If you have recently issued a Court claim or obtained a County Court Judgment (CCJ), you may be wondering what happens next. We are here to guide you through the process step by step. From the point your claim has been issued through to exploring different methods of enforcement. We will provide you with all the information you need to navigate the legal landscape.
What Happens After a Claim is Issued?
After your claim is issued by the Court, the Court will post the claim to your debtor. The debtor will deemed to have been served by a date set by the Court but is typically within 5 days from the date the claim is issued. Once served with the claim, your debtor has 14 days to respond to the claim. They may choose to admit liability and offer payment in full or part-settlement. If they do not respond within the given time period, you have the option to request a default Judgment from the Court.
If your debtor files an Acknowledgement of Service, this will give them a further 14 days to file a defence. This means they will have a total of 28 days to deal with the claim. Should your debtor simply ignore the claim, you may obtain a County Court Judgment (CCJ).
Obtaining and Enforcing a CCJ (County Court Judgment)
A County Court Judgment (CCJ) is an official legal document that states that your debtor owes you money. It is important to note that receiving a CCJ does not guarantee immediate payment.
The CCJ will outline how much money is owed, plus any additional costs or interest. You should keep this document safe as it serves as evidence of the debt owed to your business.
Once you have obtained a CCJ, you can now consider various methods of enforcement to recover the debt. These methods include:
1. High Court Enforcement Officers (HCEO): The High Court Enforcement Officer (known as the HCEO) is the preferred method of enforcement for the majority of County Court Judgments (CCJs). The HCEO is an employee of a private company licensed by the High Court to enforce debts with a value of over £600 (unless the debt is regulated by the Consumer Credit Act and under £25,000).
2. County Court Bailiff: Unlike the High Court Enforcement Officer, a County Court Bailiff can enforce debts under £600 or debts under that are regulated by the Consumer Credit Act and under £25,000. They will often only make visits during office hours whereas a High Court Enforcement Officer is more flexible.
3. Attachment of Earnings Order: If the debtor is employed, this order allows deductions to be made directly from their wages by their employer until the debt is repaid.
4. Charging Order: If the respondent owns property, this order secures your debt against it so that when they sell or remortgage, they must repay what they owe. It’s important to note that a Charging Order may also be registered against stocks and shares, it does not have to be placed on a property.
5. Third-Party Debt Order: This enables you to freeze funds held by third parties for or on behalf of the debtor – such as bank accounts – until your debt is satisfied.
6. Information Order: An Information Order is a Court Order that requires the debtor to attend Court for questioning. It does not require the debtor to make payment, however it may be used to enable you to make a more informed decision on which enforcement method to use.If the debtor fails to attend, they can be held in contempt of Court and committed to prison for a short period.
Every enforcement method has its pros and cons, depending on individual circumstances of your case. It’s worth seeking advice from a debt recovery solicitors who can guide you through these options and help choose which one suits your situation best.
Lovetts is a specialist UK & International debt recovery solicitors with more than 25 years of industry experience. If your business has overdue debts that’s it’s seeking to recover, contact us today.
CELESTIAL AVIATION SERVICES V UNICREDIT BANK  EWHC 633
With sanctions an increasingly routine part of business life, the courts have been considering the circumstances in which US sanctions prevent a contracting party from making a payment that they would otherwise be legally obliged to make in the English jurisdiction. The recent cases emphasise the difficulty of relying on US sanctions in such situations.
The facts of the Celestial Aviation case were that, between 2005 and 2014, certain aircraft were leased to two Russian companies. The payment obligations of the Russian companies were secured by standby letters of credit (“LOCs”) issued in favour of Celestial and another Irish aircraft-leasing company. As of 2017, the LOCs were issued by Sberbank, a Russian bank, and confirmed by the London branch of UniCredit, a German bank.
In 2022, following the invasion of Ukraine, events of default were declared under the leases and Celestial demanded payment under the LOCs. It was common ground that, subject to the question of sanctions, UniCredit was liable to pay under the LOCs.
As to the question of sanctions, the LOCs were governed by English law and payable in US Dollars. Celestial demanded that payment be made into accounts held in London and Dublin. However, at the time that payment was demanded, the financing of aircraft leasing had been made the subject of UK trade sanctions. Sberbank itself was then listed as a “designated person” for the purposes of the UK sanctions restricting use of funds or economic resources, which, amongst other matters, prohibited paying out under LOCs. Sberbank also became the subject of US and EU sanctions.
After several months, UniCredit paid out, following receipt of a licence issued by the UK’s Office of Financial Sanctions Implementation (“OFSI”). UniCredit paid the amount due under some of the LoCs in US Dollars and then the remaining ones by paying equivalent sterling amounts to accounts held at non-US banks in London.
The dispute that remained was as to whether Celestial was entitled to interest and costs. In order to determine these aspects, the Commercial Court was asked to determine certain matters giving rise to issues of general interest, as follows.
Prior to the granting of the OFSI licence, had UniCredit been prohibited from making payment by the UK sanctions regulations?
The court concluded that UniCredit had not been prohibited from making the payments under the LOCs. This was because the purpose of the UK’s trade sanctions against Russia was to prevent financial assistance from being provided to Russian entities in relation to the supply of aircraft. However, in the present case, any services of that type had been provided many years previously. All that remained to be done as at the time the prohibition came into effect was for UniCredit to perform the obligation that it had taken on long before as confirming bank, which obligation would benefit the Irish companies, rather than any Russian entity. Therefore, paying out under the LOCs would not have been in breach of the trade sanctions.
Nor had UniCredit been prevented by the economic resource sanctions from paying out, both because these sanctions had not come into effect at the time that payment fell due and also because the payment by UniCredit was in discharge of its own independent obligations under the LOCs and did not affect Sberbank’s property.
