The Pre-Action Protocol for Construction and Engineering Disputes: traps for the unwary and how to avoid them (Part 2)
In part one of our series exploring the Pre-Action Protocol for Construction and Engineering Disputes (the Protocol) we considered the application of the Protocol, its time limits, proportionality requirements, and insurance requirements. In part two we consider contractual requirements, document management and jurisdiction.
Before triggering the Protocol by sending a Protocol-compliant letter of claim it is important to check the relevant contractual documents, including the contractual provisions which concern the resolution of disputes.
Construction contracts sometimes contain a multi-tiered dispute resolution clause (such as in the FIDIC and NEC4 standard form contracts), which require the parties to use a form of alternative dispute resolution before commencing litigation or arbitration, examples being senior employees of each party meeting to try to resolve the dispute, and the referral of the dispute to a third party to give an interim decision, such as adjudication, a dispute adjudication board or expert determination.
Key matters to consider:
- It should be established whether such requirements are optional or mandatory. Even if the steps are optional, there may be good reasons to exhaust them before commencing the Protocol. It may be a less formal, quicker and cheaper process if successful.
- If the requirements are mandatory, all steps required should be completed before commencing the Protocol. Failure to do so can result in the court ordering specific performance to complete the prescribed steps before reverting to litigation.
- In Peterborough City Council v Enterprise Managed Services Ltd  the Technology and Construction Court (TCC) granted the contractor a stay of proceedings, holding that the contract required the dispute to be determined by an adjudicator as a pre-condition to any court action.
- Whilst the matter might ultimately end up before the courts, the TCC held in DGT Steel and Cladding Ltd v Cubitt Building and Interiors Ltd  that there should be a presumption in favour of the parties having agreed a contractual mechanism for the resolution of disputes by which they will be bound.
Document management and retention
Construction disputes are typically document-heavy and disputes can arise long after the completion of a project. Where a construction contract has been executed as a deed it will provide 12 years from the date of breach in which to bring a claim for breach of contract.
Whether commencing a claim or responding to a claim, retention and management of project documents (both paper and electronic) is essential. To preserve all relevant documents, we recommend implementing and maintaining solid document management and retention policies, with retained documents scheduled and easily identifiable. A defendant has 28 days in which to respond to a letter of claim, so ready access to the relevant documents is crucial.
The Protocol is intended to be proportionate, and the parties are not expected to provide full disclosure of documents at the Protocol stage. However, in keeping with the ‘cards on the table approach’, the expectation is the provision of sufficient documents to enable each party to understand the other’s case.
If a party refuses to provide documents during the Protocol stage, the court may exercise its discretion to grant an order for pre-action disclosure against a likely party to subsequent proceedings in order to dispose fairly of the anticipated proceedings, assist the dispute to be resolved without proceedings, or save costs.
If unable to agree on a means of resolving the dispute other than by litigation, the parties are expected to agree the extent of disclosure at a pre-action meeting. Without knowledge of the volume of documents, their format, and how well organised they are, meaningful discussions as to the extent and mechanics of disclosure will prove difficult.
The TCC has typically heard cases that include the following:
- Traditional building disputes
- Adjudication enforcement
- Engineering and technology disputes
- Claims for professional negligence
- Claims by or against local authorities concerning the development of land
- Dilapidations claims
- Nuisance claims
- Fire claims
- IT disputes (relating to both hardware and software)
- Challenges to arbitrators’ decisions in respect of any of the above matters.
However, the TCC has seen an increasing number of disputes arising from public procurement, large-scale group personal injury actions and complex electronic technology issues.
This increased scope of the TCC’s capabilities, can cause confusion as to which claims should be heard and the applicable protocol (there are currently 16 official pre-action protocols) relating to the resolution of different types of civil claims.
What is clear is that the Protocol covers all construction and engineering disputes including professional negligence claims against construction professionals e.g. architects, engineers and quantity surveyors (the separate Pre-Action Protocol for Professional Negligence Disputes being expressly intended for claims against professionals other than construction professionals).
The protocol that relates most closely to the subject matter should be followed, although one must also consider the practical differences (and pros/cons) between protocols where more than one may be appropriate. For example, the Pre-Action Protocol for Personal Injury Claims provides a defendant with up to three months to investigate and prepare its letter of response, compared with 28 days under the Protocol.
In the absence of a specific protocol for a particular type of dispute, the Practice Direction Pre-Action Conduct and Protocols sets out the conduct usually expected of parties prior to the issue of proceedings and contains provisions that apply to all cases.
In the next instalment, we will consider the Protocol Referee Procedure.