Mr Justice Akenhead, in the recent case of Orange Personal Communications Services Ltd v Hoare Lea [2008] EWHC 223, had to consider the approach to take when faced with an application to stay proceedings in order for the Pre Action Protocol for Construction & Engineering Disputes ("the Protocol") to be followed. He decided that the correct approach to take was a pragmatic one.

The dispute arose out of works carried out at the Bristol Data Centre. Kier had been engaged to carry out the fit out works that included the provision of an air conditioning system. Haden Young were responsible for that air conditioning system. There was a flood which was said to have caused some £2m of damage. Orange issued proceedings against both Kier and Hayden Young in relation to the flood. The position taken by Kier and Haden Young in those proceedings was that they were not in any way to blame for the loss and damage which was, they said, due to failings by Orange and/or its design team.

Hoare Lea had been retained in relation to the design of the M&E works. As it was nearly six years after the flood and fearing a possible limitation defence, Orange issued separate proceedings on 15 August 2007 against Hoare Lea and APS Project Management who had carried out various project management services. APS dropped out of proceedings, having obtained a stay under the 1996 Arbitration Act.

In the first action, a trial date was fixed for 14 January 2008. However, the timetable slipped and the trial was pushed back to October. The directions made provision for ADR in April.

In December 2007, Orange served Particulars of Claim on Hoare Lea in the current action. Orange did not actually consider that Hoare Lea had anything to do with the flood. Orange's approach was a belt and braces one, being contingent upon the argument put forward by Kier and/or Haden Young in the first action succeeding. If that happened, Orange intended to assert that Hoare Lea was responsible in tort for the failures leading to the flood. Perhaps sensibly, Orange sought an application to seek an Order that the claims be consolidated or heard together.

Hoare Lea then issued an application that the claim be stayed because Orange had not followed the Protocol. Orange responded by offering to provide any particular information which Hoare Le said they might require. As the Judge noted, that offer was not taken up.

The reasons why Hoare Lea made the application were as follows:

  1. The Protocol was there to be complied with and should generally be complied with. There are general advantages in following the protocol process;
  2. Orange were guilty of a number of failings. It could have served the proceedings earlier. It should have served the proceedings earlier. Orange should have brought the matter before the Court earlier to seek directions at the time it issued the Claim Form;
  3. Hoare Lea wanted to avoid additional costs which would inevitably be incurred if the Protocol process was not implemented, for example in relation to the exchange of information and the narrowing of issues; and
  4. The Particulars of Claim were inadequate, failing properly to define the allegations of negligence. This could be resolved during the Protocol process.

Against this, Orange argued as follows:

  1. The claim was a contingent one and did not represent the primary claim against Kier and Haden Young. Accordingly, the protocol process would be a waste of time;
  2. There was little if any information that could be exchanged which would be of assistance other than the pleadings in the earlier claim which had been made available;
  3. There was little chance of resolution given that Orange's claim against Hoare Lea would only come to fruition if its claim against either Kier or Haden Young failed;
  4. Hoare Lea's involvement in the combined claims now meant that it could participate and probably stay in the forthcoming ADR and if necessary the October 2008 trial.

There have been a number of previous judicial authorities where parties have been penalised in costs for failing to carry out the pre-action protocol, see for example the case of Charles Church v Stent (see our article dated 10 May 2007.) dated 10 May 2007). Mr Justice Akenhead did not consider that case was of much assistance here since it was dealing with a serious breach of the protocol.

Having considered the authorities, Mr Justice Akenhead made the following general observations:

"(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."



Accordingly, having considered the situation as a whole, he dismissed the application put forward by Hoare Lea. The Judge gave a number of reasons, including:

  1. He did not consider that the protocol process in this particular case would be sufficiently productive to justify a stay;
  2. Hoare Lea already had the relevant pleadings from the earlier action. Therefore there had already been an exchange of information. Hoare Lea had also been reluctant to take up Orange's offer to provide additional information.
  3. Bilateral discussions between Hoare Lea and Orange would not narrow issues significantly because Orange's published primary case was not against Hoare Lea;
  4. A settlement was much more likely if all parties participated in the ADR planned for the spring. A timetable could be set up now to enable that to happen. This chance might be lost if there was a stay;
  5. The two claims were intimately connected. It would be unfortunate if they had to be tried separately. A timetable could be achieved now which could secure the trial of both claims.
  6. Little in terms of time or costs will be saved by embarking upon the protocol process. That said, the Judge reserved any application for additional costs for the future.

Finally, the Judge noted that although Orange had not complied with the Protocol to effect the protocol process, that failure had not been "contumelious or Machiavellian".

Finally, the Judge dealt with the question of the costs of this application. The Judge was concerned about the failings of Orange and thought that Orange could have told Hoare Lea about the potential claim earlier. There were also delays by Orange in relation to the procedural elements of this application. Accordingly, the Judge was of the view that Orange should pay their own costs and pay one third of the costs of Hoare Lea. This reflected the likely increase in Hoare Lea's costs occasioned by Orange's procedural failings.

Conclusion

As always, the judges of the TCC will consider individual cases on their own merits. This may be why the Judge here adopted his "pragmatic" approach to the claim for a stay. He duly considered the whole context of the dispute between not just Orange and Hoare Lea but all the parties involved. He also considered both parties' conduct. Orange may not have followed the Protocol, but it had not done so wilfully and Hoare Lea, being pragmatic, could have accepted Orange's offer of additional information.

Had this been a claim just between Orange and Hoare Lea then the situation may well have been different. However, there was a bigger picture, and taking that picture into account, the overall over-riding factor was the need to try and resolve the entire dispute. Allowing Hoare Lea's application for a stay might have jeopardised this.

This article is based on an extract 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.