The COVID-19 pandemic has caused unparalleled disruption to the judiciary, which has been presented with logistical hurdles as well as acute legal issues to tackle.

This article summarises some notable recent caselaw concerning the fallout from the pandemic. Broadly, the judiciary has adopted a strict but fair approach when parties have sought leniency due to the impact of COVID-19. Courts have not looked kindly on those who are seen to be unfairly capitalising on the disruption but, where merited, parties have been granted clemency.

The cases summarised below have been grouped into the following broad themes:

  • Adjournments and extensions of time;
  • Attempts to obtain "windfall" benefits;
  • Insolvency matters; and
  • Force Majeure.

 

  • ADJOURNMENTS AND EXTENSIONS OF TIME

RE BLACKFRIARS LTD [2020] EWHC 845 (CH)

In this decision, which is now being treated as the key authority on how to treat applications for adjournments during the COVID-19 pandemic, the court refused an application by the claimants to adjourn a five week trial, which had been listed for June 2020, on the basis of the COVID-19 pandemic. Instead, the parties were ordered to explore together the ways in which a remote trial might proceed.

The decision makes clear that as many hearings as possible should continue remotely during this period, that co-operation and planning between parties are essential, and that the challenges and upsides of proceeding remotely will generally apply to all parties equally, such that it is understood that no unfairness would be caused to any party simply by virtue of a given hearing proceeding remotely.

To read the judgment, please click here.

MUNCIPIO DE MARIANA & ORS V BHP GROUP PLC [2020] EWHC 928 (TCC)

In this case, the Technology and Construction Court granted an application to extend the deadline for service of the defendants' reply evidence by 5-6 weeks, and consequently to adjourn a hearing which had been listed during that period for a jurisdiction challenge. The defendants brought the application on the basis that their ability to prepare reply evidence in accordance with previous directions had been severely impacted by travel restrictions and national lockdown measures introduced in light of the COVID-19 pandemic.

The court considered the approach which should be taken when determining such applications in the time of the COVID-19 pandemic. With the overriding objective firmly in mind, the key principles set out in the judgment include seeking to minimise, in so far as is realistically practicable, the impact of any extension on existing deadlines and trial dates. The Court said lawyers and professional expert witnesses "can be expected go further than they might otherwise be expected to go in normal circumstances" to meet deadlines despite the difficulties posed by the pandemic, and should make appropriate use of remote technology (by acquiring new skills to do so effectively, if required). However, the Court also recognised some of the practical difficulties individuals may be experiencing whilst working from home, such as those with parenting or caring responsibilities, and acknowledged that "care must be taken to avoid requiring compliance with deadlines which are not achievable even with proper effort". It was noted that the realities of the situation are likely to increase the time and effort required to achieve certain results by remote working, and that the Court should be willing to accept evidence and other material which is "rather less polished and focused than would otherwise be required" if that proves necessary given the time constraints.

To read the judgment, please click here.

HOTEL PORTFOLIO II UK LTD (IN LIQUIDATION) V RUHAN [2020] 7 WLUK 340

In this case, the defendants applied for further extensions of the deadlines for their extended disclosure obligations and for exchange of factual witness statements. Certain extensions had initially been granted in March 2020, but due the impact of COVID-19 disruption and the lockdown on their IT systems, together with certain witness availability issues, the defendants sought to further extend the new deadlines. In addition, a further batch of documents had been found which meant that the disclosure would, in any event, take longer than initially planned.

The Court agreed that the COVID-19 disruption was "a significant event outside the reasonable contemplation of the parties" at the time of the initial case management conference in March and did, therefore, warrant the further extensions of time. However, the Court refused to allow the requested extensions in full due to dissatisfaction with the lack of progress made by the defendants, especially in light of statements which had made in witness statements served with the March applications to extend as to the amount of work outstanding at that time.

To read the judgment, please click here (available to Westlaw subscribers only).

  • ATTEMPTS TO OBTAIN "WINDFALL" BENEFITS

LUDLOW V BUCKINGHAMSHIRE HEALTHCARE NHS TRUST & ANOR [2020] EWHC 1720 (QB)

In this decision, the court granted an application to adjourn a trial for reasons related to the COVID-19 pandemic but refused a further application by the claimant to amend her claim and replace her expert. The application to amend was refused on the basis that that the claimant was not entitled to benefit from the adjournment of the trial, which had been granted for entirely unrelated reasons. The proposed amendments could have been raised earlier in the course of the proceedings, and no good reason had been advanced for the delay in doing so.

To read the judgment, please click here (available to Westlaw subscribers only).

STANLEY V LONDON BOROUGH OF TOWER HAMLETS [2020] EWHC 1622 (QB)

In this case, the claimant had applied for and been granted judgment in default due to the defendant's failure to file an Acknowledgement of Service.  The defendant successfully applied for the judgment in default to be set aside and for relief from sanctions on the basis that the claimant had served the Particulars of Claim by post to the London Borough of Tower Hamlets' offices two days after the UK was put into lockdown on 23rd March 2020.