Did US law suspend or otherwise excuse non-performance of UniCredit’s obligations under the letters of credit?
The issue of the potential relevance of US law arose because inter-bank transfers of US dollars are routed through the New York banking system, thereby bringing them within the US jurisdiction.
The court found that there had been no relevant US sanctions in force as at the date that the payment obligations fell due. However, a directive issued by the US’s Office of Foreign Asset Control (“OFAC”) which subsequently came into effect could be read as prohibiting US financial institutions from processing transactions involving Sberbank in the broadest sense.
The court held that, to the extent that the OFAC directive had a bearing on UniCredit’s pre-existing obligation to pay, and it would be an offence under US law for UniCredit to pay Celestial under the LOCs, the starting point under English law is that a breach of US sanctions, as with breach of any other foreign law, is generally irrelevant to the enforceability of an obligation governed by English law.
More specifically, English law draws a distinction between cases where performance of the act which is illegal under foreign law would take place in the foreign country, and cases where a party would merely be equipping itself in the foreign country, to perform the obligation in England (for example, to make a payment in London) where the act would not be illegal. Under English law, only the former would relieve a party from performing the obligation.
The court held further that it was established under English law that, where a dollar payment is required under the contract, the payee is in principle entitled to demand such payment in cash. This is the basis for the principle that, where the fundamental obligation is to make payment, and where it is possible to make such payment legally, then the bank must do so. UniCredit had accordingly been under an obligation to find a means of paying, albeit in another currency.
In case that analysis was wrong, the court went on to consider whether payment out under the LOCs was in fact prohibited under the OFAC directive. UniCredit put in evidence as to the broad approach that they said that OFAC would take, by implementing the directive with the purpose of cutting Russia off from the US banking system. However, the court found this evidence unpersuasive because the examples given as to the approach taken by OFAC in previous cases were regarded as distinguishable on the facts. Celestial Aviation was accordingly entitled to interest and costs.
In another recent case, Gravelor Shipping v GTLK Asia M5 (2023, Commercial Ct), the court took a similar approach, finding that contract wording governed by English law and providing for payment in US dollars could, in the circumstances of sanctions, be performed satisfactorily by payment by other means.
However, note that the outcome of the issues discussed above could be different, depending on the terms of any sanctions clause in the agreement.
For more information, please contact Wendy Miles, Chris Earl or William Sturge at Lovetts.
From 1st October 2023, there will be a significant change to Civil Litigation in England and Wales with the introduction of a new Intermediate Track and Fixed Recoverable Costs Rules. This will impact the way civil cases are conducted and managed. In this article, we explore the key aspects of these new rules, their implications, and what they mean for litigants and legal practitioners.
Understanding the Intermediate Track
The Intermediate Track is a procedural innovation introduced to streamline and expedite the resolution of certain civil cases in England and Wales. It falls between the Fast Track and the Multi Track in terms of complexity and value of claims. The primary goal of this track is to enhance the efficiency and cost-effectiveness of litigation, making it accessible to a broader range of litigants while reducing the burden on the court system.
1. Applicability: The Intermediate Track is designed for cases with a financial value between £25,000 and £100,000.
2. Simplified Procedure: To achieve its objectives, the Intermediate Track features a simplified procedure, which includes stricter case management and fixed recoverable costs (“FRCs”). This simplification aims to reduce the uncertainty and costs associated with litigation.
Fixed Recoverable Costs
Fixed Recoverable Costs are predetermined costs that a successful party in a case can recover from the losing party for each stage of the litigation process. An amendment to Civil Procedure Rule 45 will introduce FRCs for Fast Track and Intermediate Track claims. It is a significant departure from the traditional method of costs being assessed by a Judge. The key aspects of FRCs are as follows:
1. Predictability: FRCs provide greater predictability for litigants, as they know in advance the maximum amount they can recover if they win the case. This predictability reduces the risks associated with litigation and encourages settlement.
2. Cost Control: FRCs are intended to control and limit the costs of litigation. By fixing the recoverable costs, the court aims to ensure that the legal expenses incurred by the parties remain proportionate to the value and complexity of the case.
3. Encouraging Efficiency: The fixed nature of these costs incentivizes parties to resolve disputes efficiently. Prolonged and unnecessary litigation can result in parties incurring costs beyond what they can recover, thus encouraging early settlement and cooperation.
4. Reduced Burden on the Courts: By reducing the scope for protracted cost disputes and detailed assessments, FRCs alleviate the burden on the court system, allowing it to allocate resources more effectively.
View Our Fixed Costs Guide Here
Challenges and Considerations
While the introduction of the Intermediate Track and FRCs has many advantages, there are also challenges and considerations to be mindful of.
The amount of fixed recoverable costs you can recover will depend on the complexity of the case. Each case will be allocated to one of four bands depending on complexity – with band 1 being the simplest. Straight forward debt claims will generally fall into ‘band 1’. Case assessment will therefore be extremely important.
There will also be changes to Part 36 offers with fixed recoverable sums increasing or decreasing in certain circumstances. For example, a claimant who matches or beats its own Part 36 settlement offer at trial may receive a 35% uplift on the fixed recoverable costs. However, if there is unreasonable behaviour during litigation a 50% increase or reduction of fixed recoverable costs may be applied as a penalty.
For the last 30 years, Lovetts Solicitors has been campaigning for efficient, accessible, and cost-effective debt recovery. The FRCs gives costs certainty to creditors when they are forced into litigating due to non-payment of debts and Lovetts Solicitors fees will mirror the FRCs to achieve a costs neutral position for our clients in the majority of our clients.
While these changes come with challenges and considerations that legal professionals and litigants must navigate, Lovetts Solicitors believes the introduction of the Intermediate Track and Fixed Recoverable Costs Rules represents a significant step forward.
