Jul 24
If you are involved in a business dispute, then it is sensible to try to resolve the matter as quickly and cost-efficiently as possible to avoid or reduce the chances of having to go to court. Taking advice at an early stage from a solicitor who is experienced in dispute resolution is vital, and one powerful tool that can be used is a well drafted letter before action.
An effective letter before action can go a long way towards resolving a dispute, or it can at least narrow the number of contentious issues before you have to take your dispute to be decided by a court.
A ‘letter before action’ is a formal letter setting out that you have a dispute about an issue, which might relate, for example, to an unpaid debt, an interest in property, or an action taken by someone else which has caused you to lose money. This letter precedes the issuing of court proceedings and warns the recipient that if they do not come to the table to discuss a resolution of the dispute, the next step will be that legal proceedings will be issued in court, with all of the complications and costs that this entails.
It can be used for any type of business (or private) dispute, but common circumstances include:
The objective of the letter is to invite your opponent to resolve the dispute without having to go to court and to ask them to reply to the legal points you have raised in respect of the dispute.
If you decide to instruct a solicitor to act for you in respect of a dispute, they may suggest, sending a letter before action on your behalf.
This may benefit you by ensuring that you achieve an early settlement, without incurring the expense of issuing proceedings in court. The letter before action may assist in showing that you are taking steps to escalate a matter and that you will not simply let the matter go.
If you do need to go to court, then the letter will help to prove that you have taken appropriate steps to minimise court time and follow appropriate protocols, for example:
If it later transpires that such steps were not taken, the court will inevitably take this into account when making its decision in regard to the apportionment of legal costs.
Courts do not look favourably on parties who do not attempt to engage with each other before involving the court, as it wastes court time and goes against the values of the justice system.
Sending a letter before action also may assist the parties in gaining a better understanding of the other side’s legal position prior to issuing court proceedings, allowing you to better weigh up the decision to take further action.
The letter must set out what the issue is that needs to be resolved, clearly explaining what the problem is, how and when it arose, and the basis for any potential legal claim. If you have evidence or additional facts then it may be worth these being set out in the letter, with any particularly important evidence attached.
It should also be clearly stated what you want the recipient to do to resolve the matter to your satisfaction. If this is to pay you a monetary sum, then you must state what this is, how the sum arose, and how it can be paid.
For example, if you supplied goods and these have not been paid for; the letter should state what you supplied, when you supplied it, what the agreement was regarding what and when to pay, detail all invoice(s) sent by you, and confirm what is now outstanding. You may include interest if your contract terms provide for it or if there is another statutory basis for such interest.
Or, if you believe you have suffered loss due to action or inaction of your opponent, then you will need to set out the circumstances of the loss, when it happened, what loss occurred, and what you want to happen to resolve the position for you.
The letter will invite a settlement of the sums claimed within a reasonable time, which would usually be 14 days, although this may change depending on how much correspondence has already taken place between you, whether or not either side choose to instruct solicitors to represent them and whether any relevant pre-action protocol applies.
The letter may also offer an alternative to taking the matter to court, such as attending before an arbitrator or attending a mediation or other negotiation discussion to try and reach a resolution.
The letter should also notify the recipient that if they fail to engage with you to resolve the dispute, that you may need to issue proceedings in court to determine the issues, which will likely incur additional costs which you may be able to claim from them if you are successful.
It is important that your letter does not inadvertently make threats, as these could have a negative effect on the opportunity to resolve matters before involving the court, and it may not always be the case that you can recover your costs from the other side for example.
Why is a letter before action powerful?
Courts do not look favourably on parties who have ignored reasonable chances to discuss and resolve a dispute.
If your opponent chooses to ignore a letter before action, you may be able to argue that all of your costs should be paid by the other side, due to their failure to abide by the court’s rules and meaningfully engage in resolving the dispute.
The Court can choose to penalise a party for failing to abide by the Pre-Action Protocol, therefore it is important that these are considered at every stage of both a potential and actual dispute.
A well drafted letter before action will show that you are serious, allows you to fully set out your legal basis for a claim and highlight the potential next steps that you may need to take to escalate the matter. This can prompt an opponent to respond to attempts to resolve a dispute before it gets to court, knowing the risks regarding costs that ignoring a letter hold for them.
As well as helping to achieve a resolution, avoiding court action will most likely reduce your costs, your time, and ultimately the stress of being involved in court action.
The letter can either open the negotiations for a settlement, or if not, it will set you up so that if you have to go to court, you have complied with all the expected protocols, and cannot be criticised or penalised by the court for not giving ample opportunity for settlement. This will put you on a good footing when the court is considering costs.
The Dispute Resolution team at Raworths have many years of experience in drafting letters before action, many of which have prevented the need to involve the court. Contact us as soon as you are aware of a potential business dispute where we can assist.
For further information and assistance, please contact Sophia Bavin in the Dispute Resolution team at sophia.bavin@raworths.co.uk
Raworths is based in Harrogate, North Yorkshire.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
Published on 24 July 2024
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