When chasing a business or person for a debt, it’s usually a good idea to send a letter before action – also known as a pre-action letter – before commencing legal proceedings.
A letter before action is a formal notice requesting payment of an outstanding debt within 14 days in accordance with Part 7 of the Ministry of Justice’s Civil Procedure Rules.
A pre-action letter informs the recipient that a creditor is threatening to take legal action. If the creditor is in anyway unhappy with the response, they are free to make a County Court Claim.
In many instances, it can be foolish to commence legal proceedings in the absence of a pre-action letter.
For example, the creditor’s case will weaken if the debtor can say to the court: “I’ve incurred costs having to attend these proceedings, and these costs are totally unnecessary because if I’d received a formal letter explaining the debt, I would’ve happily paid.”
Courts are usually sympathetic in such cases and may order the creditor to pay the debtor’s costs.
Pre-action letters are powerful and useful tools that can help to bring out any previously unknown disputes relating to the debt.
For example, the recipient of a letter before action may respond by saying: “This debt isn’t due to you because it’s the subject of a dispute.” And if they are really savvy, they will utilise Part 36 of the Civil Procedure Rules, which encourages parties to settle disputes without going to trial.
Furthermore, under Part 36 rules, if one party rejects an offer and the debt claim goes to court; that party will probably have to pay the other side’s costs.