PHILIPP V BARCLAYS BANK  UKSC 25
‘Authorised push payment’ (‘APP’) fraud, as it is known, is the situation where individuals or businesses are manipulated, through impersonation, into making payments to fraudsters. It is one of the biggest types of fraud reported by the UK banking and financial services sector.
Compensation schemes – Various voluntary codes of practice (notably the CRM Code, introduced in 2019) have been developed within the financial services industry to compensate customers. These codes operate subject to their terms and conditions. They do not cover international payments and not all UK banks have signed up.
Under the Financial Services and Markets Act 2023, a mandatory reimbursement scheme is to be introduced by the Payment Services Regulator. This will oblige payment service providers to reimburse customers in respect of payment instructions executed subsequent to fraud or dishonesty. The intention is to protect consumers, charities and micro-enterprises in respect of payment orders executed over the Faster Payments Scheme. The regulator is aiming to have the scheme operating in 2024.
The legal principles applying where the scheme will not apply – Where it applies, the scheme will overlay the existing legal principles determining when banks must pay out compensation.
In April 2022, we circulated a briefing note, reporting on a judgment of the Court of Appeal relating to the duty of banks to compensate customers who had been victims of APP fraud. The Supreme Court has recently allowed an appeal in the same case, making very different findings as to the extent of the banks’ duties, as follows.
The facts in Philipp v Barclays Bank
Mrs Philipp is a music teacher and her husband a retired physician. A fraudster tricked them into believing that they were cooperating with the Financial Conduct Authority, the National Crime Agency and the Fraud Department of HSBC. The fraudster persuaded the couple to transfer in excess of £700,000, being the bulk of their life savings, into Mrs Philipp’s account at Barclays and thence to accounts in the United Arab Emirates.
Mrs Philipp claimed that the bank was responsible for this loss. She brought proceedings, contending that the bank owed her a duty under its contract with her or at common law not to carry out her payment instructions if the bank had reasonable grounds for believing that she was being defrauded.
The bank’s case was that, as a matter of law, it did not owe such a duty. The bank also took a point on causation, arguing that Mrs Philipp and her husband had been so thoroughly deceived that they did not trust the police or the bank and lied to the bank about the purpose of the transfers. Thus, even if the bank had delayed the transaction and asked questions, Mrs Philipp would have gone ahead anyway.
The bank applied for ‘summary judgment’, that is, to strike out Mrs Philipp’s claim on the basis that the court could decide without a trial that there was no such duty.
Supreme Court’s judgment as to the duties owed by the bank
Terms of the contract – The Supreme Court held that it would be possible for a bank to agree as an express term of the contract with a customer that it would not comply with a payment instruction if it had reasonable grounds for believing that the customer had been tricked into authorising the payment. That was not the case in Mrs Philipp’s contract.
No duty of care implied by law – In the absence of such an express term, no obligation of this kind can be implied. To the contrary, the terms on which a bank is authorised and undertakes to carry out its customer’s instructions are generally referred to as the bank’s mandate. Unless otherwise agreed, the bank’s duty to comply with its mandate is strict and must be complied with, subject to certain special situations such as where the payment would be unlawful, or to prevent money laundering.
Term implied under the Supply of Goods and Services Act 1982 – The bank is under an implied term to supply its services with reasonable care and skill. However, this relates only to the manner of providing the services and would not go so far as to support Mrs Philipp’s claim. It is not possible to derive a duty not to do something from a duty to do something carefully. Thus the implied term does not create a tension with the bank’s duty to comply strictly with the mandate.
Where the customer has appointed signatories – Payment instructions given by an agent of the customer, for example on behalf of a company or for joint account holders, where the authorised signatory is acting dishonestly or fraudulently, are in a separate category. The Supreme Court held that the decision in Barclays Bank v Quincecare (1992) was correct only to the extent that a signatory, being an agent, can never have actual authority to defraud their principal (unless the principal had specifically extended the actual authority to include such a situation, which would not be likely).
Therefore, the act of the fraudulent signatory will only bind the customer if, in their capacity as agent of the customer, the signatory had apparent authority. The relevant legal principle is therefore that the bank will not be entitled to rely on the apparent authority of a signatory if it fails to make the enquiries that a reasonable person would make in all the circumstances to verify that the signatory has actual authority to give the instruction. Examples of circumstances giving rise to the need to enquire would be where the agent signatory could be seen to be using his principal’s funds to buy himself a Rolls Royce or pay off his own debts. Giving effect to the agent’s instructions without making inquiry whilst being on notice of such circumstances would be outside the mandate.
However, that did not assist Mrs Philipp, who was the customer in her own right and had actual authority to give the payment instructions. Her instructions were valid and her intention clear. The fact that she would not have given the instructions if she had not been lied to by the fraudster did not negative her intention in giving the instructions. Therefore she had no basis for claiming from the bank.
Limit of the duty to execute valid instructions – The Court acknowledged the possibility of a further implied term, as identified in the Australian case of Ryan v Bank of NSW (1978). The analysis there was that a carrier carrying goods under contract and ordered to deliver them to a particular unloading bay at a factory would act unreasonably in complying with this order if, on arrival, the factory was on fire. A paymaster, ordered by his employer to bring the employees’ cash wages to the pay office would act unreasonably in complying if, on the way, he learned that the pay office was occupied by armed robbers. These examples showed that even provisions in a contract expressed in unqualified language will be interpreted as subject to an implied qualification preventing them from applying in particular circumstances.
This suggested that there may be an implied term that a bank should not comply with a payment instruction if a reasonable banker, properly applying his mind to the situation, would know that the customer would not wish their instructions to be carried out in the circumstances.
