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Vital legal guidance at a time of change
 
 
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Legal Research

This Practice Note sets out certain key cases and associated relevant content relating to material adverse change clauses (MAC) in a financing context. The cases are divided by topic area and include:

  1. interpreting a MAC clause

  2. acceleration based on a MAC clause

Interpreting a MAC clause

Names of parties Judgment date Case summary Relevant content
Grupo Hotelero Urvasco v Carey Value Added [2013] EWHC 1039 (Comm) 26 April 2013 This case reiterates that ordinary rules of contractual interpretation apply to MAC clauses stating: 'The approach of the English courts is to give effect to what the parties have stipulated in their agreement, applying well settled rules as to the interpretation of contracts.' Case: Arnold v Britton [2013] EWCA Civ 902

Practice Notes:
—Contract interpretation—the guiding principles
—How to approach a contractual interpretation dispute—a practical guide
—Contract disputes—key and illustrative decisions
Grupo Hotelero Urvasco v Carey Value Added [2013] EWHC 1039 (Comm) 26 April 2013 This case gives guidance on what is meant by ‘material’ and’materially adverse’.
A change can be regarded as materially adverse if it would have caused the lender not to lend at all or to lend on significantly more onerous terms (eg as to margin, maturity or security) or if it substantially affects the borrower's ability to repay, or more generally, significantly increases the risk assumed by the lender.
A temporary change is unlikely to be treated as material
An event, change or circumstance is unlikely to be material if the lender would still have provided funding on similar terms had it existed at the time the facility agreement was entered into. A lender cannot rely on a MAC clause if it was aware of the circumstances or if they were foreseeable at the time the loan was made.
When considering whether a MAC or MAE event has occurred or not, the courts will take into account certain factors such as the presence of insurance or warranty cover or any commitment from shareholders of the borrower to provide equity support to mitigate the effects of the adverse events or circumstances
Practice Note: Material adverse change and material adverse effect in facility agreements

Article: Carey v Urvasco: the application of ‘material adverse change’ and ‘insolvency event of default’ clauses (2013) 6 JIBFL 389
Grupo Hotelero Urvasco v Carey Value Added [2013] EWHC 1039 (Comm) 26 April 2013 This case also gives guidance on what is meant by ‘financial condition.’ An assessment of a company's financial condition should begin with its position as shown in the financial statements at the time and would not usually include other external factors such as business or prospects unless specifically included in the clause (although other factors may be taken into account, such as ceasing to pay bank debts).
The court was influenced in its decision by factors in the specific case, including the reference in the clause to ‘consolidated if applicable’
Practice Note: Material adverse change and material adverse effect in facility agreements
Decura IM Investments v UBS [2015] EWHC 171 (Comm) 30 January 2015 The court confirmed that 'material' in the context of a provision similar to a MAC would usually mean 'significant' or 'substantial' and that it would apply an objective test in the absence of indications otherwise in the relevant agreement. Practice Note: Material adverse change and material adverse effect in facility agreements

Article: Are courts undermining the flexibility of the MAC clause in finance documents? (2015) 8 JIBFL 485
Thomas Witter Ltd v TBP Industries Ltd [1996] 2 All ER 573 15 July 1994 In this case the court looked at the interpretation of the following representation: ‘there has been no materially adverse change [since 1988] in the financial or trading position of the Business and the Business has been carried on in the ordinary course and in the same manner (including nature and scale) as immediately before the 31st December 1988.'
The court looked at whether 'financial or trading position' included both the balance sheet and current profitability. The judge commented: ‘I have little doubt it included the latter—everything that a purchaser would want to know about the business, especially current profitability and performance against budget. 'Material' must be viewed through the eyes of the purchaser: what is 'material' to him is what matters.’
There is also a suggestion that the court agreed that ‘what had to be affected was the long-term likely profitability—the maintainable profits,’ ie, not a one off
 
Levison v Farin [1978] 2 All ER 1149 4 November 1977 This case gives guidance on what is regarded as a material adverse change. In the construction of a warranty in a sale and purchase agreement between the completion date and balance sheet date, a 20% drop in the net asset value of a company in four months was regarded as material. Practice Note: Material adverse change and material adverse effect in facility agreements
Names of parties Judgment date Case summary Relevant content
Grupo Hotelero Urvasco v Carey Value Added [2013] EWHC 1039 (Comm) 26 April 2013 This case reiterates that ordinary rules of contractual interpretation apply to MAC clauses stating: 'The approach of the English courts is to give effect to what the parties have stipulated in their agreement, applying well settled rules as to the interpretation of contracts.' Case: Arnold v Britton [2013] EWCA Civ 902

Practice Notes:
—Contract interpretation—the guiding principles
—How to approach a contractual interpretation dispute—a practical guide
—Contract disputes—key and illustrative decisions
Grupo Hotelero Urvasco v Carey Value Added [2013] EWHC 1039 (Comm) 26 April 2013 This case gives guidance on what is meant by ‘material’ and ‘materially adverse’.
A change can be regarded as materially adverse if it would have caused the lender not to lend at all or to lend on significantly more onerous terms (eg as to margin, maturity or security) or if it substantially affects the borrower's ability to repay, or more generally, significantly increases the risk assumed by the lender.
A temporary change is unlikely to be treated as material
An event, change or circumstance is unlikely to be material if the lender would still have provided funding on similar terms had it existed at the time the facility agreement was entered into. A lender cannot rely on a MAC clause if it was aware of the circumstances or if they were foreseeable at the time the loan was made.
When considering whether a MAC or MAE event has occurred or not, the courts will take into account certain factors such as the presence of insurance or warranty cover or any commitment from shareholders of the borrower to provide equity support to mitigate the effects of the adverse events or circumstances.
Practice Note: Material adverse change and material adverse effect in facility agreements

Article: Car...
Read More > 5th Jun

This Practice Note sets out the key issues which are relevant to real estate finance during the coronavirus (COVID-19) outbreak.

For information on the general issues arising from the coronavirus outbreak that are likely to be of interest to banking & finance lawyers in general, see Practice Note: Coronavirus (COVID-19) implications for Banking & Finance lawyers and, in particular:

  1. Force Majeure

  2. Execution of documents

  3. Brexit

  4. LIBOR

  5. Regulation for banking lawyers

  6. Restructuring, and

  7. Corporate

For information on general lending issues arising from the coronavirus outbreak, see Practice Notes: Coronavirus (COVID-19)—implications for lending transactions and Coronavirus (COVID-19)—Banking & Finance frequently asked questions.

The impact of coronavirus on the real estate finance (REF) market is likely to go to the heart of most transactions, affecting property values, rental cashflow and construction.

Property values and valuations

The focus of a real estate finance transaction is the property and its value. Lenders will obtain a valuation of the property as a condition precedent to the first drawdown and then will typically have the right to receive valuations of the property at the cost of the borrower at regular intervals throughout the life of the loan—for example, annually and then at any time when a default is continuing or is likely to occur as a result of that valuation.

For information on valuations, see Practice Note: Real estate finance—valuers and valuation provisions in facility agreements.

Property inspections for valuations

Inspecting properties to carry out valuations is likely to be difficult or even impossible as a result of the restrictions on movement arising from the coronavirus outbreak. Even though the lender may have the right to request a valuation of the property under the facility agreement, it may not be possible for the valuer to gain access in practice. Desktop valuations are unlikely to be an adequate substitute for physical inspections.

Property values and loan to value

Economic factors arising from the coronavirus outbreak will mean that property values are likely to drop. Market comparison data for valuations is also likely to be less representative of current property values. As a result, property valuations are being caveated with assumptions regarding the impact of coronavirus and the Royal Institute of Chartered Surveyors (RICS) has issued specific wording for use in valuations where the valuer/surveyor has concluded that there is material uncertainty as to the value of a property. For more information, see the RICS’s Valuation Practice Alert—Coronavirus.

One of the key financial covenants in a real estate finance transaction which is likely to be affected as a result of issues with valuations is the loan to value ratio. Breach of a loan to value covenant will typically give rise to an event of default. Lenders should review any assumptions or qualifications in their valuations as well as the exact wording of their finance documentation before calling an event of default based on a loan to value breach.

For information on financial covenants in real estate finance transactions, see Practice Note: Real estate finance—financial covenants—Common financial covenants in a real estate finance transaction.

Rental income and cashflow in investment facilities

Dealing with requests for rent holidays and rent reductions

Cashflow from rental income lies at the heart of every real estate finance investment transaction. With properties standing empty and the evolving uncertainties in the market, tenants are requesting rent holidays or rent reductions. In real estate finance investment facilities, the borrower uses its rental income to repay the loan. Any reduction in rental income is likely to lead to the borrower being unable to service its loan.

If a borrower agrees a rent holiday or rent reductions with its tenant, this will also have an impact on cashflow covenants in real estate finance investment facilities, in particular, forward-looking covenants like projected interest cover ratios which measure the projected net rental income to be received during a relevant period against the projected interest costs for the same period. Even before any rent holiday or rent reduction is agreed with a tenant, it will be important to check the exact wording of the projected interest cover ratio test to see whether it is dependent on rental income that is due to the borrower under the terms of the lease or on rental income that is expected to be received by the borrower and which takes into account a tenant’s intention not to pay rent for a short period. Breach of such financial covenants are likely to give rise to an event of default.

For information on financial covenants in real estate finance transactions, see Practice Note: Real estate finance—financial covenants—Common financial covenants in a real estate finance transaction.

Borrowers should check the provisions of the relevant facility documentation before agreeing any rent reduction or rent holiday with their tenants to check whether they need lender consent for any such change.

Non-payment of rent in commercial leases—protections for tenants

The Coronavirus Act 2020 (CA 2020) (which took effect from 26 March 2020) has introduced a temporary restriction on forfeiture for non-payment of rent in England and Wales in relation to commercial leases (see CA 2020, s 82). This captures occupational leases in the context of a typical real estate finance investment facility and the restriction applies from 26 March 2020 to 30 June 2020 (and may well be extended).

Other types of enforcement action available to a landlord such as commercial rent arrears recovery, service of a statutory demand or a winding up petition, are also subject to limitations.

For more information, see Practice Note: Coronavirus (COVID-19)—implications for property—Coronavirus Act 2020—restrictions on forfeiture, protection from eviction etc. and Coronavirus (COVID-19)—implications for property—Commercial leases—impact of the coronavirus.

A typical REF facility agreement will require the borrowe...

Read More > 5th Jun

This Practice Note considers the steps which a business can take to review its commercial contracts with a view to extracting maximum value from them and minimising costs under them. The Practice Note explains the circumstances which might prompt a contract review, what should be reviewed and who should be involved in the review process. It also explains the key elements of the contracts reviewed from both a customer’s and a supplier’s perspective.

Purpose of review

A review of existing commercial contracts at whatever point in the economic cycle is beneficial for the purpose of both extracting the maximum value from them; minimising exposure to unnecessary costs; and avoiding being tied into a contractual relationship with a company which is itself suffering financially.

Dependent upon whether the interests of the customer or the supplier are of concern, strategies for reducing exposure to the risk of financial difficulties include:

  1. terminating the contract or otherwise negotiating an exit from it

  2. achieving savings through contractual provisions such as benchmarking or ‘most favoured customer’ clauses

  3. achieving value through contractual provisions such as for continuous improvement, exclusivity, price review and minimum purchase obligations

  4. achieving security through payment terms and retention of title, guarantee or other security provisions, and

  5. re-negotiating individual contract terms such as price, term and notice period

A business may also find itself in the position of reviewing existing contracts because it wishes to centralise its spending, consolidate its business units or otherwise change the set-up of its contractual relationships if they no longer reflect the business direction and commercial requirements which it has any longer. It may also be reviewing a commercial contract prior to its execution with a view to setting it up in such a way as to minimise exposure to any financial risk generally.

Whatever the background to the review, it is best practice to aim to create commercial contracts which offer a business flexibility and allow it to keep its commercial options open.

What should be reviewed?

A contract review should include standard terms and conditions with both suppliers and customers and any bespoke contracts with the same, together with business contracts which touch every business area whether it be IT, purchasing, product, sales and marketing, office services, facilities maintenance, logistics or outsourcing. For information on standard terms and conditions, see Practice Notes: Key terms and conditions in contracts, Standard terms and conditions—advantages and disadvantages, and Standard terms and conditions—incorporation.

In terms of priorities, all contracts should be reviewed as all have the potential to produce a cost saving or bring about a value benefit, but it makes sense to focus initially on those contracts which are larger in terms of either volume or income/cost. Don’t be put off by a contract which appears to contain no opportunity to exit or re-negotiate its terms, the commercial reality is that many reviews and re-negotiations do happen outside of contractual review periods where either the commercial relationship, economic pressure or other incentive permits.

Who should review?

The pressure for a commercial contract review may arise from any corner of a business, but it is most likely that a legal professional will carry out the review itself. It is prudent for the reviewer to work with both the finance and commercial teams within the business so that any post-review recommendations take on board the commercial relationship which may be affected by the review and the financial requirements which it may now be necessary for the contract to operate under.

