Briefing

"I want my money back" - New rules for pursuing unpaid school fees

Posted by: Ben Longworth and Oliver Blundell | Date posted : 18/05/2017

Unfortunately pursuing parents for unpaid school fees is a fact of life for many bursars. On 1 October 2017 new rules will come into force governing the way in which businesses must begin debt claims against individuals.

The rules take the form of a new pre-action protocol for debt claims which will become part of the Civil Procedure Rules governing court claims. The new Protocol will require a significant amount of work to be done before even a small claim is taken to court. It is intended that this will steer parties towards an agreed resolution that might not otherwise have been reached. However, the Protocol will also "front load" the legal costs of pursuing debt claims such as those for unpaid school fees.

As ever, schools should carry out a robust cost-benefit analysis before embarking on litigation and be wary that the courts will now have even more ways in which to scrutinise the parties' conduct when considering who should pay the costs of court proceedings. Compliance with the Protocol will be essential if the dispute is litigated and a school wants to recover a contribution towards its legal costs from the fee-payer.

The principal steps which must be taken before a school should issue proceedings to recover unpaid school fees are:

1. Write a letter before claim.

As was always required, a letter before claim should contain full particulars of the debt, how it arose, and how it could be paid.

There are, though, some new rules about what must be enclosed with the letter. First, if the debt arose under a written agreement (which in most cases will be the relevant parent contract), that agreement must be enclosed. Secondly, the school must include a Reply Form, an Information Sheet and a Financial Statement, all in the prescribed forms annexed to the Protocol.

The school should also include a statement of account for the debt – either one that is up-to-date, or an older (but still "recent") one with an explanation in the letter of any additional charges or interest that have accrued since the date of it.

2. Wait for a response.

It will no longer be up to the school to decide what period of time the fee-payer should reasonably be allowed to respond – the Protocol specifies that the school must not go to court until 30 days have elapsed from the date of the letter. One must also take account of "…the possibility that a reply was posted towards the end of the 30-day period." That is vague, but two extra working days ought to suffice.

3. Engage with the debtor.

The fee-payer should reply using the new Reply form. The Reply form, properly filled out, will tell the school whether or not the debt is disputed, whether or not the fee-payer can pay, whether or not the fee-payer is seeking advice, what documents the fee-payer has sent to the school and which, if any, are expected in return.

4. Disclosure.

Perhaps the most onerous element of the Protocol is the mandatory exchange of documents. First, the fee-payer is asked (by the wording of the Reply form) to send any relevant documents to the school with its Reply.

In return, the fee-payer may request (again, on the Reply form) any documents or information "…sufficient to enable [the parties] to understand each other's position." Upon receipt of such a request, the school "must" within 30 days either provide the requested documents or explain why they are unavailable.

Note that under the new rules the school is permitted only to explain why a document is "unavailable" – and not to say that it is irrelevant. However, it is assumed that it will be able to say that a document goes beyond what is required to enable the fee-payer to understand the school's position.

5. Consider alternative dispute resolution.

If the parties still cannot agree a resolution following the exchange of documents, they are asked to consider informal ways to resolve the dispute without resorting to court proceedings. This could be through informal discussions and negotiations or through more formal means such as mediation.

6. Take stock.

The last section of the Protocol urges the parties to "take stock" of their positions.

In "taking stock," the school must not go to court unless 30 days have elapsed since (if requested) either documents were provided to the fee-payer or the fee-payer was told that they were unavailable. Secondly, the school must not issue proceedings before a "reasonable time" has elapsed for the fee-payer to seek debt advice.

Finally, if the school is satisfied that the Protocol has been complied with fully it must still give the fee-payer 14 days' notice of its intention to issue proceedings.

In some respects, the Protocol is merely a codification of good practice. In others, though, it places a much heavier burden on the parties to try to resolve their disputes before a claim is issued. Schools should pick their way through the new Protocol with care, and be ready for the court to scrutinise any claim for its legal costs if compliance was anything less than complete.

If you require further information on anything covered in this briefing please contact Ben Longworth (ben.longworth@farrer.co.uk) or your usual contact at the firm on 020 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, May 2017