The Supreme Court expressed no firm view on this but acknowledged that, if a bank received reliable information suggesting that a payment instruction had been procured by fraud, it might be right to refrain from complying with the instruction without first alerting the customer. However, that was not the present case, as the information which might have led the bank to refrain from making the payment was known to Mrs Philipp and therefore the bank had no reason to doubt her instructions.
The Court therefore struck out Mrs Philipp’s claim insofar as it was based on the allegation that the bank owed her a duty not to execute her payment instruction. The Court did, however, allow Mrs Philipp’s fallback argument, that the bank had failed in a duty to attempt to recover the funds, to proceed to trial.
The Supreme Court’s analysis is restrictive and represents a substantial departure from previous cases. It is unlikely to be the last word on the issue of a bank’s duty not to execute payment instructions in certain circumstances.
For more information, please contact Wendy Miles, Chris Earl or William Sturge at Lovetts.
If you’re looking for a more cost-effective, legal way to resolve your debt claims we can assist. At Lovetts, we are committed to helping your business find a time and cost effective way around commercial litigation. In this article we are going to have a look into Construction Adjudication, the process, costs involved and how you can use this form of Alternative Dispute Resolutions (ADR) to settle your dispute.
What is Adjudication?
Construction adjudication is a process whereby an impartial third party, known as an adjudicator, is appointed to make a binding decision concerning a construction dispute. The adjudicator will consider the evidence and arguments presented by both parties and will make a decision based on what they believe is fair and reasonable in the circumstances.
The construction adjudication process is often used where there is a disagreement over the terms of a contract, the quality of workmanship, or the payment of fees. It can also be used to resolve disputes between neighbours over boundary walls or other shared structural elements.
Adjudication is generally considered to be a quicker and cheaper alternative to litigation, as it avoids the need for costly and time-consuming court proceedings. It also has the advantage of being binding on both parties, meaning that the decision of the adjudicator must be complied with.
Construction disputes are often adjudicated to determine who is liable for damages. In many cases, the adjudicator will review the evidence and decide based on the facts of the case. This can be a very effective way to resolve construction disputes, as it allows both parties to present their case before an impartial third party.
If you are involved in a construction dispute which you believe could benefit from adjudication, then you can speak to our litigation team at Lovetts Solicitors who specialize in this area of law for advice on how to proceed.
The process of Adjudication
The process of resolving construction disputes with adjudication relative to debt recovery is as follows:
- The parties to the construction contract agree to submit their dispute to adjudication.
- An adjudicator is appointed by the parties or by an independent body such as Royal Institution of Chartered Surveyors (RICS).
- The adjudicator hears both sides of the argument and makes a decision on the matter in dispute. This decision is binding on both parties unless and until it is overturned by a court or arbitration tribunal.
- If one party does not comply with the adjudicator’s decision, the other party can enforce proceedings through the courts.
How long does the process take?
The process begins when the Referring Party serves the Responding Party with a Notice of Adjudication. After serving the Notice of Adjudication, the Referring Party must serve its Referral within 7 days of serving the notice. The adjudicator has 28 days to decide after the Referral is served by the Referring Party. (This period can be extended by 14 days if the Referring Party agrees).
The time required to decide adjudication is significantly shorter than in court, which is consistent with the overarching goal of improving cash flow. Whereas a party referring a dispute to adjudication may receive an adjudicator’s decision within 4-6 weeks, if that same dispute is referred to the courts, the referring party may reasonably expect the courts to render a decision within 9 to 12 months, or possibly longer.
The costs involved
The adjudication process can be costly, depending on the severity of the debt recovery dispute. If the dispute is minor, then the cost of adjudication may be minimal. However, if the dispute is more severe, then the cost of adjudication can be quite high. There are a few factors that will affect the cost of adjudication, such as:
- The nature of the dispute
- The amount of money in dispute
- The number of parties involved
- The complexity of the issue
How can Lovetts assist you?
If you are involved in a construction dispute involving debt, our experienced solicitors at Lovetts Solicitors can help. We are a debt recovery solicitors with a wealth of experience in dealing with all types of construction disputes, from payment disputes and defects to professional negligence claims.
Part of our debt recovery adjudication process includes- Fixed Fee Advice, Unlimited Legal Advice, Alternative Dispute Resolution, and Advice on Payment Terms. You can learn more about these debt recovery services via our website.
Contact Us Now.
Quadra Commodities SA (“Quadra”) v XL Insurance Co  EWCA Civ 432 (Court of Appeal)
This is believed to be the first reported case on the statutory right to claim interest on the late payment of an insurance claim. The issue arose in the manner described below.
The issues in the case
The facts – The case involved a grain commodities fraud. The Ukrainian group Agroinvest obtained grain, corn and sunflower seeds from local farmers, which it on-sold to international markets. When the group made a sale, the buyer would pay 80% of the purchase price and Agroinvest would issue the buyer with a receipt for delivery of the goods into its warehouses. Pending physical delivery to the buyer at the seaport, payment of the final 20% and transfer of title, buyers could send surveyors periodically to check and sample the goods. However, the goods as thus sold were not kept separate by Agroinvest, but stored in bulk with other quantities of the same commodity.
One such purchasing trader was Quadra, who declared its purchases from Agroinvest under its marine cargo open policy, which gave cover against misappropriation, amongst other perils.
Agroinvest’s fraud consisted of selling the same goods to numerous different buyers. Obviously, when it came to delivery against the warehouse receipts, there was not enough of the commodity to go round. Agroinvest collapsed, at which point the goods that Quadra had purchased were nowhere to be found. Quadra submitted a claim under its insurance.
The terms of Quadra’s insurance – As to the subject matter of this insurance, Quadra’s “interest” was described as being on,
“goods … and/or … interest of every description incidental to the business of the Assured … consisting principally of but not limited to cereals, grain … and food products in container, bulk and/or break-bulk”.