Considerations for a supplier

Considerations for a supplier tend to be concerned with the continuing credit-worthiness of its customers and their ability to make timely payments. It is also important for a supplier to ensure that the value of any goods or services which it has supplied (or which it is investing in the supply of) is balanced against the timing of payments received and/or other security provided to it by the customer. In particular:

  1. a credit check should be carried out against any new customer, and intermittently against existing customers, to ensure that credit and payment terms provided to a customer within a contract are appropriate to the level of risk suggested by the credit report. Supplier businesses should also consider obtaining credit insurance in respect of their customers, or specific ones

  2. the most favourable position for a supplier is to obtain payment in advance from a customer, or alternative staged payments which cover the supplier’s exposure to risk over the life of a contract. Where it is not possible to obtain such favourable payment terms or credit is offered, consideration should be given to the drafting of the invoicing and payment terms clauses within a contract. Having the right to invoice, say, monthly or quarterly in advance and for payment terms to be within x days of date of invoice, are preferable to invoicing at the end of either the month or quarter in question and for payment terms to be calculated from receipt (instead of date) of invoice. These individual days can mount up considerably over the life of a contract, and every credit day offered represents a cost to the supplier. For more information, see Practice Note: Price, payment terms and interest

  3. even where a credit check produces a favourable result for a customer, don’t assume that the customer’s financial position will always remain so secure. Where credit terms are offered, it is worth attempting to negotiate the right to withdraw credit terms and/or reduce payment terms in defined circumstances, eg where a customer’s credit rating drops below a particular level. Appropriate credit controls should be exercised throughout the life of the contract to ensure timely payment by the customer, and in the absence of timely payment, to ensure that options to terminate any credit lines offered to the customer, or even the contract itself, are considered at appropriate intervals

  4. a supplier’s contract should set out clearly what the position is in the event of the insolvency of either party. Make sure insolvency (or threat of it) automatically terminates the contract (the ...

Read More > 5th Jun

Coronavirus (COVID-19): This Practice Note contains guidance on subjects potentially impacted by procedural changes in response to the coronavirus (COVID-19) outbreak. For updates on key developments and related practical guidance on the implications for lawyers, see: Coronavirus (COVID-19) toolkit.

This Practice Note provides practical guidance on how to execute documents properly when one or more parties to a contract are not physically present. This is sometimes known as virtual signing or virtual closing.

Mercury Tax Case

The guidance is consistent with the Law Society's guidance, made on 16 February 2010 in response to the decision in the Mercury Tax case.

The Mercury Tax case considered the effectiveness of pre-signed signature pages. In that case, participants in a tax avoidance scheme signed signature pages in draft deeds which were then detached and attached to final, substantially different versions of those documents. HMRC’s challenge to the validity of those deeds was upheld by Underhill J who held that the parties must be taken to have regarded signature as an essential element in the effectiveness of the documents. The common understanding was that the document to be signed exists as a discrete physical entity (whether in a single version or in a series of counterparts) at the moment of signing.

In its guidance, the Law Society suggests that the Mercury Tax decision is limited to its facts. This has been questioned in Bioconstruct GmbH v Winspear where the Mercury Tax case was held to have potentially broader application.

The judge in Bioconstruct GmbH v Winspear did not find anything in Underhill J’s analysis in the Mercury Tax case to indicate that it was influenced by that case arising in the context of a tax avoidance scheme and that, further, there was no basis on which to so restrict that analysis. It was presumed, in the absence of evidence to the contrary, that the parties must be taken to have regarded signature of the same physical document as being essential to its effectiveness.

Pending further legal developments practitioners should take care to closely follow the statutory requirements for the execution of deeds and the Law Society’s guidance, particularly when executing deeds by virtual means using pre-signed signature pages. All parties must sign the very final, unaltered document. For more detail, see News Analysis: Deed invalidated by affixing pre-signed signature pages to altered document (Bioconstruct GmbH v Winspear).

For further information on the distinct topic of electronic signatures in the context of business-to-business commercial contracts (including the Law Commission’s 2019 report on the electronic execution of documents), see Practice Note: Electronic signatures.

For an example of a counterparts clause that provides for virtual execution, see Precedent: Counterparts clause.

If executing a deed which will form part of an application to HM Land Registry regard must be had to HM Land Registry requirements for the execution of deeds. Failure to execute a deed in the form required by HM Land Registry can lead to delays in the application for registration being completed or even to the application itself being cancelled.

For more information and links to current HM Land Registry guidance, see Practice Note: Execution of deeds—Land Registry requirements.

Initial considerations

Consider first which type of document your client is executing. Deeds, guarantees to be executed as deeds and contracts for the sale and transfer of real property may only be virtually executed using option 1, below. However, all three of the following options are appropriate in the case of guarantees that are not to be executed as deeds and simple contracts.

Note that these are guidelines that are applicable only to England and Wales. Where one or more signatories to a contract are executing or are incorporated outside England and Wales these guidelines may not fulfil requirements placed on those parties for the valid execution of the document. Practitioners should consult the legal advisers acting on behalf of the other signatories in order to ensure that virtual execution is possible and that the option chosen fulfils any requirements that the law of the other parties' jurisdiction places upon them.

The Law Society guidance does not comment specifically on the witnessing of deeds in a virtual context (for example, where that is required by section 1(3) of the Law of Property (Miscellaneous Provisions) Act 1989 (LP(MP)A 1989)). However, the Law Commission, in its 2019 report on the electronic execution of documents and Man Ching Yuen v Landy Chet Kin Wong, First-tier Tribunal (Property Chamber), 2020 (ref 2016/1089) (not reported by Lexis Nexis®) suggest that a witness should be physically present to witness the signature of a deed and that remote witnessing may not satisfy the requirements of LP(MP)A 1989, s 1(3). For more details see Practice Note: Execution formalities—witnesses and News Analysis: Can a deed be witnessed remotely and attested latterly? (Man Ching Yuen v Landy Chet Kin Wong).

Option 1—email of document and signed signature page(s)

When this option is appropriate

This option is appropriate for the execution of deeds, contracts for the sale and transfer of real property, simple contracts and all types of guarantee. It is only possible to use this option where the parties to the document have already agreed all of its terms and a finalized version, ready for signature, is available.

Process of execution

In order to validly execute a document:

  1. obtain the agreement of all parties (and/or their legal advisers) to use of the process and confirm which document format is preferable (Word or PDF format); for convenience, and especially where there are more than two signatories, the parties may agree that a single legal adviser be responsible for coordinating the execution, although this is not necessary

  2. forward the finalised version of the document, including signature page(s), to all parties, or their legal advisers, in the agreed format via e-mail (it may be preferable to include the...

Read More > 5th Jun

Coronavirus (COVID-19): Note that from 26 March 2020 until 30 September 2020 under section 81 and Schedule 29 of the Coronavirus Act 2020:

  1. notices to quit proceedings for possession of protected tenancies under the Rent Act 1977 must give at least three months’ notice (achieved by way of providing that section 5(1) of the Protection from Eviction Act 1977 (validity of notices to quit) is to be read, in relation to Rent Act notices to quit given by the landlord during the relevant period, as if the reference to four weeks were a reference to three months)

  2. notices of intention to commence proceedings for possession of statutory tenancies must be provided under section 3 of the RA 1977, and they must give at least three months’ notice

  3. notices of proceedings seeking possession, or termination and possession of secure tenancies under section 83 of the Housing Act 1985 must not specify a date for possession proceedings earlier than three months from the date of the notice

  4. notices seeking possession of flexible tenancies under section 107D of the Housing Act 1985 must give three months’ notice

  5. notices of proceedings for possession of assured tenancies under section 8 of the Housing Act 1988 (HA 1988) must not specify a date for possession proceedings earlier than three months from the date of the notice

  6. notices seeking possession of assured shorthold tenancies under section 21 of the HA 1988 must not specify a date for possession earlier than three months from the date of the notice

  7. notices of proceedings for possession in respect of introductory tenancies under section 128 of the Housing Act 1996 must specify a date not earlier than three months from the date of the notice

  8. notices of proceedings for possession in respect of demoted tenancies under section 143E of the Housing Act 1996 must specify a date not earlier than three months from the date of the notice

Also note that from 27 March 2020 under the Civil Procedure Rules Practice Direction 51Z (CPR PD 51Z):

  1. paragraph 2—all proceedings for possession brought under the CPR Part 55 and all proceedings seeking to enforce an order for possession by a warrant or writ of possession are stayed for a period of 90 days from 27 March 2020. (Note however that CPR PD 51Z has been am...

Read More > 5th Jun

Notice to complete

To: [insert recipient's name and address]

Property: [insert property details]

We:

  1. 1

    refer to the contract dated [insert date] by which you agreed to [buy the Property from the Seller OR sell the Property to the Buyer];

  2. 2

    state that the sale of the Property has not been completed on the date fixed in the contract for completion and that the [Seller OR Buyer] is ready able and willing to complete;

  3. 3

  4. give you notice under condition 6.8 of...

Read More > 5th Jun

Notice to Former Tenant or Guarantor of Intention to Recover Fixed Charge (Landlord and Tenant (Covenants) Act 1995, Section 17)

To: [insert full name of tenant or guarantor] of [insert address]

Important—the person giving this notice is protecting the right to recover the amount(S) specified from you now or at some time in the future. There may be action which you can take to protect your position. Read the notice and all the notes overleaf carefully. If you are in any doubt about the action you should take, seek advice immediately, for instance from a solicitor or citizens advice bureau.

  1. 1

    This notice is given under section 17 of the Landlord and Tenant (Covenants) Act 1995 (see Note 1)

  2. 2

    It relates to [insert address and description of the property] let under a lease dated [insert the date in its full format DD-Month-Year] and made between [insert full name of original landlord] and [insert full name of original tenant] [and (3) [insert full name of original guarantor]] [of which you were formerly tenant OR in relation to which you are liable as guarantor of a person who was formerly tenant].

  3. 3

    [I OR We] as landlord ('Landlord' for these purposes includes any person who has the right to enforce the charge) hereby give you notice that the fixed charge(s) of which details are set out in the attached Schedule [is OR are] now due and unpaid, and that [I OR we] intend to recover from you the amount(s) specified in the Schedule [and interest from the date and calculated on the basis specified in the Schedule]. (see Notes 2 and 3)

  4. 4

  5. [There is a possibility that your liability in respect of the fixed charge(s) detailed in the Schedule will subsequently be determined to be for a greater amount. (see Note 4)]

  6. 5

    All correspondence about this notice should be sent to the landlord/landlord's agent at the address given below.

Notes

1

The person giving you this notice alleges that you are still liable for the performa...

Read More > 5th Jun

This note aims to:

  1. provide practical guidance to shareholders of a distressed/insolvent company

  2. explain the position of shareholders in most types of corporate insolvency/restructuring situations

  3. provide advice on what a shareholder can do to maximise their position if a company becomes distressed

This note provides guidance to put shareholders in the best position possible when the company enters the 'zone of insolvency'. Whilst a company is operating normally, the interests of its creditors and shareholders are generally aligned. However, once it enters the 'zone of insolvency', the duties of the directors of the company switch to being owed to the creditors (see Practice Note: Directors’ duties: companies in financial difficulties and News Analysis: Directors' duties—a practical guide for insolvency practitioners). As to when the duties switch, Hellard v Carvalho in the matter of HLC Environmental Projects (in liquidation) found that definite insolvency is not a prerequisite for the duty to creditors to arise. Rather, the underlying principle is that directors are not free to take action which puts at real (as opposed to remote) risk the creditors' prospects of being paid, without first having considered their interests rather than those of the company and its shareholders. However, if a company is going to be able to pay its creditors in any event, there is no such constraint on the directors. Exactly when the risk to creditors' interests becomes real will be judged on a case-by-case basis (see News Analysis :Directors' duties and assessing insolvency).

Relevant factors

The extent to which shareholders' views will be taken into account on a restructuring or insolvency will depend on various factors, including:

  1. whether there (i) is a sole or a small number of shareholders who can co-ordinate together or (ii) are numerous shareholders with relatively small shareholdings (more difficult to co-ordinate and less incentivised to invest further time and money)

  2. whether its a (i) private company, where the majority shareholders are likely to be aware of the problems, have a presence on the board and may be prepared to invest new equity (especially if they are a private equity(PE) house) or (ii) public company, with a wide shareholder base, subject to strict listing rules and requirements to make public announcements

  3. whether a restructuring is possible (ie survival of the company) and if so, whether it requires shareholder consent

  4. where value breaks (see Practice Note: Where the value breaks and negotiating strength)

  5. whether the existing shareholders are prepared to inject more equity

Reasons for distress and the need to act quickly

The reason for the current distress may be due to various reasons, including:

  1. an asset or part of the business (eg a legacy factory unit) is loss-making and draining resources

  2. rapid growth by acquisition means new businesses have not been properly integrated

  3. loss of a major customer

  4. loss of a major supplier

  5. high pensions liabilities

  6. base costs have increased (eg airlines can be hit by increased fuel costs)

It's important to understand the reasons for the current financial difficulties. For a successful restructuring, there must be a viable underlying business worth fighting to preserve, even if it's currently hampered by unsustainable debt servicing requirements.

It's well known that the earlier restructuring experts are appointed, the more restructuring options are available. If shareholders wait until the company can’t pay the staff payroll, has no headroom left under existing banking facilities and is close to breaching bank covenants, the options for restructuring are more limited—see Figure 1 'Diminishing Options'.

$1

As time goes on, options are reduced, eventually leaving liquidation as the only result (often with no returns to shareholders). If shareholders fail to act quickly, value may quickly be eroded and they may lose their chance to get a seat at the negotiating table. Although some write-off is almost inevitable, acting quickly will maximise the likelihood of agreeing a mechanism where some future upside is preserved for existing shareholders. For guidance on specific types of restructuring, see: Restructuring tools—overview.

Order of priority of payment

Unfortunately, shareholders rank at the bottom of the order of priority of payment in a formal insolvency, so rarely see any returns, unless they also have claims as a creditor (eg under a shareholders loan—see below). Shareholders will need to act quickly to try and avoid insolvency and retain some equity stake.

See Practice Note: Waterfall of payments—a comparative guide for greater detail.

Equity cures

Most senior lending facilities will contain provisions giving shareholders a right to inject further equity to cure various covenant breaches, and so delay or avoid enforcement by senior lenders. However there may be a cap on the number of equity cures which can be given during the lifetime of the loan and also a prohibition on using them in consecutive testing periods. To be prudent, the shareholder should invest sufficient funds to ensure that it will not need to give numerous further equity cures in breach of these limits, unless the cure rights provide that only an amount sufficient to cure the financial covenant breach can be invested.

