Overhaul of Practice Direction on Pre-Action Conduct

The Ministry of Justice has finally published new Practice Directions and amendments to existing Practice Directions and Pre Action Protocols to the Civil Procedure Rules. For many commercial practitioners, the most important development is the release of a new Practice Direction on Pre-Action Conduct and Protocols (the “Pre-Action PD”), which came into force on 6 April 2015. Although it mainly applies to disputes where no specific pre-action protocol applies, it also contains provisions that apply in all cases.

The objective of the new Pre-Action PD remains largely the same as before, i.e. to encourage parties to exchange information at an early stage in order to attempt to narrow the issues and/or resolve the dispute without recourse to proceedings. However, as with everything post Jackson, the Pre-Action PD has a greater focus on efficient case management and proportionate costs.

A potential claimant should still send a letter before action setting out details of its claim to the defendant who ought to reply within a reasonable period (not exceeding three months). However, parties are now required to take “only reasonable and proportionate steps” to identify, narrow and resolve the issues in dispute and a party will be unable to recover any disproportionate costs incurred in complying with any protocol or practice direction.

Paragraph 11 of the Pre-Action PD appears to codify the decision in PGF II SA v OMFS Company 1 Ltd [2013] EWCA Civ 1288 by introducing costs sanctions for parties who fail to respond to invitations to participate in ADR (as well as those who openly refuse such invitations).

Another new provision is the introduction of a requirement for parties to review their respective positions if their dispute has still not been resolved after the Pre-Action PD has been followed, to see if proceedings can be avoided or, at least, if the issues in dispute can be narrowed before the claim is issued. It remains to be seen what this provision will actually achieve in practice particularly if the parties have already engaged in the pre-action phase without success.