The Risks of Do-it-Yourself – Barton v Wright Hassall

There are a lot of Litigants in Person (people acting for themselves) about these days. With the virtual abolition of civil Legal Aid and much more rigorous selection by No Win No Fee providers, a large number of people are more or less forced to act for themselves in many circumstances when this is far from ideal.

Predictably, they tend to make something of a mess of things from time to time, usually caused by lack of the technical knowledge needed for litigation, with a sketchy knowledge for the Civil Procedure Rules that govern the process, and little experience of how courts operate, and what they need to be told and how to do it. This has lead to calls in some circles for LiPs to be excused from complying with the CPR, provided they are not so far adrift that they cause serious prejudice to their opponents, or real inconvenience to the courts. In fact some people have been saying that the CPR should be interpreted this way already. Others say that the way forward is either to simplify the CPR for everybody, or to provide a simplified system that LiPs have to follow, leaving the detailed rules to those proceeding with professional representation.

Now, those on the front line in litigation will know that a combination of these views have been applied in practice by the District Judges who have to deal with the bulk of the LiPs from day to day. If you are appearing against a LiP then you will know that there is rarely much point in taking technical points about procedure against them – short service of documents, failure to include all the correspondence, vague allegations in the Statements of Case, or in the evidence in support. Most DJs will just raise their eyebrows and extend the time or whatever, and you won’t get anywhere unless they are miles out of line. You do better to fight things on the merits, when the fact that their case has not been properly argued or supported by evidence will count against them in the end. I have written about this before, here.

Now last week the Supreme Court gave judgment on a case which some commentators said would enshrine the new flexibility for LiPs in law. Others were more sceptical. So read on.

Barton v Wright Hassall [2018] UKSC 12 was a professional negligence claim by Mr Barton against his former solicitors, a well known local firm in Leamington Spa. Mr Barton had fallen out with the solicitors acting on his divorce and engaged Wright Hassall to sue them for negligence. Then he fell out with WH and wanted to sue them as well. He either couldn’t find a third firm to help him, or possibly thought that he could do better himself – either way, he issued the claim himself and in the summer of 2013 the time came for him to serve it.

Wright Hassall had instructed solicitors to act for them – Berrymans Lace Mawer – and they confirmed that they were authorised to accept service of proceedings for their clients, so all Mr Barton had to do was to stick the papers in the post, or deliver them by hand to their offices. However Mr Barton decided that, as he had left things to the last day for service, he would serve them by email, and sent the appropriate paperwork off to BLM on 24th June 2013. His email itself was fine, and he appears to have enclosed the right documents with it. However, he had missed a vital point, and so service was held to be invalid. This is that in order to validly serve by email the recipient has to confirm that they are prepared to accept service in that way. Just giving an email address in ordinary correepondence won’t do, they have to say they will accept service by email. PD 6A to r 6 CPR is specific:

Service by fax or other electronic means

4.1  Subject to the provisions of rule 6.23(5) and (6), where a document is to be served by fax or other electronic means –

(1) the party who is to be served or the solicitor acting for that party must previously have indicated in writing to the party serving –

(a) that the party to be served or the solicitor is willing to accept service by fax or other electronic means; and

(b) the fax number, e-mail address or other electronic identification to which it must be sent; and

(2) the following are to be taken as sufficient written indications for the purposes of paragraph 4.1(1) –

(a) a fax number set out on the writing paper of the solicitor acting for the party to be served;

(b) an e-mail address set out on the writing paper of the solicitor acting for the party to be served but only where it is stated that the e-mail address may be used for service; or

(c) a fax number, e-mail address or electronic identification set out on a statement of case or a response to a claim filed with the court.

4.2  Where a party intends to serve a document by electronic means (other than by fax) that party must first ask the party who is to be served whether there are any limitations to the recipient’s agreement to accept service by such means (for example, the format in which documents are to be sent and the maximum size of attachments that may be received).

It all looks a bit dated now, although it was probably entirely relevant when it was introduced a number of years ago. BLM had given their email address, but hadn’t confirmed that they would accept formal service there, Mr Barton made no enquiries, and so he was all set up for failure. His email arrived, was acknowledged, but was not responded to until 4th July, by which time not only had the 4 months for service expires, but so had the limitation period of 6 years for his claim itself, so he couldn’t re-issue and serve properly. A lesson not to leave things so late.