The shareholder will need to check the terms of the equity cure as it will want to ensure that the funds are invested in the business, rather than used to pay down bank debt. Typically the money may be placed on deposit (to be counted as income) or an investment of further funds for the use of the business. It is not usually possible to split the funds injected.

The terms of the cure rights will set out specific circumstances when they can be used. This could be significant if the sponsor's aim is to prevent lenders enforcing and will succeed if the equity cure can be used before a default takes place.

It's also important to consider any other ter...

Read More > 5th Jun

This Practice Note considers the impact of the coronavirus (COVID-19) pandemic on contentious trusts and estates.

For guidance on the wider impact of the coronavirus across all Practice Areas, see: Coronavirus (COVID-19) toolkit.

For general dispute resolution guidance, see Practice Note: Coronavirus (COVID-19) implications for dispute resolution.

The six-month time limit to make a claim under the Inheritance (Provision for Family and Dependants) Act 1975 (I(PFD)A 1975) is due to expire shortly, but I am concerned that it might not be possible to engage with the other side and I am concerned about issuing the claim due to potential coronavirus (COVID-19) related issues. What should I do?

An action under the Inheritance (Provision for Family and Dependants) Act 1975 (I(PFD)A 1975) should generally be commenced before the expiration of six months from the date of a grant to the estate. An application after that date can only be made with the permission of the court.

See I(PFD)A 1975, s 4:

‘An application for an order under section 2 of this Act shall not, except with the permission of the court, be made after the end of the period of six months from the date on which representation with respect to the estate of the deceased is first taken out [(but nothing prevents the making of an application before such representation is first taken out)].’

See Practice Note: Family provision claims—preliminary issues (see section ‘Time limits’).

The question of issuing a claim with the court’s permission after the six-month period has expired has been considered by the courts in the recent cases of (among others):

  1. Cowan v Foreman—see News Analysis: Court of Appeal allows Cowan appeal and clarifies the status of standstill agreements in family provision claims (Cowan v Foreman)

  2. Begum v Ahmed—see News Analysis: Begum v Ahmed (personal representative of the estate of Mohammed Yousaf Khan, deceased)

In Cowan and Begum the six-month time limit had already expired. Contrast the situation described in this question where the six-month time limit has not yet expired. In these circumstances practitioners could face a negligence claim if they do not protect their client’s position by preserving their claim, as if the court does not choose to exercise its discretion under I(PFD)A 1975, s 4, then the claim will be time barred. Remember the power to extend time under I(PFD)A 1975 belongs to the court.

There are usually two options to consider in these circumstances:

  1. entering into a standstill agreement with the other side

  2. issuing proceedings

On the facts of this question the concern is about being able to engage with the other side. Therefore, a standstill agreement is unlikely to be feasible, as this would involve agreement of the terms of the standstill with the other party. For guidance on standstill agreements, see:

  1. News Analysis: Court of Appeal allows Cowan appeal and clarifies the status of standstill agreements in family provision claims (Cowan v Foreman)—this provides guidance specific to I(PFD)A 1975 claims

  2. Practice Note: Standstill agreements to suspend or extend limitation—this provides general dispute resolution guidance on standstill agreements

On the facts of this question it is difficult or not possible to engage with the other side, presumably due to coronavirus resulting in substantial illness. In these circumstances the applicant’s position should be protected by issuing proceedings, often referred to as ‘protective’ proceedings. The usual CPR 8 provisions will apply. See Practice Note: Practice and procedure—civil procedure—contentious trusts and estates (see section ‘CPR Part 8)’.

Note that the claim form and evidence must then be served within four months of the claim form’s issue (see CPR 7.4 and CPR 7.5, which CPR PD 8A para 4.1 confirms applies to Part 8 claims). If they are not served within the four-month deadline, it is possible that the claim will become time-barred.

In the event that you commence ‘protective’ proceedings, you may wish to consider whether it is appropriate to seek an order to stay the claim. For general dispute resolution guidance, see Practice Note: Stay of proceedings—when can you apply to stay a claim?

Finally, if it is not possible to obtain the client’s physical signature to a statement of truth because they have coronavirus, this can be provided electronically. See Practice Note: Statements of truth—Using an electronic signature.

What steps can I take if I am unable to serve a claim form in time due to the coronavirus affecting the postal service?

View from the bar on serving claim forms during coronavirus.

Chris Bryden, 4 King’s Bench Walk

CPR 6 sets out the rules relating to service of a claim form. By CPR 6.3, a claim form may be served personally, by first class post, document exchange or any other service which provides for delivery on the next business day, by leaving it in a place as specified in the part, by fax or other means of electronic communication or any method authorised by the court.

CPR 6.14 provides that a claim form served within the UK in accordance with CPR 6 is deemed to be served on the second business day after completion of the relevant step under CPR 7.5(1). That rule provides that where the claim form is served within the jurisdiction, the claimant must complete the step required in the table contained within it in relation to the method of service chosen, before 12.00 midnight on the calendar day four months after the date of issue of the claim form. Where the method of service chosen is first class or next business day post, the step required is ‘posting, leaving with, delivering to or collection by the relevant service provider’. Therefore, provided that the claim form can be posted, this will amount to deemed service.

It is, however, possible that, in light of coronavirus, the postal service shuts down completely, or due to self-isolation it is impossible to post the claim form. At the time of writing (17 March 2020), there has been no change to the rules relating to court deadlines, though the situation is fluid and this may change. It is essential for practitioners to be vigilant as to temporary rule changes and other methods that HM Cour...

Read More > 5th Jun

This Practice Note considers the impact of the coronavirus (COVID-19) pandemic on charities and provides answers or guidance on some of the main issues arising for practitioners. The latest guidance and updates will be contained in this Practice Note.

For guidance on other matters affecting Private Client practitioners as a result of coronavirus (COVID-19), see the Coronavirus (COVID-19) subtopic.

How will charities ensure that they are properly governed if trustees and staff are not able to work or meet in light of coronavirus (COVID-19)?

This Q&A was produced in partnership with Sam Macdonald and Laetitia Ransley of Farrer & Co.

Many charities will have board or general meetings scheduled over the coming months and be wondering what steps should be taken to observe social distancing measures and protect attendees, particularly those more at risk from coronavirus (COVID-19). Special rules apply to these meetings and will need to be taken into account.

Formal meetings are, of course, only one (albeit an important) aspect of a charity’s operations. Outside formal meetings, staff may be able to work and meet remotely in order to keep services going. Where this is not possible, difficult decisions may have to be made about how best to protect a charity’s beneficiaries and reputation until restrictions around movement are eased.

This Q&A is principally directed to charities which are structured as companies.

Board decisions: one-off decisions where a meeting cannot be held

If a decision is needed at short notice on a specific matter and the trustees are all in agreement, they may act informally where they are unanimous. This has been interpreted by the courts to mean that an agreement signed by all the directors of a company on different dates, and not as a board, is a contract binding the company. By analogy, a decision approved over email by all the trustees on different dates is likely to be valid; though it would of course be desirable to specify a timeframe for responding in order to ensure that decision-making does not become protracted.

Trustees may also consider passing a written resolution in place of a resolution at a meeting—this may be in accordance with provisions in the charity’s governing document, or, in the absence of appropriate provisions, may again rely on the principle of informed unanimous consent.

Taking decisions within a meeting is the better option where time and circumstances allow, as it is considered best practice from a governance perspective and allows trustees to discuss the decision together.

Board decisions: meetings

It is likely that if the current situation continues charities will need to identify a more satisfactory approach to decision-making. Written resolutions are generally only suitable where the matter is straightforward and/or there has already been an opportunity for discussion and debate, and unanimity is never guaranteed (and may be harder to secure if, for example, board members are taken ill).

It is now generally accepted that a board meeting can be held by telephone or other electronic means (such as video conferencing), without an express reference to this in the governing document.

However, if a meeting is held by telephone or other electronic means, it is recommended that:

  1. all those entitled to receive notice give their express consent to the meeting being held by such means

  2. the arrangements are such that each participant can hear all the other participants, and

  3. minutes of any such meeting are circulated to each trustee for approval to ensure they are a correct record of the business transacted

The Charity Commission has published basic guidance for holding trustee meetings during coronavirus (COVID-19).

AGMs: if you go ahead

Provided that there is nothing in the Articles which either expressly or impliedly restricts the holding of electronic or ‘virtual’ meetings, it is in theory possible to attend an annual general meeting (AGM) by electronic means. All participants must however be able to attend, speak (and hear others) and vote at the meeting. Depending on the size of the meeting, this may prove logistically and/or technologically challenging. 

There is no consensus on whether a fully virtual general meeting is permissible under UK law—several bodies have expressed concerns with this practice on the basis that the AGM is the only opportunity that members have to meet and address the entire board. While the position of charities is different in that members do not have a proprietary interest in the charity’s assets, it may nonetheless be felt that postponing the meeting is a more appropriate course of action, and less open to challenge.

If a physical meeting does go ahead, trustees could also encourage the use of proxies and (at the discretion of the board) written submissions by more vulnerable attendees.

AGMs: if you adjourn

If an AGM has not yet been called, there is no difficulty with the trustees identifying a date later on in the year for the meeting, albeit trustees should consider whether delaying the AGM may result in accounts not being approved in time to meet relevant filing deadlines.

If an AGM has already been called (with notices to members sent out) but the trustees do not wish to go ahead, they could consider notifying members of their intention to postpone or adjourn the meeting to a later, more suitable date. 

Postponing a members’ meeting is usually only possible where there is an express power to do so in a charity’s governing document.

For charities without the power to postpone an AGM that has been called, and where circumstances require delaying the meeting’s business until a later time, adjourning it may be a practical option. This means that the meeting will technically take place at the specified time and place (so it must be possible to do that with a few attendees), but will be immediately adjourned on the grounds either that it is inquorate or that it is not appropriate to proceed in the circumstances. A time and place for continuing the meeting can then be notified to members once the position has become clearer. The adjourned meeting will count as a continuation of the original meeting and only the business which was to be transacted at the original meeting can be transacted at it; this does not however prevent the trustees from calling another meeting on the same day, should that prove necessary.

Latest guidance and updates relevant to charities

The latest guidance, updates and developments to date are:

  1. on 30 April 2020, members of the Lords debated the fundraising and organisational challenges faced by the charitable and voluntary sector during the coronavirus (COVID-19) pandemic, see Lords debates challenges facing charitable and voluntary sector

  2. on 8 April 2020, the Chancellor, Rishi Sunak, announced a £750m support package for charities (including hospices and charities helping domestic abuse victims). This package will be divided as follows:

    1. £360m to be directly allocated by government departments

    2. £370m to go to smaller charities (including through a grant to the National Lottery Community Fund), £60m of wh...

Read More > 5th Jun

Companies House has issued guidance for its customers, suppliers and employees on a number of temporary changes it has made to its usual procedures and services in response to the coronavirus (COVID-19) outbreak. This Practice Note summarises the key ways in which company filing and other administrative procedures have temporarily changed due to the crisis.

Extension to accounts filing deadlines

Companies House is encouraging companies to file accounts on time and using online filing procedures if at all possible. However, if a company is unable to file its accounts on time due to the coronavirus outbreak, it can apply to Companies House for an extension to their deadline. Upon an application for an extension due to reasons connected with coronavirus, an automatic and immediate three-month extension to file the accounts will be granted. However, companies must apply for the extension before the original filing deadline. See further in Practice Note: Coronavirus (COVID-19)—impact on annual accounts and reports and LNB News 25/03/2020 65.

Paper filing at Companies House

Companies House is encouraging customers to file forms using online services wherever possible. However, paper forms can still be filed at Companies House offices by posting them to any Companies House office (except the London office), although a delay to usual processing times should be expected. However, it should be noted that there are some documents that are not capable of being filed electronically, including documents relating to:

  1. re-registration

  2. voluntary strike-off

  3. reduction of capital (whether by court procedure or solvency statement procedure)

  4. administrative restoration

  5. an application to make an address unavailable for public inspection

  6. overseas companies filings

  7. European economic interest groupings filings

  8. European companies filings

  9. limited partnerships filings, and

  10. private fund limited partnerships filings

In these cases, companies will have to proceed with paper filing by sending them to one of the Companies House offices (except the London office, which does not have an external post box), but should expect longer processing times.

Same-day filing services

The same-day filing service is unavailable until further notice during the coronavirus outbreak. The same-day filing services is not available for all types of filing, so the temporary suspension will have an impact on the following company procedures and filings:

  1. incorporations of limited companies and limited liability partnerships (LLPs)

  2. changes of name for limited companies and LLPs

  3. simultaneous re-registration and change of name for limited companies

  4. re-registration for limited companies

  5. reduction of capital by solvency statement for limited companies

  6. reduction of capital by court order for limited companies

  7. registration of a UK establishment of an overseas company, and

  8. registration of a limited partnership

This means that for all of the above-listed procedures, the standard filing service will have to be used until Companies House announces that it is recommencing the same-day filing procedures.

Stamp duty payments

In order to stop the spread of coronavirus:

  1. the Stamp Office is temporarily not accepting physical stock transfer forms or any other physical document containing details of the transaction. Until further notice, taxpayers must therefore email an electronic version of the stock transfer form or other instrument of transfer to the Stamp Office using the email address found here. For the duration of these emergency coronavirus processes, it is understood that the Stamp Office will accept e-signatures and will deal with such forms electronically rather than applying a physical stamp. It is understood that further guidance and assurances will be published on ensuring that company registrars won’t face a penalty for registering changes in title based on this new electronic process, and

  2. taxpaye...

Read More > 5th Jun

This Practice Note sets out the current practice regarding the issue of divorce petitions, the phasing out of the regional divorce centres and the introduction of the Courts and Tribunals Service Centres (CTSC). It also provides guidance on the de-linking of divorce and financial remedy applications.

