COVID-19 & Residential Possession

The impact of COVID-19 has had a marked impact on Landlords of residential property. The large number of tenants facing financial uncertainty from either job losses, the furlough scheme or wage reductions has meant that a considerable number of tenants are unable to pay their rent. This has and will no doubt create some uncertainty for landlords. 

The Government has introduced a number of emergency measures to protect tenants during the pandemic, below is a general synopsis of the position. 

  1. During the period commencing on 26 March 2020 and ending on 30 September 2020 the minimum notice period is now no less than three months; this includes a number of different types of tenancies and includes the most common being assured shorthold tenancies. You will note that the usual notices periods are 2 months or eight weeks (depending on how rent is paid) for notice under section 21 and 14 days under section 8. The change will only affect those notices that are served within the relevant period, any notices served prior to the relevant period are not caught by this extension. 
  2. Ongoing possession proceedings, meaning those that were commenced before the relevant period, have been suspended for 90 days irrespective of what stage the proceedings are at. This includes the enforcement of any writs or warrants of possession.
  3. The courts will not process any new possession claims during this period, but please note that this does not apply to excluded tenants which includes those currently in interim accommodation and lodgers. 

It is uncertain whether these measures will be extended but the legislation does allow them to be extended further should this be necessary.

Wrongful Trading Part 2 – Is There Really a Suspension?

In the last blog post on this topic we discussed the effects of the government suspension on wrongful trading under section 214 and 246Z insolvency Act 1986 and the pitfall under section 172(3) Companies Act 2006.

We suggested that the suspension, although welcome, should be taken with caution as a result of section 172(3). There are a number of other provisions within the Insolvency Act that Directors should be cautious of, these are:

  1. Misfeasance – section 212 of the insolvency Act 1986 provides a liquidator a summary remedy in the liquidation of the company, thus allowing it to seek the restoration of company property or funds and assess compensation or damages against its previous directors.

Misfeasance is a broad concept and encompasses the following:

  • The retention and or misapplication of company funds or property;
  • Becoming accountable for property or funds that belong to the company;
  • Being in breach of your fiduciary duties to the company (sections 170-177 Companies Act 2006).

The Companies Act 2006 states that directors duties are generally as follows:

    • To act within powers.
    • To promote the success of the company.
    • To exercise independent judgment.
    • To exercise reasonable care, skill and diligence.
    • To avoid conflicts of interest.
    • Not to accept benefits from third parties.
    • To declare an interest in a proposed transaction or arrangement.
  1. Fraudulent Trading – these rules can impose a civil liability on directors where it evident that the business of the company has been carried out so as to defraud company creditors, creditors of any other person or for any other fraudulent purpose. It should also be noted that this is a criminal offence.

The offence is committed by anyone who is knowingly party to the carrying on of the business and can extend to non-directors and third parties also. To evidence this, a person must have taken steps in the carrying on of that business.

An intention to defraud creditors occurs where a director or others do things that he knows will result in the existing creditors not being paid e.g. dissipating assets for less than their worth so creditors cannot be paid. It could also be where someone is induced to become a creditor where they were not already so at a time where the company is or is likely to become insolvent, e.g. purchasing goods on credit who are unaware of the state of the company’s finances.

  1. Office holder claims – these claims relate to transactions made by a company before it enters administration or liquidation whilst it is insolvent (transactions at an undervalue and preferences). The Court has the power to make an order restoring the position as if the company had not entered into the transaction. The court could also order that he director be personally liable to compensate the company if the transaction was entered into where he was also in breach of his directors duties under the Companies Act 2006 (see above).
  2. Transactions Defrauding creditors – if a transaction at an undervalue or a gift is made section 423 Insolvency Act 1986 allows an insolvency officer or a victim of the fraud to seek the Courts intervention to unwind the transaction if it was entered into to put assets beyond the reach of the creditor. This could also be deemed a breach of directors duties and as such a Director could be held liable personally.

As can be seen, it is certainly not plain sailing and although the headline grabber may give you some cause for comfort you should still be cautious in entering in to any transactions that could be called into questions at a later date.

*This blog is intended to provide the reader with a general understanding of things to consider and should not be relied upon as specific legal advice. Each matter will be fact specific and you should take advice if you are concerned about any of the matters raised in this article.

Wrongful Trading – An Update and Analysis of the Recent Government Suspension

These are certainly unusual times and no doubt most businesses have been or will be affected by the effects of the lockdown caused by Covid 19. In the past three weeks the government has announced a plethora of measures designed to protect the economy, companies and workers.

As a part of those measures the government has recently announced a number of protective measures in order to provide some protection to companies and their directors that have been affected by Covid 19. A significant measure was that of the temporary suspension of wrongful trading provisions for a period of three months starting on 01 March 2020. Although the detail has yet to be revealed it is certainly some cautiously welcome news to directors at these difficult times. 

As you may know Directors can be held liable for wrongful trading by a court pursuant to section 214 and 246ZB of the Insolvency act 1986. This is triggered where prior to the commencement of insolvency of a company (liquidation or administration) a director knew or should have known that there was no reasonable prospect that the company would avoid going to into insolvent liquidation or entering insolvent administration and did not take every step with a view to mitigating and or minimising the potential loss to the company’s creditors. 

