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Company Law Memo Newsletter Issue 2 (March 2009)

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FOCUS ON… PRE-ACTION CONDUCT PROTOCOL

In the current economic climate, litigation is an important last resort for businesses to recover debts and resolve disputes.  A new pre-action protocol sets out the steps that parties to civil litigation should take before most proceedings are issued, including specific requirements for debt claims against individuals.

On 6 April 2009 a new general protocol will replace the CPR Practice Direction - Protocols (CPR Practice Direction - Pre-Action Conduct; see CLM ¶7139).  The existing protocols for specific types of claim will remain in force.

The new protocol will apply to all types of proceedings (including those governed by specific protocols), except where there is no dispute involved or where telling the other party in advance would defeat the purpose of the proceedings (for example, an application for an order to freeze assets).  It is intended as a guide for the parties, especially those who are not legally represented.

It sets out the approach of the court in relation to pre-action conduct and requirements that apply in all cases.  It also sets out the pre-action procedure to be followed where no specific protocol or other formal pre-action procedure applies.

1. Before issuing a claim in court, the claimant should write to the defendant giving him concise details about the matter.  This letter before claim should include:

» the claimant's full name and address;

» the basis on which the claim is made;

» a clear summary of the relevant facts;

» what the claimant wants from the defendant and, if financial loss is claimed, an explanation of how the amount claimed has been calculated;

» a list of the documents which the claimant intends to rely on;

» a request for copies of any documents not in the claimant's possession and which the claimant wishes to see;

» details of any funding arrangement that the claimant has entered into;

» an invitation for the defendant to agree to an appropriate form of alternative dispute resolution (if any); and

» the date by which the claimant considers it is reasonable for the defendant to have provided his full response.

Unless the claimant knows that the defendant is legally represented, the letter before claim should also refer him to the practice direction and inform him that ignoring the letter may lead to proceedings being started and may increase his liability for costs.

2. The defendant should provide a written acknowledgement within 14 days of receipt of the letter before claim, where he is unable to provide a full response within that time.  The acknowledgement should state:

» whether an insurer is or may be involved; and

» the date when a full response will be provided, giving reasons why any longer period is needed.  If this is because the defendant intends to seek advice then that fact should be stated, as well as who he intends to seek advice from and, once that advice is received, when he expects to be able to give a full response.  The claimant should allow a reasonable period of up to 14 days for the defendant to obtain advice.

The defendant may also request further information from the claimant to enable him to provide a full response.

3. The defendant's full response should either accept the claim in whole or in part, or state that it is not accepted.  Unless the defendant accepts the whole of the claim, the response should include:

» the reasons why it is not accepted, identifying which facts and parts of the claim (if any) are accepted and which are disputed;

» whether the defendant intends to make a counterclaim (if so, he must provide information equivalent to that required in a letter before claim);

» whether the defendant alleges that the claimant was wholly or partly to blame for the problem and, if so, why;

» whether the defendant agrees to the claimant's proposals for alternative dispute resolution.  If not, the reasons why not and a suggestion for an alternative form;

» a list of the documents which the defendant intends to rely on;

» copies of any documents requested by the claimant, or an explanation why these will not be provided; and

» a request for copies of any further relevant documents not in the defendant's possession and which the defendant wishes to see.

If the defendant does not provide a full response within the period stated in the letter before claim (or any longer period stated in his written acknowledgement) and a claim is subsequently issued by the claimant, then the court is likely to consider that the claimant has complied with the protocol.  If the claimant issues a claim before the end of any longer period stated in the defendant's written acknowledgement, the court will consider whether that longer period was reasonable.

4. The claimant's reply should include any documents requested by the defendant (or an explanation in writing why these will not be provided) and, if the defendant intends to make a counterclaim, information equivalent to the defendant's full response.

5. When the above steps have been followed it should be possible for the parties to take stock of the issues that remain outstanding (to narrow the scope of the proceedings and limit potential costs) and their respective positions to see if proceedings can still be avoided.

Where a business intends to pursue a debt claim against an individual, it should also:

» provide the defendant with details of how the money can be paid, for example, the method of payment and address to which it can be sent;

» provide contact details for the claimant so the defendant can contact it to discuss possible repayment options; and

» inform the defendant that free independent advice and assistance can be obtained from organisations including the National Debtline, the Consumer Credit Counselling Service, Citizens Advice and Community Legal Advice (giving contact details for these). 

This information can be provided at any time between the claimant first intimating the possibility of court proceedings and the letter before claim.  The claimant should allow a reasonable period of up to 14 days for a defendant to obtain debt advice, unless the claimant knows that the defendant has already received relevant debt advice and his circumstances have not significantly changed, or the defendant has previously asked for time to seek debt advice but has not done so.

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