Divorce centres and the Courts and Tribunals Service Centre

HM Courts and Tribunals Service (HMCTS) announced in February 2020 that it is closing, or has closed, some of the regional divorce centres (also referred to as regional divorce units (RDUs)) as a consequence of the move to issue divorce proceedings online. The divorce centres are to be phased out and replaced by an online system based at the new national Courts and Tribunals Service Centre (CTSC) at Stoke on Trent. While HMCTS has referred to plans for additional CTSCs (at Birmingham and Loughborough), it appears at present that all family work is to be dealt with at the Stoke on Trent CTSC.

Previously, in 2015, HMCTS established a network of regional divorce centres within England and Wales to be the main point of entry across the single Family Court for the issue of:

  1. divorce petitions, and

  2. financial remedy applications

All divorce petitions and financial remedy applications had to be sent by post to one of the centres rather than the local Family Court, with the exception of urgent applications that required immediate issue. Most of the uncontested decree nisi applications were considered by legal advisers rather than by district judges.

Petitions could be issued at any of the designated divorce centres.

Attendance in person was possible at one of the centres with a counter service in operation in order to issue a petition with or without a financial remedy application, although HMCTS stated that this would not gain any advantage in terms of the way that the application was handled subsequently. Details of the counter and drop box facilities for each HMCTS region are contained in the Q&A produced by HMCTS at that time providing information about the divorce centres.

Where a hearing is required, it will be listed at a local hearing centre. Litigants have an opportunity to indicate a preferred court where the hearing should take place.

Civil partnership dissolution applications also had to be sent to a divorce centre.

For historical information regarding the divorce centres, see the archived Practice Note: Divorce centres.

In May 2019, in his View from the President’s Chambers, the President of the Family Division, Sir Andrew McFarlane confirmed that the 11 divorce service centres were being phased out over a 12-month period, to be replaced by an online system based in the new national CTSC at Stoke on Trent.

In January 2020, HMCTS confirmed that it had closed divorce centres in Stoke, Wrexham and Port Talbot, and would begin closing centres in Bradford and Nottingham with a view to having them closed within a few weeks, starting with new applications. Centres in Newport, Liverpool, Southampton and Bury St Edmunds will remain open. Communications from HMCTS have made no reference to the centres at Durham and Doncaster.

The closures are as a consequence of the reform programme and the increased move towards online proceedings. Online applications were accepted from litigants in person from May 2018. This was extended to include a small number of solicitors via invitation during 2019 and in December 2019 that was extended to all legal professionals. Since March 2019, digital work relating to online applications submitted by litigants in person has been undertaken in the first of the CTSCs at Stoke on Trent and since October 2019 work relating to applications submitted by legal professionals has also been processed there. HMCTS has said that 40% of all new work is issued online and processed in the CTSC at Stoke on Trent. See Practice Note: Commencing divorce proceedings and drafting the petition—Online divorce service.

HMCTS has indicated that it anticipates that all new divorce petitions will be issued either directly online or via a ‘digital by default‘ process, whereby petitions are lodged at a central point and then scanned onto the digital platform. The intention is to roll out the digital by default process during the first part of 2020. Once rolled out in either the digital or the digital by default path, t...

Read More > 3rd Jun

Coronavirus (COVID-19): Guidance has been issued, including by the President of the Family Division, regarding all proceedings in the Family Court in England and Wales during the coronavirus (COVID-19) pandemic and until further notice, which profoundly affects normal practice, including requirements for the majority of family hearings to be dealt with remotely. For details about the changes to court processes and procedures during this time, see Practice Note: Coronavirus (COVID–19)—news and resources for family lawyers. In addition, the Coronavirus (COVID-19) toolkit provides easy access to news, practical guidance and Q&As from across a number of Practice Areas (subject to subscription). This Practice Note sets out the procedure prior to the pandemic and during this period of disruption to the justice system, practitioners should be aware that local practice may vary.

Under the Family Law Act 1996 (FLA 1996) a non-molestation order is an order prohibiting a person (the respondent) from molesting another person who is associated with the respondent or a relevant child. See Practice Notes: Non-molestation orders and Procedure for an application for a non-molestation order.

An occupation order is an order under the FLA 1996 conferring, declaring, restricting or regulating rights of occupation in the family home between parties who are in, or who have been in, certain categories of relationship. See Practice Notes: Occupation orders and Procedure for an application for an occupation order.

Where an applicant wishes to obtain a variation or extension of the terms of an existing non-molestation and/or occupation order, including any power of arrest attached to an occupation order, or a respondent to such an existing order wishes to persuade the court to vary or discharge the order, breach of which is contempt, an application can be made under FLA 1996, s 49.

Applicants

An application to vary, extend or discharge a non-molestation order and/or occupation order may be made by:

  1. the applicant for the existing non-molestation and/or occupation order, or

  2. the respondent against whom the order was granted

In the event that the court made a non-molestation order of its own motion under FLA 1996, s 42(2)(b) the order may be varied or discharged by the court even though no application has been made.

Where the original applicant’s home rights are under FLA 1996, s 31, a charge on the estate or interest of the respondent or of trustees for the respondent, an order under FLA 1996, s 33 against the respondent may also be varied or discharged by the court on an application by any person deriving title under the respondent or under the trustees and affected by the charge.

The respondent will be the applicant to the original application if the application is made by the respondent against whom the order was granted or the respondent to the original order if the application for extension is made by the applicant.

Vulnerable parties

Note that special provision is made in the Family Procedure Rules 2010 (FPR 2010) at FPR 2010, SI 2010/2955, Pt 3A and FPR 2010, PD 3AA as to the participation of, and giving of evidence by, vulnerable persons in family proceedings. The provisions require the court to consider whether a party’s or witness’s quality of evidence may be diminished as a result of vulnerability, and whether it is necessary to make participation directions, including provision for a party or witness to be questioned in court with the assistance of an intermediary. See also News Analysis: Amendments to the Family Procedure Rules 2010 regarding vulnerable parties and Practice Note: Vulnerable persons—participation and evidence in family proceedings.

Funding—legal aid

Under the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO 2012) legal aid may be available in relation to an application for a non-molestation order or occupation order under FLA 1996, Pt IV. Legal aid for non-molestation orders and occupation orders is means and merits tested. Eligibility for legal aid should be considered with the client.

See Practice Note: Eligibility for family legal aid.

Application

The application to vary, extend or discharge an order is made on Form FL403. It may be prudent to attach a copy of the original order if possible.

Whilst FPR 2010, SI 2010/2955, 10.2, (which requires that an application for an occupation order or a non-molestation order must be supported by a witness statement), is not expressly stated to apply to applications to vary, extend or discharge an order, and the application form itself includes a section for the applicant to give brief details of the reason for the application, it is preferable to file a statement in support unless the application is made by consent, although local practice may vary. The witness statement should comply with the requirements of FPR 2010, PD 22A and should be verified by a statement of truth.

If the application is made without notice, the witness statement must state the reasons why notice was not given. In drafting such a statement note should be had of the factors that the court must have regard to when deciding whether to make an order without notice to the respondent under FLA 1996, s 45(2).

If the applicant wishes to keep their (or the child’s) address or contact details confidential, they should complete Form C8—Confidential contact details.

There is no fee payable by an applicant for a non-molesation or an occupation order when applying to vary, extend or discharge such an order. Note that only the respondent’s first attempt to challenge a non-molestation order is free. Any further attempts require a fee of £95.

An application to vary, extend or discharge a non-molestation order or an occupation order should be made to the court which made the original order. The application will be allocated to the level of judge who dealt with the original proceedings.

Service of application

Note that whilst FPR 2010, SI 2010/2955, 10.3 is not expressly stated to apply to applications to vary, extend or discharge, it is suggested however that the rules as to service of the application should be followed in any event.

Application made on notice

Where the application is made on notice the applicant must personally serve on the respondent t...

Read More > 3rd Jun

Coronavirus (COVID-19): Guidance has been issued, including by the President of the Family Division, regarding all proceedings in the Family Court in England and Wales during the coronavirus (COVID-19) pandemic and until further notice, which profoundly affects normal practice, including requirements for the majority of family hearings to be dealt with remotely. For details about the changes to court processes and procedures during this time, see Practice Note: Coronavirus (COVID–19)—news and resources for family lawyers. In addition, the Coronavirus (COVID-19) toolkit provides easy access to news, practical guidance and Q&As from across a number of Practice Areas (subject to subscription).

With particular regard to injunctions under the Family Law Act 1996 (FLA 1996) Her Majesty’s Courts and Tribunals Service (HMCTS) has issued guidance: Coronavirus (COVID-19) contingency arrangements for Family Law Act injunctions which is intended to help make sure injunction applications are prioritised and victims of domestic abuse receive protection as soon as possible. In order to help the courts deal with an application for an injunction under FLA 1996 promptly legal representatives are asked:

  1. to include the words injunction, non molestation, FL401, domestic violence or domestic abuse in the subject line of the email to the court

  2. to complete a draft order using the standard order 10.1.—non-molestation order removing any unnecessary paragraphs—the guidance states that the President of the Family Division urges the use of the standard order template

  3. to include the contact details of the legal representative in the body of the email if they are different from those on the application

  4. not to contact the court by email or telephone within a three-hour period after submitting the application to give court staff time to progress it

Family courts have been asked to create a priority inbox for any emails containing specified words relating to domestic abuse and staff will check the inbox at least every hour. The guidance states that court staff will, also among other things, progress priority cases by referring without-notice injunctions to a judge within three hours of receipt, arrange emergency hearings if required, provide the applicant’s legal representative with an injunction order for service on the day it is made and make immediate arrangements for service if the applicant is unrepresented. Additionally if the judge approves the draft order, and it only has minor amendments and remains legible, the court staff will seal it and email it back to the solicitor, before updating the case management system in order to avoid delay.

This Practice Note sets out the procedure prior to the pandemic and during this period of disruption to the justice system, practitioners should be aware that local practice may vary.

Applications

A non-molestation order under the Family Law Act 1996 (FLA 1996) can only be granted to protect a person associated with the respondent or a relevant child. For details of who may apply for a non-molestation order, see Practice Note: Non-molestation orders—Associated persons.

For the definition of 'molestation' and details of the criteria to be applied when granting a non-molestation order, see Practice Note: Non-molestation orders.

Applications for non-molestation orders are governed by the Family Procedure Rules 2010 (FPR 2010), SI 2010/2955, in particular Pt 10 and the supporting practice direction FPR 2010, PD 10A.

An application for a non-molestation order should be made to the Family Court.

The court may make a non-molestation order:

  1. if an application for the order has been made (whether in other family proceedings or without any other family proceedings being instituted) by a person who is associated with the respondent, or

  2. if, in any family proceedings to which the respondent is a party, the court considers that the order should be made for the benefit of any other party to the proceedings or any relevant child, even though no such application has been made

The application is made on Form FL401, which must be supported by a witness statement verified by a statement of truth. The statement of truth does not have to be sworn. The form of the statement of truth verifying a witness statement should be as follows: ‘I believe that the facts stated in this witness statement are true’. FPR 2010, PD22A sets out the provisions relating to the format and content of witness statements. For further information about drafting a witness statement, see Practice Note: Witness evidence in family proceedings.

If the application is made without notice, the witness statement in support of the application must clearly state why notice has not been given.

No fee is payable in relation to an application for a non-molestation order.

The applicant should prepare a draft order in Form FL404a or using the Standard order 10.1—non-molestation order. See: Drafting the order below.

Funding—legal aid

Under the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO 2012), legal aid may be available in relation to an application for a non-molestation order or occupation order under Part IV of Family Law Act 1996 (FLA 1996). Legal aid for non-molestation orders and occupation orders is means and merits tested. Eligibility for legal aid should be considered with the client.

See Practice Note: Eligibility for family legal aid.

Evidence

In case the matter proceeds to a contested hearing, it is helpful to obtain as much evidence as possible in respect of the allegations made, eg:

  1. medical evidence of the effect of injuries, particularly where the effects are psychological

  2. police records evidencing reports of violence or harassment

  3. witness statements from witnesses other than the applicant

  4. a concise diary or chronology of events

Vulnerable parties

For a victim of domestic abuse the prospect of potentially being cross-examined by the perpetrator of that abuse who may be a litigant in person or facing them in court may in itself be traumatic. This situation could arise at the fact-finding stage of a contested application for a non-molestation or occupation order. Some protection for victims of domestic abuse is now available by reason of FPR 2010, SI 2010/2955, Pt 3A together with FPR 2010, PD 3AA, which make special provision as to the participation of, and giving of evidence by, vulnerable persons in family proceedings. These provisions require the court to consider whether a party’s or witness’s quality of evidence may be diminished as a result of vulnerability, and whether it is necessary to make participation directions, including provision for a party or witness to be questioned in court with the assistance of an intermediary. In relation to applications for orders providing personal protection the court may need to invoke the ground rules hearing and make provision accordingly. See Practice Note: Vulnerable persons—participation and evidence in family proceedings—What are the changes as to the giving of evidence?

Without notice (ex parte) applications

The court may make an order without notice where it considers it is just and convenient.

In determining whether to exercise its powers, the court shall have regard to the circumstances of the case including:

  1. any risk of significant harm to the applicant or relevant child, attributable to the conduct of the respondent, if the order is not made immediately

  2. whether it is likely that the applicant will be deterred or prevented from pursuing the application if an order is not made immediately

  3. whether there is reason to believe that the respondent is aware of the proceedings and is deliberately evading service, and that the applicant or child will be seriously prejudiced by the delay involved in achieving service

On 18 January 2017, the President of the Family Division issued revised guidance on the duration of orders made without notice (ex parte) in family proceedings, which supersedes the guidance issued in 2014, Practice Guidance: Family Court—Duration of Ex Parte (Without Notice) Orders, [2017] Lexis Citation 4. The guidance contains a reminder from the President of the principle applicable to all ex parte (without notice) injunctive orders made by the Family Court or by the Family Division, irrespective of the subject matter of the proceedings or the terms of the order, that a without notice application will normally only be appropriate if:

  1. there is an emergency or other great urgency, so that it is impossible to give any notice, however short or informal, or

  2. there is a real risk that, if alerted to what is proposed, the respondent will take steps in advance of the hearing to thwart the court's order or otherwise to defeat the ends of justice—in an appropriate case this can justify the grant of a non‐molestation injunction without notice, in case the respondent, having been served with an application, further molests their victim or exerts pressure on them to abandon the proceedings

The applicant must file evidence in support of the application stating the reasons why the application is made without notice.

