England and Wales High Court (Technology and Construction Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		12th February 2008

 


Mr. Justice AKENHEAD:

Introduction

1. This Judgment arises out of an application by the remaining Defendant in this claim for a stay of the proceedings pending the implementation of the process laid down by the Pre-Action Protocol for Construction Engineering Disputes. Although the Claimant has not followed that Protocol, the application raises interesting issues as to the extent to which it is appropriate for the Court to adopt a pragmatic approach in any such cases.

Background

2. Orange Personal Communications Services Ltd ("Orange") is and was the owner of a building known as the Bristol Data Centre ("the Building"). Although another contractor had carried out the first phase of the works (the basic building), Orange engaged Kier Regional Ltd ("Kier") to carry out the fitting out works which included the provision of an air conditioning system. The contract between Kier and Orange incorporated the JCT Intermediate Form of Building Contract 1998 edition.
3. Kier sub-contracted, amongst other things, the provision of the air conditioning system to Haden Young Ltd ("Haden Young"). There was a form of direct warranty as between Haden Young and Orange in relation to such sub-contracted works.
4. Orange also retained Hoare Lea, the remaining defendant in these proceedings, to carry out certain professional services in relation to the design of the mechanical and electrical engineering works, said also to include the air conditioning works. Orange also retained APS Project Management Ltd ("APS") to provide various project management services in relation to the fitting out second phase works.
5. On the night of 17 and 18 August 2001 a flood occurred in the building which is said to have affected the ground and first floors and to have caused damage to Orange's equipment in the Building.
6. Orange issued proceedings, HT-06-313, in October 2006 claiming over £2 million damages against Kier and Haden Young in relation to the flood. The Pre-Action Protocol process had been commenced in August 2006 against Kier and against Haden Young in January 2007. That process was completed in late April or May 2007 when Amended Particulars of Claim were served.
7. Unequivocally (Paragraph 9 of those Particulars), Orange attribute the cause of the flood to a failed compression joint connecting the chilled water system to the inlet pipe of an air conditioning unit (RACU 4C) located on the first floor of the Building. That failure is said to have resulted from failure of Haden Young to install the joint properly or in accordance with the relevant Specification. It is said that Kier is responsible contractually to Orange for Haden Young's default. In the alternative Orange make complaints against Kier and Haden Young in relation to a bund or bunded area around and beneath RACU 4C. The "bund" is said to have been created by an enclosure, only 100mm high and 146mm wide. The bund was said to be required "to guard against minor leaks from RACU 4C and the RACUs located adjacent to it on the first floor of the Building and/or to guard against other minor leaks of water from the condensate drainage pipework from the RACUs entering the ground floor below" (Paragraph 26). The bunded area is said to have included a hole or gulley through the floor to allow for the drainage of such water or minor leaks. Thus in the alternative it is said that Kier failed to carry out works to waterproof the bunded area beneath RACU 4C or that Kier stopped up the gulley in the floor of the bunded area with permeable material which failed to seal the hole or gulley. Against Haden Young in the alternative it is pleaded in Paragraph 9 that it failed to design or install a drain to drain water from the bunded area.
8. Kier and Haden Young both deny that they are responsible for any bad workmanship (itself denied) in relation to the joint which is said to have failed. Amongst other things Kier plead as follows:

"18.2 It is admitted that water flooded from the bunded area beneath RACU4C because Orange and their design team and/or Haden Young failed to design a drain for that area.

38. Kier did not advise or warn Orange or the design team that the hole was unnecessary and should be made good so that it was watertight, and was under no obligation to do so. It was for Orange and their design team to notify the intended purpose of the bunds to all other parties involved; and it was for Orange and their design team and/or Haden Young to give any instructions or requests that the hole was unnecessary and to be made good so that it was water tight.

62. If and insofar as Orange did suffer any loss and damage as a result of the flood, it was caused entirely or alternatively contributed to by the negligence of Orange its servants or agents.

