Limitation Periods and Dicing with Procedural Death

Legal Case Reports

“Where a party issues protective proceedings hard up against the expiry of the limitation period, it is expected to pursue those proceedings promptly and effectively; and if it subsequently seeks and obtains orders extending time for the service of the Claim Form or Particulars of Claim without notice to the other party, it dices with procedural death.”

Such were the opening words of the recent Technology and Construction Court decision in Lincolnshire County Council –v- Mouchel Business Services Ltd and another [2014] EWHC 352 (TCC).

Strict compliance with court procedures is particularly important in construction cases. Not only are such cases subject to the requirements of the Civil Procedure Rules (the CPR), they also need to comply with the Technology and Construction Court Guide (the TCC Guide) and the Pre-action Protocol for Construction and Engineering Disputes (the Protocol).

We are all aware from the alarming recent Court of Appeal decision in Mitchell –v- News Group Newspapers Ltd [2013] EWCA Civ 1537 that the courts are becoming increasingly ruthless in their strict application of the CPR. A particularly chilling extract from the judgment in that case, dealing with reasons for missing deadlines, was as follows:

“… if the reason why a document was not filed with the court was that the party or his solicitor suffered from a debilitating illness or was involved in an accident, then, depending on the circumstances, that may constitute a good reason. … But mere overlooking a deadline, whether on account of overwork or otherwise, is unlikely to be a good reason. We understand that solicitors may be under pressure and have too much work. It may be that this is what occurred in the present case. But that will rarely be a good reason. Solicitors cannot take on too much work and expect to be able to persuade a court that this is a good reason for their failure to meet deadlines. They should either delegate the work to others in their firm or, if they are unable to do this, they should not take on the work at all.”

Lincolnshire County Council, acting through their in-house legal department, managed not only to fail to comply with the CPR, but also the TCC Guide and the Protocol as well.

The rules

The relevant part of the CPR states that a Claim Form must be served before 12.00 midnight on the calendar day four months after the date of issue of the Claim Form. The CPR also states that the Claimant may apply for an extension of time for serving the Claim Form and that such an application must generally be made before the expiry of the four month, must be supported by evidence and may be made without notice. Applications for extensions of time for serving a Claim Form are therefore an exception to the general rule that such applications should be made on notice.

In addition, the court will expect the parties to have complied with any relevant pre-action protocol and will take any failure to do so into account when exercising its general powers of management, including its power to grant relief from sanctions.

In construction disputes, the Protocol requires the sending of a fully detailed letter of claim and that, within 28 days from the date of receipt of the letter of claim, or such other period as the parties may reasonably agree (up to a maximum of three months), the Defendant shall send a letter of response to the Claimant. Within 28 days after receipt by the Claimant of that letter, the parties should normally meet to agree the main issues in the case and, if possible, to resolve some or all of them.

The Protocol goes on to say:

“If by reason of complying with any part of this protocol a Claimant’s claim may be time-barred . . . 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”.

The TCC Guide mirrors the Protocol, including the mandatory requirement that a Claimant who does not comply with the Protocol because his claim may become time-barred must apply for directions as to the timetable and form of procedure to be used. It does not state that such an application must be made on notice, but that does not detract from the requirement in the Protocol that it should be.

Accordingly, while an application for an extension of time for serving the Claim Form may be made without notice pursuant to the CPR, a party issuing proceedings to which the Protocol applies without complying with the Protocol because his claim may become time barred is obliged by the Protocol to apply to the court on notice for directions as to the timetable and form of procedure to be adopted. The court in the Lincolnshire County Council case decided that there were (at least) two obvious rationales for this separate requirement. First, an application for directions on notice enables the court to review the position in the light of any relevant submissions made by each affected party. This promotes the overriding objective of the CPR by providing the court with full information on which to make its case management decision and ensures a level playing field from the outset. Secondly, if the order is made without notice, there is always the risk that one or more affected parties will apply to set the order aside as happened in the case. The requirement that the initial order for directions is made on notice thus removes the risk of further costly and time-consuming satellite litigation.