Although the suspension of the wrongful trading rules is generally welcome, directors should still remain cautious. There remain alternative ways that the wrongful trading rules can be triggered, these are:

  1. Section 172 (3) of the Companies Act 2006; and
  2. Common law duties. 

It must be remembered that these go hand in hand and the common law duty is preserved by section 172(3). This route to triggering a claim has not been suspended, can be triggered more easily than those entrenched in the insolvency act and care should be taken that you are not in breach.

The test under the s172(3) trigger is ‘is likely to become insolvent’ rather than ‘no reasonable prospect that the company would avoid going to into insolvent liquidation or entering insolvent administration’ making it less onerous than the wrongful trading trigger.

Further, the duty under s172(3) will be engaged where a director knows or ought to have that the company is or is likely to become insolvent on either the cash flow or balance sheet basis. Whereas under the wrongful trading trigger a company goes into insolvent liquidation if it goes into liquidation at a time when its assets are insufficient for the payments of its debts, other liabilities and the costs of the winding up; i.e. it is balance sheet insolvent. Once again the s172(3) trigger is an easier route to trigger a wrongful trading claim.

There are a number of other related areas that have not been suspended by the government that are of equal importance and these will be discussed in our blog over the coming weeks. 

What can you do?

  1. Ensure that you hold regular meetings with directors to discuss the financial position and viability of the company, this of course should be undertaken in line with the governments social distancing recommendations;
  2. Keep a close eye on the company’s financial position by regularly reviewing the state of affairs, keeping accurate records and by speaking to your internal and external accountants; 
  3. Keep records and meeting minutes of decisions made and why those decisions have been made, it would be a good idea to ensure that any evidence relied upon in coming to that decision is also kept.
  4. Talk to your creditors, this may well be to simply touch base with them so that they understand the position of the company, can alternative agreement be reached.
  5. Most importantly, you should take appropriate legal, financial and insolvency advice.

*This blog is intended to provide the reader with an understanding of things to consider and should not be relied upon as specific legal advice.

If you’re looking to understand whether this applies to you or your business, please don’t hesitate to contact 01753 486777

Can Coronavirus ( Covid-19) trigger a Force Majeure Clause in your contract?

What is Force Majeure ?

Force majeure is chance occurrence or unavoidable accident scenario – a  common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, epidemic or an event described by the legal term act of God (hurricane, flood, earthquake, volcanic eruption, etc.), prevents one or both parties from fulfilling their obligations under the contract.

The impact of Cornoavirus is and will continue to have a huge impact on business at all levels of the supply chain; and this is predicted to rumble on well after the lockdown comes to an end.

The impact upon all contracts shall be significant and no doubt a  number of disputes will commence on whether a Force Majeure clause can be invoked to excuse either party from performing under its contract on time or at all.

Below we raise a number of points in relation to Force Majeure and whether Coronavirus is classified as a Force Majeure event.

When considering your contracts you need to check/consider for the following?

  1. Is there a Force Majeure clause in your contract? If so:
    • How specific is it? i.e. does it list a particular set or number of events that it is limited to; or
    • Is it loosely worded? For example, plague or epidemic which in most circumstances will cover Coronavirus. Or an act of Government, this could include matters pertaining to the lockdown.
    • Does it say that the list is exhaustive or non-exhaustive? This will be key in limiting liability where there is a list of specific events;
    • You may also want to consider whether wording such as ‘beyond/outside the parties reasonable control’, this type of wording is more difficult as it will wholly depend on interpretation and will no doubt be fact specific e.g. was it as a result of the pandemic that you or another party were unable to perform the obligations in your contract? Did you attempt to mitigate?
  2. Was it coronavirus and or the lockdown that caused the non-performance or delay?
  3. Was it truly outside of your control?
  4. What could you have done differently to undertake your performance of the contract? Did you try to mitigate?
  5. Are there any mechanisms in the contract that you now need to comply with? E.g. are there any notice provisions that you must comply with? Or, did you check whether you needed to inform your contracting party before the event took place?

The question then arises as to what you can do if you can in act invoke the Force Majeure clause, normally this would mean that you are no longer obliged to comply with any obligations under the contract and therefore not be liable for any damages. There are number of other possibilities but these will of course be contract specific.

It is suggested that if you have been unable or your contracting party has or is unable to perform their side of the contract then you should consider ways within which you could comply. This can either by reducing the scope of the obligations required to be performed or alternatively in delaying the performance of it. No doubt a pragmatic approach will need to be taken by all.

This could also be a good time to extricate yourself from contracts that are no longer commercially viable and this should be considered if necessary. A word of warning here is that increased costs of performance will not be a good reason to delay or not perform; the courts do not like this.

The best way to deal with events that we face is to have sensible discussions about how each party can remedy any non-performance or delayed performance before a dispute arises.

*This blog is intended to provide the reader with an understanding of things to consider and should not be relied upon as specific advice. Each contract is different and applied in different ways to the circumstances; as such you should take specific advice.

