Letters of claim

There are many reasons why it may be necessary to issue court proceedings. For example, a debtor may owe you money that they refuse to pay, you may wish to have the court order specific performance of a contract, or you may wish to recover damages for a wrong committed against you.

In most (but not all) situations, a claimant must first send a letter of claim (also known as a letter before action) to the potential defendant or defendants.

Although a letter of claim is not a formal court document its importance cannot be understated. It sets out the basis of your claim against the defendant, and if there are any contradictions between your letter of claim and the claim eventually issued at court, or the evidence shown to the court, this will be pointed out by the defendant and used to undermine your case. It is therefore imperative that the letter of claim is drafted carefully and accurately to avoid problems later down the line.

The Practice Direction for Pre-Action Conduct (PDPAC) governs what you must do before taking court action. This includes, but is not limited to:

• Setting out the basis of the claim;
• Providing key documents relevant to the issues;
• Giving the defendant a deadline to make payment/respond by.

There are other pre-action protocols that refer to specific types of claims – for example construction disputes and personal injury claims – that govern how a claimant must act and what steps they must take before a court claim is issued.

How long does the letter have to respond?

The PDPAC states that the defendant should respond within 14 days in a normal case, however this time limit is extended up to 3 months for a very complex case.

If the defendant responds asking for further documentation, or asks for more time to respond, general practice would be to provide the documents and allow them further time to respond if it is reasonable to do so. The courts will not approve of claimants who do not seek to resolve their disputes prior to litigation, or do not provide a defendant with sufficient documentation when requested or ample time to respond.

If the defendant disputes the letter before claim there are many ways that the matter could progress before going to court. You could attempt to negotiate to resolve the disputes between the parties, or attempt an alternative form of dispute resolution – such as mediation – to reach a compromise. In some situations the parties may have contractually agreed that any disputes must proceed to arbitration as opposed to a court claim. This is a point that will need clarifying prior to undertaking any proceedings.

What if the defendant does not respond?

If the defendant does not respond by your deadline you may have to consider seeking court intervention by issuing a claim. However, court proceedings should only be issued as a last resort.

What if I do not send a letter of claim?

There are a number of issues that could arise should you not send a letter of claim.

The court can order that the defaulting party must pay the costs of the proceedings, or the court may reduce costs or interest awards to a successful party if they have not complied with the PDPAC. The defendant, whether successful or not, will most certainly highlight if you have not complied with the PDPAC.

Your letter of claim may bring to light issues that affect the claim – the defendant may have a genuine answer to your claim, or they may have a counterclaim that is capable of setting off or reducing your claim. Taking a matter to court can be expensive, and as recovery of costs is not always a certainty engaging with a defendant before issuing proceedings can provide the opportunity to reach settlement without the need to issue a claim. This can avoid not only legal costs for both sides, but also prevent your time being spent dealing with court proceedings.

To sum up…

Taking a matter to court always carries an element of risk, and there could be financial penalties for losing a claim (such as having to pay the defendants costs as well as your own). Careful consideration should be given before issuing legal proceedings. A well drafted, accurate letter of claim could bring to light issues that may affect your decision and prevent you being involved in unnecessary, expensive litigation.

Should you have any questions with regards to letters of claim, or if you wish to instruct The Endeavour Partnership to assist with a legal claim, please do not hesitate to contact a member of the litigation team on 01642 610300.

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