Where parties anticipate entering litigation, in England & Wales there is a range of pre-action rules they must comply with or else they could face sanction later in the course of proceedings, most often in the form of adverse cost orders.
What are the rules governing pre-action conduct?
Pre-action conduct is governed by the Practice Direction on Protocols and the Practice Direction on Pre-Action Conduct and Protocols (PDPACP). The objectives of the protocols in both instruments are, first and foremost, to encourage parties to avoid litigation and approach it as a last resort. Instead, settlement should be reached at the earliest stage possible.
The Practice Directions place emphasis on parties reaching consensus and arriving at decisions on their own without recourse to courts, typically through Alternative Dispute Resolution (ADR). Information sharing, subject to confidentiality agreements, is provided as a means of swiftly reaching settlement.
Are pre-action protocols industry specific?
There is a range of pre-action protocols tailored to certain industries, including personal injury, professional negligence, torts, construction, judicial review and housing and landlord disputes.
The Directives understand that following set protocols may not be appropriate in all circumstances, for example certain disclosures over freezing orders and where parties are constrained by statutory time limits for bringing action. As a general rule, parties to a dispute cannot be ordered by a court into ADR, unless a specific provision for ADR exists in the parties’ contract.
How are costs considered to have been appropriately reduced?
The PDPACP places a particular emphasis on cost reduction where possible, and adds a proportionality test for pre-action costs incurred: that they must be “reasonable and proportionate” in order to resolve factual and legal issues. If costs are considered to be disproportionate, recovery will be denied when costs are ordered in court.
The benefits of compliance with pre-action protocols, and ultimately avoiding litigation, are that the parties have control over costs, rather than relinquish control to a judicial body. However, if considerable expense is made to comply with pre-action protocols, a drawback is that through avoiding litigation a court order to recover those costs for the successful party cannot be obtained.
What are the sanctions for non-compliance?
Where a party does not comply with the applicable pre-action protocols, the court has discretion to deny costs, vary the interest on costs ordered to be paid or delay recovery of costs. If a party fails to comply with a court order during litigation proceedings and is sanctioned, the court may take into account that party’s compliance with pre-action protocols when reaching its decision on whether to reduce the sanction imposed.
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