Where an order is made without notice the court must afford the respondent the opportunity to make full representations as soon as is just and convenient at a full hearing.

In J (children) (contact orders: procedure), the Court of Appeal was critical of the failure of the court at first instance to hold a fact-finding hearing in a case in which a without notice non-molestation order which was fixed to run for two years had been made against a father and which prevented him from having any contact with his children. The father had made it plain from the very first hearing that he wished to contest the injunction and that he wished to see his children. The Court of Appeal held that the father was entirely justified in complaining that the without notice injunction, which directly impacted upon his relationship with the children, was allowed to run for over 18 months without any determination of the relevant facts.

The courts approach applications without notice for non-molestation and occupation orders differently. It is recognised that the respondent has no legal right to inflict or threaten violence. Therefore, a without notice non-molestation order does not infringe the respondent’s legal rights. An occupation order, on the other hand, overrides the respondent’s proprietary rights.

In UL v BK, Mostyn J held that an application for ex parte relief can only be justified where the matter was one of 'exceptional urgency' and that, at the very least, short informal notice must be given to the respondent unless it is essential that they are not made aware of the application. No notice at all would only be justified where there is powerful evidence that the giving of any notice would likely lead the respondent to take steps to defeat the purpose of the injunction, or where there is literally no time to give any notice before the order is required to prevent the threatened wrongful act. Cases where no notice at all can be justified are very rare indeed. The order should record on its face the reason why it was satisfied that no or short notice was given. Where no notice, or short informal notice, is given the applicant is fixed with a high duty of candour. Breach of that duty will likely lead to a discharge of the order.

Duration of order

An order may be made for a specified period or until further order.

An order made in ‘other family proceedings’ ceases to have effect if those proceedings are withdrawn or dismissed.

An application can be made by an applicant or respondent to vary, extend or discharge an order and must be made in Form FL403.

In relation to an application to vary or discharge an order made in proceedings for a non-molestation order, no fee is payable where the proceedings are issued by the person who commenced the proceedings.

Duration of ex parte (without notice) orders

The guidance from the President sets out the principles that must be complied with when making an ex parte (without notice) order:

  1. an ex parte (without notice) injunctive order must never be made without limit of time—there must be a fixed end date; it is not sufficient merely to specify a return day and the order must specify on its face and in clear terms precisely when it expires (eg 12 noon on 20 March 2017)

  2. the order must also fix a return day and must specify the date, time and place of the hearing on the return day which should normally be no more than 14 days after the date when the order was made—the length of time that the hearing on the return day is listed for is a matter for the discretion of the judge, having regard to paragraph 6 of the guidance, often a very short listing may well be appropriate

  3. careful consideration should be given to the duration of any order made ex parte (without notice)—many orders will be of short duration, typically no more than 14 days, however in appropriate cases involving personal protection, eg non‐molestation injunctions the order itself can be for a longer period, such as six or even 12 months, provided that the order specifies a return day within no more than 14 days. This is a matter for the discretion of the judge, but a period longer than six months is likely to be appropriate only where the allegation is of long term abuse or where some other good reason is shown. Conversely, a period shorter than six months may be appropriate in a case where there appears to be a one‐off problem that may subside in weeks rather than months

  4. the order must make it clear that:

    1. it was made in the absence of the respondent and that the court has considered only the evidence of the applicant, and

    2. the court has made no finding of fact

    where the evidence is written, it must be identified in the order and where, exceptionally, the court has received oral or other evidence (eg a photograph) that evidence should be recorded on the face of the order or reduced to writing and served with the order

  5. an order made in accordance with FLA 1996, Pt IV must recite that the court has had regard to FLA 1996, ss 45(1)...

Read More > 3rd Jun

Coronavirus (COVID-19): Guidance has been issued, including by the President of the Family Division, regarding all proceedings in the Family Court in England and Wales during the coronavirus (COVID-19) pandemic and until further notice, which profoundly affects normal practice, including requirements for the majority of family hearings to be dealt with remotely. For details about the changes to court processes and procedures during this time, see Practice Note: Coronavirus (COVID–19)—news and resources for family lawyers. In addition, the Coronavirus (COVID-19) toolkit provides easy access to news, practical guidance and Q&As from across a number of Practice Areas (subject to subscription).

Procedural guides provide a step-by-step guide on a wide range of family law matters, including emergency procedures, divorce, children proceedings, financial provision and enforcement. Each guide also includes links to related content including Practice Notes, forms, cases, Precedents and legislation.

Emergency procedures

Domestic abuse

Procedural guide—non-molestation orders

Procedural guide—occupation orders

Procedural guide—Protection from Harassment Act 1997 (civil remedy)

Preservation of assets

Procedural guide—application for a freezing order

Procedural guide—applications to set aside past dealings (Matrimonial Causes Act 1973, s 37)

Procedural guide...

Read More > 3rd Jun

General

The Family Procedure Rules 2010 (FPR 2010), SI 2010/2955, contain guidance on the procedure and forms for specific types of proceedings, eg applications for matrimonial and civil partnership orders, applications for financial remedies, applications for occupation orders and non-molestation orders and applications relating to children and for all other applications made within family proceedings, guidance is found in Parts 18 and 19.

FPR 2010, SI 2010/2955, Pt 18, supplemented by FPR 2010, PD 18A, sets out the procedure for making applications within existing proceedings or proposed proceedings such as where the courts permission is required to make an application and in certain other circumstances set out below.

FPR 2010, SI 2010/2955, Pt 19, supplemented by FPR 2010, PD 19A, sets out the procedure to be followed for applications involving no substantive factual dispute; where there is no form specified by a rule or FPR 2010, PD 5A on which to make an application or a rule or practice direction requires or permits that the Pt 19 procedure be used.

See Practice Note: FPR 2010, Part 19—alternative procedure for applications.

FPR 2010, SI 2010/2955, Pt 20 and FPR 2010, PD 20A provide guidance on applications for interim remedies such as interim injunctions, interim declarations or the preservation of property.

Part 18 applications

All applications for the court's permission should be made under Pt 18 save for those applications for which specific provision is made in other Parts of the FPR 2010.

The Pt 18 procedure may be used if the application is made:

  1. in the course of existing proceedings—an interim application

  2. to start proceedings except where some other Part of the rules prescribes the procedure to start proceedings, or

  3. in connection with proceedings which have been concluded

The Pt 18 procedure does not apply:

  1. to applications where any other rule in any other Part of the rules sets out the procedure for that type of application

  2. if a practice direction provides that the Pt 18 procedure may not be used in relation to the type of application in question

All applications made before proceedings are commenced should be made under Pt 18.

An application for permission to commence proceedings should be made to the court where the intended proceedings will take place. FPR 2010, SI 2010/1995, 5.4 makes general provision in relation to the court in which proceedings should be started.

Pt 18 is supplemented by FPR 2010, PD 18A containing detailed provisions on the operation of the procedure.

The rules provide that the procedure under Pt 18 should be used for applications relating to the following:

  1. an order to prevent decrees nisi being made absolute or conditional orders being made final

  2. an order under the Married Women's Property Act 1882 (MWPA 1882), or the equivalent provision under the Civil Partnership Act 2004 (CPA 2004), within existing financial order proceedings

  3. permission to apply for a financial remedy after overseas proceedings under Part III of the Matrimonial and Family Proceedings Act 1984 or CPA 2004, s 13 or Sch 7, para 46—see Practice Note: Financial relief after ov...

Read More > 3rd Jun

Coronavirus (COVID-19): Guidance has been issued, including by the President of the Family Division, regarding all proceedings in the Family Court in England and Wales during the coronavirus (COVID-19) pandemic and until further notice, which profoundly affects normal practice, including requirements for the majority of family hearings to be dealt with remotely. For details about the changes to court processes and procedures during this time, see Practice Note: Coronavirus (COVID–19)—news and resources for family lawyers. In addition, the Coronavirus (COVID-19) toolkit provides easy access to news, practical guidance and Q&As from across a number of Practice Areas (subject to subscription). This Practice Note sets out the procedure prior to the pandemic and during this period of disruption to the justice system, practitioners should be aware that local practice may vary.

The overriding objective

The Family Procedure Rules 2010 (FPR 2010), SI 2010/2955, Pt 1 sets out the overriding objective.

The overriding objective is to enable the court to deal with cases justly having regard to any welfare issues involved.

See Practice Note: FPR 2010—overriding objective.

The court must further the overriding objective by actively managing cases. Active case management includes the following thirteen elements:

  1. setting timetables or otherwise controlling the progress of the case

  2. identifying at an early stage

    1. the issues, and

    2. who should be a party to the proceedings

  3. deciding promptly:

    1. which issues need full investigation and hearing and which do not, and

    2. the procedure to be followed in the case

  4. deciding the order in which issues are to be resolved

  5. controlling the use of expert evidence

  6. encouraging the parties to use a non-court dispute resolution procedure if the court considers that appropriate and facilitating the use of such procedure

  7. helping the parties to settle the whole or part of the case

  8. encouraging the parties to co-operate with each other in the conduct of the proceedings

  9. considering whether the likely benefits of taking a particular step justify the cost of taking it

  10. dealing with as many aspects of the case as it can on the same occasion

  11. dealing with the case without the parties needing to attend at court

  12. making use of technology, and

  13. giving directions to ensure that the case proceeds quickly and efficiently—robust case management has a place in family proceedings but it also has it’s limits and hearings should not be unnecessarily truncated

Court's powers

A comprehensive list of the court's general case management powers are set out in FPR 2010, SI 2010/2955, 4.1 including to:

  1. extend or shorten the time for compliance with any rule, practice direction or court order (even if an application for extension is made after the time for compliance has expired)

  2. make such order for disclosure and inspection, including specific disclosure of documents, as it thinks fit—disclosure and inspection are explained in FPR 2010, SI 2010/2955, 21.1

  3. adjourn or bring forward a hearing—note that the court may adjourn the proceedings specifically to enable the parties to obtain information and advice about (and with effect from 6 April 2014, consider using) non-court dispute resolution where it considers appropriate

  4. require a party or a party's legal representative to attend the court

  5. hold a hearing and receive evidence by telephone or by using any other method of direct oral communication

  6. direct that part of any proceedings be dealt with as separate proceedings

  7. stay the whole or part of any proceedings or judgment either generally or until a specified date or event

  8. consolidate proceedings

  9. hear two or more applications on the same occasion

  10. direct a separate hearing of any issue

  11. decide the order in which issues are to be heard

  12. exclude an issue from consideration

  13. dismiss or give a decision on an application after a decision on a preliminary issue

  14. direct any party to file and serve an estimate of costs; and

  15. take any other step or make any other order for the purpose of managing the case and furthering the overriding objective

Power to make orders of the court's own initiative

The court can, without a request from either party, exercise its case management powers of its own initiative, except where statute provides otherwise.

The court may choose, although it does not have to, to give anyone likely to be affected by such an order the opportunity to make representations. If so the court must specify when and how such representations must be made.

Where the court proposes to make an order of its own initiative and to hold a hearing to decide whether to do so each party likely to be affected by the order must be given at least five days notice of the hearing.

Where the court has made an order of its own initiative without giving the parties an opportunity to make representations or hearing them, the order must state that the affected parties have the right to apply to have the order set aside, varied or stayed. An application to have such an order set aside, varied or stayed must be made within the period specified by the court and where no peri...

Read More > 3rd Jun

Introduction to common participants in the market

The oil and gas industry is a significant contributor to the UK economy:

  1. it supports around 375,000 jobs (both directly and indirectly)

  2. the industry contributed 0.8% of GDP in the second quarter of 2015 (down from a high of 2.5% in the second quarter of 2008)

  3. the UK is the second largest producer of oil in Europe and the third largest producer of gas

Historically, the industry has been buoyant, and insolvency practitioners have not had much involvement. In 2010, there were just four insolvencies in the sector. However, as has been well documented, in 2015 oil prices hit an all-time low which saw insolvencies in the sector rise to 28 for that year. As a result of its maturity, the UK continental shelf is amongst the more expensive places in the world to produce oil: it costs US$40 to produce a barrel of oil in the UK compared to less than US $5 in Kuwait.

Companies which borrowed money to invest in infrastructure against an assumed oil price of US$75 or US$100 a barrel are now struggling to service the loans. Consequently the distress in the sector has significantly impacted the profitability in the UK, and needed the attention of restructuring and insolvency practitioners. Oil and gas companies are being forced to look for debt restructuring. On balance, they are seeking to refinance on better financial terms that reflects the lower oil price or debt restructuring to avoid default, such as renegotiating terms to extend the payment dates.

The oil and gas industry is composed of:

  1. upstream operations (also known as the exploration and production (E&P) sector) ie searching for and recovering or producing crude oil and natural gas

  2. the midstream sector ie processing, treating, storing and transporting crude oil and natural gas; and

  3. downstream operations ie refining crude oil and then selling and distributing natural gas and products derived from crude oil (midstream operations are sometimes incorporated into the downstream sector)

This Practice Note focuses on upstream operations and, in particular, the UK offshore model.

