The Pre-action Protocol for claims in respect of monies owed to a business from an individual (including sole traders) was amended late 2017 with the aim to encourage early communication and subsequent settlement between parties thereby dispensing with the need to commence legal proceedings.
To comply with the protocol a business creditor must provide to an individual debtor full details as to what the claim relates and how it arose together with a breakdown of any accrued interest or charges claimed. The letter of claim should also enclose a Statement of Account and the applicable copy invoices.
The letter must additionally now provide the individual debtor a period of 30 days to respond and enclose three standard forms, being an Information Sheet (providing both advice and guidance to prevent a claim being issued), a Reply Form and a Financial Statement form for the individual’s completion.
Should however there be no response within the 30 days provided, the business creditor may then present a claim against the individual to the appropriate Court. It should be noted that if the business creditor does not comply with the protocol then the Court may take this into account when providing Directions for the management of the claim or when making an Order for costs.
Please click here to view a flowchart outlining the new Protocol.
So what impact has the new Protocol had?
We have seen an increase in the number of settlement proposals and indeed payments being received from individual debtors meaning legal costs are not being incurred by business creditors as they once were.
The Ministry of Justice have reported that in July to September 2018, County Court claims decreased by 8% to 513,000 and of these 411,000 were specified money claims, down 8% on the same period in 2017.
Businesses should be aware of the protocol’s requirements and ensure they are compliant. From the Government’s figures it can be seen that money claims are decreasing year on year but whether this will continue is yet to be seen.
For more information, please contact Robert Edge, Senior Chartered Legal Executive in the Litigation & Dispute Resolution team.