Debt Pre-Action Protocol – 1st October 2017

Discussion in 'Legal' started by smallclaimsassistance, Jul 14, 2017.

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  1. smallclaimsassistance

    smallclaimsassistance UKBF Enthusiast Full Member - Verified Business

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    Debt Pre-Action Protocol
    Civil justice in England and Wales is well known for having prescribed overtures to the litigation procedure. These are termed "Pre Action Protocols" (PAPs). The word "protocol" suggests a rigidity which falls slightly short of the Civil Procedure Rules themselves, and terminology does indeed imitate reality. Sanctions for not following a protocol have not been as draconian, or as rigidly enforced, as the rules themselves, but the courts do expect compliance where possible.

    For years now, there have been formal PAPs for numerous differing areas of legal dispute, such as clinical negligence, housing disrepair, construction, injury and industrial disease. Until now, however, there has not been a PAP for debt.

    The first PAP for debt work comes into effect from the 1st October 2017. From that point on, the courts will expect you to have followed the protocol in any "business" dispute over a debt.

    The qualification above is due to the fact that not all business disputes are covered.

    The debt PAP applies to the following disputes only:

    • Business to consumer

    • Business to Sole Trader

    It does not apply to business to business debt (other than above), nor does it apply to consumer to business disputes. It is easy to see that the intention here, in addition to introducing a formalisation of the pre-litigation process, with a view to reducing the pressure on the courts, is to retain an equality of arms between the parties.

    Letter Before Action
    There are several elements which must be included in your Letter of Claim to the debtor before proceedings are started. The Letter of Claim should contain the date and your return address, together with the following information:

    a. The amount of the debt;

    b. The amount of interest/charges and whether they are continuing; If not included in the letter, an up-to-date statement of account for the debt together with interest and any other charges must be sent separately,

    c. Written contract/or other agreement in writing - you must offer to send a copy of any documents in which the terms of the agreement were reached on request;

    d. No written contract - you must include a brief account of where, when and with whom any oral agreement was made, what was agreed, and if possible the words spoken. If the debt has been assigned, you should provide details of the original debt and creditor, when it was assigned and to whom;

    e. If an offer has already been made by the debtor, why their offer is not acceptable;

    f. Details of how the debt can be paid, including options for payment;

    Letter Before Action - Enclosures
    With the letter before action, you MUST send the following:

    a) Information Sheet

    b) Reply Form

    c) Financial Statement form

    These are provided as specimens at the end of the protocol. I have included them as separate documents to be downloaded above. The Complete Response Pack, as one document, can be downloaded here.

    Service of Letter Before Action
    The Letter of Claim MUST be sent by post, but can also be sent by email or fax if you have other contact details. It MUST however be sent by post.

    No Reply
    The debtor has 30 days to reply. If the debtor does not reply to the Letter of Claim within 30 days of the date of the letter, the creditor may start court proceedings, although, NOTE WORDING - "If debtor doesn't reply", NOT "if a reply is not received". It's therefore advisable to wait until a few days after the 30 day period expires, in case the debtor's reply is posted late.

    Reply from Debtor
    The debtor is required by the PAP to:

    a. Use the Reply Form for their response;

    b. Request copies of any documents they wish to see;

    c. Enclose copies of any documents they consider relevant;

    If the debtor replies, the creditor should not start court proceedings less than 30 days from receipt of the completed Reply Form, or 30 days from the creditor providing any documents requested by the debtor, whichever is the later.

    The creditor should be prepared to allow the debtor more time if there is evidence that the debtor is actively engaged in the PAP process, or seeking debt advice, or seeking time to pay.

    If the creditor does not agree to a debtor's proposal for repayment of the debt, they should give the debtor reasons in writing.

    A partially completed Reply Form should be taken by the creditor as an attempt by the debtor to engage. The creditor should attempt to contact the debtor to discuss the Reply Form and obtain any further information needed to understand the debtor's position.

    Early disclosure of documents and information is encouraged, and the protocol requires the parties to provide full disclosure, sufficient to enable them to understand each other's position. Any documents requested should be provided within 30 days of request.