It is possible to insure against perils adversely affecting a marine “adventure” such as the storage and subsequent carriage of goods by sea, and also against the loss of profits. However, the Commercial Court held that, in the present case, the subject matter of the insurance that Quadra had obtained was simply goods in which Quadra had an insurable interest.
Insurers’ central defence was that, because of the facts of the case, Quadra had no insurable interest in the subject matter insured. The court therefore had to consider the relationship between the subject matter of the insurance (damage to, or loss of, goods) and any insurable interest that Quadra had in that risk.
The court’s decision – The court accepted that the policy would not cover a situation where no goods had existed (because the goods could not then be lost or damaged). Nor did Quadra have any proprietary interest in the goods. However, the court did accept that there would be coverage for misappropriation if (a) there had been goods (b) in which Quadra had an insurable interest.
Even though the evidence partly depended on documentation issued by, and warehouse access controlled by, the fraudulent Agroinvest, the court accepted that Quadra had established, on a balance of probabilities, that goods corresponding to the cargoes they had purchased were sufficiently identified as physically present at the time the warehouse receipts were issued to Quadra.
As to insurable interest, the court held that Quadra had an immediate right to possession of the goods, the insurers not having established that any other party had any rights that would oust Quadra’s rights. The court held further that, as Quadra had rights derivable from “a contract about the property”, on old English authority Quadra did have an insurable interest in the goods. The court was fortified in this conclusion by a US court decision, itself based on English law principles, to the effect that part payment of the purchase price in respect of unascertained goods gave rise to an insurable interest even though the insured did not have a proprietary interest in the goods. Quadra therefore succeeded in its insurance claim (this decision being upheld on appeal).
The claim for interest
Pursuant to s.13A Insurance Act 2015, it is an implied term of every contract of insurance that the insurer must pay any sums due in respect of a claim within a reasonable time. The section makes clear that a reasonable time includes a reasonable time to investigate and assess the claim.
Section 13A states that what is reasonable depends on the circumstances, but (a) the type of insurance, (b) the size and complexity of the claim, (c) compliance with statutory or regulatory rules and guidance and (d) factors outside the insurer’s control, may need to be taken into account. If the insurer shows that there were reasonable grounds for disputing the claim, the insurer does not breach the implied term by failing to pay the claim while the dispute is continuing, but the insurer’s conduct may be relevant.
In the present case, there were some 15 months between the insured giving notice of loss and the commencement of proceedings. Quadra contended that the insurer did not pay sums due to it within a reasonable time, asserting that the insurer’s conduct of the claim was wholly unreasonable and its investigations either unnecessary or unnecessarily slow.
The Commercial Court approached Quadra’ claim for interest by considering two separate questions; (1) What was a reasonable time within which the insurers should have paid the claim? (2) Were there reasonable grounds for disputing the claim, the insurer’s conduct being relevant to this question?
As to the first question, the court held that the burden of proof was on the insured to show that the insurers had taken longer than a reasonable time. In the present case, Quadra offered no expert or comparative evidence. Therefore, the court considered the factors listed alphabetically above. As to (a) the type of insurance was marine cargo. Claims under such covers could involve “very various factual patterns and differing difficulties of investigation”. As to (b), the size and complexity of this claim was substantial, but not exceptional. The fraud, the uncertainty as to what happened at the warehouse and issues concerning the governing law of the insurance were all significant complicating factors. There were no relevant circumstances to consider under factor (c) but as to (d), a number of factors had been outside the insurer’s control, in particular certain local proceedings and the recovery effort in Ukraine. The court concluded that a reasonable time to investigate, evaluate and pay the claim was ‘about a year from the notice of loss’, assuming no reasonable grounds for disputing the claim.
As to the second question, the court held that the insurers did have reasonable grounds for disputing the claim. The fact that the court had found the grounds to be wrong did not indicate that the grounds were not reasonable.
Quadra argued that the issue of the insurers’ conduct should be considered in its own right, and that the insurers’ handling of the claim was unreasonable and too slow. However, the court considered that the insurers’ conduct, for example in the investigations that they made, should not be regarded as a relevant factor because it could not sensibly be distinguished from their grounds, considered reasonable, for disputing the claim. Therefore, the Commercial Court held that Quadra was not entitled to interest. This decision was not the subject of any appeal.
For further information contact Wendy Miles, Chris Earl or William Sturge at Lovetts Solicitors.
As the Bank of England continues to combat rising prices, interest rates have steadily increased. On 3 February 2023, the Bank of England Monetary Policy Committee voted to increase the base rate from 3.5% to 4%. This is the tenth time the Bank of England will increase the benchmark fee since December 2021. The base rate is also at its highest since 2008.
Base rates are the interest rate that the Bank of England sets for loans to other banks. This rate serves as a standard for interest rates in general. As such, it will also impact customers’ buying habits, business activities, and late payment interest.
This article discusses the reason for the UK’s rising interest rates and how it affects late payment/debt recovery for businesses. It will also address debt recovery Solicitors’ roles in ensuring businesses recover their monies regardless of interest rate hikes.
Why Have Interest Rates Gone Up?
As mentioned, the Bank of England has increased interest rates (bank or base rates) from 0.1% to 4% since December 2021. This is in response to the alarming high inflation rates that have ravaged the country’s economic climate. As a result, the cost of borrowing increased for many individuals and businesses. However, the increasing interest rate is the most effective method the Bank of England can employ to reduce soaring prices.
For an economy to be healthy, inflation rates must remain low and stable to ensure monetary value remains constant. The Bank of England is responsible for keeping the inflation rates at a maximum of 2%.
As the Bank of England increases interest rates, people will have less borrowing power and be motivated to save. This means they’ll also spend less, resulting in low demand for goods and services. With declining demand comes a reduction in product prices.