The various courts all held that this was not good service. What is more, Mr Barton’s application for an order under r6.15 CPR, which allows the court to validate service in some circumstances, was refused. The rule provides:

Service of the claim form by an alternative method or at an alternative place


(1) Where it appears to the court that there is a good reason to authorise service by a method or at a place not otherwise permitted by this Part, the court may make an order permitting service by an alternative method or at an alternative place.

(2) On an application under this rule, the court may order that steps already taken to bring the claim form to the attention of the defendant by an alternative method or at an alternative place is good service….

Unfortunately for Mr Barton, the District Judge, the Circuit Judge on appeal, the Court of Appeal and the Supreme Court all refused to approve service under para 6.15(2), although the SC was split 3:2 against him. Lord Sumption, giving the majority judgment said that:

  • The fact that the email actually brought the claim to BLM’s attantion was not enough. If it was, then any form of service would suffice, which was not the case.
  • Service of proceedings is important as it is the start of the timing for a lot of what follows, and stops limitation running.
  • Service by email could be a problem in case it took place without the solicitors being aware of it – for example by arriving at an address whose holder was away. Hence there are rules which ought to be followed.
  • There is no special treatment for LiPs in obeying the CPR. “Unless the rules are particularly inaccessible or obscure, it is reasonable to expect an LiP to familiarise himslef with the rules which apply to any step which he is about to take.”
  • These rules are neither inaccessible nor obscure. They are published on the internet and referred to in the instructions sent out by the court when they issued the claim. They are clear to read and if Mr Barton had read them (which he hadn’t) he would have easily understood what they said.
  • It is incorrect to say that BLM were “playing technical claims” with Mr Barton. They had not said that they would accept service by email. They were under no duty to advise him, contrary to their own clients’ interests, that he should re-serve or re-issue before limitation expired.
  • There was no reason to rescue the claim using r6.15, which would cause Wright Hassall considerable prejudice.
  • The Human Rights argument  – that this was a breach of Mr Barton’s rights to a fair trial under Art 6 – got nowhere. Rules on service and limitation periods are widespread and fair.

He did however urge the Rules Committee to look at redrafting the relevant rules in the light of developments since they were first drafted.

Lord Briggs and Lady Hale dissented, and would have allowed the appeal and validated service, on the grounds that the steps taken were effective to bring the service to the Defendants’ attention. But they repeated that there was no special treatment for litigants in person, other than the fact that they generally broke the rules by ignorance rather than as part of the tactics of a professional litigator.

So that is that. No special rules for LiPs for now, but perhaps a little bit more flexibility (depending on who is judging your case).

And finally it is perhaps ironic that if Mr Barton had put the documents in the post on that last day they would still be in time even if the Royal Mail took a week to deliver them. Because the rules on the time for service of a claim form, contained in r7.5 CPR provide:

(1) Where the claim form is served within the jurisdiction, the claimant must complete the step required by the following table in relation to the particular method of service chosen, before 12.00 midnight on the calendar day four months after the date of issue of the claim form.

And the step for service by post (or DX) is just the posting of the document, not its delivery.

More details in the usual places –  Civil Litigation Brief gives practical advice as well.


More Problems for Landlords – Gas Safety

You may remember that from 1st October 2015 landlords of ASTs have had to give certain documents – Energy Performance certificates, Gas Safety certificates (if the premises have gas appliances) and the Government’s leaflet How to rent– to their new tenants and unless they do then they cannot serve a s21 Notice bringing the tenancy to an end.

The legislation is here – s21A Housing Act 1988, AST Notices etc regls 2015 (r2), AST Notices etc regls 2015 (r3), Energy Performance etc Regls 2012, and the Gas Safety etc regls 1998. 

The important part is in s21A Housing Act 1988:

(1)A notice under subsection (1) or (4) of section 21 may not be given in relation to an assured shorthold tenancy of a dwelling-house in England at a time when the landlord is in breach of a prescribed requirement.

Now, as far as the How to rent leaflet is concerned, if the landlord omitted to hand it out when the tenant moved in, all they had to do to correct things was to serve it late, and then they could serve a s21 Notice without any problems. In fact, as the form of the leaflet changes from time to time it is probably as well to re-serve it before a s21 Notce in any event –  see my piece on it here.

Many people thought that the same rule applied to the enargy and gas certificates, although there were rumblings from some commentators that this might not be right, and it might be a once-and-for-all  requirement. The others however pointed out that this might mean that if a landlord was a day or two late in serving the certificates they would lose the right to serve a s21 notice for all time – and theoretically the tenant could stay put for ever, provided that they kept paying the rent and keeping the terms of the tenancy. Although this is the normal state of affairs for an Assured Tenancy it wasn’t for an Assured Shorthold Tenancy, and can’t be what the government intended.

