Law in the time of COVID-19: making a successful winding up petition

Article by Naomh Gibson

On 23 April 2020, the Government announced emergency measures to protect commercial tenants, to include a moratorium on evictions and a temporary ban on the the use of statutory demands (made between 1 March 2020 and 30 June 2020) and winding up petitions presented from Monday 27 April, through to 30 June, in circumstances where a company cannot pay its bills due to COVID-19.

At current time, the scope of the intended restriction and precisely how it will be implemented is unclear. This has understandably left some wondering in which circumstances a winding up petition might be permitted to proceed.

The High Court has now provided such guidance, in Shorts Gardens LLB v London Borough of Camden Council [2020] EWHC 1001 (Ch). This case concerned two applications to restrain presentation of two separate winding-up petitions against different companies by Camden and Preston councils. The petitions relate to unpaid liability orders from national non-domestic rates and certain unpaid costs orders arising out of earlier litigation.

The joint applicant (Saint Benedict’s Land Trust (“SBLT”) and Shorts Gardens) denied liability for the rates and sought injunctive relief on the basis that the debts in question were genuinely disputed on substantial grounds or were subject to cross-claims. The applicant also argued that it would be inappropriate for a winding up petition to be proceeded with, ‘until 14 days after COVID-19 has been controlled through vaccination and/or the Government make an announcement that it is safe for the United Kingdom to come out of the lockdown’.

The press announcement from Ministry of Housing, Communities and Local Government and the Department for Business, Energy & Industrial Strategy in respect of the emergency measures contained a “Notes to Editors”, which provides as follows (emphasis added):

“Under these measures, any winding-up petition that claims that the company is unable to pay its debts must first be reviewed by the court to determine why. The law will not permit petitions to be presented, or winding-up orders made, where the company’s inability to pay is the result of COVID-19….”

However, upon his analysis, Mr Justice Snowden noted that he did not consider either applicant company to be in financial difficulty from the information provided. In fact, the reverse appeared to be true, as both companies were each disputing the underlying liability orders, and SBLT was asserting a cross-claim. In an earlier hearing, the applicant companies put forward in their written submissions that they were not facing liquidity or operational challenges.

Overall, there was a total lack of financial information to support a finding that the companies were unable to pay their debts due to COVID-19, beyond witness statements from the director/trustee of SBLT and her legal representative. The veracity of these statements no doubt had to be carefully weighed, in light of the fact that a general civil restraint order was made against SBLT at an earlier date as a result of their history of ‘meritless and abusive applications’ in an attempt to avoid payment.

The learned Judge also noted the proposed measures were ‘overwhelmingly likely’ to be limited to companies in certain identified sectors of economic activity, and to relate to statutory demands and petitions based upon claims by landlords for arrears of rent. It was held that these extraordinary measures evidently intend to give relief to those facing genuine hardship, such as tenants in the retail or hospitality industry, and could not be taken advantage of by repeat-offenders like the applicant companies who were the subject of ‘outstanding court orders and longstanding arrears… owing under liability orders to local authorities’.

This decision demonstrates that the Government’s emergency measures are not carte blanche for companies to refuse paying their debts. Any Directors or limited companies facing cash-flow issues from COVID-19 must be very careful in communicating their position to creditors when seeking to buy time to make payment.

If you require any advice on your options during this unprecedented crisis, Halcyon Chambers has a dedicated Commercial and Chancery team and is still taking instructions, including for remote hearings. Please contact our clerks for further information.

Birmingham

Domestic abuse and the COVID-19 lockdown

Article by Emma Weaver

The world is currently in the midst of a pandemic and many countries have taken steps to try and reduce the spread of COVID-19. The UK has similarly followed suit when the Prime Minister announced a minimum 3-week lockdown commencing 23rd March 2020. Those who are deemed to be in the vulnerable category should have already been self-isolating and are expected to self-isolate for 12 weeks. Effectively, those who are not key workers or can work from home are expected to remain in their homes for the duration of the lockdown. There are some exceptions to this such as one form of exercise per day.

How does this affect those who are victims of domestic abuse?

