Composing a Letter Before Action

Matthew Arnold and Baldwin’s recoveries manager explains recent rule changes to the letter before action, how to compose an effective and compliant letter to get back money owed to you by debtors.

Why The Rules Were Made & What It Means?

The ‘Practice Direction, Pre-Action Conduct’ came into effect in April and means debt litigation is a final option. The practical effect is to delay the recovery timescale to allow the debtor to respond to letters before the claim.

What Are The Legal Options To Chasing Payment On Completed Work?

You can still use the same methods as before the rule changed, the changes limit the time the debtor is allowed to respond to the initial letter. Money proceedings can be commences, just a little later.
The letter before claim needs give all the details and allow a reasonable period for response. This is usually 14days plus an extra couple for the debtor to receive the letter, and you to receive the response.

But it’s not as simple as saying from 7-18days, if there are ‘issues about evidence’ no-one knows how this will be interpreted, queries about billing, delivery dates etc may qualify, so 30days for response (plus 4 either side for delivery) is deemed appropriate.

What Goes In The Letter?

The letter specifies the basis on which the claims are made and the facts it relies upon. It includes what you want from the debtor, if financial loss is claimed, (including calculations) and details of conditional fee arrangements entered into and a list of documents relied on.

How Effective Are Letters Before Claim?

The rule changes will have little effect on recoveries from debtors. Whether you give 7 or 18 days to reply to your letter, if they do reply, also will not change recoveries. And whether a reply holds stalling tactics, a sensible offer or a sob story will also most likely be unaffected by the rule change.

Not Worked? What Next?

For individuals, bankruptcy is an option. The stigma of bankruptcy has faded in recent years, automatic discharge, possibly in as little as a year, with all unsecured debts being cleared, has been taken by some as a passport to government endorsements and financial recklessness.

The web has also led to every ‘legitimate’ website offering tips for businesses owed money, having 10 showing debtors how they can avoid their obligations, explaining every dodge they can make.

Alternative Dispute Resolution (ADR) is great if it works, but with someone who has avoided paying or even sensibly talking with you for months, will mediation actually achieve anything – even if the other party agrees to pay half the mediators fee of several hundred pounds.

Similar issues apply to companies, mediators may become a waste of more time and money. Realistically, it really boils down to whether or not to sue the debtor.

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