By Robert Thompson, Civil Court Users Association (CCUA) Chair

As 2022 begins, we find ourselves in the midst of the latest review of pre-action protocols. Reading the Civil Justice Council’s interim report, many of the aspirations and ideas are clearly well intended and some should work well. However, in my view others are unfortunately misguided and significantly out of touch with the realities faced by court users.

Anything that can be done to narrow the issues between parties, avoid unnecessary litigation, or where litigation is necessary, streamline the process as much as possible and keep cost to a minimum, is of course extremely welcome.

The biggest area of misunderstanding once again relates to debt claims. There have been several attempts over the last decade to encourage pre-litigation engagement on debt claims. They have all completely missed the point. The interim report unfortunately suggests that the thinking is once again going down the same misguided route.

The first point that I would make is that a debt is not a dispute. Oxford Languages define debt as “a sum of money that is owed or due.” They define dispute as “a disagreement of argument.” They are two vastly different concepts, in fact almost diametrically opposed. Why is that relevant? It’s relevant because most PAPs relate to disputes and are drafted accordingly. A Debt PAP needs to be substantially different.

When I sat on the sub-committee of the Civil Procedure Rules when the last Debt PAP was drafted, I had some limited success with the above point. The original draft which assumed that every claim would be disputed was changed in emphasis, so that the final version was perhaps a little closer to encouraging engagement between the parties. Nonetheless, it does still have far too much reference to, and emphasis on, disputes.

In my view, the single most important aim of a debt PAP is to promote engagement between the parties. The vast majority of situations can be resolved by simple dialogue, such as agreeing a repayment schedule, or understanding that the debtor’s financial situation, or other factors including possibly health or vulnerability, mean that litigation will not be appropriate. The only way to achieve that is by engagement between the parties. The creditor is almost always doing everything possible to engage. Why? They want to be paid. They are communicating with a view to achieving that. The difficult part is encouraging the debtor to respond. They often don’t for a variety of reasons, inability to pay, embarrassment, fear, whatever. If and when they do engage, they are usually pleasantly surprised. They find that most creditors are realists. They don’t want to demand unrealistic repayments which will never be maintained, any more than they want to waste their time and money on pointless and inappropriate legal action which will achieve nothing.

So, the question should be, how do we encourage more debtors to respond? Successive ideas have placed more and more expectations on the Claimant, including the current debt PAP. I have never understood how forcing the creditor to follow ever increasing levels of bureaucracy, a lot of which is utterly pointless, is likely to encourage the debtor to engage. It certainly hasn’t worked yet, and it is doomed to failure again. I shall return to my ideas for a better approach later.

If any evidence is needed both for the lack of engagement by debtors and the fact that the vast majority of debts are undisputed, just look at the stats. Historically, around 85% of money claims end up with a default Judgment. The debtor fails to respond even once legal action is actually taken, let alone beforehand. In the financial services world, its often around 95-98%. So, why have successive attempts to improve engagement by the debtor only really aimed at the creditor to do more, and why does there remain this presumption that there is likely to be a dispute when there usually isn’t?

Oxford languages define “pap” as “worthless or trivial reading matter….” It would be wrong to say that the current debt PAP is quite that bad. However, speaking as one of the 5 members of the subcommittee who drafted it, I do feel that it is very much a demonstration of what goes wrong when the interests of opposing parties are “fudged” together. The result favours nobody, which is a good thing, but it’s also entirely unsuitable for purpose. It does need to change. But what to? I’ve argued for years that there should be a two-stage process. The first stage should be very simple, quick and easy to follow, designed to promote a response. It should be basic and attractive in its requirements-

• Clearly identify the debt, who is the creditor, what is the amount, where it should be paid.
• Signpost to debt advice, in case that may be beneficial
• Encourage the debtor to engage with the creditor, whether that be to discuss repayment, or to communicate essential information, such as health issues, vulnerability, unemployment, general lack of ability to pay. I don’t think that many realise that if the creditor only knew those facts, that would often immediately end any consideration of legal action.
• Give the opportunity to raise any query or dispute. However, this should be done with care, not in a way that encourages spurious arguments. That would be contrary to the overriding objective, not helpful to it.