How High Could Interest Rates Go?
No one, not even the Bank of England, can predict with 100% accuracy how high the interest rates can rise. It depends on the economy and inflation rates in the next few years. However, one thing is sure — the Bank of England will continue reviewing its monetary policies to curb inflation. If this means a continuous increase in bank rates, they’ll have no option but to explore that route.
The Bank of England reviews the economy and decides on interest rate increases every six weeks. So, they will likely make the next decision on interest rates on Thursday, 23 March 2023.
However, analysts believe interest rates may peak at 4.5% . While that’ll be a new peak, it’s a significant fall from the over 6% interest rate predicted some weeks back.
What’s the Interest on Late Commercial Payments by Debtors?
Late payment is one of the major concerns businesses face in the UK. According to the Credit Protection Association, half of SMEs suffer late payments. As a result, these affected SMEs are at high risk of business failure due to limited cash flow.
Fortunately, the government stepped in to solve this problem by introducing the Late Payment of Commercial Debts (Interest) Act 1998. The purpose of this Act is to discourage late payments and ensure that creditors receive compensation for them.
This act stipulates the rate of interest businesses may demand from debtors that are late on their payments. The interest rate is 8% above the Bank of England base rate. This interest starts counting from the day the debt becomes due.
How the Rise in Interest Rates Affect Debt Recovery
An increase in the Bank of England’s interest rates directly affects contractual and late payment interest rates against debt owed. However, the Late Payment of Commercial Debts (Interest) Act freezes interest at the rates that are in place on 31 December and 30 June. Therefore, despite interest rates going up to 4%, the Late Payment Act will apply the rate as of 31 December 2022 which was 3.5%. However, this base rate is added to a statutory 8% per annum meaning that creditors claiming under the Late Payment Act can claim interest of 11.5% per annum on debts that become due between 31 December 2022 – 30 June 2023.
For example, if a debtor owes £1,000 with the current bank rate of 3.5%, the annual statutory interest on this would be £115 (1,000 x 0.115=£115). So to get the daily interest, you’ll have to divide £115 by 365 days. This will amount to 31p per day.
Why Do You Need Debt Recovery Solicitors?
As inflation and interest rates rise, People might be compelled to use more of their income for non-discretionary purchases. Unfortunately, this means they’ll have less money to pay debts and are bound to default on their responsibilities. That’s bad news for cash flow needed to sustain your business.
Recovering money from debtors in these trying times has undoubtedly become a daunting task. As such, you may require the services of an expert (debt recovery Solicitor) to do the work for you.
From sending demand letters to commencing court action and everything in between, we’ll ensure payment is forthcoming as soon as possible. In addition, debt recovery Solicitors will provide you with quality advice and guidance when necessary.
Do you need help from Lovetts Solicitors? Sign up for free today.
BTI 2014 LLC v SEQUANA SA AND OTHERS  UKSC 25
Directors will need to monitor their company’s financial position more closely, following a recent decision of the Supreme Court.
To paraphrase section 214 of the Insolvency Act 1986 relating to wrongful trading, the court may require a contribution to be made to the funds of an insolvent company by a director who, when he ought to have known that the company could not avoid insolvent liquidation, failed to take every reasonable step to minimise the potential loss to creditors.
Further, to paraphrase section 239 of the same Act relating to preferences, the court may require a contribution to be made or a repayment where, within six months prior to the start of insolvency proceedings, at a time when the company had been unable to pay its debts, funds or assets were transferred by a director out of the company with the intention of preferring the recipient over the general class of creditors.
In addition to the statutory provisions referred to above, the Supreme Court has recently decided that the common law fiduciary duty which is owed by directors to their companies, essentially requiring directors to act in good faith in the interests of the company as a whole, can extend beyond considering the interests of shareholders, so as to become a duty to consider the interests of the creditors as a whole (referred in this note as ‘the creditor duty’).
In summary, the duty is to refrain from harming creditors’ interests. The more perilous the financial position, the more onerous the creditor duty becomes. If the creditor duty is breached, the court may, on the application of the company, require the director personally to make good the loss arising.
The type of situation covered by the creditor duty which is not already covered by sections 214 and 239 might typically involve a director of a company which is bordering on insolvency entering into a risky transaction as ‘a last roll of the dice’. The shareholders might have little to lose from such a course, but creditors could be severely prejudiced economically.
The creditor duty has only recently become established and its parameters are still being developed. The Supreme Court’s decision is therefore of considerable importance to directors and their D&O Insurers.
In May 2009, AWA distributed a dividend of €135m to its only shareholder, Sequana SA, thereby discharging some intra-group liability. This payment was lawful in that it complied with the regulations governing dividends contained in Part 23 of the Companies Act 2006 and with rules relating to capital maintenance. AWA was at the time unquestionably solvent on both a balance sheet and a cash flow basis.
However, AWA had long term pollution-related contingent liabilities of a very uncertain amount. The company had made provision for these in its accounts albeit that there was uncertainty as to the value of one class of its assets (insurance). This gave rise to a real risk, although not a probability, that AWA might become insolvent at an uncertain but not imminent date in the future.
Subsequently, BTI 2014 LLC, as assignee of AWA, brought proceedings claiming that the directors who had authorised the dividend had acted in breach of their duty to have regard to the interests of AWA’s creditors.
Finally in 2018, some nine years after the dividend was paid, AWA entered insolvent administration.
BTI’s case was that the creditor duty had arisen by the date of the dividend distribution because by then there was a real and not remote risk that AWA may in the future become insolvent.
However, the Supreme Court found in favour of the directors and held that, by the date of the distribution, the creditor duty had not yet arisen.
In order to reach their decision, the judges of the Supreme Court considered the justification for the creditor duty and made provisional findings as to what it consists of and when it arises. Their findings are summarised as follows.
