LITIGATION: An Introduction to North East

Chambers & Partners litigation team update/overview article

Since the WHO's declaration of a pandemic on 11 March 2020, COVID-19 has dominated the concerns of businesses and legal practice throughout the year. Whilst emerging into this new world has posed a number of issues for litigators, for the courts and for the viability of legal businesses more generally, the litigation sector has nevertheless adapted and still seen high levels of activity. There are therefore reasons to be optimistic thanks to the advances in paperless filing, the shift away from exclusively office-based working and the sudden development of virtual meetings. There have been other positive developments, for example described below.

1. Conduct of litigation and court updates

1.1. The courts have adapted to the new circumstances, and have introduced new ways of working. Numerous methods of holding court hearings are now available, using Skype for Business, Zoom, BT conference call or Cloud Video Platform. The courts, parties and their representatives have had to be more proactive about all forthcoming hearings whilst navigating the current landscape. This has included bundles for the hearing being prepared and circulated electronically: paper bundles even at in person hearings will soon be a thing of the past. A good understanding of the working of Pdf Docs or its equivalent is now essential. Many of the developments we have experienced during the lock-down will continue and will make litigation a more streamlined experience for litigants, albeit becoming increasingly difficult for those without the IT knowhow.

1.2. One example of a regime which has been introduced is hybrid trials for lower value claims. Hybrid trials allow for parties and their witnesses to be linked into the court room by video link, whilst the judge and advocates are present in court.

1.3. There will still be cases that require in-person hearings to take place, for instance where the use of translators will be necessary or due to the inherent complexity of the case or its witness evidence, but this must be agreed upon and the needs of the parties discussed with the court prior to listing and directions.

1.4. Outside of the courts and in arbitration proceedings or cases where alternative dispute resolution (ADR) is ongoing, parties have also generally adapted well, with virtual mediations becoming the norm, which allow parties to discuss issues together whilst eliminating the cost of travel, sustenance and accommodation both for the mediation and for the parties overnight.

Top tips for remote advocacy:

1. Background. A blank wall is not necessarily best—it lacks character—but nor do parties want to see your washing and ironing, your dirty dishes and certainly not beds.

2. Lighting. Multiple light sources are best - avoid facing a window, especially on a sunny day, as well as avoiding putting a window behind you as you will be a featureless silhouette.

3. Attire. Do dress smartly for hearings - many firms have abandoned the dress code but that doesn’t mean you should not dress as you normally would for court if you were in person.

4. Angle. Do not peer down into a laptop camera, instead, either buy a camera or put the laptop on a stack of papers or books so that you are looking directly into it.

5. Notes. Put your notes behind and just above your camera. Notes do not have to be on paper, but if they are mounted just above and behind your camera you can maintain eye-contact.

6. Speak up. Speak clearly, avoid mumbling and remain conscious of any other sources of noise in your home whilst you have your microphone active.

2. Business interruption insurance 

2.1. One of the major developments in recent litigation practice has been the impact of COVID-19, which has also brought about a significant development in insurance law, clarifying how the courts will approach non-damage business interruption insurance policies, that is where business interruption has occurred absent any physical or property damage but rather where it is due to disease or restricted access caused by the disease.

2.2. The pandemic, and the resulting controls imposed by governments, have caused widespread, often catastrophic business disruption and forced business closures. Businesses have incurred significant losses and many businesses have made claims for these losses under business interruption (BI) insurance policies. Many insurers rejected those claims, saying the policy was never intended to cover a pandemic.

2.3. This issue was brought before the courts in the FCA's test case, The Financial Conduct Authority v Arch and Others. The judgment was handed down on 15 September 2020, and whilst there is an Appeal to the Supreme Court, the FCA have published Guidance which details its expectations of insurers (including managing agents) following the test case.

2.4. In its guidance the FCA describes the judgment as bringing greater clarity and certainty for all parties. The FCA expects "all insurers to take a pragmatic, transparent and consistent approach to their interactions with policyholders over any remaining evidence that applies to individual claims, rather than these creating additional barriers or delays to paying valid claims." There is further detail in the guidance regarding claims handling, government support, and communicating with policyholders.

2.5. Practically speaking, as regards the enforceability of policies, the judgment has been described as "a score draw." Whilst cases will come down to the precise wording of the policy, the judgment was generally helpful where there is no distinction made in the policy between a local infection and a pandemic; here the insurer must pay. However where businesses were seeking to rely upon COVID-19-related restrictions preventing or limiting local access to businesses, insurers fared much better. Here a successful claim may require a clear mandate from government (via legislation or statutory instrument) preventing access altogether in order for the insured to rely on the policy provision and successfully claim insurance cover. Mere guidance or advice on social distancing making access to the business more difficult is unlikely to be enough to ensure cover exists.

3. Force majeure and frustration 

3.1. The pandemic rendered many business arrangements across all sectors unworkable overnight. Parties therefore sought to escape from their obligations via reliance upon "force majeure" clauses and/or the doctrine of "frustration".

3.2. Operating at common law, "force majeure" clauses quickly came under the microscope following the declaration of the pandemic and imposition of lockdown restrictions. Force majeure is a standard clause included in contracts to cover eventualities where the parties are prevented from performing their obligations due to acts outside of their control that were not contemplated at the time of entering into the contract, common examples being storms or riots. However there is no firm definition in law of what "force majeure" actually means. Whether it may be invoked or not depends on the construction of the individual clause. Like those hoping to rely upon the restricted access caused by lockdown to make an insurance claim, relying upon a force majeure clause may be ineffective unless performance has been rendered totally impossible, rather than just difficult.

3.3. The doctrine of frustration on the other hand operates outside of the contractual terms and the force majeure clauses. Therefore, regardless of the terms of the contract, it could be rendered "discharged" where the operation of the contract becomes impossible, or illegal. Frustration may be particularly helpful to consumers in their contracts with businesses who were unable to perform obligations after lockdown. It may be, for example, that where a venue is unable to host a particular event due to it being illegal due to lockdown restrictions, the contract could be considered discharged and payments already made under it would then become repayable to the consumer.

3.4. In situations where neither frustration, force majeure or BI cover is available, then a commercial approach may be the best solution. In retail outlets, where there is no or negligible footfall and therefore no income to enable retailers to pay their bills, regardless of the legal position, it will often be in all parties' interests for business owners, landlords and suppliers to look at varying the performance obligations.

Although the above issues will certainly be of concern to many businesses, and the long-term outlook of the economy remains unclear, this further highlights the need for businesses and individuals of all types to ensure they receive good, proactive legal advice in relation to their disputes and indeed before such disputes arise. There has been a renewed focus on the ways in which lawyers and courts can improve their working methods to both navigate the current pandemic restrictions and provide the best service for their clients. The remainder of 2020 will potentially see a conclusion to the business interruption insurance test case, and no doubt a host of other litigation which stems from the impacts of COVID-19 on contracts, insurance, and the economy as a whole.