"Particulars of Negligence

62.3 Failing to require that the water leak detection system operated an alarm in the security area…"

9. Haden Young in its Defence pleaded at Paragraph 37:

"….. such loss and damage as the Claimant may prove was caused wholly or in part by its own negligence and/or that of its …. agents.

Particulars

(i) The Claimant and/or its design team knew or ought to have known that the Hoare Lea drawings provided to Haden Young did not show any means of draining the Bund;

(ii) The Claimant and/or its design team instructed the sealing of the hole in fact made by Pearce Construction Limited which they presumably made because it was shown on the architect's drawing;

(iii) The Claimant and/or its design team did not thereafter give any instructions for the creation of alternative drainage;

(iv) The Claimant and/or its design team were aware that the bunds were defective and inadequate to contain water in the event of a leak…"

10. Kier and Haden Young exchanged Part 20 proceedings against each other Haden Young's defence to Kier's Part 20 claim included the following:

"6(B)(i) The conceptual design of the alarm system was by Hoare Lea;

(ii) The detailed design was sub-contracted by Haden Young to specialists;

(iii) The detailed design was approved by Hoare Lea and the fact that the system did not operate an alarm in the security area must have been obvious to them…"

11. Haden Young brought in APS in Part 20 proceedings complaining in effect that APS owed them a contribution by reasons of APS's alleged project management failures.
12. Thus, it can properly be concluded that Kier and Haden Young's positions in these earlier proceedings have been that they are not in any way to blame and the loss and damage is attributable to failings by Orange or its design team. In context, although Orange does not accept that there was any design deficiency, Orange has concluded that if there is a design complaint it can be laid at the door of Hoare Lea.
13. Fearful of a possible limitation defence and just within six years after the flooding, Orange issued these proceedings (HT-07-258) on 15 August 2007 against APS and Hoare Lea. APS have effectively dropped out of these proceedings, having secured a stay under the Arbitration Act 1996. This claim was not served until December 2007.
14. Meanwhile, in the earlier action against Kier and Haden Young, the trial date was fixed for 14 January 2008 by Mr Justice Jackson on 24 May 2007. Built into the directions was provision, clearly by agreement, for the parties to engage in ADR by early October 2007.
15. By early November 2007, it seems that ADR had not taken place between Orange, Haden Young and Kier. For various reasons, the parties had fallen behind in complying with the various procedural directions which had been issued before then. Consequently the parties, including APS agreed further directions which were the subject matter of the consent order on 1^st November 2007. By agreement with the court the trial date was re-fixed for 6^th October 2008 with provision for ADR to take place by mid April 2008. Orange, Kier and Haden Young had already exchanged Lists of Documents albeit that lists were to be exchanged with APS by 18^th February 2008. APS was to be part of the ADR. Other directions were agreed in relation to the exchange of expert reports and the like leading, moderately comfortably, up to trial in October 2008.
16. On 11^th December 2007 Orange served Particulars of Claim on Hoare Lea in this claim, attaching the pleadings from the earlier action. Material parts of that pleading are as follows:

(a) Orange made it clear that their primary case is that Kier and Haden Young are responsible for causing the flood (Paragraph 4).

(b) Reference is made to what Kier and Haden Young allege in their respective Amended Defences alleging in effect that Hoare Lea's acts and/or omissions and/or negligence and/or breach of contract caused or contributed to the flood and Orange's loss and damage (see paragraph 6).

(c) The agreement between Orange and Hoare Lea is pleaded at paragraph 10 and at paragraphs 11 and 12 a contractual and tortious duty of care is pleaded against Hoare Lea.

(d) In paragraphs 15 and 16 rather more detail is pleaded as to what Haden Young plead in their pleadings is or might be attributable to the failures of Hoare Lea.