The Lincolnshire County Council case

Mouchel was an architect. Lincolnshire outsourced architectural services to Mouchel by a contract executed by way of deed on or about 3 April 2000. Later in 2000 Lincolnshire wanted to procure the extension of a science block at Boston Grammar School and Mouchel carried out the design of the building.

The building works started on site in about May 2001. About a year after construction was finished it became apparent that the building had problems with rising damp. The exact date on which this became apparent was not clear, but practical completion was achieved on 28 March 2002, which indicated that it was in about March 2003. Lincolnshire alleged various problems including a failure to seal sheets of the damp proof membrane together or to the damp proof course, the failure to implement a suitable slope away from the outside of the building, and a failure to incorporate a step in the design of the concrete raft to prevent water pooling on top of the concrete slab.

Since the defects were all related to the ground slab, with the possible exception of landscaping, it was probable that the design would have been completed and implemented relatively early on in the construction process. All that was known was that works started on site in May 2001 and were practically complete in March 2002. This strongly suggested that the floor slab works would have been carried out well before the end of 2001. The implications of these dates for limitation when proceedings were eventually issued in July 2013 and not served within the four months prescribed by the rules are obvious.

Following various correspondence between the parties, Lincolnshire instructed its legal department in August 2012. In December 2012 and February 2013 expert consulting engineers instructed on behalf of Lincolnshire undertook intrusive investigations and reported on the causes of the damp. The February 2013 report concluded that Mouchel’s design was “fundamentally flawed”.

Lincolnshire’s legal department recognised the danger of limitation problems and arranged for the issue of proceedings against Mouchel and the Contractors on 19 July 2013. They also issued an application for an extension of time for service to 18 January 2014 but no other directions. In support of the application it was said that Lincolnshire had not complied with the Protocol before issuing proceedings and that the purpose of the extension of time was to allow the parties to take the steps set out in the Protocol.

Lincolnshire did not give notice of the application to the Defendants.

On 23 July 2013, the TCC granted the extension, ordering that “the time for service of the Claim Form and Particulars of Claim be extended to 18 January 2014 to enable the parties to comply with the Protocol for Construction and Engineering Disputes.” The order thus had two constituent parts: proceedings had to be served by 18 January 2014 and Protocol was to be complied with by then.

What in fact happened was that Lincolnshire did not issue its letter of claim until 13 December 2013, four and a half months into the period allowed by the order. On the evidence, Lincolnshire took no effective steps to progress its claim or the protocol procedure between 19 July and mid-September 2013. The explanation for this was that the person dealing with the matter had two weeks annual leave and had to cover for other members of the team who had annual leave during that period.

Early in September 2013, Mouchel emailed Lincolnshire asking for convenient dates for them to attend site with a contractor. Lincolnshire also wanted to attend with an expert, so a joint inspection was arranged for 24 October 2013. It was arranged to take place during half term because the School did not want the inspection to be carried out during term time. There was no reason on the evidence why a joint inspection could not have taken place before term started in early September 2013. Further, there was no reason why Lincolnshire could not have undertaken any further investigations that it considered necessary between 19 July 2013 and the beginning of term.

Lincolnshire eventually sent its letter of claim on 13 December 2013. Mouchel replied that it was their intention to provide their response in accordance with the Protocol and that they would be available to attend a meeting in the week commencing 13 January 2014. In the event, they replied to the letter of claim on 24 December 2013, well within the 28 days permitted by the Protocol.

The previous day, 23 December 2013, Lincolnshire had issued an application for a second extension. Once again, they did not request any other directions. The application was supported by a witness statement, in which they said that the school had not been willing to allow an invasive inspection of the building to take place during term time so inspections were carried out by experts during the school’s half term. They did not disclose that they had taken no effective steps between July and mid-September 2013.

They did not give Mouchel notice of the application either before or after issuing it.