Prior to the UK being placed in lockdown many other countries had already taken this step and there are worldwide reports that the number of domestic abuse incidents have increased. For example, it is reported that this had increased threefold in one county in China. Unfortunately, the UK is no exception to these statistics with a number of police forces already reporting an increase in domestic abuse incidents.

Those who are the victims of domestic abuse will no doubt feel trapped in their own home. There may have been some respite for the victims if the perpetrator worked outside of the home. However, where the perpetrator now has the ability to work from home, the victim will constantly be faced with their abuser.

What can be done to protect victims of domestic abuse during the lockdown?

The Home Secretary, Priti Patel, has stated that victims of domestic abuse can leave their homes to seek refuge and/or report domestic abuse; this will not be deemed a breach of the current lockdown rules. It is reported that refuges remain open in these uncertain times to provide help and shelter to victims as does The National Domestic Abuse Helpline.

Furthermore, a number of courts remain open or staffed to enable victims to make applications to the court. Where a victim’s local court centre is not open, advice should be sought from the court before making an application. Victims can therefore, continue to apply for a non-molestation order and/or an occupation order. This can be done in person (where the facilities remain available) or via email. Such applications are currently defined as urgent. Accordingly, the courts will continue to deal with them, if the particular court centre is open or staffed. This will also include the return hearing. However, it should be noted that the courts have always been wary in making an occupation order where the respondent does not have notice of the application.

In line with the President of the Family Division’s Guidance published on 19th March 2020, (The President’s Guidance can be found here) all hearings are expected to be dealt with remotely including urgent hearings. Where this is not possible, the court will endeavour to list a ‘face-to-face’ hearing. Remote hearings may cause some litigants in person difficulties in they do not have the technology required to conduct these hearings or do not know how to use said technology. Face-to-face hearings may also put those in the vulnerable category at risk, if they have to leave their home to attend a hearing.

A number of firms of solicitors also remain open as they are able to work remotely. This enables victims to seek legal advice on what they can do to protect themselves from domestic abuse. The police are of course available for the victim’s immediate protection, if necessary.

What can Halcyon Chambers do to help?

The family team have a number of years’ experience between them in domestic abuse cases and approach such cases with the sensitivity that is required whilst taking a robust approach in the court to ensure that the best outcome for the client is achieved. The members of the family team are available to take instructions from both solicitors and from the client directly (for those who undertake direct access work) during the ongoing pandemic. The pandemic should not be a bar to the delivery of justice.

Law in the time of COVID-19: Changes to wrongful trading laws

Article by Naomh Gibson

Wrongful trading is a statutory offence under Section 214 and Section 246ZB of the Insolvency Act 1986. Once Company Directors conclude – or should have concluded – that there is no reasonable prospect of the Company avoiding an insolvent liquidation or, in relation to business conducted on or after 1 October 2015, insolvent administration, they have a duty to take every step which a reasonably diligent person would take to minimise potential loss to the Company’s creditors.

If a Director fails to comply with this duty, the Court can order the Director to make such contribution to the Company’s assets as it thinks proper. However, on 28 March 2020 the Government announced it would introduce new insolvency measures to prevent businesses unable to meet debts due to the impact of COVID-19 from being forced to file for bankruptcy.

The move will allow Directors to pay staff and suppliers, even if there are fears the Company could become insolvent. This is a very real concern for Directors and a suspension of this potential liability will take some of the risk away when deciding whether to continue trading through this period.

The temporary suspension takes force retrospectively from 1 March 2020 for a period of 3 months. All other checks and balances to ensure directors continue to fulfil their legal duties and obligations will remain in place, including those relating to fraud, misfeasance, and the threat of Director disqualification. As such, Directors should continue to seek advice on how to record their decision making throughout this period.

In addition to the temporary suspension of wrongful trading provisions, the new measures also include:

  • Permitting Companies who are required by law to hold AGMs to hold them remotely, or where this is not possible, postpone them without sanction, or hold them in-person. Any in-person AGMs will still have to comply with social distancing protocols but will not be considered ‘gatherings’ so as to fall foul of new restrictions;
  • A moratorium for businesses undergoing a restructuring process, during which time they cannot be put into administration by creditors and will continue to be able to access all raw materials;
  • New restructuring plans to bind and safeguard creditors and supplies, to ensure that they are being paid while a solution is sought.  