(e) The plea against Hoare Lea is ultimately relatively simple:

"To the extent that Kier and/or Haden Young succeed in proving the allegations against… Hoare Lea that Kier and/or Haden Young make against… Hoare Lea in HT-06-313 Orange adopt those allegations as allegations of (1) negligence by … Hoare Lea and/or (2) breach by … Hoare Lea [of contract…"

17. Thus it is absolutely clear from this pleading that Orange does not primarily consider that Hoare Lea had anything to do, culpably, with the failure and flood which occurred. The claim by Orange against Hoare Lea is contingent upon the failures put forward by Kier and/or Haden Young being established. If they are established, Orange will assert that such failures were actionable breaches of the contractual or tortious duty pleaded against Hoare Lea.
18. On 21 December 2007, Orange issued an application seeking an order that the two claims be consolidated or at least tried together. On 3 January 2008, Hoare Lea's solicitors issued their application that this claim is stayed because Orange have not followed the Pre-Action Protocol.
19. By letter dated 3^rd January 2008, Orange's solicitors wrote to Hoare Lea's solicitors offering to provide the particular information which Hoare Lea required in connection with the preparation of their defence. That offer was not taken up.
20. It is of some interest that in the statement of Mr Richards, Hoare Lea's solicitor, he does not say that Hoare Lea could not be ready for a trial in October 2008; he instead concentrates upon the benefits of staying the later claim to enable the Pre-Action Protocol process to take place.

The Parties' Arguments

21. I will not be reiterating in detail the parties' arguments which were fully set out in competent written notes for the hearing, and supplemented orally. In broad outline Hoare Lea's counsel, Miss Ansell, argued as follows:

(a) The Protocol is there to be complied with and should generally be complied with.

(b) There are advantages in general and in this case in particular of the Protocol process to be followed.

(c) Orange were guilty of a number of failings; it could have served the proceedings earlier; it should have served the proceedings earlier so that the Court could make informed directions in early November 2007; finally Orange should have brought the matter before the Court to seek directions at the time it issued the Claim Form or at least well before Christmas 2007.

(d) Hoare Lea wants to avoid the additional costs which will inevitably be incurred if the Pre-Action process is not implemented, particularly with regard to the exchange of information. Issues are likely to be narrowed if the process takes place and Hoare Lea would like to see if the differences can be resolved before litigation is implemented in earnest against them.

(e) The Particulars of Claim against Hoare Lea are inadequate in defining what negligence is in reality asserted against them

22. Mr Curtis for Orange argues broadly as follows:

(a) Orange's case is very much a contingent claim it does not represent Orange's primary claim, which is against Kier and Haden Young.

(b) A Protocol process would be substantially a waste of time by reason of that factor.

(c) There is little if any information which can be exchanged which will be of assistance other than the pleadings in the earlier claim (already served) and disclosure by all the other parties which can be made available to Hoare Lea now if they so wish.

(d) There is little chance of resolution given that Orange's claim against Hoare Lea is a claim over in what Orange see as a relatively unlikely scenario.

(e) Hoare Lea's involvement in the combined claims now can ensure that it can participate both in the coming ADR and, if necessary, in the trial in October 2008.

Practice and the Law

23. Relevant parts of the Protocol are:

"1.3 The objectives of this Protocol are as set out in the Practice Direction relating to Civil Procedure Pre-Action Protocols, namely:-

(i) to encourage the exchange of early and full information about the prospective legal claim;

(ii) to enable the parties to avoid litigation by agreeing a settlement of the claim before commencement of proceedings;

(iii) to support the efficient management of proceedings where litigation cannot be avoided."

2. The general aim of this Protocol is to ensure that before court proceedings commence:

(i) the claimant and the defendant have provided sufficient information for each party to know the nature of the other's case;

(ii) each party has had an opportunity to consider the other's case, and to accept or reject all or any part of the case made against him at the earliest possible stage;

(iii) there is more pre-action contact between the parties;

(iv) better and earlier exchange of information occurs;

(v) there is better pre-action investigation by the parties;

(vi) the parties have met formally on at least one occasion with a view to

• defining and agreeing the issues defining and agreeing the issues between them; and

• exploring possible ways by which the claim may be resolved;

(vii) the parties are in a position where they may be able to settle cases early and fairly without recourse to litigation; and

(viii) proceedings will be conducted efficiently if litigation does become necessary."

