Pre-action protocols: from review to reform

Professionals and their insurers can breathe a sigh of relief on the issue of Pre-Action Protocols. The eagerly anticipated Civil Justice Council's (CJC) Final Report Part II on Pre-Action Protocols is focussed on fine-tuning the current protocol regime rather than introducing a radical overhaul. 

Nevertheless, there are some key recommendations in the Report which will impact on the future handling of professional indemnity and insurance coverage disputes. This article examines key changes and their significance for the professional indemnity market.

Some context

The CJC is responsible for making policy recommendations on civil justice issues and has been reviewing the Pre-Action Protocol regime since 2020. This second and final Report sets out recommendations for reform of litigation specific Protocols, to include the Professional and Construction and Engineering Pre-Action Protocols. The Report also recommends the creation of two new Protocols, one of which is for claims on the multi-track in the Business & Property Courts – this may apply to certain coverage disputes.

The new Report follows the CJC's Final Report Part I and an earlier Interim Report and consultation, considered in our previous article here. 

Professional negligence: no change to timetable and no "good faith" obligations

The Report recommends no change to the three-month deadline for service of a Letter of Response in the Professional Negligence Protocol. The earlier consultation sought views on revising time limits for responding to the Letter of Claim to those suggested for a proposed General Pre-Action Protocol, namely 14 days (with a right to extend for a further 28 days to obtain further information).

The CJC reports that "there was strong opposition from both claimants and defendants to altering the current timeframes", with one insurer arguing that "one of the principal reasons why the [Professional Negligence Protocol] has been successful is because it allows the defendant sufficient time to investigate the claimant's allegations and to respond properly". The CJC acknowledges that the Professional Negligence Protocol has worked well on the whole and that sufficient time must be allowed for allegations (which are often detailed and complex) to be investigated and for input to be obtained from multiple parties, including the insured and insurers.

The earlier Interim Report and consultation raised the possibility of introducing a "good faith" obligation to seek to resolve the claim as early as eight weeks after service of the Letter of Response. This has not made it into the final recommendations for the Professional Negligence Protocol. This reflects the wider changes to the mediation landscape in the intervening years which place greater emphasis on the court's power to mandate ADR. In particular, the Court of Appeal's decision in Churchill -v- Merthyr Tydfil County Borough Council, which clarified that compulsory mediation would not constitute a breach of the right to a fair trial under Article 6 of the European Convention on Human Rights provided it is timely, at proportionate cost and the parties can still go to court if the process fails. In addition, recent changes to the Civil Procedure Rules give greater emphasis on ADR and the court's power to mandate it.

Professional negligence: introduction of stocktake procedure and non-compliance warning

There will be a new formal stocktaking process. The Professional Negligence Protocol already has a separate, standalone stocktake procedure which was described as "too woolly" and often ignored or glossed over. The CJC recommends a formal stocktake procedure which places a clear obligation on the parties to co-operate with each other in narrowing issues and completing and filing a stocktake report which will, in turn, assist the courts in managing the dispute more efficiently.

The report also recommends amending the Professional Negligence Protocol to refer to the courts’ powers to take into account non-compliance with the Protocol when giving directions and to penalise the parties in costs or to stay proceedings for non-engagement with a dispute resolution procedure. A minor amendment to the list of dispute resolution procedures (in order to add a brief explanation of each one) is also proposed.

New multi-track protocol for Business & Property Courts

There will be a new Pre-Action Protocol for multi-track litigation in the Business & Property Courts. This Protocol is likely to be relevant to some insurance coverage disputes. This will not apply where another protocol, such as the Professional Negligence Protocol, applies and lower value claims will be governed by a proposed new General Pre-Action Protocol. 

The precise wording of the Business & Property Courts Protocol will be a matter for the Civil Procedure Rules Committee but the CJC has produced draft wording. This proposes the early exchange of information within the same timeframes as the current Professional Negligence Protocol. The parties will then be required to engage in a non-prescriptive dispute resolution process to try and settle before proceedings are issued – this could be an informal meeting or even a phone call. There will be a stocktake obligation but a less structured one than that proposed for the Professional Negligence Protocol. If proceedings are issued, the parties will need to explain to the court what steps have been taken to resolve the dispute. 

The new Protocol will be mandatory save for urgent cases or where the parties opt out or engage in an equivalent process. 

Construction and Engineering Pre-action Protocol

The Construction and Engineering Pre-Action Protocol has also been subject to scrutiny. This Protocol is, of course, relevant to claims against construction professionals. The most notable recommendation is that engagement with this Protocol will be mandatory, save for some limited exceptions. Other significant amendments were considered but, in the end, not adopted. The remaining proposed amendments are relatively minor. These include that the Protocol include a list of dispute resolution procedures and also reference the courts’ powers to take into account non-compliance with the protocol when giving directions and to penalise the parties in costs or to stay proceedings for non-engagement with a dispute resolution procedure. 

Impact

These are some of the recommendations set out in Part I and Part II of the Final Reports. Together with proposals to make Pre-Action Protocols more user-friendly through the use of digital portals and to streamline the assessment of costs in cases that settle pre-action, they are aimed at creating a more streamlined process for resolving disputes pre-action, reducing associated costs for the respective parties and narrowing the issues

What next?

The CJC's role is limited to policy review and recommendations. It now becomes the responsibility of the Civil Procedure Rule Committee and the Online Procedure Rule Committee to consider how to take forward the recommendations in Part I and Part II of the review and changes will need to undergo a detailed drafting process. So, whilst changes will not be implemented immediately, they are likely to filter through in 2025.