    Unfortunately, the completed Protocol provides no option for a reply not using the Reply Form. The answer to this anomaly, I believe, can be found in the court's approach to compliance with other Pre Action Protocols, and that approach requires compliance with "the spirit" of the protocol. S2 of the PAP covers the aims of the protocol, which are to encourage engagement and promote early settlement, thereby avoiding litigation. Therefore if the defendant replies by means other than the Reply Form, the court will probably expect the creditor to give them the benefit of the doubt, and continue trying to service the aims of the protocol.

    If the parties cannot reach agreement, they are required to consider Alternative Dispute Resolution (ADR - Mediation), although this is no more than a mirror of the compulsory requirement encompassed in the Allocation of cases to the Small Claims Track.

    If a matter proceeds to litigation, the court will expect the parties to have complied with this Protocol. The court will take into account non-compliance when giving directions for the management of proceedings. The court will consider whether all parties have complied in substance with the terms of the Protocol, although it is unlikely to be concerned with minor or technical infringements, especially when the matter is urgent.

    For further information about the court's approach to compliance, see the Practice Direction - Pre-Action Conduct and Protocols (paragraphs 13 to 16).

    Since the 2013 changes to Court procedure, encompassed in the Legal Aid, Sentencing and Punishment of Offenders Act (2012), the Courts have been much more harsh on, and much less tolerant of, non-compliance with the rules. This extension of the Pre-Action Protocol regime to debt claims, means that, where you may not before have been penalised for failing to follow accepted procedure (albeit informal), you will now.

    It is therefore crucial that, in the event of a dispute, you ensure that you follow the Protocol as closely as you follow Court Orders and the rules themselves, as if you fail to do so, even if you win your case, your victory could be soured by costs or other penalties being imposed on you.

    Posted: Jul 14, 2017 By: smallclaimsassistance Member since: Jan 7, 2015
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  2. The Byre

    The Byre UKBF Legend Full Member

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    Another wonderfully 'fuzzy' area of common law being replaced by 'Romanesque' rules!

    But a brilliant post and should be made a 'sticky' somewhere, given the number of people who come here, trying to get their debtors to cough up!
    Posted: Jul 14, 2017 By: The Byre Member since: Aug 13, 2013
  3. DavidWH

    DavidWH UKBF Enthusiast Free Member

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    Good post, thanks for sharing.

    The trouble is, some creditors dish out credit willy nilly, and when they don't get paid don't know if they're Limited or sole traders. (What happens if they're a partnership?)

    What that provides is the debtor another 30+ days to drag out payment, in the comfort that nothing 'legal' will happen within that time.

    I think we'll start to only giving credit to Ltd Co's.
    Posted: Jul 14, 2017 By: DavidWH Member since: Feb 15, 2011
  4. Mr D

    Mr D UKBF Legend Free Member

    24,830 3,028
    Don't forget to take out insurance on the debt when giving credit to limited companies.
    Posted: Jul 14, 2017 By: Mr D Member since: Feb 12, 2017
  5. simon field

    simon field UKBF Big Shot Full Member - Verified Business

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    Sticky please someone.

    My first post on this forum related to creditor who tried to shaft us to the tune of circa £65K.

    We made them pay in the end, and shortly after, they went tit* up.

    Not that I'm smug
    Posted: Jul 15, 2017 By: simon field Member since: Feb 4, 2011
  6. The Resolver

    The Resolver UKBF Big Shot Full Member

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    Thanks Dean. I suggest you submit this as an article.

    Apart from specifying informal forms and slightly more certainty as to the period in which to respond, it is hard to see what this PAP adds to the existing Practice Direction for Pre-Action Conduct which has long applied to all business debt not just such as is owed by sole traders or consumers.

    This is not just to a requirement to consider mediation but, as has long been the case with the existing Practice Direction above and PAPs generally, the duty is satisfied just by showing any attempt to resolve the matter between the parties themselves or just referral to an ombudsman to make a ruling rather than a judge. In many ways this is the 'old skool' approach of the consultation teams that provides lip service to real consensus building forms of ADR such as mediation. (I speak as someone who was once vice-chair of a committee that created a previous Pre-Action Protocol (so know how they tend to work by consolidating around the boring non-innovative middle ground) and also currently as a member of a 6 man Working Party just putting the finishing touches this week to a Report commissioned from us by the Civil Justice Council to suggest moves to increase the use of ADR.