1.4 If proceedings are commenced, the court will be able to treat the standards set in this Protocol as the normal reasonable approach to pre-action conduct. If the court has to consider the question of compliance after proceedings have begun, it will be concerned with substantial compliance and not minor departures, e.g. failure by a short period to provide relevant information. Minor departures will not exempt the 'innocent' party from following the Protocol. The court will look at the effect of non-compliance on the other party when deciding whether to impose sanctions. For sanctions generally, see paragraph 2 of the Practice Direction – Protocols 'Compliance with Protocols'.

1.5 The overriding objective (CPR rule 1.1) applies to the pre-action period. The Protocol must not be used as a tactical device to secure advantage or to generate unnecessary costs…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 require to marshal and disclose all the supporting details and evidence that may ultimately be required if the case proceeds to litigation.

6. If by reason of complying with any part of this protocol a claimant's claim may be time barred under any provision of the Limitation Act 1980, or any other legislation which imposes a time limit for bringing an action, the claimant may commence proceedings without complying with this Protocol. In such circumstances, a claimant who commences proceedings without complying with all, or any part, of this Protocol must apply to the court on notice for directions as to the timetable and form of procedure to be adopted, at the same time as he requests the court to issue proceedings. The court will consider whether to order a stay of the whole or part of the proceedings pending compliance with this Protocol."

24. Relevant parts of the Practice Direction are:

"2.1 The Civil Procedure Rules enable the court to take account of compliance or non-compliance with an applicable Protocol when giving directions for the management of proceedings (see CPR Rules 3.1(4) and (5) and 3.9(e) and when making orders for costs (see CPR rule 44.3(5)(a)).

2.2 The court will expect all parties to have complied in substance with the terms of an approved Protocol.

2.3 If, in the opinion of the court, non-compliance has led to the commencement of proceedings which might otherwise not have needed to be commenced, or has led to costs being incurred in the proceedings that might not otherwise have been incurred, the orders the court may make include:

(1) an order that the party at fault pay the costs of the proceedings, or part of those costs, of the other party or parties;

(2) an order that the party at fault pay those costs on an indemnity basis; ….

2.4 The court will exercise its powers under paragraphs 2.1 and 2.3 with the object of placing the innocent party in no worse position than he would have been in if the protocol had been complied with."

25. Paragraph 2.6.1 of the second edition of the TCC Guide (October 2007) provides that:

"There can often be a complaint that one or other party has not complied with the Protocol. The court will consider any such complaints once proceedings have been commenced. If the court finds that the claimant has not complied with one part of the Protocol, then the court may stay the proceedings until the steps set out in the Protocol have been taken."

26. There have been a number of authorities which are of some relevance which have been cited. In Daejan Investments Ltd v Park West Club Ltd [2004] BLR 223, HHJ Wilcox in this Court decided, wholly correctly, that the Pre-Action Protocol applied to Part 20 proceedings; the Claimant to such Part 20 proceedings who had not followed the Protocol was ordered to pay the costs of the Part 20 proceedings up to the date of a re-amended Particulars of Claim because the judge formed the view that the Protocol process would have got the parties to that stage. The decision is and can be viewed as a pragmatic one because it was an example of where costs and time would have been saved by the protocol process being followed.
27. In Alfred McAlpine Capital Projects Ltd v SIAC Construction (UK) Ltd [2006] BLR 139, Mr Justice Jackson refused a stay to enable the Protocol process to be followed after a third defendant was joined. Materially the learned judge said:

"39. What is the position in relation to parties who are brought into an ongoing action without having been involved in the previous Protocol procedures? In this situation there are two conflicting considerations. On the one hand, the new parties should not be deprived of the benefits of the Protocol. On the other hand, it is undesirable that the existing trial timetable should be maintained.

