Settling Construction Disputes early and the effectiveness of the Pre-Action Protocol

The Pre-Action Protocol for Construction and Engineering Disputes (“the PAP”) is currently under review by the Civil Procedure Committee to potentially abandon the PAP altogether or for it to be made voluntary.

'It does a number of things. It avoids vexatious litigation. It forces parties to articulate their claim in some level of detail, which often flushes out claims that are either entirely bad, or bad in part. It often has the result of moving the parties toward settlement at what is considered as a far cheaper route than if the parties went to litigation straight off.'

The Pre-Action Protocol for Construction and Engineering Disputes ("the PAP") is currently under review by the Civil Procedure Committee to potentially abandon the PAP altogether or for it to be made voluntary.

The primary objectives of the PAP are namely to:

  1. Encourage settlement and early resolution of disputes to avoid the need to go to Court;
  2. Encourage parties to narrow the issues in dispute by encouraging full and early exchange of information and documentation; and
  3. Manage cases effectively.

As a result of the potential upheaval, the issue of how effective the PAP is has therefore arisen and been called into consideration.

The TeCSA committee sponsored a detailed study to obtain the industry's views on the topic and questioned and interviewed both solicitors and industry members alike.

The final report was published in mid-January this year.

The final report

The report is far reaching and covers a broad range of issues which all seek to evaluate the usefulness of the PAP as a whole and whether it is fulfilling the aims of the Jackson reforms.

The information considered and research conducted was expansive; data records from 216 disputes were examined, which was supplemented by 39 in-depth telephone interviews. The participants in the telephone interviews were from law firms providing construction services and leading construction companies. Those interviewed collectively had experience with 677 disputes to which the PAP had applied.

The most notable statistics the report revealed were:

  1. Almost all respondents (95%) thought the PAP was a valuable pre-action mechanism;
  2. 87% believe that the PAP creates access to justice;
  3. 49% felt that the PAP should be retained largely in its current form; and
  4. 49% felt that the PAP should be amended to increase its effectiveness.

The above statistics highlight the importance of the PAP and how greatly it is seemingly valued by its users.

One solicitor commented on page 17 of the report in relation to the PAP being a valuable mechanism in promoting settlement and early resolution:

'It does a number of things. It avoids vexatious litigation. It forces parties to articulate their claim in some level of detail, which often flushes out claims that are either entirely bad, or bad in part. It often has the result of moving the parties toward settlement at what is considered as a far cheaper route than if the parties went to litigation straight off.'

What is perhaps most interesting are the comments provided by the construction clients on page 18 of the report, for example:

'With sufficient exchange of documentation by both parties, they will really know where the claim is going beforehand without having to wait for very late disclosure later on.'

'You can have built-in adversarial views before the case will ever get to court, but quite often the senior people in a company do not get to explore what the arguments are about until they are sitting in the court room wondering why they are there because the matter could have already been dealt with. The Pre-Action Protocol offers a reasonable balance because it is serious enough to draw in the senior people in a company provided it is managed properly. They should then be made aware of what it is all about before it gets out of everybody's control and you find yourself up in front of the judge.'

Comments such as these and the other comments as contained in the report, provided by the industry clients, evidence the value they place on the PAP, thereby evidencing its importance and its perceived and actual effectiveness.

Areas for Change

The two main areas identified for change were that the PAP should be amended so that the costs of complying with it are recoverable and that the Technology and Construction Court ("TCC") should have an involvement in administering the PAP and that it should perhaps be part of the TCC process.

The current costs position is that a defendant is unlikely to recover costs involved in rebutting a claim that does not go to trial. In a number of instances the process of complying with the PAP can be long and sometimes drawn out which serves to increase costs substantially. Accordingly, it is not surprising that there are calls for the process to be monitored or guided in some way by TCC judges. A policing of the process by the Courts may well serve to reduce the risk of any perceived abuse and enhance positive belief in the procedure.

One comment on page 33 of the report in relation to the recoverability of costs sums up the position quite succinctly:

'if it became a cost recoverable exercise it might increase the Protocol's effectiveness because people might become a bit more conscious of not letting things drag on unnecessarily, and ensure they do not do unnecessary work. They may clarify their case earlier if they are going to go through the process, rather than doing half a job and then having to redo it again before proceedings'.

Overall, it appears the PAP is extremely valued by its users but requires reform in relation to the ability to recover the costs of complying with the PAP and that it should in some way be policed and be guided by the TCC to try and rule out the risk of abuse.

For more information please contact Tamrah Woolfe at [email protected]