On 15 January 2014, the TCC granted the further extension of time for service of the Claim Form, this time until 18 April 2014. Lincolnshire notified Mouchel two days later and Mouchel applied to set aside the order granting the further extension.

The decision

The court decided that the Protocol and the TCC Guide complemented the normal and well established principles by requiring the Claimant to bring the case before the court for directions on notice. Such an application would ensure that the court was in the best possible position to assess the significance of the failure to comply with the Protocol before the issuing of proceedings; it could then decide what steps should be taken for the future, whether by imposing an immediate stay for compliant steps to be taken or a later stay or otherwise, to counteract the failure of pre-action compliance. With both parties before the court and a full understanding of the facts it would of course be possible that the court would not grant a stay but would extend time limits to enable Protocol steps to be taken within an overall framework of directions. Equally, it might decline to grant any extension at all in an appropriate case.

The court decided that a Claimant who applies without notice for an extension of time does not thereby comply with its obligations under the Protocol and (in a case brought in the TCC) the TCC Guide. It further stated that the importance of a party issuing an application for directions on notice in a case to which the Protocol applied could not be overemphasised.

The court identified a number of things that went wrong following the issue of proceedings by Lincolnshire on 19 July 2013. First, Lincolnshire did not apply on notice for directions either at the same time as or after applying for the initial extension of time. Secondly, having itself set the period for compliance with the Protocol and service of proceedings by requesting the initial extension to 18 January 2014, Lincolnshire took no effective steps to advance compliance with the Protocol until 11 September 2013, which had the disastrous knock-on effect that the inspection did not happen until 24 October and the letter of claim was not sent until 13 December 2013. Thirdly, having recognised the need to serve proceedings by 18 January 2014, Lincolnshire did not cause Particulars of Claim to be drafted and did not serve the proceedings in accordance with the court order. Fourthly, Lincolnshire issued another application without notice, thereby compounding its failure to seek directions on notice in July.

The court decided that the only reason for the absence of any steps being taken before mid-September 2013 was that the person dealing with the matter took some holiday and, when at work, had to cover for other colleagues who did the same. That, it said, was no good reason at all. A solicitor undertaking litigation must ensure that it is run properly and efficiently and with the necessary allocation of resources. Lincolnshire should have ensured that all necessary steps were taken promptly, but did nothing. Even after 11 September, they showed no urgency at all. The period from 11 September to 24 October 2014 was unjustifiable as it was the product of the failure to arrange inspection before term started; and no evidence had been adduced showing any real attempts to persuade the School to allow an inspection earlier, whether during the weeks that passed or even at weekends.

Against the background of Lincolnshire’s failure to issue an application for directions as required by the Protocol and the TCC Guide, the court decided that they should have served the proceedings on or before 18 January 2014 and that the continuing failure to complete steps that should have been completed before the proceedings were issued was no good reason for failing to do so.

The Judge concluded:

“To my mind, the established principles, the amendments to the CPR that I have identified, and the terms of the Protocol all point in one direction: parties who issue late are obliged to act promptly and effectively and, in the absence of sound reasons (which will seldom if ever include a continuing failure to comply with pre-action protocol requirements) the proceedings should be served within four months or in accordance with any direction from the Court. A Claimant who does not do so and (where the Protocol for Construction & Engineering Disputes applies) who does not obtain directions on notice does so at extreme peril.”

Accordingly, the Judge set aside the order granting an extension of time for service of the Claim Form and struck out the claim against Mouchel because it had not been validly served within the time limit of its validity.

Commentary

This case represents a stark warning to parties and their lawyers who are faced with the impending expiry of a limitation period, especially where the Protocol applies. It should not be difficult to apply on notice for directions when issuing proceedings in these circumstances and the court has now provided very clear guidance on how to proceed and the consequences of failing to comply with the correct procedures.

By John Starr, Consultant, Stepien Lake. A version of this article has previously appeared in the Property Law Journal, published by Legalease Ltd