Those taking the more relaxed view pointed out that the AST Notices etc Regls say in respect of the gas regulations that

(2) For the purposes of section 21A of the Act, the requirement prescribed by paragraph (1)(b) is limited to the requirement on a landlord to give a copy of the relevant record to the tenant and the 28 day period for compliance with that requirement does not apply.

So all will be well.

Not so, according at any rate to HHJ Jan Luba QC , sitting in the Central London County Court on 2nd February 2018 on a appeal from DJ Bloom in the case of Caridon Property v Mony Schooltz (unreported as yet).  He pointed out that the specific reference in the Gas regulations to 28 days is for checks carried out after the commencement of the tenancy:

(6) Notwithstanding paragraph (5) above, every landlord shall ensure that—

(a)a copy of the record made pursuant to the requirements of paragraph (3)(c) above is given to each existing tenant of premises to which the record relates within 28 days of the date of the check; and

(b)a copy of the last record made in respect of each appliance or flue is given to any new tenant of premises to which the record relates before that tenant occupies those premises save that, in respect of a tenant whose right to occupy those premises is for a period not exceeding 28 days, a copy of the record may instead be prominently displayed within those premises.

So every new tenant has to be given a copy of the latest certifcate before they move in.

A landlord who doesn’t do this is in breach of the requirement and will always be in breach of the requirement and so is for ever barred from serving a s21 notice in respect of that tenancy. HHJ Luba was a prominent housing QC before his appointment and his view is likely to be widely respected, although technically it isn’t binding on anybody outside the Central London County Court.

Now, it is clearly a good idea to keep tenants safe from faulty gas fittings, but this can’t be what the minister meant when he made the regulations in 2015. What is more, the same argument can be applied to the energy performance certificates, because the 2012 regulations say

(2) The relevant person shall make available free of charge a valid energy performance certificate to any prospective buyer or tenant—

(a)at the earliest opportunity; and

(b)in any event no later than whichever is the earlier of—

(i)in the case of a person who requests information about the building, the time at which the relevant person first makes available any information in writing about the building to the person; or

(ii)in the case of a person who makes a request to view the building, the time at which the person views the building.

(5) The relevant person must ensure that a valid energy performance certificate has been given free of charge to the person who ultimately becomes the buyer or tenant.

So if they don’t do this then the landlord is in breach of the 2015 regulations and no s21 notice for him. Note the deadline for the certificate – no later than the first viewing.

Matters may get worse, because the 2015 regulations only apply to tenancies that start on or after 1st October 2015 at present. They will apply to all ASTs from 1st October 2018, so tenancies going back to possibly 1998 may be covered.

It is Superstrike all over again – see my piece here for a reminder of that fiasco.

There are only two good points to cling on to

  • this only applies to ASTs in England, because the 2015 regulations don’t apply to Wales, and Scottish tenancy law is quite different;
  • after the Superstrike fiasco surely the Minister will make some corrective regulations without undue delay.

But who knows. At any rate it will make the housing lists in the busy County Courts even more fraught than usual. Keep your fingers crossed.

[That said, there is a quite respectable case for abolishing s21 notices entirely and requiring landlords to justify regaining possession to a judge or other tribunal. But if this is going to happen it ought to be brought in intentionally, and with warning and safeguards, not by accident like this.]

For more on this see the ever excellent Nearly Legal or Tessa Shepperson’s Landlord Law.


New How-To-Rent Guide

The government’s How to Rent Guide has been updated. The changes are trivial – the removal of the references to the London Mayor’s London Rental Standard, which was abolished 6 months ago. But the change is important because an AST landlord has to serve a copy of the Guide on each new tenant, and if they don’t do so then they can’t serve a s21 notice. The new version is available here. It took effect on 17th January 2018, and if you serve the old version (very similar) then it is invalid.

So get it right if you are a landlord, and check your landlord has got it right if you are a tenant (or advising either of them).

The new booklet has to be served on every new tenant, and on every tenant whose fixed-term tenancy converts to a statutary periodical one, or who is granted a fresh fixed-term tanancy, if the booklet has changed in any way since the original copy was supplied. Until the landlord does this they can’t serve a valid s21 notice.

Cynical landlords may also serve the current version on any tenants shortly before they serve a s21 noticeanyway, just to be sure (don’t do it at the same time – that won’t work).

All a load of nonsense really, as there are likely to be more changes in the booklet soon to take account of other changes in housing law, but there we are. Job done.