The new Restructuring Moratorium may be an essential tool for some of these businesses who need extra time to work out a temporary solution to their cash flow issues. Previous consultations have suggested that the Restructuring Moratorium will be modelled on the existing Administration Moratorium and triggered by an out-of-court filing.

The Government states that it intends to introduce the legislation at the earliest opportunity and may extend any of the above measures as necessary, depending on the development of the pandemic. The overriding objective will be to help companies to keep trading.

Other changes to ease the burden of regulation on Companies during this challenging time have already been introduced. On 25 March 2020, Companies House announced that Companies affected by COVID-19 can apply for a 3-month extension for filing their annual accounts. Applications for the extension can be made through a fast-tracked online system (here) and will be treated with latitude where issues around COVID-19 are cited in support. An application for the extension must be made before the company’s filing deadline.

Birmingham

Law in the time of COVID-19: A Practitioners Guide to Hearings

Article by Naomh Gibson

In Ernest Hemingway’s 1926 novel, The Sun Also Rises, characters Mike Campbell and Bill Gorton discuss Mike’s money troubles:-

“How did you go bankrupt?” Bill asked.

“Two ways,” Mike said. “Gradually and then suddenly.”

Gradually and then suddenly

Much like Mr Campbell, the legal profession in the UK has also had to quickly come to terms with something which was slowly and inevitably coming down the pipeline  – video-link and telephone hearings. 

The spectre of remote hearings has always been on the horizon. There were semi-frequent pilot schemes and trials in the decade leading up to the COVID-19 pandemic. For example, from 2009-2010 HMCTS ran a ‘Virtual Court’ pilot for 12 months in two magistrates’ courts in London and North Kent, covering 15 police stations in London and one in North Kent (MOJ, 2010). While the main drawback of the pilot was the expense, researchers agreed that broadening the use of the technology might improve the economic case for its installation. The consensus was a ‘more integrated and fundamental inter-agency system would probably deliver better efficiency savings’.

Similarly, between 2018-2019, HMCTS ran pilot schemes for remote hearings in the Tax Tribunal and the Immigration and Asylum Chamber in Birmingham and London for a limited number of simple contested matters, usually case management hearings. As before, while the results were generally positive, as noted by the Master of the Rolls Sir Terence Etherton, the principal complaints concerned the reliability of IT equipment and the absence of training of the judiciary for the use of that system (see here). Again, underfunding and under-implementation proved to be the stumbling blocks of an otherwise ambitious and innovative project.

On 20 June 2018, HMCTS announced that part of their £1bn reform programme projects would include judicial training on new technologies, an improved telephone conferencing system and ‘assisted digital’ i.e. a service for members of the public (including litigants in person) who have limited digital capability or who are unable to access resources and information digitally – including web-chat, telephone and face to face support – to be rolled out between September 2017 and March 2022 (see here). So far, so good. And then COVID-19 happened.

Current arrangements

From 18 March 2020, HMCTS has guidance on conducting remote hearings which is updated every few days (see here).

The essential headlines to take away are as follows: HMCTS provides an essential service, and this cannot stop during the pandemic. They will therefore try to ensure your hearing goes ahead.

However, HMCTS will have to make decisions on prioritising which cases are heard and in what order, as they always have. This is because, overnight, HMCTS have had to implement technological measures which would typically be in the works for months, potentially several years – as seen above. There will inevitably be teething problems, and this may cause a backlog while solutions are found.

Therefore, unless your hearing relates to a particularly urgent matter, expect that it may be considered low priority unless:

  • It relates to the custody or detention of an individual; 
  • It relates to the immediate well-being or safety of an individual and is not mitigated by social distancing protocol i.e. findings of fact for Child Arrangement Orders which are now moot as the children are limited to direct contact within the family home and the applicant family member does not live with them;
  • It relates to public health legislation, particularly under the Coronavirus (Emergency) Act 2020.