Position prior to insolvent liquidation being probable – It is to be noted that liability for wrongful trading under section 214 only arises when there is a subsequent insolvent liquidation. The rationale for this restriction be may that creditors are not the main stakeholders at any earlier stage than when the company enters insolvent liquidation. It is the prospect of insolvent liquidation, in which creditors will have an economic interest in the sense of a right to receive a distribution of the assets of the insolvent estate, that entitles creditors to have their interests considered earlier, when liquidation appears likely.
Prior to insolvent liquidation appearing likely and as the present case illustrates, there may be a lengthy period and a major difference between a company being subject to a real risk of insolvency on the one hand, and probable or imminent insolvent liquidation on the other. Insolvency may be temporary and there may genuinely be light at the end of the tunnel. For example, many start-up companies may be in this position. Applying these and other considerations, the Court held that the existence of a real risk of insolvency is too far removed from the liquidation process to give rise to the creditor duty.
Position when insolvent liquidation is probable, albeit the situation is not necessarily irretrievable – The content of the creditor duty at this stage is to consider creditors’ interests, to give these appropriate weight, and to balance the creditors’ interests against shareholders’ interests where they may conflict. The evaluation thus undertaken is likely to be highly fact-sensitive.
As to when the creditor duty arises, a majority of the Court considered that this would be either on ‘imminent’ insolvency (i.e. an insolvency which directors know or ought to know is just round the corner and going to happen) or when there is the ‘probability’ of an insolvent liquidation ‘about which the directors know or ought to know’. Another formulation is when the company is ‘bordering on insolvency’. There are also different ways of defining the term ‘insolvency’ itself, as the case may require.
Position where insolvent liquidation is inevitable – Here the economic interest lies with the creditors. The interests of shareholders cease to carry any weight and the company’s interests have to be treated as equivalent to the interests of its creditors as a whole. That gives rise to the duty to treat the interests of creditors as paramount.
Limits on the principle of ratification – Shareholders have the power to authorise or ratify acts committed by directors in breach of their duties as long as these are within the powers of the company. However, the Court held that this principle applies only to solvent companies.
This case is helpful in clarifying numerous aspects of the creditor duty. However, there may be some difficult judgment calls for directors in determining when a company is ‘bordering on insolvency’ or when insolvent liquidation is ‘imminent’ or ‘probable’ and therefore when directors become subject to the creditor duty. Directors will need to monitor their company’s financial position and prospects with care, take professional advice when necessary and make a careful record of their assumptions and decisions.
For further information, please contact Wendy Miles, Chris Earl or William Sturge at Lovetts.
On 2 November 2022 the Court of Appeal heard a case concerning a claim for flight compensation that had been wrongly denied in the lower Courts. Lovetts successfully represented the passengers in seeking to overturn the decision of two earlier courts.
The case of Dore & anr v EasyJet Airline Company Ltd  EWCA Civ 1553 stemmed from a delayed flight on 1 June 2019, where two passengers had booked a flight operated by easyJet. The flight was delayed by 7 hours meaning the passengers were each entitled to compensation of 250 € each.
EasyJet provide an online customer portal designed to allow its customers to submit claims for compensation. In this case, the passengers’ request for compensation was submitted through easyJet’s portal (despite having already having received a request for compensation from Lovetts on behalf of the passengers) by a flight compensation company. Following the request for compensation being submitted the airlines portal, easyJet responded by email and claimed the passengers’ details could not be found and the request for compensation was refused.
Court proceedings were subsequently issued and easyJet filed a defence, claiming the passengers had not submitted a claim via their online portal and had not complied with their terms and conditions, this was incorrect.
The first hearing was held at Luton County Court. At the hearing, easyJet changed their position and conceded that a submission via the portal did occur but the data submitted was probably wrong. They did not disclose the data received nor did they say what data was wrong. Despite this Deputy District Judge Abrahams dismissed the Claimants claim and held that it was likely easyJet had not received sufficient information to process the claim.
The decision of the first instance judge was appealed. At Oxford County Court HHJ Clarke dismissed the appeal on the basis that the burden of proof remains with the Claimant and despite the airline holding the data and failing to disclose what they had received, HHJ Clarke held that the passengers could have taken a screenshot, photograph or printed evidence of the claim being submitted through easyJet’s portal, to evidence that a claim had been submitted.
The decision of HHJ Clarke would have had serious repercussions for all consumers that complete forms and/or place orders/make bookings online. It would have placed an unreasonable burden on consumers to screen shot everything they do online and accordingly it should be deemed a material obstacle. As a result, an appeal was made to the Court of Appeal on the grounds that the decision in the first appeal was wrong and/or unjust due to serious procedural irregularity. Additionally, the decision raised an important point of principle that warranted consideration by the Court of Appeal.
In addition, the Appeal would consider whether the passengers had complied with easyJet’s terms and conditions in submitting a claim directly to easyJet and allowing 28 days to respond, before engaging a third party (Lovetts) to submit a claim on their behalf.
The case of Dore and anr v easyJet Airline Company Ltd was heard in November 2022 by Lord Justice Males, Lord Justice Birss and Lord Justice Snowden.
The Terms and Conditions
The first error arose from the fact that easyJet claimed their terms and conditions had not been complied with. This was incorrect because they were relying on terms that did not apply to the passengers. The terms easyJet had relied on at the first hearing, were terms that had not been incorporated at the time the passengers made the booking.
The Court of Appeal correctly identified that when the passengers booked their tickets, easyJet’s terms and conditions at the time of booking were different to the terms and conditions which were before the judge in the first instance.
Can you instruct someone else to request compensation on your behalf before instructing solicitors to issued court proceedings?
