Prior to issuing a claim to recover a debt, a claimant is obliged to consider whether the Pre Action Protocol for Debt Claims (the Debt Protocol) applies to prescribe steps which need to be taken before a claim can be issued.

The Debt Protocol applies to any business (including sole traders and public bodies) claiming payment of a debt from an individual (including a sole trader). The business will be referred to as the “creditor” and the individual will be referred to as the “debtor”. The Debt Protocol does not apply to business-to-business debts unless the debtor is a sole trader.

A claimant is obliged to send a Letter Before Action (LBA) whether the Debt Protocol applies or not, to provide a debtor with details about the claim.

Where the Debt Protocol does apply it will be necessary for a creditor to set out in their LBA the following non-exhaustive information:

  • The amount of the debt.
  • Whether interest or other charges are accruing.
  • Where the debt arises from a written agreement:
    • the date of the agreement;
    • the parties to the agreement; and
    • the parties to the agreement; and
    • Where the debt has been assigned, the details of the original debt and creditor, when it was assigned and to whom it was assigned.
    • Details of how the debt can be paid (including, for instance, the method of payment and the address for payment).
    • Details of how to proceed if the debtor wishes to discuss payment options.
    • The address to which the completed Reply Form should be sent.

It is an established principle of pre-action conduct that the parties involved in litigation should attempt to resolve disputes first, before instituting formal proceedings. LBAs represent one of the ways in which fact gathering and identification of issues can be done before a case is issued at court.

There may be reasons why a regarded debt may – on good analysis of the matters that are drawn out in the LBA – reveal more about the case, such that a simple debt matter may reveal that it has more to it. In such cases, advice may need to be taken around how best to pursue the monetary sum in dispute because pursuing it as a debt may not be appropriate.

Any LBA should set out the nature of the dispute and how the debt has arisen. It should provide supporting documentary evidence to provide the other side with as much information as possible to enable them to respond as fully as possible.

An LBA should allow the debtor a reasonable opportunity to respond or where the Debt Protocol applies, 30 days to:

  • Complete and return the Reply Form;
  • Request copies of any documents they wish to see; and
  • Enclose copies of any documents they consider relevant, for example, details of payments made but not taken into account in the LBA.

In exceptional circumstances where there is a need to issue proceedings swiftly, or where parties have been already exchanged pre-action correspondence, a shorter deadline for receiving a debtor’s response may beset. It may be premature to issue proceedings if there is a genuine dispute about the debt or pre-action alternative dispute resolution is viable to undergo. If a debtor is not engaging properly or at all then it may be that issuing proceedings at court is the only option that can be taken towards obtaining relief.

Logistically, a claim can be issued online or by lodging the claim in paper hard copy with the court to issue.

When lodging a claim form, a form N1 should be used. The claim form must be headed with the title of the proceedings, including the full name of each party. If the particulars of claim are not contained in or are not served with, the claim form, a claimant must state on the claim form that the particulars of claim will follow. If an outstanding debt relates to a contract entered into between the parties, a copy of the contract should also be enclosed with the claim. A court fee will be payable upon making a claim to the court, which is calculated by reference to the value of the claim.

Once a claim has been issued and served upon a debtor, they will have 14 days to acknowledge receipt of the claim and/or to serve their defence. If the debtor serves an acknowledgment of service without a defence in that 14 day period, they will then have a maximum of 28 days from service of the claim on them to file a defence.

Depending upon the value of the claim and the track the matter is allocated to, a winning party in the claim may recover their costs.

If you have any debt recovery matters and would like further advice in relation to the same, please contact Fisher Jones Greenwood LLP for expert legal advice, call 01206 700113 or email [email protected].