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Co-operate before you sue - pre-action conduct

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A new Practice Direction comes into force on 6 April 2009 governing the conduct of parties to potential litigation (pre-action conduct).  It applies to all potential litigants including those not represented by lawyers (who may therefore not be aware of it).  The Practice Direction is in addition to specific protocols which apply to certain types of claim such as personal injury claims.  The Courts have for some time required parties to potential litigation to engage in a "reasonable exchange of information" and to cooperate to try to avoid the need for proceedings to be issued, or at least to narrow the issues if proceedings are inevitable.  The new Practice Direction is longer and more onerous than the old one.  It includes detailed guidance about the content of the letter of claim and how long should be allowed for a response.  It is important for anyone thinking of issuing Court proceedings to be aware of the requirements and to comply.  There are sanctions for non-compliance including the possibility of a stay on proceedings (stopping the proceedings until there has been compliance with the protocol), costs orders against the party in default and interest of up to 10% above base rate on monies due to a Claimant if the Defendant is the party in default.  Clearly, the Courts are frustrated with parties not cooperating with each other before issuing proceedings, as the Court sees it.  It will be interesting to see whether the tougher line set out in the Practice Direction translates into more frequent and more severe sanctions for parties in default, especially where parties claim lack of awareness of the Practice Direction.

Another issue is whether the Practice Direction goes too far in trying to force parties to resolve their differences out of Court.  ADR refers to Alternative Dispute Resolution, which includes procedures such as mediation or without prejudice meetings to try to settle things without a trial.  The old wording saying that ADR is not compulsory has gone.  ADR is still not strictly speaking compulsory, but unreasonably refusing to consider ADR is a ground for sanction in the new Practice Direction.  ADR is a valuable tool in resolving disputes, but timing is important for successful ADR. Many Claimants may view offering ADR in a letter of claim as offering an an escape route for Defendants and think that it is not appropriate to offer ADR at least until after the Defendant has given a reasonably detailed response to the claim.

A copy of the Practice Direction can be seen at page 32 onwards at http://www.justice.gov.uk/civil/procrules_fin/pdf/preview/cpr_update_49_PD_amendments.pdf

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