Pre-action behaviour in non-protocol cases Lexis PSL Dispute Resolution Practice Note ® Pre-action behaviour in non-protocol cases —Practice Direction Pre-Action Conduct and Protocols This Practice Note explains when the Practice Direction Pre-Action Conduct and Protocols (the ‘Practice Direction’) (in force as of 6 April 2015, in place of the previously named Practice Direction- Pre-Action Conduct) applies and sets out its principles and purpose. It also deals with the contents of a claimant’s letter before claim and the defendant’s response to it. It also briefly addresses issues of ADR, limitation, experts and pre-action behaviour generally and in the Commercial Court. Links in red are available to LexisPSL Dispute Resolution subscribers. For a free trial, see lexisnexis.co.uk/DRPSLTrial. Note: there are no transitional provisions. All links in this Practice Note are to the Practice Direction in force as of 6 April 2015. Should you still require access to the Practice Direction in force prior to 6 April 2015 and its procedure, please see our Practice Note: Pre-action behaviour in non-protocol cases (pre 6 April 2015). When does the Practice Direction—Pre-Action Conduct and Protocols apply? There are currently a number of protocols that deal with specific types of claims. For more detail, see: Pre-Action Protocols—list of the protocols. Note: para 18 of the Practice Direction Pre-Action Conduct and Protocols lists the current claim specific protocols, however, there is an error in this listing as the protocol for professional negligence claims was also revised as of 6 April 2015 and this is the most up-to-date version in force (not that of 16 July 2000). If a claim does not fall within any of the specific protocols, you will need to follow the principles set out in the Practice Direction Pre-Action Conduct and Protocols (Practice Direction) before proceedings are issued. The Practice Direction sets out the conduct usually expected of parties prior to the issue of proceedings. Although the Practice Direction mainly deals with cases which are not covered by one of the specific protocols, it also contains provisions that apply in all cases. Objectives (para 3) Before commencing proceedings, 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 ADR to assist with settlement support the efficient management of those proceedings, and reduce the costs of resolving the dispute Parties are not to use the Practice Direction or any of the protocols as a tactical device to secure an unfair advantage over another party or to generate unnecessary costs. If disproportionate costs are incurred they may not be recoverable (paras 4-5). Exchanging information Claimant’s letter before claim (para 6) The claimant must write to the defendant with precise details of the claim. The letter should include: Pre-action behaviour in non-protocol cases • the basis on which the claim is made • a summary of the facts • what the claimant wants from the defendant, and if money, how the amount is calculated Documents (para 6(c)) Whilst the Practice Direction does not specifically require it, the claimant may also wish to set out what type of ADR the claimant considers to be most suitable and invite the defendant to agree to it. See the topic ADR, in particular Types of ADR— Overview which sets out the different types of ADR. Debt claims - Claimant is a business and defendant is an individual The judgment in Bailey emphasises the importance of pre-action letters of claim and of ensuring that they accurately reflect the claim or, if they do not, that this is subsequently acknowledged and explained. In this case, the claimants’ ultimate claim varied considerably from the pre-action letter of claim. The fact that the claimants’ solicitor did not suggest that the letter erroneously failed to set out the claimants’ case in accordance with their instructions went some considerable way to destroying the claimants’ credibility as witnesses in the trial. His Honour Judge Pelling QC had this to say: ‘The significance of a letter before action is that it forms the basis or should form the basis for an attempt to resolve differences using the Pre-Action Protocols. It is meant to set out accurately and comprehensively the case being advanced so as to enable the proposed defendant to respond in detail to what is being alleged as a pre-cursor to an attempt to resolve the dispute either by negotiation or by alternative dispute resolution. Thus, whilst such a letter is not supported by a statement of truth, it is nonetheless a document which all concerned can expect to fully and accurately set out the case of the party on whose behalf it is sent. Where such letters are written by solicitors and it is suggested that there is a material inconsistency a court can legitimately expect a solicitor who is satisfied that a mistake has been made to say so either in correspondence or a witness statement. The letter in this case was written by a solicitor. It has not been suggested by the solicitor concerned that the letter erroneously failed to set out the claimants’ case in accordance with the claimants’ instructions.’ (paragraph 18) Defendant’s response (para 6) The defendant must respond to this letter within a ‘reasonable time’ - 14 days in a very straight forward case and no more than 3 months in a very complex one. The reply should state: • if the claim is accepted • if the claim is not accepted, the reasons why and an explanation of which parts are disputed • whether the defendant is making a counterclaim, with details of the counterclaim if being made Claimant’s reply The Practice Direction does not specify what should be included in a reply (if any) but the claimant would be advised to respond in compliance with the spirit of the Practice Direction, including providing documents requested by the defendant where appropriate. When sending the letter before claim or response, the parties must disclose key documents which are relevant to the issues in the dispute. The practice direction that was in force prior to 6 April 2015 (Practice Direction- Pre-Action Conduct) set out in Annex B the information that was to be provided where the claimant is a business pursuing a debt claim against a defendant who is an individual. However these provisions have been removed from the revised Practice Direction Pre-Action Conduct and Protocols in force as of 6 April 2015, and, whilst it had been anticipated that a special debt claims protocol would be issued, this has not happened to date. Therefore, if you are dealing with a debt claim you will need to follow the general principles set out in the Practice Direction Pre-Action Conduct and Protocols as confirmed in paragraph 2. Settlement and ADR (paras 8–10) The Practice Direction states that parties should consider whether negotiation or ADR might enable them to settle their dispute without commencing proceedings and reminds parties that Part 36 offers can be made before proceedings are issued. Mediation, arbitration, early neutral evaluation and Ombudsmen schemes are suggested as methods of resolving the dispute. For more information see Practice Notes: • • • • Part 36 offers—overview Advantages and disadvantages of mediation Early neutral evaluation Understanding arbitration under the Arbitration Act 1996— overview If proceedings are issued, the court may require evidence that ADR was considered. A party’s silence in response to an invitation to participate or a refusal to participate in ADR may be considered to be unreasonable and may result in an adverse costs order. For more information see Practice Notes: Non-compliance with pre-action protocols and ADR and the CPR: court’s approach pre-action. Experts (para 7) The Practice Direction reminds parties that court permission will be required before expert evidence can be relied on so parties need to bear this in mind if they are contemplating instructing an expert before proceedings are issued. If expert evidence is necessary, parties should consider instructing a single expert, particularly in low value claims. Pre-action behaviour in non-protocol cases Limitation (para 17) The limitation period is not suspended while parties comply with a pre-action protocol or the Practice Direction. Where a party has to start proceedings before complying with a protocol or the Practice Direction because of the imminent expiry of a limitation period, the parties should apply to the court to stay the proceedings while the parties take steps to comply. Non-compliance (para 13) If proceedings are issued, the court will expect parties to have complied with the Practice Direction and will take into account any non-compliance when giving directions for the management of proceedings and when making orders for costs. For more information see Practice Notes: Non-compliance with pre-action protocols. In relation to pre-action behaviour, the following should be noted from the Commercial Court Guide: • the letter of claim should be concise and do no more than explain the proposed claim sufficiently for the potential defendant to understand and investigate the allegations being made and to identify the key dates involved • only essential documentation need be provided with the letter of claim • the period specified for a response should be no more than a month without good reason • the potential defendant need only provide a concise response to the letter of claim and only essential documents need be supplied • it should be possible to respond sufficiently within 21 days • where it is necessary to start proceedings quickly, for example, in cases of ‘forum shopping’, this may be done without following pre-action procedures Stocktake (para 12) If the parties are not able to resolve the dispute after having followed a protocol or the Practice Direction, they should review their respective positions. They should consider the papers and evidence to see if proceedings can be avoided and at least seek to narrow the issues in dispute before proceedings are issued. Pre-action behaviour in the Commercial Court Precedents For a precedent letter before claim (seeking recovery of a debt), acknowledgement and reply see: • Letter before claim seeking recovery of a debt • Defendant’s acknowledgment of letter before claim • Defendant’s full response to claimant’s letter before claim Where relevant, the pre-action protocols apply to actions in the Commercial Court. Where there is no relevant protocol, the Practice Direction applies. For more details about Lexis®PSL Dispute Resolution or to have a free trial, please see lexisnexis.co.uk/DRPSLTrial Reed Elsevier (UK) Limited trading as LexisNexis. Registered office 1-3 Strand London WC2N 5JR Registered in England number 2746621 VAT Registered No. GB 730 8595 20. 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