Physical hearings are to be avoided as far as possible, except in the rare situation where they cannot be held remotely. Practitioners should consider what can be done to minimise the need for physical presence – particularly as from 30 March 2020 only 157 Courts and Tribunals will be open to the public (see HMCTS court tracker for updated information).

Ultimately, the decision as to how a hearing is conducted is a matter for the judge, magistrates or panel, who will determine how best to uphold the interests of justice. Any live hearings from Monday, 23 March 2020 will need to be approved by the judge hearing the matter, if necessary in consultation with their leadership judge. As such, if you consider a hearing must be in person, seek permission from the judge as soon as possible. 

What if my hearing is in person?

If your hearing must be in person and you have approval for this, contact your designated priority hearing centre/check the HMCTS guidance 24 hours ahead of the hearing to confirm what their updated COVID-19 protocol is – given the increasingly fast-paced developments, there may be last-minute changes in how the hearing is to be conducted.

General good practice is to maintain standard social distancing protocols where possible, e.g.:

  • Do not attend the hearing if you or anyone in your household has had symptoms and you have not yet completed the self-isolation period;
  • Bring your own drinks and avoid any court-supplied water carafes or fountains;
  • Bring your own sustenance as there will realistically be limited café services in or near the court building;
  • Bring tissues and/or handkerchiefs to wipe down surfaces or use as a physical barrier if needed;
  • Keep separation distance (2m/6ft) from people at all times, including when in queue to get into the court building or go through security;
  • At security, open your own bags/belongings for checking – particularly if security staff are not wearing gloves;
  • At security, if the tray for visitors’ belongings is not lined with paper or you are concerned it is not clean, put your belongings in an open bag and ask that it be checked that way instead;
  • Do not use elevators if at all possible. If you must, use elevators one person at a time, save for any person who is accompanied by a medical professional or member of their household such as a carer; 
  • Do not share documents/ Ipads/ holy books/ oath laminated sheets etc;
  • Take breaks every 2 hours during hearings to wash/sanitise hands – hand-washing is preferable to using hand-sanitiser.

What if my hearing is remote?

If your hearing is to be conducted remotely, ascertain quickly whether it will be by telephone or video link, and using what software. Typically, BTMeetMe is being used for telephone hearings, and Skype for Business is used for video link hearings. Telephone hearings may also be via BT Telephone Conferencing, Legal Connect, Kidatu, and Arkadin.

There is no need for specialist equipment for either of these types of remote hearing. Telephone hearings require access only to a telephone, and video-link hearings require access to a laptop with an in-built webcam, or a PC with a webcam plug in option. The mobility of laptops will make them preferential as opposed to desktop computers. iPads and iPhones are not recommended, but as a backup they can be used if all else fails.

While not essential, participants might find the audio for remote hearings runs smoother when using a headset, or headphones with microphone. This allows the audio from others to play directly into the participant’s ear, and the audio from the participant will be picked up much easier by the proximate microphone. This has the benefit of avoiding background noise from interfering with the remote hearing, especially for those working from home with noisy pets/children/partners.

It is unlikely to apply due to social distancing protocols, but if you are in a remote hearing in the same room as a colleague/client and you wish for them to also hear the call and contribute freely, consider using a splitter adapter/jack so both of you may use headsets/headphones, or alternatively a Bluetooth speaker.

Participants to a video-link hearing do not need Skype for Business to join the same, however they will need the free Skype Meetings App. Each participant will receive instructions and a link to click to join the hearing, as a ‘guest’.

Once users click on the link, they should follow the browser’s instructions for installing Skype Meetings App. Do this as early as possible to be prepared for your hearing.

If you don’t receive a link, send the Court a request for a link and ask them to do the following:

  • Click on Meeting Entry Info in their Skype session – they will see this image in the bottom right hand corner of the screen;
  • Click copy info on the new window and email that to the participants.

