Abi Flanagan, Partner and Laura Zverev, Associate and in the Dispute Resolution team discuss the Professional Negligence Pre-Action Protocol.
The Professional Negligence Pre-Action Protocol should be used in all negligence claims against professionals such as claims against solicitors, surveyors, accountants, or banks where they have acted negligently or in breach of their duties to a client.
The purpose of the Protocol is to allow potential claimants to try to settle their case without the need for court proceedings. The Protocol encourages parties to understand and identify the issues in dispute, exchange information at an early stage, narrow the issues in dispute and ultimately to encourage resolution outside of the courtroom. The message of the Protocol is, in essence, that court proceedings should be a last resort to resolve a dispute.
It is important that parties follow the pre action rules set out in the Protocol. The court takes these rules seriously and, if at a later stage, the court determines that the Protocol was not followed when it reasonably should have been then the court may impose sanctions on any defaulting party.
The claimant is encouraged to notify the professional in writing of their potential claim as soon as they have reasonable grounds to suspect that negligence has occurred. That notification is called a “Preliminary Notice”. The Protocol sets out what information the claimant should provide in their Preliminary Notice. The notice should contain information relating to the identity of the claimant, a brief outline of the claimant’s grievance against the professional and a general indication of the financial value of the potential claim (if possible). The Preliminary Notice should make a request that the professional inform their professional indemnity insurers of the potential claim.
Letter of acknowledgement
The defendant should acknowledge the Preliminary Notice in a Letter of Acknowledgement within 21 days of receiving the Preliminary Notice.
Letter of claim
Once the claimant has had an opportunity to investigate the claim more thoroughly, a further substantive letter setting out the detail of the claim and the financial loss should be sent to the defendant. This letter is often referred to as the “Letter of Claim”. The Letter of Claim should identify the parties and set out each aspect of the claim including the allegations, a chronological summary of the facts, the legal arguments and request further documents which are held by the professional. The Letter of Claim also needs to calculate the financial loss, or the financial value suffered as a result of the negligence and explain how the alleged error has caused this loss.
As with the Preliminary Notice, the defendant has 21 days to acknowledge the Letter of Claim. The professional will then have three months from the date of the Letter of Acknowledgement to investigate and respond with either a letter of response, or an offer of settlement, or both. The defendant is entitled to request an extension of time to respond, and the claimant should agree to any reasonable requests for an extension of that period in accordance with the Protocol.
Letter of response
The Protocol explains how defendants should respond to a Letter of Claim. The response should make it clear which parts of the claim are admitted or denied, comment specifically on allegations, provide the professional’s version of events where they are different to the claimant’s events and set out the professional’s estimate of loss, if appropriate.
Offers to settle
If the defendant wishes to offer a settlement at this time to avoid further proceedings, it should be included at the same time as the Letter of Response. However, careful thought should be given as to whether any offer made is sent on an “open” basis or a “without prejudice” basis.
If the Letter of response denies the claim in its entirety and there is no offer to settle, it is open to the claimant to commence court proceedings. However, before court proceedings are instigated, the Protocol makes it clear that both parties should reasonably consider whether any type of alternative dispute resolution would be appropriate.
Alternative Dispute Resolution
Alternative dispute resolution (“ADR”) should be considered throughout the pre-action stage and, once proceedings are issued, ADR should continue to be considered at each stage of the litigation. Either party may suggest alternative dispute resolution, which should be carefully considered by the other. If a party is deemed to have unreasonably refused to participate in ADR, then the court does have discretion to impose sanctions, which may include a reduction in costs awarded, even if a party succeeds in their claim.
Several forms of alternative dispute resolution are available, including:
- Mediation: this is where a third party facilitates a resolution. Mediation is commonly used in professional negligence claims and often leads to a successful resolution of the dispute.
- Arbitration: this is where a third party decides the dispute. Arbitration can be a formal process and can be costly. It is not usually used as a first step to resolve a professional negligence dispute.
- Early Neutral Evaluation: this is where a third party will give a non-binding, informed decision on the merits of the dispute.
- Adjudication: this is a process by which an independent adjudicator provides the parties with a decision that can resolve the dispute either permanently or on a temporary basis, pending subsequent court determination; and
The pre-action stage and compliance with the Protocol is very important for both the claimant and defendant in a professional negligence claim. Failure to comply with the Protocol could lead to the court imposing sanctions against that party or putting the court proceedings on hold until the Protocol has been completed. It is therefore important to seek legal advice at an early stage if you consider that you have a potential professional negligence claim.