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
		26th April 2012

 


Mr Justice Akenhead:

1. This application for a stay of proceedings to enable without prejudice meetings to occur raises issues about the need for the parties always to have regard to the overriding objective in relation to the application of the practice relating to the Pre-Action Protocol.

The Protocol

2. The Pre-Action Protocol for Construction and Engineering Disputes is expressly premised at Paragraph 1.5 as follows:

"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 for one party or to generate unnecessary costs. In lower value claims such as those likely to proceed in the county court, the letter of claim and 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 that 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".

The overriding objective specifically applies of course also to the court proceedings themselves and emphasises amongst other things the need for saving expense, dealing with cases so as to save expense and dealing with any given case in ways which are proportionate to the amount of money involved in the case and the financial position of each party.

3. Paragraph 1.3 states:

"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."

Paragraph 2 of the protocol goes on to state:

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."

4. The Protocol then goes on to require the claimant to send a letter of claim to the defendant to be followed within 28 days by the defendant serving its response. Section 5.1, deals with a Pre-Action Meeting, and provides:

"Within 28 days after receipt by the claimant of the defendant's letter of response … after receipt by the defendant of the claimant's letter of response to the counterclaim, the parties should normally meet"

The purpose of the meeting is, as it set out in Paragraph 5.2, to settle all or any of the issues and, if litigation is unavoidable, to resolve upon the steps to be taken to ensure that the litigation can be conducted in accordance with the overriding objective.

5. The Court has considered in the past whether there has to be, always and in every case, compliance or exact compliance with the Protocol. In Orange Personal Communications Services Ltd v Hoare Lea [2008] EWHC 223 (TCC), the Court referred to the judgment of Mr Justice Jackson (as he then was) in Alfred McAlpine Capital Projects Ltd v SIAC Construction (UK) Ltd [2006] BLR 139 in which he refused a stay to enable the Protocol process to be followed after a third defendant was joined. He stated:

"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]…"

The Court in the Orange case held that this supported a pragmatic approach in relation to whether there should be a stay pending the protocol process being effected (see Paragraph 28). The Court went on to say at Paragraph 31:

"Some general observations should be made:

(a)The overriding objective (in CPR Part 1) is concerned with saving expenses, 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 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 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-compliance in a pragmatic and commercially realistic way. Non-compliances can always be compensated by way of costs orders"

6. Nothing has changed in practice since that decision and it is almost more important in cases involving low values that the need for pragmatism, particularly in the circumstances in which either or both parties find themselves at any given time, becomes very important. This pragmatism is dictated by the need to comply with the overriding objective.

This Case

7. The claim as it has been formulated is pleaded to be less than £70,000. It is a claim partly for professional negligence and partly for repayment of overpaid fees. It is not a big claim and it is likely that, with the best will in the world, the costs of both parties will substantially exceed the amount in dispute. Based on the Particulars of Claim, the First Claimant, Higginson Securities Developments Limited, is said to be wholly owned by the Second Claimant, Spiritualist National Union Trust. The claim relates to a development project at a site on the Isle of Wight which took place between 2004 to 2010 involving the construction of a new Spiritualist church and a block of nine flats. The Defendant was an architect, said to have been retained by the Second Claimant initially, albeit effectively by novation later by the First Claimant. The claim involves claims for overcharging and for work which it is said that the Defendant had not carried out and for professional negligence in five particular respects, such as a relating to the production of inappropriate designs. The professional negligence damages claim totals £38,792.08 and the overcharging claim is for just over £40,000.
8. Solicitors had become involved for the Defendant prior to the sending of the Letter of Claim under the Protocol by the First Claimant's solicitors on 25 March 2011. The Second Claimant is identified in that letter as a relevant party, albeit that another entity, the Cowes Spiritualist Church, was named as the organisation which first retained the Defendant in 2004 with the First Claimant being identified as the party which took over from that entity in 2008. The Letter of Claim runs to 4 pages, with three pages of back-up material and the claim is essentially for overcharging and overpayments as well as for some inadequate design. There clearly were some delays, to which both parties could be said to be responsible, between March and 20 December 2011 when the Defendant's solicitors prepared his Response. The Defendant somewhat belatedly had called for further information after several months and the First Claimant took some time to provide it; the Defendant thereafter took the best part of three months to serve its Response. The Response itself running to 6 pages, although prefaced with a complaint about the First Claimant's Letter of Claim being "woefully vague and lacking in the required degree of particularity" goes into a substantial amount of detail about why the Defendant is not liable. It concludes, somewhat uncompromisingly, as follows:

"Having now fully reviewed this case it is clear that your client's claim cannot succeed. It is apparent from the wholesale lack of particularisation of the allegations and, upon examination of the facts, from the history of this contract and the decisions taken by your client and by others to which our client was not party. We therefore invite you to confirm that the claim is withdrawn and will not be pursued. Failing that, we have instructions to vigorously defend this matter and it will include an application for security for costs."