    The real advances in access to justice and improving the pre-action process, especially for individuals and sole traders increasingly being priced out of the courts, is in the application of ODR (Online Dispute Resolution) and online courts. ODR covers both the alternatives to the courts such as arbitration and mediation as well as the court procedure itself. The guided pathways built into online courts necessarily include intuitive pre-action processes that obviate the need for these separate Pre-Action Protocols. Later this month sees the start of the first pilot of an online court (first recommended in a Report by another CJC group of which I was a member).

    So one half of the HM Courts and Tribunal Service is still slogging along with old, increasingly threadbare, processes that have not worked well in that the courts remain, as the old saying goes, 'open to all like The Ritz Hotel' (such as this Protocol) while quite another is on the cutting edge of technology as a world leader in bringing the court as close as your smart phone. As to 'cutting edges' see this Hakathon from two weeks ago (I'm pleased to say my team entered a system for predictive outcomes which made the final).
    Last edited: Jul 16, 2017
    Posted: Jul 16, 2017 By: The Resolver Member since: Mar 31, 2006
  7. The Byre

    The Byre UKBF Legend Full Member

    10,348 4,328
    American Depository Receipt (banking)

    Average Daily Rate (hotel occupancy)

    Additional Dialogue Recording (movies)

    Automatic Dialogue Replacement (movies)

    Average Damage per Round (gaming)

    Adverse Drug Reaction (medical)

    Agreement for Dangerous goods by Road (UN transport treaty)

    Australian Design Rules (automotive engineering)

    Alternative Demokratische Reformpartei (Luxembourg politics)

    Allgemeine Dummheits Reglung (OK, I made that one up!)

    Ah, here we are - Alternative Dispute Resolution!

    P.S. OP should be a sticky, but with additional info for Scotland.
    Posted: Jul 16, 2017 By: The Byre Member since: Aug 13, 2013
  8. The Resolver

    The Resolver UKBF Big Shot Full Member

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    :) - you left out the Acronym Definition Randomiser..... but actually it was defined in the first post above.

    I do try to clarify sometime that 'ODR' is nothing to do with that other 'ODR' that deprives Amazon sellers of sleep - the Order Defect Rate.
    Posted: Jul 17, 2017 By: The Resolver Member since: Mar 31, 2006
  9. smallclaimsassistance

    smallclaimsassistance UKBF Enthusiast Full Member - Verified Business

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    Posted: Jul 17, 2017 By: smallclaimsassistance Member since: Jan 7, 2015
  10. obscure

    obscure UKBF Ace Free Member

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    One question:
    "b. Request copies of any documents they wish to see;"

    What happens if the debtor requests documents that are time consuming or difficult to produce and have nothing to do with the issue at hand - or just asks for lots and lots of stuff that is irrelevant or is confidential. Is there some clarification in the process regarding the relevance of requested documents?
    Posted: Jul 17, 2017 By: obscure Member since: Jan 18, 2008
  11. smallclaimsassistance

    smallclaimsassistance UKBF Enthusiast Full Member - Verified Business

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    Two different questions:

    If they're relevant, and are required to prove your case, you must produce them.

    If they're not relevant, or are privileged (as opposed to confidential) in nature, you don't need to. If they're confidential and relevant, but not privileged, you'll probably have to disclose them.

