When ignorance is not bliss...

Pre-action protocols can be found online at justice.gov.uk and set out the steps the court would normally expect parties to take before commencing proceedings for particular types of civil claims. As set out in paragraph three of the Practice Direction – Pre-Action Conduct and Protocols, before commencing proceedings, the court will expect the parties to have exchanged sufficient information to:

(a) Understand each other’s position;
(b) Make decisions about how to proceed;
(c) Try to settle the issues without proceedings;
(d) Consider a form of Alternative Dispute Resolution (ADR) to assist with settlement;
(e) Support the efficient management of those proceedings; and
(f) Reduce the costs of resolving the dispute.

A claimant is expected to provide the defendant with a Letter of Claim, putting the defendant on notice that court proceedings may be brought against them following a dispute. A Letter of Claim should set out the basis on which the claimant is making the claim, include facts relating to the claim and detail what the claimant wants from the defendant to resolve the claim.

Paragraph 6b of Practice Direction – Pre-Action Conduct and Protocols sets out that the defendant is usually required to respond to the Letter of Claim within 14 days, although this can vary depending on the complexity of the dispute and can be extended to no more than three months. A response should include confirmation as to whether liability for the claim is accepted and if disputed, the reasons why. If the claim is disputed and the defendant is making a counterclaim, the defendant should include details of the counterclaim within the response.

If a dispute proceeds to litigation, the court will expect the parties to have complied with a relevant pre-action protocol/Practice Direction. Examples of non-compliance include failure to provide sufficient information, not acting within a time limit set out in a relevant protocol, or within a reasonable period, unreasonable refusal to use a form of ADR, or failure to respond at all to an invitation to do so.

The court has the power to consider the parties’ compliance with a relevant pre-action protocol when making an order for directions [CPR 3.1(4)], when ordering a defaulting party to pay a sum into court [CPR 3.1(5)] and when considering costs [CPR 44.3(5)(a)].

In relation to the last of these, the Practice Direction – Pre-Action Conduct and Protocol sets out a range of possible penalties where the court considers that non-compliance has led to proceedings being commenced unnecessarily or where additional costs have been incurred. These are:

• Payment of part or all of the costs of the proceedings by the defaulting party;
• Payment of such costs on an indemnity basis;
• Where the defaulting party is the claimant, the amount of interest awarded can be reduced or extinguished; and
• Where the defaulting party is the defendant, interest on damages be payable at a rate not exceeding 10% above base rate. It therefore follows that, should a defendant fail to respond to a Letter of Claim within the relevant time limit, the court may order that sanctions are to be applied.

In Aegis Group Plc v Inland Revenue Commissioners [2005] EWHC 1468 (Ch) the matter concerned a defendant’s failure to respond to a Letter of Claim in judicial review proceedings. The defendant had taken nearly two months to reply to the Letter of Claim. Although the claimant eventually discontinued the judicial review proceedings, the defendant’s delay in responding to the claimant’s Letter of Claim was taken into account by the court when awarding costs to the defendant.

The court ordered that the defendant was only entitled to 85% of its costs. In R (Bahta & others) v Secretary of State for the Home Department [2011] EWCA Civ 895 the Court of Appeal reiterated the importance of complying with the relevant pre-action protocol with Lord Justice Pill stating:

“What is not acceptable is a state of mind in which the issues are not addressed by a defendant once an adequately formulated letter of claim is received by the defendant. In the absence of an adequate response, a claimant is entitled to proceed to institute proceedings. If the claimant then obtains the relief sought, or substantially similar relief, the claimant can expect to be awarded costs against the defendant. Inherent in that approach, is the need for a defendant to follow the Practice Direction (Pre-Action Conduct) or any relevant Pre-Action Protocol, an aspect of the conduct of the parties specially identified in CPR r. 44.3(5). The procedure is not inflexible; an extension of time may be sought, if supported by reasons.”

Summary

Whilst it may be tempting to ignore pre action correspondence, the courts have demonstrated that a party’s pre-action conduct can be taken into account by the court.

A failure to engage in pre-action correspondence and adhere to the pre-action protocols can have significant financial consequences. It is important for a party to commence investigations as soon as a claim is intimated and that a protocol compliant response is sent to a claimant within a reasonable time.