Pre-Action Protocol for Debt Claims

The Pre-Action Protocol for Debt Claims (“PAPDC”) comes into force on 1 October 2017.  The PAPDC outlines the conduct that the Court will normally expect from parties in debt claims prior to the issue of Court proceedings.

The PAPDC contains a more prescriptive procedure than that which was contained in the previous rules.  The PAPDC places additional obligations on both parties when dealing with debt claims.   Unfortunately, these obligations are a greater burden to the creditor than to the debtor with the creditor having to provide greater information at the outset, provide standard forms for the debtor to complete and allow the debtor lengthy periods to respond.

What claims does PAPDC apply to?

PAPDC applies to any debt claim where a business is making a claim against an individual.  A sole trader is classed as a business if in the role of creditor but as an individual if in the role of debtor. 

What claims does PAPDC not apply to?

The PAPDC does not apply to business to business debts nor does it apply to any claim which is not a debt claim (and so is governed by one of the other pre-action protocols) nor to any claim between businesses. 

What additional information needs to be provided?

Under the previous rules sufficient information had to be provided to allow the debtor to understand the claim being made against them but specific information or documentation which needed to be provided to the debtor was not prescribed by the rules.   This therefore allowed creditors to set out the most basic information in relation to that outstanding debt without having to provide the main relevant underlying documents. However, the PAPDC has changed this and requires the creditor to provide the following information/documentation to the debtor with the letter of claim:

  • The amount of the debt;
  • Whether interest or other charges are accruing;
  • If the debt arises from an oral agreement details of the agreement including who made the agreement, when and where the agreement was made and what was agreed;
  • If the debt arises from a written contract, the date of agreement, the parties to it and the fact that a copy contract can be requested from the creditor;
  • Where the debt has been assigned the details of the original debt and creditor, when it was assigned and to whom;
  • If instalment payments have been offered by the debtor an explanation as to why that offer is not acceptable;
  • Details of how the debt can be paid;
  • The address to which the response should be sent;
  • Enclose a statement of account or clearly state in the letter of claim the amount of interest and any other charges accrued;
  • Enclose a copy of the Information Sheet and Reply Form; and
  • Enclose a Financial Statement form.

The Information Sheet, Reply Form and Financial Statement form are standard forms which are contained within the PAPDC and must be provided by the creditor to the debtor with the letter of claim.  The Reply Form (if properly completed by the debtor) should set out the debtor’s position clearly.  However, it also gives the debtor an opportunity to ask for further information or documentation and to get specify an intention to get advice on the debt.

How does the PAPDC impact on the timescales for the issue of Court Proceedings?

The PAPDC will mean that it will take longer for a creditor to be able to issue of Court proceedings for the recovery of a debt than it currently does.  Proceedings should not be issued within 30 days of the letter of claim.  If the debtor provides the completed Reply Form then proceedings should not be issued within 30 days of receipt of the Reply Form. If the debtor requests additional documents within the Reply Form then the 30 day period starts from the date on which the creditor provides the documents (rather than from receipt of the Reply Form).

If the debtor specifies an intention to seek advice on the debt and that this advice cannot be obtained during the 30 day period the creditor should allow a reasonable time for the debtor to obtain that advice.

The creditor is also required to give the debtor 14 days written notice of intention to issue Court proceedings.  However, there is nothing contained within the protocol which states that this notice cannot be given until after the relevant 30 period expires and as such, this notice could be given to run during the 30 day period (i.e. notice of intention to issue Court proceedings is given on day 16 of the 30 day period).   

Is there an obligation to consider settlement without resorting to the issue of Court Proceedings?

The PAPDC does require the parties to take steps to try to resolve the dispute without the issue of Court proceedings.  The PAPDC acknowledges that the manner in which to seek to reach a settlement will vary depending on the case; in some cases it acknowledges that a simple discussion may be sufficient whilst in others a formal mediation process will be appropriate.

The PAPDC is intended to encourage the parties to exchange information and seek to resolve matters without resorting to the issue of Court proceedings.  However, the PAPDC makes the recovery process more cumbersome for creditors.  It is also open to debtors to abuse the process (by making spurious requests for documents or information) to seek to delay payment.

At Turner Parkinson our Debt Recovery Team have made the appropriate adjustments and undertaken the relevant preparation in order to continue to robustly collect debts in a manner compliant with the PAPDC.  Should you require more information about the PAPDC or Debt Recovery please do not hesitate to contact Paul Jagger or Mark Bartliff.