40. I have come to the conclusion that there is no simple formula or universal answer to this problem. The following considerations are, however, relevant to the exercise of the court's case management powers:

(1) When was it known that the party was going to be joined in the action?

(2) What information about the action and the underlying dispute was given to that party before joinder and when?

(3) How large a part does the new party play in the action as a whole?

(4) What stay, if any, could be accommodated in the proceedings against the new party without jeopardising the overall timetable?

(5) Does justice require that the whole timetable should be put back and that a new trial date should be fixed?

(6) Could the new party be compensated in costs for any non-compliance with the Protocol? If, so, should the question of costs be addressed immediately or should that question be addressed at the end of the action?

(7) Is there any way (other than a stay) within the parameters of the existing timetable by which the new party could be put in the same position that it would occupy if the Protocol had been followed?

45. More importantly, however, I do not think that the Protocol process would have achieved anything during that period [the pre-Part 20 proceedings period]…"

28. This case is an authority which supports a pragmatic approach to the issue of whether there should be a stay pending the Protocol process being effected, particularly when there are Part 20 or (by extension) Part 20 type proceedings under consideration. To the seven questions posed by Mr Justice Jackson, one can add an eighth, raised in effect in Paragraph 45 of the judgment: will a stay or the implementation of the Protocol process achieve anything useful?
29. In Charles Church Developments Ltd v Stent Foundations Ltd and another [2007] EWHC 855 (TCC), Mr Justice Ramsey was concerned with a serious breach of the Protocol and the costs consequences of that breach. I do not consider that it is of much assistance here when I am merely considering whether there should be stay to enable Protocol steps to be taken.

Decision and Discussion

30. I indicated to the parties at the conclusion of the hearing that I would dismiss the application and give my reasons in writing later.
31. Some general observations should be made;

(a) The overriding objective (in CPR Part 1) is concerned with saving expense, proportionality, expedition and fairness; the Court's resources are a factor. This objective whilst concerned with justice justifies a pragmatic approach by the Court to achieve the objective. The overriding objective is recognised even within the Protocol as having a material application.

(b) The Court is given very wide powers to manage cases in CPR Part 3 and elsewhere so as to achieve or further the overriding objective.

(c) The Court should avoid the slavish application of individual rules, practice directions or Protocols if such application undermines the overriding objective.

(d) Anecdotal information about the effectiveness of the Pre-Action Protocol process in the TCC is mixed. It is recognised as being effective both in settling disputes before they even arrive in the Court and narrowing issues but also as being costly on occasion and enabling parties to delay matters without taking matters very much further forward.

(e) Whilst the norm must be that parties to litigation do comply with the Protocol requirements, the Court must ultimately look at non-compliances in a pragmatic and commercially realistic way. Non-compliances can always be compensated by way of costs orders.

32. In the light of these observations, my reasons for dismissing Hoare Lea's application are as follows:

(a) I do not consider that the Protocol process will, at this stage of the two sets of proceedings, be sufficiently productive to justify a stay or more productive than if no stay is granted.

(b) Hoare Lea already has in its possession Orange's Particulars of Claim and the pleadings in the earlier proceedings which equate to a letter of claim under the Protocol. Hoare Lea's defence will equate to Hoare Lea's Protocol response. The information available, such as the other parties' views in their pleadings and the extensive document disclosure already made in the earlier claim, is equivalent and probably greater than what would normally be expected in a Protocol process. I take into account, with regard to information, Hoare Lea's reluctance to take up Orange's solicitors' offer of information on 3 January 2008.

(c) It is unlikely that any bilateral discussions between Hoare Lea and Orange would narrow issues significantly because Orange's published primary case is not against Hoare Lea at all who would simply agree (if at all and rightly or wrongly) in all probability that Kier and/or Haden Young were to blame. Hoare Lea's involvement in these disputes is to some extent provisional and only arises if the drainage, waterproofing and leak alarm issues turn out to be evidentially relevant.

