Expectations for Pre-Action Conduct in proceedings to recover a sum of money

The Practice Direction on Pre-Action Conduct was revised on Monday, 06 April 2015. We consider whether there has there been a draftsman’s error in this latest version and outline the important points to note now the Direction is in force.

The Civil Procedure Rules’ Practice Direction on Pre-Action Conduct initially came into force on 6 April 2009 (PD PAC 2009), with the aim of:

  1. Enabling parties to settle the issue between them without the need to start proceedings.
  2. Support the efficient management by the Court and the parties of proceedings that cannot be avoided.

One of the main implications for the credit industry was signposting, as with the ‘Information to be provided in a debt claim where the Claimant is a business and the Defendant was an individual’. Individuals would be informed of the free independent advice and assistance that could be obtained from organisations such as National Debtline, StepChange Debt Charity, Citizens Advice and Community Legal Advice. Indeed, the thrust of the PD PAC 2009 was to guide individuals and parties not known to be legally represented through the pre-action procedure that was likely to satisfy the Court in most circumstances.

Commentators have said that the PD PAC 2009 has shown to be a practical and proportionate guide to pre-action requirements and the Court’s expectations of the parties’ conduct. In practice, it has been a useful addendum to the overriding objective of the Civil Procedure Rules, encouraging co-operation and a focus on identifying the issues at an early stage. The 2009 PD PAC defined the ‘rules of engagement’ in a very structured manner, assisting both sides in drafting a letter before claim and providing a full written response

From November 2012, the Civil Procedure Rule Committee (CPRC) has taken responsibility for all pre-action protocols, including a proposed draft Pre-Action Protocol for Debt Claims (the Debt Protocol). Suffice it to say that – not least because of the onerous requirement on creditors to provide significant volumes of paperwork and the delays to process that would be incurred – the clamour from creditors was overwhelmingly negative. Even reported responses received from an invitation made to organisations that assist debtors in September 2014 were not overwhelmingly positive, some citing concerns that the paperwork requirements could be outfacing and result in Defendant’s disengaging from the process.

It is understandable that the CPRC is currently giving careful consideration to the Debt Protocol – as the government’s website says: ‘We are analysing your feedback’. Watch this space!

In the meantime the revised Practice Direction on Pre-Action Conduct has, curiously, quietly come into force on Monday, 06 April 2015 (PD PAC 2015). This “applies to disputes where no pre-action protocol approved by the Master of the Rolls applies”, as with debt recovery.

The Practice Direction on Pre-Action Conduct 2015 - important points to note

The first important point to note is that the PD PAC 2015 is now entirely silent as to matters where there is no dispute – this was specifically referenced in the previous version, which stated that the guidance was ‘not intended to apply to debt claims where it is not disputed that the money is owed and where the Claimant follows a statutory or other formal pre-action procedure.’ Is it to be assumed that no formal pre-action steps will be expected from creditors before commencing proceedings in a debt claim where there is no dispute? Surely not. Is this a draftsman’s error?

Where there is a dispute, the PD PAC 2015 is a little more prescriptive, providing guidance that the Court will expect the parties to have exchanged sufficient information to:

  • Understand each other’s position.
  • Make decisions about how to proceed.
  • Try to settle the issues without proceedings.
  • Consider a form of Alternative Dispute Resolution (ADR) to assist with settlement.
  • Support the efficient management of those proceedings.
  • Reduce the costs of resolving the dispute.

However, this is nowhere near the level of detail and structure provided for Claimants and Defendants both in the guidance from PD PAC 2009. The focus is much narrower on ‘the issues in dispute’.

There is an increasing focus on settlement and ADR – a particular highlight being that ‘A party’s silence in response to an invitation to participate or a refusal to participate in ADR might be considered unreasonable by the court and could lead to the court ordering that party to pay additional costs.’

Again, compliance with the PD PAC remains important for litigants: the delays that may otherwise be incurred whilst a matter is stayed or the sanctions that are applied may be substantial. Sanctions include:

  1. An order that the party at fault pays the costs of the proceedings, or part of the costs of the other(s).
  2. An order that they pay those costs on an indemnity basis.
  3. An order depriving the party at fault of interest, or awarding at a reduced rate.
  4. An order awarding a higher rate of interest (up to 10% above base rate).

These sanctions are no different in practice from those defined in PD PAC 2009. There is some concern regarding the removal of the reference to the provision for such costs being applicable even in cases allocated to the Small Claims Track, however, it could be considered that this is in keeping with the general reduction of the PD PAC into less specific detail and is likely to remain applicable.

‘Signposting’ for Defendant’s not known to be legally represented is now removed – previously a letter before claim should have drawn a Defendant’s particular attention to the Court’s powers to impose sanctions for failure to comply with the PD PAC. This is no longer the case.

The final major omission, however, is perhaps the most significant for creditors: there is now apparently no requirement for the ‘Information to be provided in a debt claim where the Claimant is a business and the Defendant was an individual’, as was previously provided for in Annex B.

Are these all steps taken to provide a more flexible approach and cut red tape or moves made in anticipation of a much more prescriptive Debt Protocol? Only time will tell…

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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