If having followed a basic process in line with the above without any engagement from the debtor, then the creditor should be permitted to commence proceedings. The chances are that this is heading to a default Judgment.

If, and only if, a query or dispute is raised under stage one, should the process then move to the second stage.

At this stage, any additionally requested information should be supplied, providing its relevant and proportionate. If it’s not, then any refusal to supply should be fully explained. In the event of a dispute being raised, there can then be no objection to the creditor having to supply all documentation, explanation or other evidence which they will require to prove their claim in court in the event that the claim subsequently becomes defended. Better now, and hopefully avoid the need for litigation, than waiting until after legal action has commenced. However, the crucial point is that this should only ever become necessary if the debtor has engaged and this becomes relevant. Otherwise, it’s just pointless bureaucracy. And the more pointless bureaucracy there is, the more the overall message gets lost which is likely to be counterproductive in gaining engagement from the debtor.

I appreciate that others take the opposite view, that virtually every single piece of evidence needs to be produced at the start to disprove a dispute which may perhaps exist, even when there has been no dispute raised and that it is statistically highly unlikely that one ever will be. Once again it is regrettably being suggested in this consultation that a copy of the contract or credit agreement should possibly be produced right at the start of the process with the first letter of claim, even when no dispute has ever been suggested. What purpose would that serve? It is pointless bureaucracy. It is clearly not proportionate and runs contrary to the Overriding Objective. It would be a burden on UK business as well as a barrier to justice. For larger businesses, it passes cost onto the general consumer. I cannot help but think that some of those advocating this are more in the sphere of debt avoidance than genuinely trying to assist with debt resolution or the efficient progression of a claim. As I’ve said above, only if and when a dispute is raised should it be necessary to supply explanation and evidence to address it.

There are other issues within the consultation which are also particularly relevant to debt claims, but also possibly to other claims as well. There is the suggestion of claims or defences possibly being struck out due to lack of compliance at the pre-legal stage. I don’t think that I can agree with that. If a claim or defence has merit, then surely it deserves to run, regardless of any prior wrongdoing. It would seem unjust to deprive a party of that opportunity, potentially involving substantial sums of money.

There do need to be sanctions though, to promote compliance and engagement. As I said above, this has been particularly problematic for debt claims, in trying to encourage the debtor to engage. This isn’t just a problem pre-action, but as regards compliance with the Civil Procedure Rules as a whole, particularly on the Small Claims Track where there are not usually any cost provisions to be concerned about. In my experience, it is very rare that the courts will permit costs under CPR 27.14(2)(g) even when there is very clear evidence of unreasonable behaviour. It is unfortunately an increasingly common litigation tactic to wear the other party down with non-compliance, causing them substantial work and expense which would not otherwise be necessary.

In my view, if the courts are serious about parties complying with the Rules both pre and post issue, and progressing cases efficiently, then a very simple and effective way of doing that would be to have transparent costs consequences notified in advance. An amount could be stated within the Rules which would be payable to the other party if the requirement was not met, payable forthwith, or as soon as possible after issue in the event of pre-action situations. This would include the Small Claims Track.

That seems to me to be a far more proportionate and efficient approach which could be used for a wide range of indiscretions, rather than going straight to consideration of the draconian extreme of striking out the whole claim.

I also have concerns about whether such measures are currently being exercised even-handedly. Claims are often struck out for fairly minor delays or indiscretions, such as being a day or two late with a hearing fee. On the other hand, Defendants are usually given multiple warnings and opportunities to correct any situation. This imbalance is particularly true for litigants in person. The interim report suggests that litigants in person are disadvantaged compared to represented parties. I would suggest that frequently it is the other way around. Litigants in person are usually given the benefit of the doubt, or concessions are made for them, which are simply not generally offered to parties with legal representation.#

In my view, the courts should take a careful look at this. I have no doubt that the courts believe that decisions are being taken for the correct reasons and with the best of intentions, and that judicial discretion is being exercised in the most appropriate way. However, I think that there is a very real and growing concern that this is actually creating an imbalance between the parties

In summary, I would say that this review is most welcome. The debt PAP in particular could be substantially improved to genuinely promote engagement, mainly by significant streamlining. However, some of the thinking and the ideas being suggested are once again very concerning, in my view often the very opposite of what is required. Great care needs to be taken to finally get this right.