Commercial Debt Recovery: Pre-Action Protocols and Conduct
The court will expect the creditor to have sent out a Letter Before Claim to the debtor, which would set out the basis of their claim and allow a reasonable amount of time for the debtor to fully respond. For straight-forward cases, it is expected that a response should be received within a period of around 14 days for companies or 30 days for individuals, although this can be extended if the matter is more complex.
As the parties will have set out the basis of the claim and the defence in response, they will be better placed to understand where their differences lie. Upon understanding the points in dispute, the parties are able to discuss those points in further details and to narrow down the issues in the hope of reaching an amicable settlement.
During the pre-action stage, the parties should consider whether they would be agreeable to settle the potential claim by entering into a payment plan, which could potentially preserve a business relationship that may otherwise be lost if legal proceedings were issued. Although a claimant may see a payment plan as a delay to getting paid, there is no guarantee that legal proceedings be any quicker in achieving the desired outcome.
Should the parties not be able to settle following the initial correspondence and communication, they should consider whether alternative dispute resolution (ADR) would be an appropriate next step, as the court insists on litigation being used by the parties as a last resort. Such ADR could include mediation, in which the parties would attempt to resolve their differences with the assistance of an independent mediator.
The pre-action stage will also provide the parties with an opportunity to consider whether expert evidence would be of any value, particularly in relation to the points in dispute.
The court expects the parties to have complied with these protocols and, if any party has unreasonably not complied, there could even be consequences in relation to costs. Should a party have not complied with the protocols without good reason, their conduct may be referred to the court by the other party when dealing with the issue of costs in those proceedings. An example of a party’s non-compliance of the protocols could be their unreasonable rejection of the other party’s offer of mediation, which could have led to the parties resolving the claim without unnecessarily utilising the courts time and incurring costs.
If you are owed money and are considering legal proceedings, you should make every effort to ensure that you have complied with the CPR, including the Pre-Action Protocols and Conduct. Given the potential costs penalties that could be imposed on you by the court for non-compliance, you may wish to seek independent legal advice and assistance before deciding to take the step of issuing a claim.
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