Does Carillion Ring any Bells?

I’m not going to cover the details of this topical case, because they are fast-moving, not entirely clear yet, and covered in more detail by specialists elsewhere. What matters more is that a distressingly small proportion of comentators, let alone ordinary business-owners, know very much about what happens when a business becomes insolvent, and, more to the point, goes bust.

I am going to look at a few hard truths.

The Background

The brief outline, for the sake of people reading this piece in years to come (if any) is that Carillion was the product of a merger between a number of well-known companies in the construction and facilities-management sector – part of Tarmac Construction, Mowlem, Alfred McAlpine, and part of John Laing, plus some businesses in Canada and elsewhere. It divided its activities between facilities management (eg maintenance of prisons, and railways), large constuction projects (eg hospitals and part of HS2) and mining and mineral extraction abroad. It was the second largest construction company in the UK.

After a number of apparently good years it issued a profits warning in July 2017 recording a downturn in its construction division of some £845m. The share price crashed from 192p to 45p by the end of August, resulting in the loss of 5 directors and frantic searches for refinancing or a buyer. These were scuppered at the end of September when it was revealed that the business had lost £1.15bn in the 6 months to 30th June 2017. Two further profit warnings were issued, and eventually all the options ran out and the company was placed into compulsory liquidation on 15th January 2018. The business owed some £900m, plus a £580m deficit in its pension fund.

Somewhat controvertially the Government, who had a high proportion of Carillion’s business, continued to award it contracts throughout this period, including the amazing award of a substantial share in the HS2 scheme a few days after the first profits warning.

The Outcome

The business apparently had assets worth just £29m when it closed. These would all be charged to its bankers, and although the head office in Wolverhampton may be worth something, the claims for payment on the various construction contracts are likely to be worth very little because of the counterclaims the employers are likely to raise arising out of the additional costs caused by the failure and various “defects in construction” which will come to light over the next few days or weeks.

The facilities management in the state sector – the prisons and the schools – will continue, initially funded by payments to the liquidators to cover the cost, and no doubt in due course the staff will be taken in-house by the clients, or the contracts will be re-let to other contractors, and the staff will, to the most part, be able to follow the work. There will be very little change, although the future cost will be higher because the cause of the failure was taking on contracts at unrealistically low prices in the first place.

The construction in the state sector – building the hospitals for instance – will also continue, after a bit of a hiccup. The hospital will need to be completed and the contract will have to be awarded to another contractor. This may take a bit of time, and will cost more (obviously) but there is every chance that the staff will be taken on by the new contractor, who will suddenly need just the number of workers who are working on the project when it failed, and although there will be some shaking out, and the replacement of key managers, things will continue. And hopefully some lessons will have been learned so that next time the contractor manages to finish the project intact.

The private sector work will be more difficult. Some facilities maintenance work will be taken in-house, with or without the workers, and the construction projects will continue, but after what could be a significant pause. There are likely to be more losses of employment, as new contractors bring in their own teams.

HS2 and the A14 road improvement projects are special cases: they are joint ventures between a number of contractors and they have guaranteed to take over the projects in the event of a failure such as this. Subject to their own financial stability, the survivors are likely to take over the existing staff and continue as before.

But there will be casualties – employees not taken over, pensioners and sub-contractors

The Victims

Although there has been a lot of fuss about them in the media, the employees have various sources of compensation. If they lose their jobs they will get statutary redundancy payments from the government, plus up to 8 weeks’ wages at up to £489/wk, and holiday pay, sick pay and notice pay. It may not be everything but it will be most of it, and few employees will be owed more than a few weeks at this point. And there is a good liklihood that they will be taken on again by whoever takes over the project.

Pensioners also have some protection from the Pension Protection Fund. Those receiving pensions will continue to do so at the same rates, although the rate of increase for future years will be restricted. Those who are below the scheme’s retirement age will get 90% of the pension that they would otherwise get, and subject to a cap (of some £38,500 odd for 2017). Again future rates of increase will be restricted.

It is sub-contractors, suppliers, and their employees, who will take most of the hit. Any company in Carillion’s position will have become very slow in paying their bills and the amounts that are owed will be considerable. I have heard talk that some were operating on payment terms of 120 days, or even 6 months, and for a small business this level of exposure is likely to be fatal. Even if they are taken on by the new contractors they won’t be paid for the work that they have done up until 15th January, and few businesses can afford a hole of this magnitude in their cashflow. They are unlikely to have insurance cover, and factoring won’t save them because the factor will just deduct payments from future invoices until they have been reimbursed.