    The relevant rules for disclosure are not (and will not be) in the protocol, but can be found in Part 31 of the Civil Procedure Rules. The main bit you need to be aware of is section 31.6. This is the "default" approach to disclosure adopted by the courts and is as follows:

    "Standard disclosure – what documents are to be disclosed

    31.6 Standard disclosure requires a party to disclose only–

    (a) the documents on which he relies; and

    (b) the documents which –

    (i) adversely affect his own case;

    (ii) adversely affect another party’s case; or

    (iii) support another party’s case; and

    (c) the documents which he is required to disclose by a relevant practice direction

    That's the bottom line. If you're in a situation where you are required to disclose something which you don't believe you should have to, it's worth having a read of the relevant section of the Civil Procedure Rules, but as in all legal matters, there is NO black and white, only grey. This is just the default position.
    Posted: Jul 17, 2017 By: smallclaimsassistance Member since: Jan 7, 2015
  12. atmosbob

    atmosbob UKBF Ace Free Member

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    Ah, the time wasting response of defendants. I once had one ask a question which he had obviously copied from the web and didn't understand. I replied that I would only send the information to an expert who could understand and would explain it to him at a price. (It was to do with proving that possession of a unique RAW file from a numbered camera was different than a JPEG screen grabbed off the web).
    Posted: Jul 17, 2017 By: atmosbob Member since: Oct 26, 2009
  13. smallclaimsassistance

    smallclaimsassistance UKBF Enthusiast Full Member - Verified Business

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    Sorry, missed this.

    You sue them individually as partners trading as "xxxx" (the partnership).

    For example:

    First Defendant: John Smith - t/a Smith and Jones Partnership
    Second Defendant - David Jones - t/a Smith and Jones Partnership

    The difference of approach is because, unlike Ltd companies, you can enforce against the partners themselves, rather than just their business. You CAN sue just the partnership name, but if you do, you'll not be able to enforce any resultant judgement against the partners individually, only against the business.

    NB: Only applies to partnerships, not limited liability partnerships (LLPs).
    Posted: Jul 17, 2017 By: smallclaimsassistance Member since: Jan 7, 2015
  14. obscure

    obscure UKBF Ace Free Member

    3,318 850
    hard to prove you own an image if someone else owns the only copy of the RAW file... and those of the images taken just prior to and after it. When I shoot I always keep some of the RAWs that weren't good enough just in case the issue of ownership ever arises.
    Posted: Jul 18, 2017 By: obscure Member since: Jan 18, 2008
  15. CW Legal Services

    CW Legal Services UKBF Regular Free Member

    159 27
    Superb Article. An interesting footnote. Last week in court a Judge allowed a defendant to continue with a defence even though the defendant had ignored the Judges own order to file documents on which he would rely on by May 18 2017. Defendant filed nothing but a spurious counter claim for £11k (ok he lost, but that was not the point). Our experience shows that Judges in the small claims track are more concerned with transgressing Article 6 of the convention of Human Rights (Right to fair trial in civil matters) than adherence to pre action protocols
    Posted: Jul 21, 2017 By: CW Legal Services Member since: Jan 19, 2016
  16. smallclaimsassistance

    smallclaimsassistance UKBF Enthusiast Full Member - Verified Business

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    Thanks. This is my experience in the Fast and Multi Tracks also, although as far as that is concerned, the main reason, as it's appeared to me over the years I've been practising, is that judges don't like making brave decisions ("brave", for the litigant, meaning appealable decisions, and "appealable" usually means a life or death decision for one of the litigant's cases).

    This is in many respects the same thing as above. Nevertheless, not something you can rely upon, particularly since the fundamental change of approach by the courts to compliance in 2013 with the introduction of Civil Procedure Rules 3.8 & 3.9, in their current form.

    For those non-lawyers, the change of approach can be summarised by the following:
    • Cock-up pre April 2013 - you were probably not screwed, and if you were, you could usually get out of it.
    • Cock-up post April 2013 - you're definitely screwed unless you happen to be able to manufacture miracles, and even then, you're probably screwed.
    Andrew Mitchell ("Plebgate" - remember that?), was the first lucky big winner of adjudication under this new rule, which resulted in a very minor mistake by his solicitors costing him the right to recover most of his legal bill. The courts have rowed back from that now in the case of Denton, but rule 3.8 ("cock up and you're screwed unless the judge says otherwise") still applies. It's just now applied a little less harshly.
    Posted: Jul 21, 2017 By: smallclaimsassistance Member since: Jan 7, 2015
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