The pre-action protocol for debt claims was recently introduced into the court system.

In short, the courts expect the parties to follow the guidance set out in the protocol itself. The protocol only came into force on 1 October 2017 so it isn’t clear at this early stage as to what steps Judges will take if there has been non compliance but the risk is that the court may impose a sanction such as putting the claim on hold so that the steps can be complied with, to as to ensure that the relevant information has been exchanged. The courts also have a wide discretion as towhat they can do if there has been a failure to comply with a court rule or order. It is possible a Judge could strike out a claim but more likely that it may impose some form of costs sanction.

The aim of the pre-action protocol for debt claims and all the pre-action protocols, is to encourage parties to settle matters out of court or narrow the issues before going to court.

The debt protocol applies when the sum being pursued is a debt and the person being pursued is an individual, whether acting as a consumer or a business. It does not therefore apply if you are pursuing a limited company.

It gives the debtor quite a lot of time to respond to the claim and limits how quickly a court claim can be issued at court after the initial letter of claim and bundle of documents has been sent. The letter of claim needs to include, amongst other things, information about how the debt is alleged to have been incurred and calculated. It is important to include the standard forms for the debtor to complete too.

If the debtor does not respond within 30 days of the letter of claim, you can then issue proceedings.

If the debtor responds in the 30 day period, you should give a 14 day notice of intention to commence court proceedings, before actually doing so.

The above is just a brief overview and there is no substitute for sitting down and reading through the debt protocol itself which you can find here.

It isn’t very lengthy and well worth spending five minutes to read through. You will need to print off the standard forms included in the protocol when sending the letter of claim, so if you deal with a large number of debt claims, you had better stock up on paper and toner!

Our view is that the pre-action protocol for debt claims is going to go largely ignored. Many claimants will not know it exists or consider the protocol steps to onerous and create too much delay. Many defendants will not want to complete all the information in the forms.

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Currently, it is very rare to recover costs in small claims, with the exception of court fees and expenses. Small claims typically cover disputes of a value up to £10,000. Claims between £10,000 and £25,000 tend to fall into the fast track and those above £25,000 into the multi track. The general rule in fast track and multi track litigation is that the successful party can expect the unsuccessful party to pay their reasonable legal costs. Those legal costs can be significant.

Sir Rupert Jackson (Lord Justice Jackson – of the Jackson reforms) has proposed that fixed fee solicitor costs be introduced for all cases in the fast track and for all multi track cases up to £250,000 in value. That will by and large, cover the vast majority of work in the courts.

So How Will The Fixed Fee Solicitor Costs Work?

The amount of costs recoverable for reaching a particular stage in the litigation process, will be capped to the sums specified in a costs table, which will allow different recoverable costs depending upon the value of the claim. This will give greater certainty for parties as to what their liability for the other side’s costs might be, if they were to lose. It is not to say however, that clients will not have to pay more than the fixed costs to their solicitors to reach that particular stage. What is recoverable and what the client actually pays are two different things, unless the solicitor agrees to charge only up to the recoverable costs.

That is the main problem. The types of claims the courts deal with are not all the same and will not take the same amount of time. Some claims will be complex with lots of documents. Some will be simple with little documentation. However, they would both be subject to the same fixed fees.

Fixed fee solicitor costs also encourage quicker and cheaper advice. It is cheaper for a paralegal or legal executive to run a claim than a solicitor or partner. It is likely firms will look to have cheaper and less experienced employees carry out the work, given that the same level of costs will be recoverable. Corners might be cut. That might not be the best service for the client.

It has been said this new regime could be introduced within a year. That seems optimistic. However, it would have a big effect on dispute resolution and the quality of service clients may receive.

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Court office staff are going to be reduced according to an announcement by HM Courts and Tribunals Service. It plans to lose around 2.5% of its workforce. The total number to go will be in the region of 400 or so employees.

The vast majority of the reductions will be by attrition with staff leaving and not being replaced but the rest will be asked to consider a voluntary exit scheme.