If you are say an electrical contractor, if you fail then not only do your employees lose their jobs, but your suppliers, your landlords, your contractors and even (God forbid) your lawyers and accountants will miss out. To say nothing of any guarantees put up by directors or shareholders. It will be very grim.

And finally, there are the banks. There is something in the region of £900m owed to RBS, Santander, Barclays and HSBC and a few others. They will get very little of this back, and, although they won’t get much sympathy, that is money that they can’t lend to the rest of us, that can’t be invested in the economy, and we will all suffer as a result. Plus RBS still belongs to the government, and we will lose that way as well.

What can we learn?

Any manner of things:

  • Bigger is not necessarily better.
  • There is no point in bidding for a contract that has such a slim margin that the slightest problem makes it run at a loss.
  • Big construction projects used to lose money for the government because of cost and time over-runs. That is why they were put out to tender. They can still lose money for a private contractor too.
  • It isn’t always best to take the lowest bid – will the bidder still be around when the project is completing?
  • Just because the government continues to employ a company doesn’t mean that it is financially secure – so make your own enquiries.
  • Being a sub-contractor or supplier in these circumstances is risky, and this needs to be factored into your price, or indeed your decision on whether to do the work at all.

I won’t even begin on the activities of the Carillion directors, the payment of dividends when the pension funds were in deficit, the vast salaries and bonuses, and the apparant failure to see the writing on the wall. Or indeed on the government’s involvement in things. These are matters for another day.

And I am not covering the question of whether governments ought to out-source activities in this way. Again, something for another day

It is a sad time for a lot of hard-working people. We all need to learn a few hard truths.

Let’s Unwind – Leases and Consumer Law

This blog was originally aimed at housing and landlord and tenant law. It has expanded, as the list of topics down the side will show, but I still tend to avoid consumer law because it is suprisingly complex for a field that is directed at the consumer and becase it is difficult to make a living doing it, so I don’t want a long line of readers beating a path to my door with your consumer problems. However, sometimes the areas overlap, and this is one of them.

The Consumer Rights Act 2015 has all the recent publicity, but I am looking at its less prominent cousin, the Consumer Protection (Amendment) Regulations 2014. These have their snappy title because they amend the now middle-aged Consumer Protection from Unfair Trading Regulations 2008, which do what they say on the tin – protect the consumer from various unfair commercial practices. To save my typing I’ll refer to this lot by their dates from now on.

Most of these don’t normally apply to land or leases, but the 2014 regs do apply to “a relevant lease” which is defined in Regl 27C.

Unpicking the legalese, it means that ordinary ASTs or holiday lettings are covered, but not ones provided by social housing organisations, or as part of shared ownership schemes, or equity release schemes, or provision by local councils for homeless people.

For those who need chapter and verse:

(2) In this regulation “relevant lease” in relation to England and Wales means—

(a)an assured tenancy within the meaning of Part 1 of the Housing Act 1988(1), or

(b)a lease under which accommodation is let as holiday accommodation.

(3) But none of the following are relevant leases for the purposes of paragraph (2)(a)—

(a)a lease granted by—

(i)a private registered provider of social housing(2), or

(ii)a registered social landlord within the meaning of Part 1 of the Housing Act 1996(3);

(b)a lease of a dwelling-house or part of a dwelling-house—

(i)granted on payment of a premium calculated by reference to a percentage of the value of the dwelling-house or part or of the cost of providing it, or

(ii)under which the lessee (or the lessee’s personal representatives) will or may be entitled to a sum calculated by reference, directly or indirectly, to the value of the dwelling-house or part;

(c)a lease granted to a person as a result of the exercise by a local housing authority within the meaning of the Housing Act 1996 of its functions under Part 7 (homelessness) of that Act.

There are similar provisions for Scotland and Northern Ireland, but I will leave you to follow them up yourselves if you wish. So far so good.

What is Prohibited?

The 2008 regs prohibit unfair commercial practices, which are defined as being

  • misleading actions (regl 5)
  • misleading omissions (regl 6)
  • agressive behaviour (regl 7) or
  • behaviour listed in sch 1.

The 2014 regs give consumers a right of redress (reg 27A) if, among other things,

  • a consumer enters into  a contract with a trader for the sale or supply of a product to the consumer; or
  • a consumer makes a payment to a trader for the supply of a product; and
  • the trader engages in a prohibited practice in relation to that product, ie
    • misleading actions (regl 5) or
    • agressive behaviour (regl 7); and
  • the prohibited practice is a significant factor in the consumer’s decision to enter into the contract.

