Scottish Civil Justice System: COVID-19 Implications Date of publication: 18 May 2020

www.macroberts.com Glasgow | | Dundee Scottish Civil Justice System: COVID-19 Implications

Whilst business seems to continue on a different format in the English & Welsh courts, the position in is not as happy…

Here, we look at the position in relation to:

Litigation – urgent, non-urgent and appeals

Messenger-at-Arms & Liquidation & changes to Commercial leases – Officers the insolvency regime irritancy

What can debtors What do debtors under generally do to avoid commercial leases need financial difficulties to be aware of? and protect their credit rating? Scottish Civil Justice System: COVID-19 Implications

Litigation

Urgent At present, the Scottish Courts operate at limited capacity and are only dealing with urgent business on a prioritised basis as follows:

Sheriff Court

· Applications/motions relating to the care and · Child abduction petition protection of children · Applications for interim interdict Urgent applications/motions: · · Imminent time-bar cases (i.e. court actions - for interim interdicts (i.e. injunctions); which might fall foul of the law of prescription - for interim orders under the Adults with and limitation if not registered and served Incapacity Scotland (Act) 2000; shortly) - for interim sexual offences prevention orders or interim risk of sexual harm orders; In order for any other business to be processed, - for non-harassment orders; the party needs to satisfy the Court of the - for interim antisocial behaviour orders urgency of the matter before any action could · Caveats be taken. In the , this appears to apply to imminent time-bar cases as well. · Urgent insolvency and sequestration applications

Non-urgent Sheriff Court The Sheriff Courts have “resumed” non-urgent business, though only Court of Session in relation to previously commenced proceedings. If a party wishes In the meantime, the Outer to restart an action, the same would have to make an application to House of the Court of the Court and provide a “justifiable reason for earlier resolution” of Session has begun to progress the case. A number of factors would be taken into account, including business including procedural the availability of the other party to participate by electronic means hearings by telephone and/ and the suitability for the case to be progressed on paper without or written submission where any hearings. The Court has been given wide discretionary powers to appropriate. decide the outcome of such applications.

Appeals Court of Session Sheriff Court Civil appeals to the Inner House of the Court of Session are now being progressed. On 21 As of 28 April 2020, civil appeals to the Sheriff April, the Court conducted its very first remote Appeal Court will start to be processed again and hearings in the Inner House. It is expected that hearings on procedural business will be assigned this would trickle down to hearings in the Outer from . 11 May 2020 House (the first instance court). Scottish Civil Justice System: COVID-19 Implications

Messengers-at-Arms & Sheriff Officers In line with the impediments experienced in relation to the courts, service of court documents has become difficult, if not impossible, in certain circumstances, as such officers require to work in pairs. The Society of Messengers-at-Arms and Sheriff Officers (the Scottish equivalent of Bailiffs and High Court Enforcers) has issued guidance directing its members on what kind of enforcement work is deemed essential during the COVID-19 lockdown. While the guidance is not mandatory on the judicial officers, it is understood that the different firms holding commission are following the recommendations.

The Society has designated the following · Serving Charges for Payment activities as non-urgent: · Charges for Removal · Notices of Removal · Attachments and Auctions · Ejections · Service of writs (initiating court actions) and other notice · Arrestment or Earnings Arrestment (though the judicial officers are encouraged to assess this on a case-by-case basis).

Work with which the judicial officers would likely bewilling to get involved includes: · Service of action – initiating writs where a time-bar issue is present · Any document which requires to be served as a result of a court application which on which the Court has issued an order. These will likely be in line with the type of business the Court has deemed urgent enough to review.

Judicial officers in Scotland are obliged to follow all lawful instructions but they can refuse to so do if “it is not reasonably practicable for [them] to carry out [the] instructions”. Arguably, any health and safety concern the officers might have about service of a particular document would allow them to refuse the instruction. Scottish Civil Justice System: COVID-19 Implications

Liquidation & changes to insolvency regime Whilst the courts may not process winding up or As stated, a liquidation petition might be sequestration petitions for some time (being non-urgent processed if the Court is satisfied of its business), the mere presentation of such a petition may urgency. trigger a default under various agreements, including funding, securities and/or leases. The mere presentation For example, we recently managed thereof may prove a powerful tool. to successfully obtain registration of a liquidation petition in view of the insolvent company’s connection with the health sector and the necessity for a liquidator to be appointed and to take charge of the company’s affairs to bring them to an orderly end.