9. The First Claimant's solicitors replied on 28 December 2011 saying that they would take instructions anticipating that this might take up to a month. They generally challenged much of what was contained in the Response of the position that they had inadequately particularised the allegations. They said that there was sufficient in previous correspondence for the Defendant and its solicitors to understand and the answer the allegations, particularly in circumstances in which the Defendant was "very well acquainted with each and every one of the allegations against him".
10. No meeting was suggested by or on behalf of either the First Claimant or the Defendant. Proceedings were actually issued by the Claimant on 13 February 2012. On 20 February 2012, the Claimants' solicitors (Mr Eagle) e-mailed Mr Pye of the Defendant's solicitors informing them of the issue and indicating whether they were instructed to accept service. In response on 22 February 2012, Mr Pye said that the Protocol had "not been exhausted: the next step is a without prejudice meeting (or meetings) of the parties"; he went on to say that, if proceedings were served, the Defendant intended to apply to stay the proceedings. To this, Mr Eagle replied on the same day that it was clear "from your blanket denial of any liability that it is you and your client who have abandoned the protocol.", going on to say that there was "clearly no merit in a without prejudice meeting in the light of your correspondence"; any stay would be resisted and proceedings would be served. Mr Pye responded by a second email on that day emphasising the need for a meeting to comply with the Protocol
11. The Claim, Particulars of Claim and Response Pack were served under cover of a letter dated 9 March 2012, although the Defendant's solicitors could find no record that this letter or its enclosures were received at that time. On 15 March 2012 Mr Pye e-mailed Mr Eagle asking for a response to his second e-mail of 22 February 2012. Mr Eagle replied shortly thereafter to say that service had been affected but that he was willing to reciprocate and engage in discussions. However he suggested that a mediation would most likely succeed if the parties had full knowledge of one another's case and evidence and he suggested that the best time for without prejudice negotiation would be after disclosure, witness statements and expert reports had been exchanged; however, he added that his clients were willing to meet before if the Defendant so wished.
12. On 20 March 2012 Mr Eagle indicated by e-mail to Mr Pye that he would not agree to a stay of proceedings but would be willing to agree to a modest extension of time "for you to file and serve your defence in order to enable the meeting to take place". This provoked a further exchange of e-mails on 21 March 2012 in which Mr Eagle (10:30 am) said:

"If you apply to stay the proceedings we will defend the application, and cite the fact that you have had, and still have, ample opportunity to arrange and conduct the without prejudice meeting which you so desire, but instead [you] have chosen to use the time preaching somewhat ironically about the overriding objective, which is remarkable behaviour if your concern is truly to explore all avenues for resolution. We suggest you stop wasting time, accept our offer of a reasonable extension of time preparing your defence (all work which you will need to undertake to effectively deal with a w/p meeting in any event), and provide us with your availability dates and meeting within the next month."

The invitation to the Defendant's solicitors to arrange a without prejudice meeting was repeated later in the day, suggesting that a meeting in London would be best and asking for availability dates.

13. Under cover of a letter dated 23 March 2012, following emails as to whether or not the proceedings had been served, Mr Eagle served at least copies of the Claim and Particulars of Claim on the Defendant's solicitors; these were received on 26 March 2012, on which day they filed their Acknowledgement of Service.
14. On 30 March 2012, the Defendant's solicitors drafted their application to stay the proceedings "to enable the parties to comply with the Pre-Action Protocol" and on 2 April 2012 Mr Pye drafted and signed his statement in support. The application and statement were, wrongly, addressed to my Clerk; they should have been lodged with the TCC office. The application was formally issued on 4 April 2012 and the hearing date was fixed. It appears that it was served under cover of a letter dated 11 April 2012 after the Easter break.
15. There was an extensive exchange of e-mails between the solicitors on 2 and 3 April 2012 following Mr Pye's sending to Mr Eagle the draft application and evidence by e-mail in which he said that the defendant did:

"not intend serving a defence until after this application has been heard by the court. Please would you confirm that you will not seek to enter a judgement in default of defence…"

The response from Mr Eagle an hour (15.58) later was:

"We are not willing to grant an indefinite extension of time to service of the defence, nor are we willing to agree to the proposed stay of proceedings.

The correct course of action for you, in order to give due regard to the overriding objective, is to serve a defence – for which you apparently have sufficient instructions and have had ample time - and then deal with witness statements and disclosure, after which the meaningful and potentially useful without prejudice meeting or mediation can take place.