(d) A settlement is much more likely if all the parties participate in the ADR planned for the Spring. A timetable can be achieved which will enable this to happen. I will also order that a Pre-Action protocol meeting between the parties should take place if Hoare Lea wants one after service of its Defence.

(e) The earlier action is somewhat behind the usual disposal time in the TCC as trial will be some two years after issue. I would be reluctant to delay the trial still further to enable a Protocol process to take place. That would be undesirable in terms of cost, time and resource.

(f) The two claims are intimately connected. It would be unfortunate if they had to be tried separately, with the extra costs and risk of inconsistent factual findings. They should be tried together. To try them together but accommodate a stay in this action would inevitably delay the joint trial well beyond October 2008.

(g) A timetable can be achieved for this later claim which can secure trial of both claims in October 2008. The claims are not complicated by the standards of the TCC. The pleadings can be completed before mid-March 2008, disclosure by Hoare Lea shortly thereafter, and witness statements and expert reports drafted and served by mid-summer. I do not accept Miss Ansell's pessimistic submission, on (doubtless bona fide) instructions, that Hoare Lea could not be ready for an October 2008 trial date. I have regard to the Court's experience in this regard and to the noteworthy absence of any such suggestion in Mr Richards' statement to that effect.

(h) So far as costs are concerned, although my judgment at present is that little in terms of time or cost would be saved by embarking on the Protocol process, I will reserve and defer any application for additional costs occasioned to Hoare Lea by the non-compliance with the Protocol so that it will be protected against the consequences of such non-compliance.

(i) I do not consider that, although Orange has not complied with the requirements to effect the Protocol process, this has been contumelious or Machiavellian.

Costs

33. Orange did not comply with the proper practice. Although, given the possible impending limitation difficulty, Orange is excused from commencing the Protocol process before issuing this claim, there is no valid excuse why it could not and should not have told Hoare Lea about the issue of the claim at the latest by mid October 2007 when it must have been clear that the ADR planned for the period before was not to take place for some months thereafter and that the trial had to be deferred. Furthermore, Orange should have informed the other parties and more importantly the Court when agreeing and presenting agreed directions to the Court that there was a probability that a new party would effectively be added. Even when Orange served its claim against Hoare Lea, it did not do what Paragraph 6 of the Protocol requires in mandatory terms, namely to bring this issue before the Court.
34. It is realistically possible that the Court might well have been then inclined to allow a Protocol process to take place between Orange and Hoare Lea and adjust the timetable, for instance by fixing a trial date some six weeks later. The TCC High Court list for the October 2008 to April 2009 period has, since early November 2007, become very much fuller so that option is no longer available.
35. Although Hoare Lea as such lost the application for a stay, they had little choice but to issue the application given Orange's failures as set out above. It was a reasonable application to bring which sought broadly what the rules generally require, namely the implementation of the Protocol. Although there was some correspondence between the solicitors on the topic, it was only on 28 January 2008, almost four weeks after the service of Hoare Lea's application, that Orange's Solicitor served evidence in reply.
36. To reflect the Court's concern about the failings of Orange and the likely consequential increase in costs of the making of this application, I have formed the view that Orange should pay their own costs of the application and should pay part of Hoare Lea's. Although I indicated at the hearing that two thirds of the latter's costs should be paid, on reflection I consider that one third would be appropriate to reflect what I assess is the likely increase in Hoare Lea's costs occasioned by Orange's procedural failings. I have considered further submissions from Hoare Lea on the fixing this proportion of the costs and they do not alter this final view; those submissions proceed upon the basis that if Orange had issued an application in December 2007, there would have been no or a limited contest. I consider that there would have been such a contest albeit a less expensive one and an allowance of one third of Hoare Lea's costs is a fair reflection of the costs wasted by Orange's failings. The summary costs are agreed at £4978.49. One third is £1660.