Our view is that the courts are already under resourced and that the technology has not advanced enough to replace court staff. In a time when court fees have rocketed, it seems odd that the court staff are to be reduced. Our experience is that the courts can be particularly slow in processing work and it would be appropriate to increase staff levels or redistribute the existing staff,  using the additional revenue from increased court fees.

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The figures may not therefore be representative of every day businesses in England and Wales but on the whole it shows a trend of reduced spending in litigation.

The reasons for reduction can only be speculated upon but it could be:
– The increased use of in house legal action, with businesses carrying out certain work itself rather than using solicitors and barristers.
– The increased and earlier use of mediation, an alternative to court proceedings going all the way to trial if terms can be reached.
– The increased trend in fixed fee legal services, instead of traditional hourly rate. Legal consumers are pushing for more certainty and value in costs.

It is anticipated the trend of reduced litigation spending will continue but the use of the courts still remains a hugely important option and process in credit control and cash flow.

If our site, free guide or courses have been of help, please let others know on social media at Twitter, Facebook and Google+.

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They show in the last year the number of claims which went undefended increased by 25%. A total of 829,000 judgments were entered in 2014.

Only 189,000 defences were recorded in 2014. So the vast majority of claims issued go unanswered and the Claimant obtains judgment for the sums claimed.

In 71% of cases in which a defence was lodged, both Claimant and Defendant had legal representation. In 14% of cases, neither had legal representation.

So What Does This Mean?

In short, the statistics show that if you issue a claim, it is more likely than not that the claim will go undefended.

If our site, free guide or courses have been of help, please let others know on social media at Twitter, Facebook and Google+.

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Court issue fee increases came into effect on Monday 8th March 2015, giving little in the way of warning.

The increased fees had been been proposed but it was only the week before the came into action, that the introduction was confirmed. It will no doubt have resulted in many people issuing claims earlier than the might otherwise, to avoid paying the increased fees.

The court issue fees for small claims are unchanged but claims of a value greater than £10,000 have suffered a huge increase. For claims over £10,000 the court issue fee is now calculated as 5% of the sum claimed. At the lower end of the scale, it might not make much difference but for higher value claims it makes starting a claim cost several thousands of pounds more.

The largest court fee chargeable will be capped at £10,000.

Here are a few projections which show the wide swing:

Value of claim £15,000
Current court fee £550
New court fee £750

Value of claim £50,000
Current court fee £815
New court fee £2,500

Value of claim £100,000
Current court fee £910
New court fee £5,000

Value of claim £150,000
Current court fee £1,115
New court fee £7,500

Value of claim £200,000
Current court fee £1,315
New court fee £10,000

The only reason the 5% principle is not being used for claims of a value less than £10,000, is because it would make the fees cheaper than they already are. The government certainly wouldn’t want that!

Court Fee Increases – What We Think At SV Legal Training

The last round of court fee increases was only in April 2014. It is far too soon for more increases.

The government has pulled a huge amount of resources away from the civil court system, most notably by drastically reducing the eligibility of legal aid in family work. It now uses the court system as a cash cow to generate income. We are not aware that the extra revenue received from the increased court fees, will result in extra funds for the court systems and processes.

The government has not adopted a balanced approach. Give and take is required. It is however, all take and no give. It is only time until the increased pressure the courts come under cause serious implications on access to justice. Judges are already complaining about the number of litigants in person appearing before them at hearings, not preparing properly or simply getting things wrong. Not having lawyers appearing at hearings, makes the lives of Judges and court staff much more difficult.

An increase in fees will have an impact on whether people issue a claim or find the courts as accessible. It is inevitable that some people will be priced out of litigation or it will decide it is disproportionate to litigate at all.

We think it is likely that parties in dispute are more likely to consider other options before going to court, such as mediation or other ADR.

You can read more at the government website here.

If our site, free guide or courses have been of help, please let others know on social media at Twitter, Facebook and Google+.

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The use of the names was criticised as it gave the impression that the letters were sent from firms of solicitors, when they were just being sent by Wonga. The FCA obtained compensation being paid by Wonga to those affected. The SRA has done nothing.

