Fees Management

Recovery of fees: pre-action requirements

Starting legal proceedings for the recovery of fees is seen by most as an act of last resort. Jacques Smith reports on the options available

If it seems that legal proceedings will be needed to secure payment, it is important to recognise that the steps taken before starting proceedings are themselves the subject of regulation under what is known as the practice direction for pre-action conduct (PDPAC).

The overarching purpose of the PDPAC is to encourage prospective litigants to attempt to resolve the claim without resorting to Court proceedings. The PDPAC does this by setting out the steps that the prospective litigants must take. It also gives guidance as to the penalties that the Court should consider imposing on a party who starts proceedings without having first taken the required pre-action steps.

In summary, the requirements placed on a claimant before issuing proceedings are to send a detailed claim letter containing certain required information, to consider any response received from the prospective defendant, and to actively attempt to resolve the claim by means of alternative dispute resolution methods before starting proceedings.

The forms of alternative dispute resolution which parties are encouraged to consider comprise:
• discussion/negotiation;
• mediation; or
• arbitration (for example, by a professional body).

If a party starts proceedings without having first completed the pre-action procedure, the Court may impose sanctions, such as disallowing the recovery of costs and/or interest on the claim, even if the claim is ultimately successful.

This means that in practice, and as a potential claimant, you should:
• always engage by correspondence, well before the commencement of any proceedings;
• always send a letter of claim and give a reasonable period of time for the debtor to respond;
• do not reject proposals from the debtor without good reason – the more reasonable your position in correspondence, the more sympathetic the Court will be to your position in any later proceedings;
• inform the debtor of their obligations under the PDPAC, namely to provide early disclosure of any relevant documents and to articulate fully any issues they wish to raise as reasons for a refusal to pay; and
• actively consider and propose a form of alternative dispute resolution – in practice the preferred form will normally be a negotiation meeting.

It is also important to bear in mind that the nature and extent of pre-action conduct should be proportionate to the amount of the debt being pursued. Accordingly, the larger the debt, the greater the efforts that should be made to attempt to resolve the matter or at least narrow the issues before commencement of proceedings. Conversely, if the debt is comparatively modest, it would normally be appropriate to commence proceedings after sending a claim letter, considering any response and discussing this with the debtor.

Jacques Smith is a partner at Blandy & Blandy LLP.

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