We intend to oppose your application on that basis, and if you wish to avoid a default judgement in the meantime either serve a defence or apply for an extension of time in which to do so.

Your current stance is a slavish adherence to a protocol which you long ago abandoned, when the parties, the court and the interests of justice would be much better served by following the course we have proposed above and which we suggested some time ago. Is it the protocol or a cost-effective solution which you seek to promote?"

16. 20 minutes later Mr Pye replied expressing amazement at Mr Eagle's approach, suggesting that if judgement in default was obtained that a wasted costs order would be sought against Mr Eagle's firm and suggesting that the proceedings had not still been effectively served. 27 minutes thereafter, Mr Eagle replied saying that the default was the Defendant's and not his clients and reminding Mr Pye that an extension of time to serve the defence had been offered and that he had not responded to this offer or to the suggestion that a without prejudice meeting be arranged. There apparently being no response again, Mr Eagle sent a further open e-mail (18.02):

"For the avoidance of doubt (and for the record) our client is willing to engage in a without prejudice meeting…(with or without lawyers) Time and date of your client's choosing, at a venue which is reasonably convenient to all involved. If you will agree to such a meeting, we will agree to stay the proceedings, including service of your client's defence, until such a meeting has taken place, provided the meeting takes place within the near future - no more than six weeks from now for the sake of clarity. In the event that the meeting does not produce a solution or at least agreement to engage in further ADR, we will require you to serve your defence no later than four weeks post meeting…"

17. Mr Pye's response 15 minutes later (at 18.17) saying that he and his clients were willing to withdraw the application on the following basis:

"1. You consent to an order staying proceedings terminable by either party on giving 28 days notice in writing, but such notice not to be given for six weeks from the date of the consent order. This is to allow parties to fully exhaust the Protocol process.

2. You agree to pay our client's costs consequent on your decision to abandon the Protocol, such costs to include those relating to the purported service of proceedings and those relating to the application process day, such costs to be thoroughly assessed if not agreed, and payable forthwith.

As for a meeting, it has always been our client's intention to fully comply with the provisions of the Protocol, which of course makes full provision for a meeting or meetings. Your "proposal" is therefore not a proposal at all; it is what your client is obliged to do under the Protocol.

We also require your specific agreement that you will not enter a judgement in default pending resolution of our client's application to extend time, and we shall in the circumstances be inviting the court to order your firm to pay our costs of such application on an indemnity basis…"

The day's e-mailing finished with Mr Eagle at 18.58 saying:

"Our offer is as set out in our last e-mail. Your response simply goes over old ground which we have covered ad nauseam. If you proceed with your application in the light of our offer, which is really just a repetition in substance of what we have offered before your application was even drafted, you do so at your cost peril.

As for our obligations under the protocol, you have to engage too, and so far you have failed to do that, either before or after the issue of proceedings.

We do not intend to waste more of our client's money on this correspondence. Proceed with your application if you feel it will advance the settlement of this dispute.

In the meantime our offer stands."

18. There was a further bout of e-mailing on 3 April 2012 which did not advance matters on either side.

The Application and Hearing

19. Following the service of the application and Mr Pye's statement, Mr Eagle filed a statement. Between the two statements, the respective arguments and standpoints, together with the history of the dispute were set out.
20. Contrary to the approach suggested in the TCC Guide, the Defendant's solicitors did not file an Application bundle and Mr Pye did not file a skeleton argument, albeit that Counsel for the Claimant did. The failure to file such a bundle and skeleton at the very least doubled the length of the telephone hearing because it emerged that the Court had not been provided with a copy of Mr Eagle's witness statement; Mr Pye's witness statement unsurprisingly did not include the e-mail traffic of 2 and 3 April 2012 and much of it had to be read to the court.
21. Mr Pye was adamant in his arguments that there was simply a clear non-compliance with the Protocol, that the issue of the proceedings before a without prejudice Protocol meeting was unjustified and, broadly, that there was no answer to the stay application. He also argued that, having started the proceedings, the Claimants were acting unreasonably at the very least in not agreeing to extend time for service of the Defence pending the hearing of his client's application and in not accepting on 2 April 2012 an obligation to pay his client's costs as set out in his e-mail timed at 18.17. He dismissed the various offers made by Mr Eagle as inadequate. Mr Allston, Counsel for the Claimants, argued that the Protocol meeting was not an absolute requirement and that in any event it was incumbent on both parties to bring one about. He said that, specifically and taken in the round, the many offers from mid-March 2012 onwards for meetings to take place were reasonable, sensible and pragmatic.