Corporate Since the UK Business Secretary announced On 25 April 2020 the UK Business Secretary did on 28 March 2020 that there would be changes announce that a Bill would be introduced on these to the insolvency regime (e.g. suspending rules matters. Due to the liquidation process not being on wrongful trading), no primary or secondary a fully devolved matter to Scotland, it is likely that legislation has been introduced to bring about these changes would apply cross-border. these changes as yet.

Personal In terms of personal insolvency, Schedule 2 of the The Coronavirus (Scotland) No 2 Bill, which Coronavirus (Scotland) Act 2020 has made changes was introduced on 11 May 2020 and is currently to the bankruptcy regime in Scotland. Usually an making its way through the Scottish Parliament, individual would be entitled to make an application will introduce some further changes to the law to the Accountant in Bankruptcy which would of bankruptcy to protect individual debtors. If then institute a moratorium on any enforceable passed, the Bill will raise to £10,000 the minimum diligence such as arrestment of earnings. The debt that must be owed by an individual before an changes in the law have effectively allowed application to bankrupt the debtor can be made by individuals to make a debtor application even if the a creditor. same person has made such an application in the last year, which was not previously allowed. Further, the period of the diligence moratorium has been extended from six weeks to six months.

The upper threshold for the minimal asset process Along with the extended moratorium in the will also be increased to £25,000 under the new Coronavirus (Scotland) Act 2020, which extends Act. This will mean that individual debtors who the moratorium on diligence from six weeks to were facing bankruptcy previously will be able six months, these changes will offer protection to to avoid the expensive and lengthy bankruptcy individuals in debt. regime. Scottish Civil Justice System: COVID-19 Implications

Commercial leases

Irritancy – arrears All notices which were served on There has been a significant change in the law on irritancy of parties in default but which period commercial leases. Previously, an irritancy notice for non-payment of notice had not expired on 7 of rent required to give the party in default at least a 14 days’ April 2020 have become void by notice. The notice period has now been extended to 14 weeks. operation of the new legislation.

Irritancy – other basis (including insolvency) It should be noted that the above change does not apply to:

• Residential or agricultural leases • Legal Irritancies (e.g. failure to pay two years’ rent) • Termination for non-monetary breaches of the commercial lease

What do debtors under commercial leases need to be aware of? As discussed above, there is now an extended irritancy notice period. While this might prompt a collective sigh of relief from many tenants in arrears, please remember the following:

Even if the petition cannot be Irritancy of a lease may also As explained above, if you justified as being ‘urgent’ court be triggered by winding up are served with an Irritancy business, it can still be lodged petitions, if this is provided for Warning Notice, the clock is and will be processed once the within the wording of the lease. still running. Court is back up and running.

A winding up petition is a means You have 14 weeks (just over three by which creditors can petition the Therefore, the threat of lodging months) to pay any arrears but court to have the debtor company such a petition is still a very potent this still isn’t terribly long to remit wound up. It is the ‘company’ weapon which might be used funds due, especially given the equivalent of sequestration for against debtors in arrears. financial difficulties COVID-19 individuals. brings.

What can debtors generally do to avoid financial difficulties and protect their credit rating? Debtors should be aware of the impact non-payment can have on their credit rating.

If a decree (court order) is issued, this will also A debtor’s credit rating will be affected should affect the debtor’s credit score and remains on they fail to make minimum payments on time, record for six years and will be an obstacle to despite the ongoing pandemic. obtaining finance in the future. Contact Us

Gillian Craig Partner [email protected] 0141 303 1228

MacRoberts is one of Scotland’s leading law firms with a history and About Us heritage tracing back over 150 years. Through the delivery of high-quality, innovative and practical solutions for clients, along with an impressive ability to adapt to the contemporary commercial landscape, we have maintained a position of leadership and prestige in the Scottish legal sector and beyond. Our strength comes from our collaborative relationships and connections – we have an extensive network of clients and contacts throughout Scotland, as well as strong links to the wider UK and international markets. We are more than just lawyers – we are industry experts with unrivalled commitment to the sectors in which our clients operate. In this era of digital revolution and economic difficulty, we have risen to the challenge in the same way we have done for more than 150 years – with sophistication, passion and expertise

www.macroberts.com Glasgow | Edinburgh | Dundee