There are a large number of participants in the area:

  1. E&P companies—companies which hold the licenses to extract oil and gas

  2. oilfield service providers (OFS)—companies which provide support services to the oil and gas industry throughout its cycles of exploration, appraisals, development and decommissioning

  3. oilfield equipment manufacturers—producers of the specialist equipment used in the E&P sector

  4. investors—given the financial distress in the sector, 'non-traditional investors' such as private equity houses and integrated chemical groups are entering the sector

  5. Oil & Gas UK—the UK industry body

  6. government agencies—the industry is heavily regulated by a large number of government agencies:

    1. Oil & Gas Authority (OGA) (part of the Department for Energy and Climate Change (DECC)) is responsible for licensing offshore oil and gas activities and is accountable to the Secretary of State

    2. Health & Safety Executive, Department of Energy and Climate Change and the Maritime and Coast Guard Agency are responsible for health and safety and environmental protection of offshore operations under a tripartite arrangement

    3. Environmental Agency (EA) is responsible for environmental regulation of all onshore oil and gas operations

    4. Office of Gas and Electricity Markets (Ofgem) is responsible for the regulation of downstream gas markets

Legal basis for exploration and production

The UK government controls UK offshore production by granting licenses through the OGA to E&P companies in regular licensing rounds. These licenses are granted for a nominal annual license fee and the UK government derives revenue from the licenses by taxation on the production that the licensee wins from the license.

The licenses are granted for a set period of time and geographical area and contain obligations which have significant financial and work obligations. The licenses cover exploration, appraisal, development, production and decommissioning.

For further reading, please see Practice Notes: Oil & Gas—UKCS licensing regime and Oil & Gas Authority (OGA).

Exploration and Production Licence ('E&P Licence')

Pursuant to the terms of the Petroleum Act 1998 (PA 1998), the Crown owns all the oil and gas within the UK and its territorial waters and has the exclusive right to search, bore for and extract it.

Section 3 of the PA 1998 grants the OGA the power to grant licences to search and bore for and extract oil and gas. There are three different types of licences for offshore exploitation, and a separate licence for onshore exploitation. The terms of these licences known as 'Model Clauses' are set out in statutory instruments including the Petroleum Licensing (Production) (Seaward Areas) Regulations 2008, SI 2008/225 which, at Clause 41, gives the Minister the right to revoke the licence on various grounds including formal insolvency and making an arrangement or composition with creditors.

These grounds include:

  1. any payments due under the license being in arrears or unpaid for two months after any of the days whereon the same ought to have been paid

  2. in Great Britain, the bankruptcy or sequestration of the licensee

  3. in Great Britain, the making by the licensee of any arrangement or composition with his creditors

  4. in Great Britain, if the licensee is a company, the appointment of a receiver or administrator or any liquidation whether compulsory or voluntary

  5. in a jurisdiction other than Great Britain, the commencement of any equivalent insolvency procedure to those listed above

  6. any breach or non-observance by the licensee of the terms and conditions of a Development Scheme; and

  7. if the licensee is a company, the licensee’s ceasing to direct and control either its operations under the licence; or any commercial activities in connection with those operations, from a fixed place within the United Kingdom

Licences are issued following a competitive licencing round which takes place approximately once a year. A rental fee which is charged at an escalating rate for each square kilometre covered by the licence is payable annually.

The OGA will play a pivotal role in any restructuring process. Pursuant to the terms of the Model Clauses, the OGA has the power to revoke a licence on insolvency of the operator, following a change in control or if the annual licence fee is not paid, in which case they also have a right of distress.

Some older licences are also, in theory at least, terminable on the insolvency of only one of the co-venturers to a licence. This risk has led to solvent co-venturers seeking to acquire the share of any co-venturer that is likely to be close to insolvency. Licences cannot be sold, transferred or assigned without the consent of the OGA. When deciding whether or not to grant consent, the OGA will consider the technical and financial capability of the assignee/transferee.

A licence cannot be charged without the consent of the OGA. To facilitate financing (providing that it is not a condition of the charge that the licence be assigned), the OGA’s consent does not need to be obtained prior to the charge being granted provided that details of the charge are provided within ten days.

Joint Operating Agreements

To balance their risk, most E&P companies will hold licenses or interests in licenses in different oilfields and different stages of development. They also spread their expertise, cost and risk by joining together with other companies to apply for a license. Where there are multiple licensees, they are jointly and severally liable to the OGA for the performance of work and payment obligations under a license.

To regulate their joint venture, and allocate the costs, obligations and benefits between themselves, the parties will enter into a joint operating agreement (JOA). These tend to be based on modifications to a standard form produced by the industry group Oil & Gas UK but other industry groups such as the Association of International Petroleum Negotiators (AIPN) produce templates and some of the larger E&P companies produce their own.

Under a JOA, one party, usually that with the biggest interest in the joint venture is appointed as the 'operator', who then has full control of conducting and directing all operations in the contract area, under the confines of the JOA. The other parties are considered 'non-operators', who only retain indirect control of the operations in the contract area, such as voting on subsequent operations, electing whether to consent to subsequent operations, and certain inspection rights.

Please also see Practice Notes: The purpose and the principles of the joint operating agreement and Joint operating agreements—operator and non-operating party perspectives.

Restructuring issues

Under the terms of the JOA, the parties are usually responsible for contributing to the costs of the joint venture in proportion to their respective interest. If one party defaults under the terms of a JOA, the other parties will be required to make up that shortfall, and if the default is not remedied within a certain timeframe, there are various consequences which will need to be taken into account as part of any restructuring process. The defaulting party will lose their right to vote and the co-venturers will have the right to act without consulting the defaulting party, which may have the effect of imposing cost liabilities, so making the financial position even worse.

The most draconian consequence is that the defaulting party's interest in the joint venture may be forfeited. It is debatable whether or not the defaulting party can claim relief from forfeiture. The defaulting party will also loose the right to receive information and vote and accordingly decisions can be made without them during this period. Some JOAs provide for complete loss of production and int...

Read More > Produced in partnership with Squire Patton Boggs (UK) LLP 3rd Jun

This Practice Note discusses some of the key considerations and implications for IP practitioners during the coronavirus (COVID-19) pandemic. It also includes a table containing an archive of news items on coronavirus and coronavirus developments that relate to IP.

For a discussion about the impact of the pandemic on IP strategy and practice, see News Analysis: Coronavirus (COVID-19)—the impact on IP strategy and practice.

IP deadlines and procedures

In light of the coronavirus pandemic and associated guidance on social distancing, offices were closed and some postal services suspended. In response to such measures, the UK Intellectual Property Office (IPO), World Intellectual Property Office (WIPO), European Patent Office (EPO) and EU Intellectual Property Office (EUIPO) announced changes to various IP deadlines and procedures. These announcements are tracked in the IP coronavirus tracker below and the IPO, WIPO, EPO and EUIPO have created dedicated and maintained coronavirus pages. Due to the fast-paced nature of the coronavirus crisis, it is essential to check these sites before undertaking any IP procedures during this time. For more information on:

  1. IPO tribunals and hearings, see: Alterations to our services—tribunals and hearings

  2. IPO patent procedures, see: Alterations to services—patents

  3. IPO trade marks and designs procedures, see: Alterations to services—trade marks and designs

  4. general information relating to IP service at WIPO, see: Covid-19 Update: WIPO’s IP Services

  5. WIPO COVID-19 IP Policy Tracker showing information on measures adopted by IP offices around the world such as the extension of deadlines and information on legislative and regulatory measures for access and voluntary actions

  6. WIPO Madrid System (the international trade mark system), see: Covid-19 Update: Madrid System

  7. WIPO Hague System (the international design system), see: Covid-19 update—Important Information for Hague Users

  8. WIPO PCT System (the international patent system), see: Covid—19 update: PCT System

  9. WIPO Lisbon System (the international system of geographical indications), see: Lisbon—The International System of Geographical Indications

  10. EPO procedures and additional information for customers, external partners and potential visitors to the EPO, see: Coronavirus (COVID-19)—continually updated information

  11. EUIPO procedures in relation to trade mark and design applications, see: EUIPO—Covid 19 updates

IP infringement and enforcement

In response to the coronavirus health crisis, the UK government asked companies from sectors outside life sciences to manufacture critical medical equipment, such as ventilators, to help support the NHS. Other companies within the sector are working to develop a coronavirus vaccine and suitable treatments for the disease it causes.

In normal circumstances, IP would be a significant consideration, with companies carrying out freedom to operate searches before embarking on manufacture, to avoid infringing third-party patents and other IP rights. However, during such exceptional circumstances, companies manufacturing equipment for use in the coronavirus pandemic need to understand whether they risk being sued for patent infringement, and if so, what they can do to avoid such risks.

IP rights holders are unlikely to enforce their rights during the crisis and will consider their position carefully before threatening action later. Not only are they unlikely to want to risk the negative PR in doing so, the pandemic has created a spirit of collaboration, with companies working together towards the common goal of producing life-saving equipment.

Crown use and compulsory licensing

There are also several statutory provisions that may apply to the use of patented technology in emergency situations, particularly the Crown use and compulsory licensing provisions set out in sections 55–59 of the Patents Act 1977. Although these provisions are rarely invoked in normal practice, in extraordinary times such as the coronavirus pandemic, they may give some comfort to potential infringers. However, once the pandemic ends, if businesses continue to use patented technology without permission, they may face infringement claims up to six years after the infringing acts occurred.

For more information about whether there is anything to prevent individuals and businesses that develop, manufacture or supply medical equipment in response to the coronavirus pandemic from being sued for IP infringement, see News Analysis: Coronavirus (COVID-19)—IP infringement and enforcement—Crown use and compulsory licensing and for a discussion of the US government’s powers to seize patents and the initial perceived likelihood it would invoke this power in relation to patents concerning treatments or vaccines for coronavirus, see News Analysis: How coronavirus (COVID-19) could spur the government to seize patents.

Royalty-free licences

Individual companies are granting royalty-free licences of their patented technology or licensing their IP for use in ending the pandemic through schemes such as the Open COVID pledge. The licence under that scheme will remain in place for one year after the World Health Organisation (WHO) announces that the pandemic has ended. A number of large tech innovators have recently pledged their patents through the scheme. The limited licence term may encourage other rights holders to sign up. Patent pools, often seen in the TMT sector, are also being used more widely as a means to share IP to develop treatments. As far as manufacture of key equipment is concerned (such as ventilators), many engineering groups are making relevant IP available to other manufacturers through consortia or by publishing relevant know-how.

Collaborations

There is a general spirit of collaboration in the life sciences sector reflecting that is seen in the wider community. For example, Glaxo Smithkline and Sanofi are collaborating in the search for a vaccine. The vaccine task force has also been launched to support UK projects.

IP indemnities

IP indemnities are often seen in commercial contracts, particularly research and development (R&D) contracts. Where R&D is being conducted at speed, as during the coronavirus crisis, without the usual searches to identify relevant third-party IP, there may be an increased risk of infringement. An indemnity is one way of allocating that risk between collaborating parties.

The UK government indicated that it will indemnify manufacturers if equipment made in response to the Ventilator Challenge infringes third-party IP rights. This should give companies responding to the call to arms some assurance.

Court processes and proceedings

The coronavirus pandemic has necessitated fast-moving changes to the civil courts’ processes and procedures. For example, the UK courts have issued two practice directions aimed at the coronavirus crisis—CPR PD 51Y on the conduct of telephone and video hearings and the temporary CPR PD 51ZA (which will last until October 2020) allowing parties to agree extensions of time without the court’s permission up to 56 days (extended from the usual 28 days). Any applications for extensions beyond 56 days will be considered on paper.

There are significant implications for litigation procedures and concepts that those involved in litigation need to be aware of. For practical information on these implications, including: attending court; contacting the court; remote hearings; civil court listing priorities; limitation considerations and challenges; filing and serving court documents; obtaining instructions and electronic signatures for court documents; obtaining and managing evidence; enforcement; costs budgeting and costs management; settlement and alternative dispute resolution; and case management and progression generally, see Practice Note: Coronavirus (COVID-19) implications for dispute resolution.

Given the far-reaching impact of the pandemic, it may be necessary or desirable for certain litigation deadlines to be extended or for court proceedings to be adjourned or. The Patents Court granted a modest extension of time to serve reply evidence following COVID-19-related difficulties arising during the Heineken v Anheuser-Busch patent infringement proceedings. However, the court noted that long extensions and adjournments will be very difficult to justify and are likely to be refused due to the public interest in dispute resolution continuing if at all possible. For more information, see News Analysis: COVID-19, coronavirus, adjournment of trial, extensions of time (Heineken Supply Chain BV v Anheuser-Busch Inbev SA). The Patents Court also provided useful guidance on the adjournment of trial as a result of the coronavirus pandemic in the patent proceedings Conversant v Huawei. For more information, see News Analysis: Adjourning complex FRAND trials in the current health crisis—(Conversant Wireless Licensing v Huawei Technologies).

Contractual obligations and rights

Many businesses have had and will continue to have their operations affected by the coronavirus pandemic and commercial pressures arising from the coronavirus outbreak could rapidly escalate into disputes between businesses. Dispute resolution mechanisms in the UK are well-prepared for these challenges, but clear thinking, sensitivity and diplomacy are needed as well as, where time is an issue, prompt action. While practical solutions are important, these should not be at the expense of putting contracts and remedies aside and potentially storing up legal problems for the future.

There are various options available to business and dispute resolution lawyers need to consider how best to advise them, including contract-review and adherence to any contractual procedures, the need for discussion and co-operation as and when issues do arise, protecting contractual rights and remedies (including a discussion on force majeure) and considering, as appropriate, alternative forms of dispute resolution, should those issues escalate into full blown disputes. For more information, see News Analysis: Coronavirus (COVID-19)—contractual rights, co-operation and dispute resolution—when and how to act and Can my force majeure clause protect me against the economic impact of coronavirus (COVID-19)?

For a further discussion of the key issues to consider when a party is unable to comply with its contractual obligations due to the impact of coronavirus—eg to proceed with or complete works under a construction contract, or supply goods or services under a supply contract (or series of supply contracts), see: Coronavirus (COVID-19) and contractual obligations—checklist.

