Businesses which are seeking to recover debts must comply with the Civil Procedure Rules when undertaking recovery actions. Namely, the Practice Direction for Pre-Action Conduct and the Pre-Action Protocol for Debt Claims apply; the latter in circumstances in which the debtor is a sole trader only. The objective for these protocols is to enable businesses to understand one another’s position and seek to resolve the dispute outside of court proceedings thereby saving time and costs of what otherwise becomes a protracted legal dispute. Discussions often centre around the nature of the services provided, what was agreed from the outset, whether any payment plan can be agreed and how to preserve a commercial relationship when it has become strained.

Under the Practice Direction, a creditor can send a Letter of Claim consisting of the concise details of the claim, the basis on which the claim is made, a summary of the facts and how the sum due has been calculated. For a straightforward case, the debtor ought to be able to respond within 14 days but in complicated matters the debtor can be afforded up to three months to provide its response. A Letter of Claim and Letter of Response can be very useful for both parties and should not be underestimated. They set out each other’s position and enable the parties to understand where their differences lie and serve as a useful starting point for discussions to take place to see whether any of the issues in dispute can be narrowed facilitating a resolution. Alternatively, the positions can be so far apart that formal legal proceedings are necessary and in that sense it is better to know that form the outset so that the appropriate steps can be taken to resolve the matter by way of court proceedings.

The protocols also enable the parties to consider and indeed collaborate over expert evidence. The court must give permission before expert evidence can be relied upon. However, at the same time parties should be served well by considering expert evidence from the outset to see if there can be an expert determination or other means of alternative dispute resolution such as adjudication, arbitration or mediation to avoid the necessity of court proceedings. In some situations, consideration of expert evidence will be required even in circumstances in which a court order has not yet been handed down to rely on expert evidence. For example, when pleading allegations of professional negligence against construction professionals following the decision in Pantelli. There is sound reason for that – a lawyer should not be able to plead criticisms of say an architect without another independent architect providing its views because a lawyer specialises in the law and not the preparation of designs, drawings and specifications.

Parties are expected to comply with the protocols and in the event of non-compliance without any reasonable justification parties will be able to refer to one another’s conduct to the court when it comes to the issue of costs. There is a plethora of case law on the sanctions for non-compliance with the protocols and for rejecting an offer of alternative dispute resolution. It has been held that a party is entitled to understand the case it has to meet before entertaining an offer to mediate and it has equally been held that a blanket refusal to mediate on the basis that the offeree will be the successful party at trial is not a good enough reason to reject mediation. It is clear from cases such as the Register of the Corby Group v Corby Borough Council that one must consider a refusal to mediate at the time that the offer was made. It has also been held that a party which assumes an unreasonable position in relation to mediation without rejecting it outright will be treated as if it had rejected it outright. This is what happened in the Earl of Malmesbury and others v Strutt and Parker. It therefore remains sensible to consider all avenues of resolving disputes from the outset and setting out the positions as clearly and as early as possible enable that process to take place.