It’s not clear why the misleading omissions or the sch 1 actions are excluded, but they are for these purposes. And note that the practice has just got to be “a significant factor”, not necessarily the crucial one.

And then there is aggressive behaviour. This also allows the same remedies if decisions have been caused by harassment, coercion or undue influence. See Regl 7 of the 2008 regs for more details.

How can this affect a Lease?

Surprisingly easily. Prospective tenant looks at flat and asks agent “is it noisy/damp/expensive to heat/secure?” and is told no (or yes) as applicable when this is untrue. Tenant signs lease and then finds out that it is noisy etc and complains. This is misleading and so a breach of regl 5. The definition of “misleading” in regl 5 means “contains false information” – there is nothing about whether the giver believed it, or indeed had reasonable cause to do so. The only test is whether it

causes or is likely to cause the average consumer to take a transaction decision he would not have taken otherwise, taking account of its factual context and of all its features and circumstances. (Regl 5(3))

There is a long list of features that may be covered and you can see them in the 2008 regs if you need to. They include “the main characteristics of the product.”

The point is that it is easy to imagine a claim arising over an AST, and even easier for a holiday letting.

A trader is defined as being  a person acting for purposes in relation to that person’s business, whether in person or through an agent, and a consumer is somebody acting wholly or mainly outside their business. Virtually all landlords operate businesses, and most tenants are consumers.

What are the Consequences?

Well, they can be pretty dire form a landlord’s point of view. Because the principal remedy of the right of redress is the right to unwind (regl 27E and 27F) which is the right within 90 days of the start of the lease (or supply of goods etc) to bring the arrangement to an end by rejecting it, which in the case of a lease means, as far as I can see,

  • ending the lease,
  • repaying any deposit, and
  • repaying any rent paid, (although if the lease is rejected more than one month after the start date then the landlord can retain the appropriate part of the rent paid, less any deduction caused by the misleading action.)

If the tenant doesn’t reject the lease in the first 90 days (and the rejection does not have to be in writing but has to be “clear”) then they have a right to a discount (regl 27I) calculated according to the seriousness of the prohibited practice. There is a scale:

  • more than minor – 25%
  • significant – 50%
  • serious – 75%
  • very serious – 100%

This discount can apply to sums already paid or payable in the future. However it is expected that if the lease has not been rejected a court will take this into account in deciding how serious the practice was in misleading the tenant.

What is more, there is even a right to damages (regl 27J) if the tenant has suffered other financial loss, or even alarm, distress, or physical inconvenience or discomfort, although the landlord has a defence to these claims if they can prove that the matter was caused by a mistake etc and that they took all reasonable precautions and exercised all due diligence to avoid the occurrance.

All of this is enforcable in the County Court, which can grant injunctions etc to enforce the consumer’s rights. Or local councils can prosecute for various offences in the 2008 regs.

And the Moral is?

Well, I’m surprised how little effect this has had on things so far, which I must assume is due to consumer lawyers keeping away from landlord and tenant work, and vice versa. It must also be a reflection of the generally weak position that AST tenants have in disputes with their landlords, because of the ease of eviction under s21, and the need to give a reference for their next property. So this will only come to light when everything else has gone wrong already and there is no need to hold back. Perhaps a bit unlikely in the first 90 days of the lease.

Anyway, if you are a landlord or advising one, be very aware of what your agents are telling people, and if you are a tenant then there may be a way out if you respond early enough.

If you want more information there is a surprisingly good guide produced by BIZ  – link here. And there are the usual culprits of Landlord Law and Nearly Legal.


And Another Thing….

I wrote a piece on the Pre-Action Protocol for Debt Claims yesterday – link here. I took the title at face value and assumed that it was about Debt Claims – by businesses against customers or possibly others for sums of money that were owed by individuals.

However, the definition of scope is surprisingly wide:

1.1 This Protocol applies to any business (including sole traders and public bodies) claiming payment of a debt from an individual (including sole traders).

A number of people have pointed out to me that most claims for possession or forfeiture of leases include a claim for payment of  a debt – the rent or service charge arrears – and so the Protocol appears to apply to them.

Now the Protocol doesn’t apply when the debt is covered by another protocol (para 1.4) but the only possession claims that are covered by their own protocols are mortgage possession claims and possession claims by social landlords. The other claims  – for ASTs based on rent arrears (Grounds 8 or 10 or 11), for long residential leases based on arrears of rent or service charges, and even for business tenancies  where the tenant is a sole trader – are not, so the Protocol presumably applies. In all of these cases the Landlord invariably asks for a money judgment against the Tenant for the amount of the arrears, and this is clearly a “debt” in the normal meanong of the word.

