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New ‘Pre-Action Protocol for Debt Claims’

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For a number of years now, parties have been expected to comply with Pre-Action Protocols before they resort to litigation. There are different Pre-Action Protocols for a range of disputes, and then finally the Practice Direction – Pre-Action Conduct for those not subject to a specific Pre-Action Protocol.

Paul Trincas

Paul Trincas

The Protocols explain how the court expects the parties to behave at the pre-action stage and encourage them to consider other methods by which they might resolve their disputes. Failure to comply might result in the court imposing cost sanctions on the offending party. In practice the court is unlikely to do so unless one party makes an issue of the other’s non-observance.

The Civil Procedure Rule Committee is now consulting a new Pre-Action Protocol for Debt Claims. It will apply in circumstances where a business (including sole trader) is claiming payment of a debt from an individual, or where both parties are sole traders. The draft Protocol requires the Claimant to include certain ‘initial information’ within its letter of claim whilst enclosing copies of specified documents (including a copy of the Protocol itself). The Claimant’s letter of claim ‘must’ contain a prescribed statement, essentially outlining the requirements of the Protocol and encouraging the debtor to take independent advice.

As the draft currently reads, the defendant will then have at least 28 days to obtain advice. The Protocol encourages the defendant to respond using a form attached to the Protocol at Annex 1. This will explain whether or not the debt is admitted or disputed.

The Committee has received objections to certain parts of the draft Protocol. It is hoped that everything will be finalised and the new Pre-Action Protocol for Debt Claims implemented by April 2015.

Businesses will be used to issuing proceedings themselves, or instructing their solicitors to do so, in order to pursue debts. Currently, it is necessary to comply with the Practice Directions – Pre-Action Conduct before issuing, but once a specific Pre-Action Protocol for Debt Claims has been adopted clearly a new set of requirements will need to be adhered to. If businesses are uncertain as to what sort of steps they should take in the run-up to issuing proceedings for a debt claim they should take advice from their legal advisor.

For further information please contact Paul Trincas on 01635 521212 or paul.trincas@clmlaw.co.uk

Written by Paul Trincas

December 3rd, 2014 at 10:55 am