Artificial intelligence (AI)

Artificial intelligence (AI) involves the development of intelligent computers and machines, which are trained to think and work like humans. AI machines are programmed to look for specific patterns or instances, and through training can be used to test theories, and solve specific problems. Consequently AI machines have been considered by researchers, governments and health organisations as a useful tool to bolster the fight against coronavirus and its effects, but protecting the rights of AI owners and ensuring the best for society is a fine balancing act.

For more information about the use of AI during the pandemic, see News Analysis: Artificial Intelligence in the fight against coronavirus (COVID-19) and for a discussion about the Google DeepMind unit’s use of AI to help speed up the discovery of a coronavirus vaccine, see News Analysis: Google's DeepMind's coronavirus (COVID-19) protein research shows cost of not using AI in emergencies.

Issues for brand owners

At a procedural level, as set out above, trade mark offices and courts are adapting to new ways of working, involving remote hearings, electronic filings and extensions to deadlines, as a result of the pandemic.

One of the key issues affecting brand owners as a result of the pandemic is the spike in production of medical counterfeit goods such as face masks, disinfectants, pharmaceuticals and fake COVID-19 tests. The closure of physical stores means that there has been an increased risk that consumers looking for goods online may come across counterfeits, and criminal counterfeiters are in manufacturing overdrive, preparing vast stocks of goods to market once the health crisis is over. The press has also reported numerous convincing sign-up pages to popular entertainment streaming services, aiming to obtain personal information of unsuspecting consumers, including their credit card details.

For more information about combatting counterfeiting activities, see Practice Notes: Anti-counterfeiting and Sale of counterfeit goods online.

In addition to ensuring that the use of their trade marks is properly policed, and combatting the circulation of counterfeit goods, brand owners also need to guard against the risk of non-use attacks against their trade mark registrations, given that many businesses are not able to use their trade marks genuinely during the ‘lockdown’. In most jurisdictions, trade marks must be used genuinely to create a market for the goods and/or services for which the mark is registered. If the proprietor does not use the mark, then a third party can seek to revoke it on the basis of non-use. It is a defence, however, to show that there are ‘proper reasons’ for non-use. For more information, see Practice Note: Removal of trade marks from the register: expiry, surrender, invalidity and revocation.

The immediate risks may be low—in the EU, there must be no use for a period of five years, so it would really only be businesses right at the end of the five-year period who were about to launch, but were prevented from doing so by COVID-19. That’s going to arise very rarely. However, brand owners should be aware that the predicted (severe) recession creates a further risk—the EU General Court has held that an economic downturn does not amount to a proper reason for non-use, even if the consequences of a recession last for many years.

At a more specialist level, the producers of goods covered by protected geographical indications (PGIs) and protected designations of origin (PDOs) may also need to take steps to protect their position. In order to qualify for such protection, the producers must comply with a product specification that defines the local production methods and, if necessary, the origin of any raw materials. For more information, see Practice Note: Protection of geographical indications. However, the COVID-19 ‘lockdowns’ mean that many smaller agricultural producers are struggling to comply with elements of the relevant product specification. However, the EU regulations governing these schemes allow temporary amendments to product specifications to help producers that are having difficulties complying with production requirements.

For more information about all of these issues, see News Analysis: Coronavirus (COVID-19)—issues for brand owners.

Practical steps which brand owners can take to mitigate the effects of the pandemic include:

  1. working towards meeting original procedural deadlines where possible, to avoid a deadline build-up and heavy workload in future, and any challenges by third parties to the legality of the extended deadlines

  2. resisting the temptation to cut back on IP protection strategies and, where possible, reviewing them to ensure that they have the necessary trade mark and design registrations as well as up-to-date notices filed with the border authorities to streamline the process of dealing with counterfeit goods

  3. monitoring use of trade mark registrations and ensuring that they are put to genuine use as soon as possible following the lifting of lockdown measures—bearing in mind that a future economic downturn is unlikely to amount to a proper reason for non-use

  4. taking advantage of schemes allowing temporary amendments to product specifications for PGIs and PDOs

  5. being prepared for extra hurdles when registering COVID-19-specific domain names, as additional evidence or validation steps may be required

Brexit

As a result of the pandemic, UK and EU teams involved in Brexit negotiations on the future relationship suspended face-to-face meetings after the first round of talks in March 2020. Talks on the future relationship and implementation of the Withdrawal Agreement continued remotely, but the coronavirus outbreak shifted priorities on all sides. The UK government aimed to review progress in the negotiations in June 2020 and to stick to the 31 December 2020 deadline for ending the transitional arrangements under the Withdrawal Agreement. For a discussion on whether the transition period could be extended, see Practice Note: Could the Brexit transition period be extended due to coronavirus (COVID-19)?

The European Scrutiny Committee of the House of Commons produced a report which concluded that the UK government must factor in the EU response to the coronavirus during the transition period. For more information about the report, which focused on three aspects: movement of people and goods, economic support measures and financial assistance from the EU budget, see News Analysis: UK government must factor in EU response to coronavirus (COVID-19) during Brexit transition, lawmakers say.

For key Brexit updates, research tips, resources and a discussion about extension of the implementation period due to coronavirus, see News Analysis: Brexit Bulletin—key updates, research tips and resources.

Coronavirus (COVID-19) toolkit

Our Coronavirus (COVID-19) toolkit provides easy access to news, practical guidance and Q&As from across a number of Practice Areas (subject to subscription).

IP coronavirus tracker

This table contains an archive of news items on coronavirus and coronavirus developments that relate to IP.

Date News Analysis Brief description of the News Analysis
21 May 2020 Coronavirus (COVID-19)—HMCTS publishes updated operational summary for week commencing 25 May HM Courts and Tribunals Service (HMCTS) has updated its operational summary on courts and tribunals operations during the coronavirus (COVID-19) pandemic.

The summary for the week commencing (w/c) 25 May 2020 includes information on document upload centres and details the plan to start dealing with more cases where the defendant is on bail.

Further information:
—LNB News 26/05/2020 51
21 May 2020 Coronavirus (COVID-19)—EPO publishes new guidance for oral proceedings by video conference The European Patent Office (EPO) has published new guidance for the conduct of hearings via video conference during the coronavirus (COVID-19) pandemic. It includes technical aspects, procedural issues and legal questions. Training material about legal provisions and technical set-up have also been released.

Hearings via video conference have been offered at EPO since 1998. A total of 2,345 oral proceedings have been conducted virtually in 2019, representing 13% of all examination oral proceedings for that year.

Further information:
—LNB News 20/05/2020 90
18 May 2020 Coronavirus (COVID-19)—HMCTS publishes updated operational summary for week commencing 18 May HM Courts and Tribunals Service (HMCTS) has updated its operational summary on courts and tribunals operations during the coronavirus (COVID-19) pandemic.

The summary for the week commencing (w/c) 18 May 2020 includes the restarting of jury trials and new Cloud Video Platform and Skype guidance for joining video hearings.

Further information:
—LNB News 18/05/2020 88
18 May 2020 Online piracy doubles in two months following coronavirus (COVID-19) outbreak The Federation Against Copyright Theft (FACT) has reported that it has removed more than double the volume of film links and illegal streams in April 2020 than it had in February 2020, due to a surge in online activity following the outbreak of the coronavirus (COVID-19) pandemic.

FACT reminds digital users that flagging and removing pirated links is necessary to minimise loss to the rights holder. FACT collates information from each instance of non-compliance to use in subsequent investigations against illegal websites and services.

Further information:
—LNB News 18/05/2020 28
15 May 2020 Guidance for EUIPO time limits amid coronavirus (COVID-19) The European Union Intellectual Property Office (EUIPO) has published guidance for users who still face difficulties due to the coronavirus (COVID-19) pandemic, once the extension of time limits in proceedings come to an end on 18 May 2020. EUIPO extended these time limits in Decision No EX-20-3 and Decision No EX-20-4. The guidance sets out the available remedies, which includes the extension of time limits, suspension of proceedings, continuation of proceedings and reinstatement of rights.

Further information:
—LNB News 15/05/2020 51
15 May 2020 Coronavirus (COVID-19)—Guidance on time limits after extension period published The EU Intellectual Property Office (EUIPO) has issued a guidance note on time limits after expiry of the extension period to 18 May 2020, which it had previously granted as a result of the coronavirus (COVID-19) pandemic.

Further information:
—LNB News 15/05/2020 14
13 May 2020 Coronavirus (COVID-19)—New contact tracing app open to phishing scam The Chartered Trading Standards Institute (CTSI) has announced that it has received evidence of a phishing scam themed around the new contact tracing app that is currently being tested in the Isle of Wight in response to the coronavirus (COVID-19) pandemic.

Although the app has not yet been released nationally, members of the public have received texts informing them that they had come into contact with someone who had tested positive for coronavirus.

The CTSI confirms that the message contains a link to a fraudulent website that requests personal data, which scammers can use to gain access to bank accounts and commit other forms of identity fraud. The CTSI Lead Officer, Katherine Hart, has insisted that recipients of the fraudulent messages ‘should not click on any accompanying links, and report them to Action Fraud’.

Further information:
—LNB News 13/05/2020 36
11 May 2020 Coronavirus (COVID-19)—HMCTS publishes updated operational summary for week commencing 11 May HM Courts and Tribunals Service (HMCTS) has updated its operational summary on courts and tribunals operations during the coronavirus (COVID-19) pandemic.

The summary for the week commencing (w/c) 11 May 2020 includes the staffing of Fox Court, the availability of Welsh language services and an update to Judicial Review applications in immigration tribunals, which can now be submitted by email.

Further information:
—LNB News 11/05/2020 27
11 May 2020 Intellectual Property Office renews ‘interrupted day’ notice due to coronavirus (COVID-19) The UK Intellectual property office has reviewed its decision in relation to 'interrupted days' due to the coronavirus (COVID-19) pandemic. It has decided to continue with the period of interruption.

On 27 March 2020, the UK Intellectual Property Office declared 24 March 2020 and subsequent days until further notice to be 'interrupted days' for the purpose of calculating deadlines​​ (see LNB News 27/03/2020 84​).

It will be reviewed again on 28 May 2020 and customers will be given advance notice (at least two weeks) to plan prior to the end of interrupted days.

Further information:
—LNB News 11/05/2020 11
11 May 2020 WIPO calls on governments to support science and innovation amid coronavirus (COVID-19) Francis Gurry, the Director General of the World Intellectual Property Organization, has published a written statement in relation to the coronavirus (COVID-19) pandemic.

He concludes that the main challenge at the present time is not access to vaccines, treatments or cures for coronavirus, but the absence of any approved vaccines, treatments or cures to have access to.

He asserts that the policy focus of governments at this stage should therefore be on supporting the science and innovation that will produce a vaccine, treatments or cures.

Further information:
—LNB News 11/05/2020 10
7 May 2020 Law Society sets out stance on virtual execution and e-signature during coronavirus (COVID-19) pandemic The Law Society has published its position on the ‘use of virtual execution and e-signature during the coronavirus (COVID-19) pandemic’.

The note forms part of the Law Society’s work in helping solicitors and their clients navigate the challenging coronavirus landscape and brings together a variety of established guidance.

Further information:
—LNB News 07/05/2020 83
5 May 2020 WIPO introduces tracker to bring together coronavirus (COVID-19) policy The World Intellectual Property Organization (WIPO) has launched a new tool that tracks coronavirus (COVID-19) related intellectual property measures being implemented by WIPO member states in response to the pandemic. This is the latest in a series of measures taken by the organisation in relation to the coronavirus pandemic.

WIPO Director General, Francis Gurry, believes the tracker will help stakeholders navigate changes implemented by the intellectual property community as it adjusts to the pandemic.

Further information:
—LNB News 05/05/2020 78
4 May 2020 Publishers Association’s five government asks for coronavirus (COVID-19) pandemic support TMT analysis: Stephen Lotinga, CEO of the Publishers Association, shares the Publishers Association’s key asks for the government in light of the coronavirus (COVID-19) pandemic.

Further information:
—News analysis: Publishers Association’s five government asks for coronavirus (COVID-19) pandemic support
4 May 2020 Coronavirus (COVID-19)—HMCTS publishes updated operational summary for week commencing 4 May HM Courts and Tribunals Service (HMCTS) has updated its operational summary on courts and tribunals operations during the coronavirus (COVID-19) pandemic.

The summary for the week commencing (w/c) 4 May 2020 includes the introduction of the Kinly Video Platform, a new Queens Bench (QB) bulletin and updates to the Employment Tribunal’s FAQs.

Further information:
—LNB News 04/05/2020 60
30 April 2020 EUIPO extends time limits due to Coronavirus (COVID-19) The European Union Intellectual Property Office (EUIPO) has published Decision No EX-20-4, extending until 18 May 2020 all time limits expiring between 1 May 2020 and 17 May 2020, to further support and assist users during the coronavirus (COVID-19) pandemic, along with an information note an giving full details of the scope​ of the Decision.

Further information:
—LNB News 30/04/2020 17
30 April 2020 Coronavirus (COVID-19)—WIPO excuses Hague users from failing to meet time limits The World Intellectual Property Organization has confirmed that users of the Hague System for the international registration of industri...
Read More > 3rd Jun

This Practice Note looks at CE-File electronic working in the courts under CPR PD 51O, in the context of case management. It provides guidance on how to file a document electronically, deal with rejected electronic filings, issue a claim electronically, file electronic bundles (eBundles) for case management, costs management and other directions hearings, interim applications and trial.

This Practice Note provides guidance on the interpretation and application of the relevant provisions of the CPR. Depending on the court in which your matter is proceeding, you may also need to be mindful of additional provisions—see further: Court specific guidance.