I haven’t thought it all through, but I can’t think that this was entirely intended. The timescales in the Protocol don’t really fit in at all well to the normal commercial timescales in possession claims. Is the tenant really going to be given up to 90 days before possession proceedings can be brought against them, when the rent is normally payable monthly, or even weekly? Is the Landlord going to have to ask for possession but not a money judgment until a lot later, when the tenant has possibly moved out?

And what about the complicated procedure for claims for service charges, with all their applications to the FTT, or the rules on payment for maintenance, complete with the mechanism for consultation beforehand, payments of estimated sums on account, followed by balancing charges, and so on? This really doesn’t tie in with the Protocol procedure.

I just don’t know, because it was only drawn to my attention by James Attew of Brethertons today (here) and I had previously thought that as the Protocol has been around in draft form since late 2015 somebody would have thought of this by now.

Now it may be that there is going to be a new protocol covering all this, although I haven’t heard anything about it. Or the courts are going to say that “debt” doesn’t mean “debt” for these purposes, or something. I just hope that it isn’t another mess-up on the lines of the deposit protection fiasco, because that is rather what it looks like at present.

Any views would be most welcome.

Pay Up or I’ll…Wait For It!


The 7-day letter is one of the oldest forms of legal communication. Asking your lawyer to write to a debtor telling them to pay up or be sued has been around since Victorian times, and indeed for a lot longer. The exact form, and the period given, has varied over the years. When I qualified (a disturbing time ago now) it was usual to give 7 days, although the court were fairly sanguine if you gave less, and given that all communication was by letter, and all payments by cheque, the debtor would have to get their skates on to get payment to you in time. The letter could be very short and to the point, and no information other than the amount due and perhaps the invoice number was required.

Then the Pre-Action Protocol in the CPR increased the length of time to at least 14 days, and required certain basic information, and the provision of details of where to get help to be given to non-businesses. This was generally felt to be a good idea, although some debtors would play the system, asking for extra time to take advice when they had no intentions of taking any. But it meant that you might get offers of settlement before you issued proceedings rather than afterwards, which did at least save the issue fee. And you might be able to weed out the debtors who had no income or assets and so weren’t worth suing at all.

Well, everything has now been turned on its head, at least in respect of claims against individuals by businesses by the Pre-Action Protocol for Debt Claims which comes into force on 1st October 2017.

The Scope of the Protocol

It covers any business (including sole traders and public bodies) claiming payment of a debt from an individual (including a sole trader). It complements any regulatory regime applying to the creditor (eg  under the Financial Conduct Authority) which must be complied with as well, but does not apply to debts covered by other Protocols , such as the Construction and Engineering, or the Mortgage Arrears Protocols, or to claims by HMRC for taxes and duties (covered by PD7D).

So a claim against a consumer or a sole trader (eg F Bloggs t/a The Red Lion PH) is covered. A claim against a partnership or a limited company (eg F Bloggs Ltd t/a The Red Lion PH) isn’t.

What is Required

I am afraid that there is no alternative to setting a lot of the Protocol out in this piece, although I have summarised where I can. The exact wording can be seen via the link here and above.

  1. The Letter of Claim

The creditor has to send a Letter of Claim to the debtor. So far no real change. Note however that this must be sent by post – email or other electronic means will not do unless the debtor has expressly requested that the post is not used. And the Letter of Claim needs a lot more information than before, including:

  • the amount of the debt
  • whether interest or other charges are continuing
  • details of any oral agreement
  • the date and parties of any written agreement and an offer to supply a copy on request
  • assignment details if relevant
  • if regular instalments are being offered, or paid, an explanation of why the offer is not aceptable and why a court claim is being considered
  • how the debt can be paid – where and how – and how to discuss payment terms
  • the address where the completed Reply Form should be sent

The creditor also needs to send

  • an up to date statement of account, or details of how the claim is made up including any interest and administrative charges
  • the Information Sheet and Reply Form in Annex I
  • a Financial Statement form (like the example at Annex II)

2. The Response by the Debtor

If the debtor does not respond within 30 days the creditor can start proceedings.

If they do (using the Reply Form) they can ask for copies of any relevant documents, supply any document sof their own, and make proposals. The creditor should allow at least 30 days from receipt of the Reply Form, or 30 days from provision of any documents requested before issuing proceedings. If the debtor needs more than 30 days to get debt advice they can ask for it and the creditor should allow extra time if reasonable in the circumstances.

