UK: Just How Detailed Do Pre Action Protocol Letters Need To Be?

Last Updated: 16 October 2007
Article by Jeremy Glover

As you will almost certainly know, a revised Pre Action Protocol for Engineering and Construction Disputes ("the Protocol") came into effect on 6 April 2007.1 Already this year, there has been one case, Charles Church Developments Ltd v Stent Foundations Ltd & Peter Dann Ltd, [2007] EWHC 855 (TCC), before the courts, where Mr Justice Ramsey, who has recently taken over as the head judge at the Technology & Construction Court had to consider the consequences of failing to comply with the Protocol.2

A similar question recently came before Mr Justice Jackson in the case of Cundall Johnson and Partners LLP v Whipps Cross University Hospital NHS Trust [2007] EWHC 2178 (TCC).

In 2000, Whipps Cross University Hospital NHS Trust ("the Trust") set out to redevelop Whipps Cross Hospital in Leytonstone. Cundall Johnston and Partners LLP ("CJP") provided engineering services to the Trust in respect of two of the preliminary projects. The first project was for enabling works and the second was for the construction of a new energy centre ("the EC Works"). CJP claimed that it was owed outstanding professional fees on both projects.

In respect of the enabling works, in March 2006 CJP sent a letter to the Trust requesting payment of five invoices totalling Ł305,571. The parties’ solicitors entered into correspondence and the Trust requested details of CJP’s appointment documentation to verify the unpaid invoices. CJP did not produce this documentation and subsequently alleged that there was an oral contract. CJP requested a meeting. The Trust unsurprisingly requested proper details of the oral contract and refused to meet in the absence of these details. In August 2007 CJP commenced proceedings to recover the fees.

In respect of the EC works, in July 2006 the Trust made a claim against CJP intimating negligent design. In October 2006, CJP responded with a claim for outstanding fees. After some debate between the parties concerning the entitlement to adjudicate, CJP commenced proceedings to recover the outstanding fees.

The Trust considered that CJP had not set out its case properly in pre-action correspondence and therefore applied to the Court for a stay of the proceedings commenced by CJP on the basis that CJP had failed to comply with the Protocol.

There were three issues before the Judge:

  1. Does the Protocol apply to claims for professional fees or debt collection?;
  2. Did CJP comply with the Protocol?; and
  3. Should the Court exercise its discretion to grant a stay for non-compliance with the Protocol?

In a comment of some importance, Mr Justice Jackson noted that

"The Protocol sets out a procedure for the exchange of information between the parties followed by a meeting. Neither the letter of claim nor the defendant’s response are required to resemble pleadings either in their length or in their detail. What is required from each side is a clear and concise summary of their respective cases."

He reinforced this by noting that as a consequence of the concern that had been expressed in some quarters that the Protocol could be used in an oppressive manner, a new paragraph 1.5 had been added to the Protocol which made it clear that both parties must take a proportionate response. Paragraph 1.5 states as follows:

"The overriding objective (CPR r.1.1) applies to the pre-action period. The Protocol must not be used as a tactical advice to secure advantage for one party or to generate unnecessary costs. In lower value claims (such as those likely to be proceed in the county court) the letter of claim and the response should be simple and the costs of both sides should be kept to a modest level. In all cases the costs incurred at the Protocol stage should be proportionate to the complexity of the case and the amount of money which is at stake. The Protocol does not impose a requirement on the parties to marshal and disclose all the supporting details and evidence that may ultimately be required if the case proceeds to litigation".

Mr Justice Jackson stressed that the intention of the changes to the Protocol was this:

"If both the letter and the spirit of the Protocol are complied with, many disputes can be resolved at proportionate cost without the need for proceedings. Furthermore, disputes which are litigated can be more sharply focused at the outset."

In the case here, it was accepted that CJP’s claim for additional fees in respect of the EC project did fall within the Protocol. There was, however, a dispute between the parties concerning the enabling works. CJP said that the claim for fees did not fall within the scope of the Protocol; it was simply a matter of debt recovery. Mr Justice Jackson disagreed. A disputed claim for professional fees made by a firm of consultant engineers falls within the term "engineering disputes" in the context of the Protocol. The mere fact that it could be characterised as debt collection did not take it outside the scope of paragraph 1.1 of the Protocol. Indeed it was of note that "debt recovery" was not one of the specified exceptions in paragraph 1.2 of the Protocol.

The Judge then considered the question of a stay. He felt that it was clear that CJP had not complied with the Protocol. In particular, in relation to the enabling works, the contractual basis of CJP’s claim remained "obscure until proceedings were issued". In other words, CJP’s lawyers had not sent out a claim which complied with the requirements of paragraph 3 of the Protocol. Had they done so, the basis of the contractual claim would have been clear. With the EC project, CJP’s solicitors had forwarded a copy of their expert report to the Trust’s solicitors. The Judge accepted that this was "helpful" but said that this in itself was not sufficient to comply with the requirements of paragraph 3 of the Protocol.

There were therefore 3 reasons why the Judge thought that it was appropriate to order a stay:

  1. Having considered all the correspondence, and listened to the submissions of counsel, he believed that there was "a real possibility of settlement" if the parties went through the Protocol process;
  2. Therefore, a stay would be in the best interests of both parties. It may lead to a saving in costs and bring about an earlier resolution of the dispute between the parties;
  3. It was unfair on the Trust to proceed immediately with litigation, when a proper summary of the claim had not been notified in advance.

The case was therefore stayed for approximately 10 weeks.

Conclusion

The answers to the questions raised by the Judge were these:

  1. The Protocol does apply to claims for professional fees. There is no exclusion, in any event, in the Protocol for debt recovery;
  2. CJP failed to comply with the Protocol; and
  3. The consequence was that the court ordered that there by a 10 week stay.

The Judgement is particularly interesting because Mr Justice Jackson made it clear that he does not expect that letters of claim and responses be so sophisticated as to resemble pleadings. This represents a welcome re-statement of the original principles of the Protocol. However the courts will still expect parties to set out their positions in a clear and concise manner. If they do not, the Court may well exercise its discretion to stay proceedings in order that the parties comply. And do not forget that this may, in the end, result in adverse cost consequences for the party in default.

This article is based on an article from a forthcoming issue of the Fenwick Elliott Dispatch, a monthly newsletter which summarises recent key developments relating to contentious and non-contentious construction law issues. To see the current issue please visit www.fenwickelliott.co.uk.

Footnotes

1 Are You Ready For The New Construction Pre-Action Protocol? - 15 March 2007

2 Paying The Price Of Failing To Comply With The Pre Action Protocol – 10 May 2007

To see further articles on matters relating to construction, engineering and energy projects, please visit www.fenwickelliott.co.uk.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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