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A new Pre Action Protocol for Debt Claims (The Debt Protocol) is likely to be introduced by Spring 2015, following on from Lord Justice Jackson’s recommendation that a new specific pre action protocol should be introduced.  Brian Kirby, Head of Debt Recovery, explains what these changes mean if your business is claiming payment of a debt from an individual.

To begin with it’s important to point out that this protocol does not apply to business to business debts unless both parties are sole traders.  It sets out the conduct the Court will normally expect of the parties prior to the start of proceedings with the general aims as follows;

(a)    Resolve the matter without the need to start Court proceedings.

(b)   Exchange early and full information about the matter.

(c)    Consider using Alternative Dispute Resolution (ADR) procedure.

(d)   Act in a reasonable and proportionate manner in all dealings with one another.

(e)   Support the efficient management, by parties and the Court, of proceedings that cannot be avoided.

A core principle of the Debt Protocol is that debtors, or alleged debtors, should be provided with sufficient information to enable them to obtain advice on their position prior to the issue of a claim.   More details on the initial information that is required to be provided are set out in paragraph 3.1 of the Debt Protocol.

Another key feature of the new protocol allows the debtor sufficient time to seek debt advice (paragraph 4.3 of the Debt Protocol).   It is envisaged that this cooling off time should help to settle the case, or at the very least narrow the issues.

If a debtor is seeking specialist debt advice which cannot be obtained within 28 days, the debtor must tell the Claimant, who must allow reasonable additional time to enable the debtor to obtain that advice.

Finally, if the parties still cannot agree about the existence, enforceability, amount or any other aspect of the debt, they are actively encouraged to take steps to resolve the dispute without starting proceedings.   Paragraph 6 of the Debt Protocol provides guidance on the use of ADR.  Failure to do so could result in the Court ordering either party to pay additional Court and/or other legal costs.

Should you wish to discuss any aspect of the new pre action protocol for debt claims and its effect on the recovery of your bad debts, you can contact Brian Kirby on 02380 717421 or email briankirby@warnergoodman.co.uk.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.