Any proposals for payment by instalments should be considered and if not acceptable the creditor should give the debtor reasons in writing. And a partly completed Reply Form should elicit an attempt to contact the debtor to obtain further information.

3. Disclosure of Documents

If the debt, including any interest or time for payment etc, is disputed the parties should exchange information and documents to enable them to understand each other’s position. And if the debtor asks for a document or information it should be provided within 30 days, or an explanation should be given as to why it is unavailable.

4. Attempts to settle and ADR

Parties should negotiate on any points still in dispute using ADR if appropriate. This can range from discussions to formal steps such as mediation in a larger case.

If the parties reach agreement on repayment the creditor should not start court proceedings while the debtor complies with the agreement. And if they wish to start court proceedings at a later date they must send a new Letter of Claim and start the Protocol afresh, although they don’t need to send documentation again if it has been sent in the last 6 months.

5. Taking Stock

If the debtor has responded to the Letter of Claim but agreement has not been reached the creditor should give them at least 14 days’ notice of their intention to start court proceedings, to allow both parties to review their positions and see if proceedings can be avoided.

The Consequences of not Complying with the Protocol

These are the usual consequences of not complying with a Pre-Action Protocol – the court can give more time, penalise in costs or interest or in other ways. But it looks at the substance, and is not concerned with minor or technical breaches.

It is not clear at present how far the courts are going to enforce compliance with the Protocol, given the enormous number of debt claims that go to a default judgment and enforcement without any court officers actually looking at them. The other protocols generally cover areas which are disputed and where the parties can raise breaches in a Defence or application of some kind. Most debt claims are undefended and with most debtors unrepresented they may not know if corners have been cut or even avoided altogether. See below.**

The Annexes

You really need to read the Protocol for these. They set out

  • An Information Sheet (compulsory)
  • A Reply Form (also compulsory)
  • A Standard Financial Statement (an example)

So What does a Creditor Do?

This cannot be ignored. It will have a radical affect on the recovery of debts from individuals, and unless businesses adapt appropriately they may suffer a disastrous hit to their cashflow. Because today’s 14 day letter will turn into between 30 and 104 days under this new regime, and possibly more if the debtor goes through the process, agrees to pay and then only pays a couple of instalments, when the Protocol must start again.

Possible suggestions:

  1. Don’t allow credit – get paid up front before the goods or services are supplied. You may lose some customers, but customers who don’t pay aren’t worth having.
  2. If you deal with businesses consider avoiding sole traders. Claims against partnerships and companies are not affected by this. Although a small company may not be worth suing either, for different reasons.
  3. And make sure you know who you are contracting with (always a good idea anyway). Is The Red Lion PH run by a sole trader, or a partnership, or a company, and if so who are they?
  4. Credit-check you customers before you do business with them, not just before you sue them.
  5. Start the process very early – the moment that the payment becomes overdue.
  6. Send non-protocol letters chasing debts as present, knowing that at the end of the day you probably won’t sue for claims below a certain value.
  7. Insure, or factor, or sell your debts, or consider doing so. 50% of a debt that is actually paid is better than 100% of a debt that isn’t.
  8. Get some training so you can get things right, or pass the debt collection to an outside collector who knows the ropes.
  9. And get your paperwork in order. The new system will expose errors that you used to be able to hide in the past.
  10. Or hope for the best and see above.**

And the Verdict?

When the Mortgage Arrears Protocol was introduced a number of years ago there was much concern in the industry that the new procedure, not that different to that given here, would make mortgage arrears impossible to recover. In fact, once the lenders had got used to things I understand that it made very little difference, and although the process took longer this merely allowed the borrowers who could pay if given time a bit more time to pay, to everybody’s advantage. The borrowers who couldn’t pay were evicted a bit later, but as most of the debts were covered by the security of the houses the lenders got paid in the end. So on the whole it was a good result.

I’m not sure that this will happen here. Consumer debts aren’t covered by security on the whole, and small businesses can be badly affected by delays in payment. There is a lot of scope for the ingenious debtor to delay things and play the system.

These procedures may be appropriate for a finance company, or a credit card company which is recovering debts on a large scale, although they are already covered by the FCA’s requirements which are not that different. They are less appropriate for the plumber or nursery, or indeed the  friendly local solicitor who don’t insist on payment in advance at the moment. Although that may have to change.

It will be interesting to see how this works out.