This Practice Note should be read in conjunction with:

  1. Practice Note: CE-File—introduction to electronic filing in the Rolls Building and other courts—for guidance on which courts use CE-File electronic working and to which proceedings CE-File applies, how to get started using CE-File including paying fees and inspecting the record electronically

  2. Practice Note: Electronic filing and communications

  3. Court specific guidance—see below

As from 25 April 2017 until 6 April 2021, CE-File electronic working is mandatory in the following Rolls Building jurisdictions in London (the Rolls Building Jurisdictions): the Chancery Division, the Commercial Court, the Technology and Construction Court (TCC), the Circuit Commercial Court and the Admiralty Court (the Rolls Building Jurisdictions). From 1 January 2019 until 6 April 2021, CE-File electronic working also operates in the Central Office of the Queen's Bench Division under CPR PD 51O and in Business and Property Courts (B&PCs) District Registries and from 7 October 2019, it operates in the Senior Courts Costs Office (SCCO). For more information on which courts use CE-File and when, see: Which courts use (or will use) CE-File electronic working? in Practice Note: CE-File—introduction to electronic filing in the Rolls Building and other courts.

Click here for access to the portal.

Impact of coronavirus (COVID-19) on CE-File and case management

The Courts and Tribunals Judiciary has published a protocol to aid civil courts in conducting remote hearings as a result of the coronavirus outbreak. The protocol outlines what should happen when hearings are fixed, how the hearings should be handled and how the courts and parties should prepare.

Under the protocol, parties should, if necessary, prepare an electronic bundle of documents and a separate electronic bundle of authorities. Both should be indexed and paginated and sent to the judge’s clerk, court official or judge (where there is no official available) and to all representatives and parties. Bundles should be sent ‘well in advance of the hearing’ in accordance with the protocol. For guidance on how to prepare an electronic bundle, see News Analysis: E-bundle preparation guide and for general guidance on how to prepare trial bundles, see Practice Note: Preparing trial bundles.

Electronic bundles must be filed using CE-File if available or sent by link to an online data room (preferred) or emailed. The bundles should only contain essential documents and authorities to the hearing. Large electronic files can slow down transmission and are unwieldy to use.

For proceedings in the B&PCs District Registries, arrangements will probably need to be made for electronic bundles to be sent directly to the court by email. This is because although it is the intention to keep the CE-File system operational in each of the B&PCs District Registries, there may be delays in processing filed documents and judges will not have access to unprocessed filings. This was set out by Mr Justice Snowden in a position summary and guide for urgent applications in the Leeds, Liverpool, Manchester and Newcastle civil courts dated 31 March 2020.

New filings on CE-File for the Senior Courts Costs Office should be limited to applications with approaching deadlines, any documentation in support of hearings which have been listed and requests for final costs certificates. For more information, see: Coronavirus (COVID-19)—HMCTS publishes updated operational summary for 6 April .LNB News 06/04/2020 13.

In respect of using CE-File in insolvency proceedings, see Practice Note: The Temporary Insolvency Practice Direction (April 2020).

For more information on the general impact of the coronavirus on the application of CE-Filing, see Practice Note: CE-File—introduction to electronic filing in the Rolls Building and other courts — Impact of coronavirus (COVID-19) on CE-File electronic filing. For guidance on the wider implications of the coronavirus pandemic in civil proceedings, see Practice Note: Coronavirus (COVID-19) implications for dispute resolution.

How do I issue a claim electronically using CE-File?

Upon logging into CE-File (click here to access), you will need to select the option 'Create Filing' which displays initial options allowing you to select the appropriate court and the filing category, being either a new or existing case.

You will need to provide certain mandatory information as part of the filing process including the matter number, case category, the case type and sub-type (eg Part 7, construction claim), filing type and sub-type (eg Filing, Claim Form (Part 7)), value and party and representative's details. The choices will change the subsequent drop down options. The parties’ information needs to be added at the ‘Party Information’ stage and includes the party’s role (eg claimant, defendant), the type of party (eg individual, organisation) and contact details, party representation. The claim form itself and any other attachments will need to be uploaded. Each document must be correctly named and filed under its own filing type. For example, a claim form should be named ‘Claim Form X v Y’ and filed under ‘Filing—Claim Form’. Covering letters should be filed as an additional document to the first document submitted. The information can be edited once it has been entered and associated filings may also be added.

For guidance on filing individual documents electronically, see: How do I file a document using CE-File?

Where any of the claims documents being filed are confidential, you may request under 'Filing information' that they are treated confidentially. For guidance on maintaining confidentiality in electronically filed documents, see: How do I maintain confidentiality in documents filed electronically using CE-File? in Practice Note: CE-File—introduction to electronic filing in the Rolls Building and other courts.

Claim forms may be saved on CE-File in draft and changes made to the draft version. Where a claim form has already been filed and changes need to be made, an amended claim form may be submitted.

Upon submission, you will need to make any appropriate payment either by credit card or the PBA system (for more guidance, see Practice Note: How do I pay court fees on CE-File?).

Once a claim has been submitted, a printable version can be shown and an email will be sent confirming submission. If you click on the notifications speech bubble, it shows confirmation of the submission time and date.

Subject to acceptance (CPR PD 51O, para 5.5), a claim form or other originating application submitted electronically will be:

  1. issued—the issue date for a claim form or other originating application filed electronically using CE-File will usually be the date on which the relevant court fee was paid. For guidance on the deemed timing of court fee payment, see above and Practice Note: CE-File—introduction to electronic filing in the Rolls Building and other courts—How do I pay court fees on CE-File? Where a fee is not required, the date and time of filing will be the date and time of issue. Note: where a claim form or other originating application is filed electronically under CPR 51O, subject to payment and acceptance, it will be issued and proceed in the relevant Rolls Building Jurisdiction, in the Queen’s Bench Division or in the relevant B&PC District Registry unless it is transferred to another court

  2. sealed—the claim form or other originating application will be electronically sealed with the date on which the relevant court fee was paid (which will also be its issued date, as above). For guidance on the deemed timing of court fee payments, see Practice Note: CE-File—introduction to electronic filing in the Rolls Building and other courts—How do I pay court fees on CE-File? Note: court seals used on paper documents in the Rolls Building are black to ensure consistency. For defendants outside the jurisdiction, the Foreign Process Department will accept claim forms and other documents for service abroad with an electronically generated seal. The Foreign Commonwealth Office have also indicated that they will accept electronic seals for service requests from non-convention countries. There is no requirement either in the EU Regulations or Hague Conventions for documents to be served to have an original seal. For court specific guidance, see below, and

  3. returned electronically and in pdf format to the claimant’s online account with notification that it is ready for service. The email notification will be sent with a case number that should be used in all correspondence and a link to the filing. Note: the parties, rather than the court, will generally be required to serve documents filed or issued under CPR PD 51O electronic working scheme. The court can, however, order otherwise. Note also the requirements to file evidence of service under the CPR and IR 2016

For guidance on what happens where a claim form or any other electronically-submitted document fails acceptance, see: What happens where an electronically-submitted document fails acceptance?

A new filing on an existing case may be created by selecting 'Create Filing' and then 'Existing Case'. The case number will need to be provided as well as the filing type and subtype. Where the case number is not available, contact the court (see Practice Note: Where to start the claim for court contact details).

How do I file a document using CE-File?

To file a document or submission electronically, it needs to be uploaded to CE-File. To access CE-File, click here.

Upon logging into CE-File, you will need to select the option 'Create Filing' which displays initial options allowing you to select the appropriate court and the filing category (existing case).

You will need to provide certain mandatory information as part of the filing process including the case number, filing type (eg Filing) and sub-type (eg Filing, Claim Form (Part 7)). The choices will change the subsequent drop down options. The submission and any other attachments will need to be uploaded. Each document must be correctly named and filed under its own filing type, for more information on the importance of this and guidance on the courts’ requirements, see below, ‘Correctly categorising electronically filed documents’. The information can be edited once it has been entered and associated filings may also be added.

Where any of the documents being filed are confidential, you may request under 'Filing information' that they are treated confidentially. For guidance on maintaining confidentiality in electronically filed documents, see: How do I maintain confidentiality in documents filed electronically using CE-File? in Practice Note: CE-File—introduction to electronic filing in the Rolls Building and other courts.

Upon submission, you will need to make any appropriate payment either by credit card or the PBA system (for more guidance, see: How do I pay court fees on CE-File?).

Once a submission has been made, a printable version can be shown and an email will be sent confirming submission and confirmation that the document is being reviewed by the court prior to being accepted (Court Charter for Customers in the Business and Property Court, Rolls Building). If you click on the notifications speech bubble, it shows confirmation of the submission time and date. For more information on what happens after filing a document electronically, see below.

As from 7 October 2019, parties (both legally and not legally represented) may use CE-File to start and/or continue any relevant claims, detailed assessment proceedings or applications in the SCCO (for more information on the application of CE-File in the SCCO, see: CE-File—introduction to electronic filing in the Rolls Building and other courts—Which courts use (or will use) CE-File electronic working?) This means that from that date, whenever an electronic bill is filed at the SCCO using electronic working the following will need to be provided:

  1. a copy of the full electronic spreadsheet version and a PDF version must be uploaded, and

  2. the electronic bill must not be filed at court by any other means

For general guidance on how to get started using CE-File, see: How do I get started using CE–File? in Practice Note: CE-File—introduction to electronic filing in the Rolls Building and other courts.

To monitor developments concerning filed documents, you may wish to turn on notifications on the CE-File dashboard. To do this, select the grey wheel on the right of the home page. Click here to access the home page.

Technical requirements and guidance

Unless the court orders otherwise, documents filed on CE-File must:

  1. be in PDF format, except:

    1. draft orders, which must be in Word format, or

    2. where the court directs that a document is to be filed in another format

  2. not exceed 50 megabytes (or other limit specified by HMCTS). Where the document you wish to file exceeds the maximum limit, you must divide it into parts and use the ‘add another’ option to file each part separately on the same case. A maximum of ten filings (each not exceeding the maximum volume) can be made at any one time

  3. be scanned separately where appropriate, regardless of document size. For example, schedules to Tomlin orders should be separated and labelled appropriately

  4. consist of one copy only. Additional copies should only be filed where this is required by a court order, rule or practice direction

  5. not be filed by any other means (including paper format), unless ‘some other means of filing’ is required:

    1. under a court order

    2. a rule or practice direction or

    3. under CPR PD 51O, paras 3.4(2), 10, 11 or 13

Electronic filing and email submissions (CPR 51O, para 3.4(2))

Amended wording of CPR PD 51O, para 3.4(2) came into effect on 1 April 2017 and provides:

‘In relation to any document required by the Rules, any Practice Direction or any order of the court to be filed, the Court will not accept that document for filing if submitted by e-mail and any such document must be filed through Electronic Working (unless submitted on paper); but if a Judge, Master or Registrar has requested or permitted the submission of such a document by e-mail then it must be so submitted as well as being filed through Electronic Working (or on paper).’

Namely, the court will not accept filing by email of a document required by the CPR, any Practice Direction or order. If a document is requested or permitted by a judge, master or registrar to be submitted by email, the document must be filed by both email and electronic working.

The definition of ‘submissions’ that may generally be submitted by email (as set out in the Chancery Guide):

  1. every day communications with the court, such as dealing with case management issues

  2. skeleton arguments submitted for hearings or applications on documents

  3. chronologies submitted for hearings or applications on documents

Note: where such a direction has been given, the parties may also submit them by email to the listing officer or the judge’s clerk in question.

Each court may manage electronically submitted documents in its own way. For example, the Chancery Guide provides confirmation:

  1. that if the court considers that an email contains ‘information that should be placed on the electronic file’, it will be placed onto the electronic file by the clerk or the filing party will be requested to do so. It will then be treated as a submission

  2. that late submissions may, where ‘necessary, for the convenience of the court’, be emailed where:

    1. they need to reach the judge, master or registrar urgently, and

    2. it is acceptable to the judge or the clerk

      Note: contrary to the previous best practice provision that communications by email should not be sent by another medium, ‘it is essential that they are also filed using electronic filing’

  3. that telephoning should only be used in an emergency and fax not at all

For court specific guidance, see below.

Correctly categorising electronically filed documents

When filing, ensure documents are filed on the correct case and as the correct filing type. Filing correctly will enable the correct filing fee to be determined and improve the processing time of the document.

Electronically filed documents must be categorised or labelled according to the type of document, eg claim form, witness statement, exhibit (CPR PD 51O, para 5.1(d)).

This provision in the CPR followed the guidance issued for Commercial Court users setting out various document category names to be used to enable the judge and court staff to deal with applications without having to open documents to find out the nature of the document, as follows:

  1. applications

  2. witness statements

  3. exhibits to witness statement (separate for each exhibit)

  4. signed consent orders (in PDF format)

  5. draft consent orders (in Word format)

  6. draft orders (if not by consent) (in Word format)

  7. correspondence

  8. other (only to be used if none of the above)

Where an attempt is made to file a document under an incorrect category or label, it may be rejected and the filing of the document will not be successful. In Moke International v Ming, a complaint was made that IT issues affecting the courts led to the failure to successfully file an application. The judge sitting in the Chancery Division noted that he had made his own enquiries and ‘at no stage have those IT issues prevented users from filing applications in this court. I have also confirmed that there is nothing outstanding that is not shown on the court's electronic system (CE file). I have also checked the CE file personally.’ In fact, the application had not been successfully lodged on the court’s electronic systems as it had been filed either as a defence or as an amended claim. This was despite the fact that correct advice was given (by the court) about how to file an application correctly. Nevertheless, the judge received a copy of the application but it is not clear from the judgment how. This decision also usefully illustrates that any attempt to blame a failure to file a document on unrelated court IT issues can be investigated and, if not legitimate, will probably fail.

In relation to the communications with the court, check the position in relation to the specific court in which your case is proceeding. Certain courts permit the parties to email the judge though his or her clerk responsibly but when doing so, should copy the other ...

Read More > 3rd Jun

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