Discussion

22. Potential parties to litigation embarking on the Pre-Action Protocol for Construction and Engineering Disputes must always remember to consider it in the context of the overriding objective. It must not be used as a weapon or tactic. Both parties must seek to co-operate during its implementation. In relation to low value claims, such as this one, it is important that the parties proceed reasonably expeditiously, do not drag the process out and keep the costs of the exercise to a reasonable minimum. The process in this case was not conducted with appropriate expedition. The Claimants could have done better producing the further information requested more quickly and the Defendant could have done measurably better in producing its response very much earlier than it did.
23. So far as the meeting is concerned, the wording of the Protocol does not state that a meeting is absolutely mandatory; it does however say that "normally" a meeting should take place. Essentially, the "default option" is that a meeting should take place unless there is a reasonably good reason for such a meeting not to take place. The wording does not impose specifically on a particular party an obligation to arrange the meeting and so it must be incumbent on both parties to seek to set up a meeting. Usually, if one party expresses the view that it wants a meeting, that will be a good reason for a meeting to take place.
24. I am not altogether surprised that the Claimants took the view that a meeting was unlikely to produce any resolution, given the absolute and uncompromising rejection of the claim in the Protocol response. However, if the Defendant and his advisers thought that it was a good idea to have such a meeting, they could just as easily themselves have suggested it; they did not.
25. Once the Claimants had instituted proceedings, it was important, in my judgement, for both parties to seek to adopt a sensible and pragmatic solution in circumstances in which the Defendant did in fact want such a meeting to take place. I have formed the clearest view that, whilst the Claimants repeatedly adopted a pragmatic approach, the Defendant and his advisers did not do so. The Claimants' solicitors said as early as 15 March 2012 that, although they thought that pleadings, disclosure and witness statements should emerge before such a meeting, they would be willing to have a meeting before. That offer was rejected or at least ignored. The offers on 2 and 3 April for there to be a meeting even before the service of the Defence were met with wholly non-pragmatic requirements that wholesale cost concessions be made.
26. It is vitally important that practitioners in this field, particularly in low value claims, consider pragmatic and cost saving responses in the circumstances in which they find themselves at the given time. Even if Mr Pye considered that a without prejudice meeting was a vital part of the protocol process in this particular case and was likely to bring about a saving of cost, time or resource, he needed to review what would be the best way of preserving his clients' position on costs whilst bringing about the without prejudice meeting to which he attaches such apparent importance. I suggested to him that a pragmatic response to the issue of proceedings would have been along the lines of seeking to reserve the costs of and occasioned by any purported non-compliance with the Protocol, securing a without prejudice meeting and, pending that, securing an extension of time for service of the Defence. He had little if any effective response to this in argument, albeit that he did express concerns that Mr Eagle was pointedly not undertaking not to enter judgement in default of Defence. However, if that was a real concern, he could have sought at short notice an extension of time from the Court for the service of the Defence. The point was being conceded however in the e-mail from Mr Eagle of 2 April 2012 timed at 18.02 and in those circumstances, if that offer had been accepted, no judgement in default could properly have been obtained. Instead, as soon as that unequivocal offer was made, Mr Pye sought to secure in effect all of the costs of the proceedings to date. If the Defendant and his advisers really wanted the without prejudice meeting, it was simply confrontational of them to require what they did require in their e-mail timed at 18.17 and in the way that they required it.
27. He went on to argue that there had been some changes between the Letter of Claim and the Particulars of Claim and that these could have been discussed. However, the sensible and pragmatic approach would be for the Defendant to serve a Defence dealing with the somewhat altered case against it and for there then to be a short 28 day stay of proceedings to enable a without prejudice meeting to take place. Again, this suggestion, made by the Court to Mr Pye, was not challenged as anything other than sensible.
28. From their summary cost estimates in relation to the Defendant's application, the Defendant has incurred nearly £5,000's worth of cost and the Claimant just over £4,000's worth and this even before a Defence has been served, let alone any of the further steps in the proceedings taken. All this is in the context of a £68,000 claim. One only has to look at these figures to see that the Defendant's approach has been disproportionate, both in terms of keeping costs down and in terms of avoiding time being wasted.

Decision

29. It follows from the above that this application is dismissed; it should not and needed not have been brought let alone pursued. What should be required is that the Defendant serves its Defence within 14 days and that there is then a short stay of 4 weeks to enable a without prejudice meeting or mediation to take place. As indicated in court, the fighting of this case is largely pointless since, unless indemnity costs are ordered, each party's costs will exceed the value of the claim even assuming that it succeeds completely and the proportion of any standard costs assessment which the "winning" party will have to bear itself will account for a sizeable part of the claim. The Court also indicated that this is a case which merits transfer to the County Court unless there is some very good reason why it should remain in the High Court.
30. I indicated the general thrust of the above orally and also that the Defendant should pay its own costs and £3,500 of the Claimant's costs, summarily assessed.