STATE COURTS PRACTICE DIRECTIONS AMENDMENT NO. 6 OF 2019 – BRIEF UPDATE
This article summarises some of the key changes effected via the State Courts Practice Directions Amendment No. 6 of 2019, being the new Practice Direction 144 and the pre-action protocol set out therein, which will apply to actions commenced in the State Courts from 1 October 2019 onwards.
Overview
Practice Direction 144. In brief, Practice Direction 144 (the “PD144”) enacts a pre-action protocol (the “Protocol”) for “business-to-business claims”. Creditors in such a claim must comply with the Protocol before commencing Court proceedings.
In this regard, we highlight that it is not only creditors who are affected by PD144 and the Protocol. Debtors are also affected by PD144 and the Protocol.
Sanctions for non-compliance. Failure to comply with PD144 and the Protocol can attract sanctions (at the Court’s discretion), which include disallowing in whole or in part the costs claimed by the defaulting party (even if the defaulting party succeeds in the action), or to order the defaulting party to pay costs of the other party on an indemnity basis.
Scope of PD144 and the Protocol
“Business-to-business claims”. PD144 and the Protocol apply to “business-to-business claims”, which are defined as a claim by a business entity (which includes sole proprietorship, partnership, company, foreign company, limited partnership, limited liability partnership) to another business entity for a contractual debt that falls within the following categories:
“(a) a claim for payment for the sale of goods or the supply of services (except for construction and renovation services)
(b) a claim for payment for rental or for the hire-purchase of goods;
(c) a claim under a banking, overdraft, or other credit facility; and
(d) a claim under a guarantee.”
On its face, PD144 and the Protocol does not appear to apply to, e.g., purely tortious claims, such as claims under the tort of deceit.
However, it is unclear if PD144 and the Protocol would apply to, e.g., tortious claims that could have been brought as a contractual claim.
O. 108 Rules of Court. The Protocol operates in addition to O. 108 of the Rules of Court.
Small Claims Tribunals Act. The small claims process under the Small Claims Tribunals Act (Cap. 308) is not affected by the Protocol.
Letter of Claim
Letter of Claim. The Protocol prescribes that prior to commencing an action, the creditor must first send a Letter of Claim in the prescribed form, marked “Private and Confidential: to be opened by addressee only”, and not to be marked “Without Prejudice”.
The Letter of Claim must contain certain prescribed information, including, e.g.:
1. Particulars of the oral agreement (if applicable);
2. Particulars of the timeframe for the debtor to respond (which should be at least 28 days);
3. The amount of interest incurred and any administrative or other charges incurred;
4. An updated statement of account for the debt (if applicable);
5. A statement as to which of the alternative dispute resolution options (the “ADR option”) the creditor proposes for the debtor to consider.
The prescribed form is found in Form 1 to the Protocol.
Mode of service. The Letter of Claim must be sent to the registered address or last known address of the debtor via a mode that provides the creditor with a written acknowledgment of posting or delivery. The examples given are by way of certificate of posting and registered post.
ADR option. The ADR options referred to in the Protocol includes mediation at the Singapore Mediation Centre, mediation at the Singapore International Mediation Centre, and mediation under the Law Society Mediation Scheme.
It is important to note that if the parties agree on a mode of ADR, then the creditor should submit the relevant request for ADR within 14 days of the agreement to initiate ADR.
However, neither party can be compelled into entering any form of ADR.
Response to Letter of Claim
Response to Letter of Claim. The Protocol also prescribes that the debtor must provide a Response within 28 days of receipt of the Letter of Claim (or such shorter time as specified in the Letter of Claim) in the prescribed form.
The Protocol prescribes that if the debtor gives a shorter time-line, then the debtor needs to spell out the reasons for the urgency.
The Response must contain the prescribed information, including:
1. Whether the claim is accepted;
2. If accepted in whole or in part, terms of repayment;
3. If more information is needed, what information is needed and why;
4. If the claim is rejected, an explanation of the reasons why it is rejected including “sufficient indication of any fact on which the debtor is likely to rely in support of any substantive defence”; and
5. Whether the debtor agrees to the ADR option.
The prescribed form is found in Form 2 to the Protocol.
More time needed. If the debtor needs more time, then the debtor needs to acknowledge receipt (a sample Acknowledgement can be found at Form 3 to the Protocol), and inform the creditor of the length of time the debtor needs to respond substantively.
Mode of service. The Response / Acknowledgement of receipt must be sent to the creditor via a mode that provides the debtor with a written acknowledgment of posting or delivery. The examples given are by way of certificate of posting and registered post.
“Entitlement” to commence proceedings. The creditor is entitled to commence proceedings without further compliance with the Protocol if no Acknowledgement of receipt / Response is received within the timeframe set out in the Letter of Claim.
Counterclaims. If there are any counterclaims or cross-claims, they must be included in the Response, and the creditor should provide a Response to such counterclaim within the equivalent period allowed to the debtor to respond to the Letter of Claim.
Disclosure of documents
It is also provided in the protocol that where any aspect of the debt is disputed, the creditor and debtor should “exchange all documents that they will be relying on if the matter eventually proceeds to trial.”
In this regard, the Protocol also provides that if the debtor requests a document/information, the creditor must either provide the document/information within 28 days of receipt of the request, or explain why the document/information is unavailable.
Pre-Action Protocol Checklist
The creditor must file together with the Statement of Claim a duly completed Pre-Action Protocol Checklist found in Form 4 to the Protocol.
Repayment Plan Calculator.
The Protocol also provides a link to a Repayment Plan Calculator.
Conclusion
PD144 and the Protocol apply to claims commenced in the State Courts from 1 October 2019 onwards.
It therefore appears that if a claim is to be commenced on 1 October 2019, compliance with the PD144 and the Protocol would require (if we apply the 28 days time-line) for the Letter of Claim to be issued as soon as possible; otherwise, there is a risk that the claim cannot be commenced on 1 October 2019 without failing to comply with PD144 and the Protocol.
In addition, as PD144 and the Protocol have yet to take effect, it remains to be seen how non-compliance with PD144 and the Protocol would be dealt with by the Courts.
While PD144 appears to contemplate costs orders at the end of the proceedings (given its reference to “succeeded in the action” and “costs of the proceedings”), it is unclear if the Courts can sanction non-compliance at an earlier stage.
Furthermore, practically, while it appears that non-compliance of PD144 and the Protocol would not cause a claimant/defendant from being barred from raising a defence, it remains to be tested:
1. What is the level of particularity that needs to be given in the Letter of Claim and the Response; and
2. How this would affect the Courts’ assessment of whether a party has complied “in substance and spirit with the terms of the Protocol.”
As such, prudent parties (and in particular, debtors) may wish to seek legal advice before preparing the Letter of Claim or the Response.
Tags: Civil litigation; State Courts; Commencement of proceedings; Practice Directions 144; Pre-Action Protocol
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