The Court was satisfied that the "unprecedented national health emergency" provided good reason to set aside the default judgment and noted that the claimant's solicitor was at fault for not having checked whether service by post was still possible and feasible during lockdown.  Whilst the Court recognised that it needed to enforce compliance with the rules, overall it was satisfied that the interests of justice required the judgment in default to be set aside and found that it would be unconscionable for the claimant to benefit from the pandemic.

To read the judgment, please click here.

INTERNATIONAL PIPELINE PRODUCTS LTD V IK UK LTD & ORS [2020] EWHC 1602 (CH)

In this case, the Court considered an application for security for costs by the defendant, which argued that the economic downturn caused by COVID-19 would place the claimant in a position in which it would be unable to pay any costs order against it.

The Court refused to grant the order, having not been satisfied that (a) the claimant would be unable to pay, and (b) it would be just to grant the order. While the judge recognised the inherent uncertainty caused by the pandemic, he was not convinced by the applicants' arguments in relation to both the general effect on the claimant's industry and its particular circumstances.

To read the judgment, please click here.

  • Insolvency matters

SHORTS GARDENS LLP V LONDON BOROUGH OF CAMDEN COUNCIL [2020] EWHC 1001 (CH)

In this case, the applicants were subject to winding up petitions presented just before the government announced plans to bring into force emergency legislation (now in force in the form of the Corporate Insolvency and Governance Act 2020) restricting such petitions "where the company's inability to pay is the result of Covid-19". They therefore applied to have the petitions restrained.

The Court dismissed the applications "as an abuse of process" which were "totally without merit". Firstly, it commented that the new law had not yet been passed, and that it could only decide the applications on the basis of the law as it stood at the time. Secondly, even had the new law been passed, it was clear that the applicants would not have been able to benefit from it because their inability to pay the relevant debts was not a result of COVID-19.

To read the judgment, please click here.

RE: A COMPANY (INJUNCTION TO RESTRAIN PRESENTATION OF PETITION) [2020] EWHC 1406 (CH)

In this case, a high street retailer applied to restrain the presentation of a winding up petition which had been e-filed – but not yet presented – by a creditor landlord which couldn’t use the ordinary route of the forfeiture of the relevant lease due to s.82 of the Coronavirus Act 2020.

The Court granted the application on the basis that, under the government's new Corporate Insolvency and Governance Act, the petition would be restrained, even though the legislation was still only a Bill at the time of the hearing. It was satisfied that (a) the content of the Bill would not substantially change before being given Royal Assent; and (b) the retailer's finances had been impacted by COVID-19, thus bringing it under the new legislative protections.

The case can be distinguished from the Short Gardens case referenced above in that the petition was e-filed at a point in time when significant progress had been made towards passing the legislation which in Short Gardens had only just been announced as planned emergency legislation. The specific provisions, and intended date of effect, of the proposed legislation were taken into consideration. Further, the Court was satisfied on the basis of the evidence before it that there was "a strong case (at the lowest) that coronavirus has had a financial effect on the company before the presentation of the petition and, further, that the facts on which the petition would be based would not have arisen if coronavirus had not had a financial effect on the company".

To read the judgment, please click here.

  • Force Majeure

2 ENTERTAIN VIDEO LTD V SONY DADC EUROPE LTD [2020] EWHC 972 (TCC)

Lastly, we note this decision, which, while not directly related to the COVID-19 pandemic, is quite pertinent to the present circumstances as it offers a reminder of the limits of force majeure clauses more generally. The decision concerns the interpretation of a contractual force majeure clause.

In very brief summary of the facts, Sony provided warehouse storage and certain distribution facilities to the claimant, 2 Entertain. Due to an arson attack during certain riots which took place in London in 2011, Sony's warehouse and its contents – over 20 million CDs and DVDs - were destroyed by fire. 2 Entertain sued Sony for breach of contract, on various grounds connected with a failure to adequately secure the goods at the warehouse.

In its defence, Sony sought to rely in part on the force majeure clause in the contract, which expressly included both riots and fire as potential force majeure events.  However, this argument was rejected by the court.  It held that, although both the riots and the fire were 'unforeseeable', on the facts, Sony ought to have taken certain measures against damage caused by fire and intruders generally.  In particular, Sony had been contractually obliged to ensure that adequate security measures were in place, and that the goods were kept in a secure location. The security measures in place at the warehouse had in fact been inadequate, and the court held that the primary cause of damage was therefore not the fire per se, but negligence on the part of Sony in securing the premises.

In present circumstances, this decision therefore serves as an important reminder that parties may not be able to rely on force majeure clauses where they have failed to take reasonable precautions in relation to the types of event set out in the relevant clause.

To read the decision, please click here, and for a more detailed case briefing from our Commercial team, please click here.