If you’re looking to understand whether this applies to you or your business, please don’t hesitate to contact 01753 486777

Notice of court proceedings

When we receive correspondence entitled ‘Notice of Court Proceedings’ we often feel shocked, worried and distressed. ‘What does this mean?’ and ‘how will it impact me?’ we ask. If you find yourself in a situation like this, our litigation solicitors are here to guide you through the entire process. Come down to our offices at Windsor Crown House, Slough, SL1 2DX to chat to one of our friendly solicitors. Meanwhile here is a quick guide as to what steps need to be taken before court proceedings.

Life is full of ups and downs and often we find ourselves stuck in situations that are far from ideal. Whether you’re behind on loan repayments or you haven’t paid a penalty, you may receive a notice of court proceedings from your creditors threatening legal action if the fine isn’t paid.

The first step is to try and achieve a resolution without having to go to court. The Practice Direction on Pre-Action Conduct (PDPAC) of the Civil Procedure Rules explains the need to try to mediate prior to going to court, and any sanctions the court can impose for failing to do so. For example, failure to comply with the pre-action protocols can be taken into account by the courts when making orders as to costs and case management directions.

A claimant’s letter before claim should give concise details about the claim, including but not limited to:

  • Their full name and address.
  • Why the defendant is liable.
  • A clear summary of the facts on which the claim is based.
  • What the claimant wants from the defendant.
  • A list of the essential documents that the claimant intends to rely on.

If a defendant cannot provide a full written response to the claimant’s letter before claim within 14 days of its receipt, he must instead provide an acknowledgment of letter before claim within the 14 day timeframe, which should include but is not limited to:

  • Should state the date by which a full written response will be provided.
  • If this date is longer than that set out in the letter before claim, the defendant should give reasons why a longer period is required.
  • May request further information to enable the defendant to produce a full written response.
  • Should, where the defendant cannot provide a full written response within 14 days of receipt of the letter before claim because they require advice, state:

o    that the defendant is seeking advice;

o    from whom it is sought; and

o    when it is expected to be received, to allow a full response to be given.

The claimant must allow a reasonable time (up to 14 days) for this advice to be obtained.

The defendant’s full response should either:

  • Accept the claim in whole or in part.
  • State that the claim is not accepted.

If the claim is disputed in whole or in part, the defendant’s response should:

  • Give reasons why the claim is not accepted, identifying:


o    which parts are accepted and which are disputed; and

o    the basis of the dispute.


  • State whether the defendant intends to make a counterclaim and, if so, give details of the claim equivalent to the claimant’s letter before claim.
  • State whether the defendant alleges that the claimant was wholly or partly to blame for the dispute and give details.
  • State whether the defendant agrees to the claimant’s ADR proposals, propose an alternative, or give reasons why ADR is inappropriate.
  • List the essential documents on which the defendant intends to rely.
  • Enclose copies of documents requested by the claimant or explain why they are not included.
  • Identify and request copies of any further documentation.

The claimant should supply copies of documents requested by the defendant within as short a time as practicable or explain in writing why the documents are not provided.

Similar fact evidence in Civil Proceedings

Similar fact evidence may be admitted in civil trials if:

  • the proposed evidence is probative of one or more issues in the current litigation; and
  • there are no good grounds why a court should decline to admit it in the exercise of its case management powers.

Matters relevant to this exercise of discretion include the need to weigh the potential probative value of evidence against its potential for causing unfair prejudice, and the need to consider the burden which its admission would lay on the resisting party. In addition, the court will consider the risk that the admission of similar fact evidence will distort the trial and distract the attention of the Court by expecting it to focus attention on issues collateral to the issue to be decided.

On any application, the Court will have regard to the need for proportionality, expedition and the overriding objective.


Reminder of Claims not Covered by a Settlement / Compromise Agreement

A brief reminder of the employment tribunal claims which cannot be waived by means of a settlement agreement (or compromise agreement).

The following employment claims can only be settled by ACAS conciliation:

  • Claims for failure to inform and consult with appropriate representatives on collective redundancies. However, it is possible to use a settlement agreement to compromise an individual employee’s right to bring a claim for failure to pay a protective award.
  • Claims for failure to inform and consult or failure to pay the compensation that is equivalent to the protective award under TUPE, as well as claims for failure to provide employee liability information under TUPE.
  • Claims under the Agency Workers Regulations in relation to regulation 5 (right to equal treatment following a qualifying period), regulation 12 (access to collective facilities and amenities), regulation 13 (access to employment vacancies) and regulation 17(2) (right not to be subjected to a detriment).
  • Claims for breach of regulations 5, 6 and 9 under the Employment Relations Act 1999 (Blacklists) Regulations 2010.

The following employment claims do not have any statutory mechanism for settlement:

  • The right to statutory maternity pay, statutory paternity pay or statutory adoption pay as there is an absolute restriction on contracting out of these payments.
  • Claims for failure to notify the right to request working beyond retirement, and breach of right to be accompanied at a meeting to discuss retirement.

If you are an employer requiring advice on drafting a settlement agreement, or, you are an employee requiring advice on entering into a settlement agreement, contact us today.