At least 24 hours before the remote hearing, do a dry-run with your colleagues or clients. Skype can be used and experimented with at-will between participants who have accounts. As BTMeetMe usually operates by the Court dialling out, a dry-run for a telephone hearing may require using another platform and asking a colleague to dial out to participants as the ‘Court’.

At the time of the video-link hearing, participants go to the Skype Meetings App sign-in page, enter their name, and select “Join”.

Ensure you are dressed appropriately for Court and have a neutral background – if you wish to blur your background, hover over the “Video” button during a call. In the pop-up that appears, toggle the “Blur my background” setting and Skype will automatically adjust your video feed so you remain in focus while a blur is applied to your background.

At the time of the telephone hearing, participants will be called and must accept the call as normal. Good practice during a telephone hearing, as you will not be visible, will be to ask every party to introduce themselves at the beginning of the call, and then to identify yourself before you speak each time. Consider keeping your microphone on mute during remote hearings when you are not speaking. Judges should take the lead in directing when they wish to hear from specific parties to avoid cross-talk.

Conclusion 

Only time will tell how successful remote hearings are in practice. For some, one of the few benefits of the current situation is that it has provided a kick up the proverbial to the legal profession to modernise.

While it would have certainly been more beneficial if HMCTS had made greater progress in the past decade at implementing remote hearing methods before the current crisis, they have laid a modest framework upon which to build. Any practitioners previously involved in pilot schemes should share the wealth of their experience, and together the profession can adapt.

Reference list

‘Virtual Court pilot: Outcome evaluation’ (Dec 2010) Ministry of Justice Research Series 21/10

Birmingham

COVID-19 and the Risk of Losing Your Home

Article by Katie Wilkinson

The true financial impact of the COVID-19 coronavirus is yet to be felt, but for many the inability to pay rent on their homes is a real problem that they are facing imminently.

The government announced emergency legislation on 18 March 2020 which included extensive measures to protect renters and landlords affected by coronavirus.

The effect of the legislation means that no persons in rented accommodation (including both social housing and private properties) will be forced to move out of their home during the period that COVID-19 affects society.

Landlords will be unable to commence possession proceedings to evict tenants for a period of at least 3 months. To address the unfairness that arises for landlords who may not be receiving their rental income, they can apply for a 3 month mortgage payment holiday meaning that they will not have the financial pressures of meeting mortgage payments, and in turn will not need to place pressure on tenants to pay rent.

At the end of the 3 month period the Government has stated that landlords and tenants will be expected to work together to establish an affordable repayment plan, taking into account tenants’ individual circumstances.

The bill acts to extend the period of notice for all types of tenancy to 3 months irrespective of what the grounds for possession are.

For example Section 21 notices previously required a notice period of 2 months, so in practical terms the legislation extends that period by 1 month. The legislation applies, however, to all notices seeking possession until 30 September 2020. The Bill does allow for further legislation to be passed to extend the 30 September date, and to lengthen the notice period further if required.

Landlords can continue to issue proceedings either in relation to notices which have already expired or notices which will expire prior to 30 September 2020. Such claims are routinely being stayed until the 90-day period has expired but in any event, whether the Court would be able to hear such claims in the next 3 months is unlikely.

On 19 March 2020 a message was released from The Lord Chief Justice to judges in the civil and family courts which reads:

“The default position now in all jurisdictions must be that hearings should be conducted with one, more than one or all participants attending remotely. That will not always be possible. Sensible precautions should be taken when people attend a hearing. They are now well-known. We all take them when out of the home”

Whilst the civil courts have utilised telephone hearings for many years, they are rarely ever used when one party is unrepresented (which means that a person is not using the services of a Solicitor and instead represents himself).

Guidance from the Courts and the Government is evolving almost daily to take into account new information and issues arising as a direct result of COVID-19. Whilst the new measures will be welcomed by persons in rented accommodation, it should not be forgotten that any rent unpaid in the next 3 months will ultimately become repayable in full. The financial implications of this will no doubt subsist for many months to come and, whilst the Court may be sympathetic to financial problems caused by COVID-19, the laws applicable to possession claims will still be in force once the current situation improves.