TCC has announced that it has a working party undertaking a review to find out. 

The review will consider the role the Protocol will play in future dispute resolution, in particular whether and/or how comprehensively litigants will have to comply with it before issuing court proceedings. As part of the review, the Technology and Construction Solicitors Association is carrying out a survey of its members to gauge views on how useful and cost-effective the Protocol is.

Jackson LJ’s findings

The concern, outlined in Jackson LJ’s report on costs, is that the Protocol can often be a waste of time and cost. Interestingly, there was a split opinion between the TCC judges and barristers on the one hand and solicitors on the other:

  • The judges and barristers expressed concern that the Protocol substantially increased the time and cost of proceedings by requiring parties to carry out work in the Protocol phase that would be duplicated after proceedings were issued.
  • Solicitors held the view that the Protocol, when followed sensibly, promoted early settlement and led to a saving of costs.

Costs are incurred, but are they wasted?

There is no doubt that parties complying with the Protocol incur costs. However, it seems to me that the question is not whether costs are incurred, but whether:

  • The costs are unnecessary and extra to the costs that are incurred in proceedings in any event.
  • There is any value to be gained from incurring these costs before proceedings are issued.

The purpose of the Protocol is to ensure that the parties have considered settlement before commencing litigation so that only those disputes that cannot be settled proceed to court, thereby avoiding the time and cost impact of proceedings.

The Protocol in action

The claimant is required to send a letter of claim to the defendant. The defendant is then required to respond to those allegations and set out any counterclaims. This forces the parties to have a better understanding of the strengths and weaknesses of their own case, and share those with the other party.

When the parties meet (as the Protocol requires), they should identify the root cause of their disagreement on each issue and consider whether those might be resolved without litigation (through ADR). If litigation is unavoidable, the parties can then ensure that it is conducted in a proportionate manner.

It is only when the parties fully understand the case against them that they can realistically consider settlement. For complex cases, it is correct to say that this process can be lengthy and time-consuming. However, I query whether these costs are wasted costs.

Is there an alternative?

What is the alternative? Are the requirements of the Practice Direction on Pre-Action Conduct really so different?  If a pre-action TCC case had to follow the practice direction instead, I am not persuaded that this would result in a significant saving in time or costs. If the parties were simply to issue proceedings in court, not only would every case that is currently settled pre-action require court time and resources, it would also delay the point at which the parties exchanged details of their case.

In my view, most of the costs incurred during the pre-action phase are not wasted. The investment made at this stage in preparing a party’s case, investigating the documents, speaking to witnesses and understanding the expert evidence, allows the parties to make an informed and educated decision about settlement. If settlement is not possible, the information gleaned is useful and valid in the context of the court proceedings.

If the parties were to do away with this phase, not only would more claims be issued in the TCC, but parties would likely delay their investigations and may well not be able to proceed to trial in the relatively quick manner that they currently can in the TCC.

Better options?

Apart from abolition, what other options are there?

  • Make it voluntary. Currently, it is the risk that a party may be criticised (and penalised on costs) for not engaging in the Protocol properly that gets many parties to take part and settle disputes. BUT: if the process was voluntary, it is unlikely that an unwilling party would engage in the process.
  • Make it part of the court process. After issue, proceedings would be stayed to allow time for the Protocol process. BUT: this would mean all claims would need to start off in court, taking up valuable court time and resources.
  • A third way? Give the parties recourse to the TCC judges pre-action to make applications if they feel the other party is not performing as it should or is not taking a proportionate response. I think this is the most sensible solution for ensuring that the Protocol does not get out of hand.

Don’t forget the costs management pilot

Finally, in the context of cost management under the new pilot scheme, it is interesting to note that the parties will be required to include their pre-action costs within the costs schedule. Judges will be able to ensure that pre-action costs remain proportionate by interrogating the parties on how these costs have been incurred and then use this as a basis of discounting costs incurred later. For example:

  • If the parties have already expended a lot of time and money in reviewing documents, the cost of the disclosure phase should be reduced.
  • If the experts are already engaged and have formed preliminary views, the expert costs incurred during the proceedings should be reduced.

To conclude

In short, it is my view that the costs incurred during the Protocol phase are not wasted. The Protocol provides the parties with an important and valuable opportunity to settle without wasting further costs in going to court. To do away with the Protocol or to curtail its application is likely to lead to more disputes going to trial, resulting in greater costs for the parties and the court service.

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