The police have investigated but have confirmed that no action will be taken against Wonga. They stated “The central allegations were that Wonga had deceived its customers by sending letters falsely purporting to be from lawyers with the aim of recovering outstanding debts from customers.” It added that “there is not enough evidence to progress a criminal investigation.” It is odd phrasing as they must have had plenty of evidence. Perhaps they mean there isn’t enough evidence of a crime having occurred.

Is this a dangerous precedent? Is it giving free licence for other businesses who aren’t solicitors, giving the impression that they might be. We make it abundantly clear at SV Legal Training, that we are not a firm of solicitors. However, other businesses and individuals will have no ethical difficulties causing confusion to those they write to.

If our site, free guide or courses have been of help, please let others know on social media at Twitter, Facebook and Google+.

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The court made the warning after two neighbours incurred hundreds of thousands of pounds in legal costs, arguing over a noise dispute, in the matter of Coventry v Lawrence.

The President of the Supreme Court, Lord Neuberger stated, “These figures are very disturbing. They give rise to grave concern.  …  The fact that it can cost two citizens £400,000 in legal fees and disbursements to establish and enforce their right to live in peace in their home is on any view highly regrettable.”

He added “It would be wrong for this court not to express its grave concern about the base costs in this case, and express the hope that those responsible for civil justice in England and Wales are considering what further steps can be taken to ensure better access to justice”.

Litigation can be expensive. Steps should be taken to resolve disputes before going to court and at the very least a letter setting out the claim should be sent to the other side, giving them a reasonable time to respond.

If our site, free guide or courses have been of help, please let others know on social media at Twitter, Facebook and Google+.

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From August, employers will only be required to pay trainee solicitors the national minimum wage which is currently £6.31.

For many years, trainee solicitors were entitled to receive a minimum salary as directed by the Law Society. Most recently, the minimum salary was £16,650 outside London and £18,590 inside London. The JLD claims that removing this will leave junior lawyers vulnerable and at the risk of being exploited. Many larger firms pay top dollar to attract the top legal talent but those are the minority.

The legal profession has a well earned reputation for long hours. It is unlikely that trainee solicitors will receive overtime for the extra hours worked.

Will the loss of the minimum salary encourage those who were thinking of entering the legal profession, to look elsewhere? There may be long term rewards for those entering the legal profession but will they be put off by the pay and conditions that await some, after just coming out of university with lots of debt?

Will it encourage the markets at the lower end to become more competitive as costs are saved?

If our site, free guide or courses have been of help, please let others know on social media at Twitter, Facebook and Google+.

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Solicitor Hourly Charging Rates May Be About To Change

The guideline rates tend to be used by the courts to decide how much costs should be paid when a costs order is to be made against a party.

The rates vary across the country. For example, a grade A fee earner (solicitor with over 8 years litigation experience), the guideline hourly recoverable rate is £217 in Manchester, £201 in Bolton and £409 in Central London.

It is important to remember however, that the rates do not affect what is agreed between a solicitor and client. Solicitors generally charge a rate greater than the recoverable hourly rate.

A Change Ahead?

An announcement is due imminently on the review by the Civil Justice Council Committee on the guideline solicitor hourly hourly rates.

The master of the rolls, Lord Dyson, stated that the proposed rates “may have far reaching effects on the legal services market”. What this means is unclear but it is anticipated that the guideline rates will recommend higher rates being recoverable and therefore likely to be charged.

Initial reaction is that the use of paralegals, is likely to become less cost effective. Work carried out by paralegals when assisting another fee earner, is anticipated to be devalued significantly. This means that the courts will be likely to award a reduced rate for work carried out by paralegals. Paralegals have been more common in law firms, as they tend to be paid less than solicitors. They are more common where work is being carried out for fixed fees, such as personal injury claims, conveyancing and wills.

The review of hourly rates is arriving months later than it should. It remains to be seen how long we will be waiting for an announcement.

“Changes to the hourly rates may affect the recoverability of legal costs incurred when dealing with litigation matters. It is all the more reason for businesses to be carrying out their own basic litigation work such as debt recovery.”

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