On 1 October 2017, the Pre-Action Protocol for Debt Claims (“the Protocol”) comes into force www.justice.gov.uk/courts/procedure-rules/civil/pdf/protocols/pre-action-protocol-for-debt-claims.pdf however, the new rules do not appear to distinguish between debts that arise in Contract and those that do not. Consequently, it could be argued that the new rules do not apply to non-contract debt claims as losses that arise from an act and/or omission other than in contract are strictly speaking damages as opposed to debt. Creditors will therefore need to think carefully as to whether their claim amounts to debt or damages.

The Protocol will affect any company claiming payment from individuals and it does not apply to businessto-business debts, unless the debtor is a sole trader.

Essentially, the protocol aims to:

a) Promote early exchange of information between the parties

b) Highlight any disputes.

c) Avoid litigation.

d) Consider ADR

e) Encourage the parties to act reasonably and proportionately

Before legal proceedings are issued, the creditor should send the debtor a formal letter of claim and this must be sent by post unless alternative means of communication have been agreed between the parties, (such as email). The debtor must provide a reply form within 30 days stating whether they agree the debt or not failing which, the creditor may start legal proceedings.

Whilst the aim of the protocol is to save the time and costs of litigation, it is considered by many creditors as a frustrating and unwanted interference as it is expected that many debtors will take advantage of the protocol as a means of delaying payment where no genuine dispute exists.

However, what amounts to a “debt” for the purpose of the protocol is not defined. It might be inferred that the protocol appears to overlook the fact that not all debt claims are based on the Law of Contract and can additionally or alternatively arise in restitution (overpayments to an insured or service provider) or under a statute (s151 recovery), for example.

In those examples, there is no contractual agreement for the debtor to repay a sum of money. However, the absence of a contractual agreement, where there is a clearly defined sum of money arguably still amounts to a debt. Creditors in those circumstances therefore potentially face the risk of treating the claim as damages as opposed to a debt and then facing criticism by the court for not following the protocol.

Once the protocol comes into force and the courts’ interpretation emerges it may become clearer as to what amounts to a “debt”. However until then, when considering cases involving the recovery of a clearly defined sum of money (such as overpayments/s151 recovery), creditors should probably exercise caution and treat the matter as though it is a debt, using the new protocol so far as it is practicable after 1 October 2017.