In the present case, the Court of Appeal also briefly considered whether a third party flight compensation company could submit a claim through easyJet’s portal on behalf of the passenger.
Little thought was needed, as it had recently been determined in Bott & Co v Ryanair DAC  EWCA Civ 143 (“Bott”) that a third party could submit a claim on behalf of the passenger. In the present case, the Court of Appeal reaffirmed the earlier finding stating
“even if the matter was free from authority, I would hold that the passengers are entitled to have someone else access the online portal on their behalf and thereby make a claim in their name. The other person could be a friend of family member, or it could be a claims handling company or solicitor engaged for that purpose”.
The Court of Appeal noted that it was irrelevant if an airline preferred its customers not to use a claims handling company on its behalf, passengers are allowed to do so.
The appeal and an issue of public policy
The Appeal Judges unanimously agreed that easyJet had placed a material obstacle in the way of the passengers, by requiring evidence that a claim had been submitted through its portal, when the passengers had no way printing or returning to their submission once it had been sent.
Such a requirement was clearly not in the interest of public policy. It prevented passengers from claiming compensation, which they are entitled to when a flight has been delayed or cancelled.
It was also highlighted that a system such as the one provided by easyJet, which produced automated response emails which do not allow a user to see what data had been recorded as entered (so as to facilitate the correction of errors), risk itself amounting to a material obstacle. The Court highlighted that such a system should provide an accessible record of data entered to assist passengers correct any input errors and make their claim for compensation. EasyJet’s system did not do this. It presented a material obstacle to the passengers obtaining compensation.
Lord Justice Males set out a 4 part test for an online system to achieve the objectives of enabling passengers to claim compensation without difficulty and to receive payment with incurring legal fees or paying claims companies, without putting a material obstacle in the way:
1. The airline’s terms and conditions must make clear to the passenger that the use of the system must be compulsory and must be used before court proceedings are commenced.
2. The passenger should have the ability to save the claim which is submitted and should be strongly advised to do so in case of any issue arising.
3. If it is the case the claim can only be processed if some or all of the claim details are correctly entered on the online form which is submitted and that an error in one or more fields will lead to the claim being rejected, that must be explained to the passenger.
4. If a claim is rejected on the ground the claim details have not been entered correctly, the automated response sent by the airline must make this clear.
Lovetts was successful and the Appeal was granted. Not only did this success protect passengers right by reaffirming the decision in Bott and Co that a flight compensation company could assist a passenger claiming compensation, it also protected all consumers from the burden of having to screen shot everything they do online.
LJ Males in his Judgment stated:
“Its (easyJet) computer knows which flights have been subject to delay and knows the identities of the passengers on those flights. Although there was no evidence about this, it ought not to be difficult for it to contact passengers (or at any rate, those who have made the booking for passengers) who are entitled to compensation, but no doubt it suits EasyJet that a certain percentage of passengers will never bother to claim. So although EasyJet is not required to contact passengers in this way, in a sense any costs incurred in handling the claims of those passengers who do claim can be set against the savings achieved as a result of deciding not to pay compensation unless a claim is made.”
LJ Males correctly identified that airlines save money by not paying out compensation to passengers that do not make claims. Even for passengers who do make claims, airlines make it manifestly difficult in the hope they will drop their claim. That is why Lovetts Solicitors and other flight compensation companies assist passengers by recovering flight compensation rightly due to them.
Lovetts are delighted that the claimants obtained the correct outcome and that justice has been served.
(1) Stonegate Pub Co v MS Amlin and Others
(2) Various Eateries Trading v Allianz
(3) Greggs v Zurich
(2022, Commercial Court)
The Commercial Court has given judgment in three cases raising similar issues as to how business interruption (‘BI’) insurance operates in the context of the covid 19 pandemic and the government’s and the public’s reaction thereto. The actions are not consolidated, but, with the parties’ agreement, the judgments take account of issues arising across the three sets of proceedings.
The three claimants in these cases took out BI insurance on the same standard form of policy wording (known as the Marsh Resilience form) and are claiming from their insurers in respect of BI losses sustained at their respective pubs, bars and other locations across the UK. The judgments will be significant for insurers and insureds who still have covid-related BI claims to resolve.
The judgments lay down general principles, as the first stage in determining how much each insured can claim, particularly in relation to how retentions and limits apply to covid-related losses.
Essential to the court’s judgments is the distinction drawn between (1) a ‘covered event’, being an event covered under the insurance which gives rise to a claim under the policy, (2) the issue of whether the insured‘s BI loss was caused by a covered event and (3) the aggregation of losses, and imposition of a monetary limit per occurrence as provided for under the insurance, where individual covered events are connected by a ‘single occurrence’. (The insureds contend for the maximum number of occurrences and the insurers contend for the minimum.)
The main findings of the court are set out below, by reference to the Stonegate judgment which is the fuller of the three, cross-referring to the other judgments for specific points.
What are the ‘covered events’ in covid-related BI losses?
Cover for Notifiable Diseases and Other Incidents – Each of the three insureds had cover for BI loss where any of the diseases listed in its policy, or another disease which came to be classified as a notifiable disease under the health regulations, was discovered at any of its insured locations or occurred within the vicinity of an insured location, during the period of insurance. The term ‘vicinity’ was defined in the policy.
The disease section of cover extended to ‘Enforced Closure’. This gave cover for BI loss resulting from the enforced closure of an insured location by a governmental or other relevant authority, for health reasons.
Covid 19 was made a Notifiable Disease in early 2020.
In the Various Eateries case, the insurers’ primary argument was that this section was expressed to cover the discovery or occurrence of the disease within the vicinity, and accordingly the state of affairs constituted by the presence of the disease in the vicinity should be regarded as the covered event.
Meanwhile, in the Greggs case, the insurers argued that the effect of the policy was to provide an indemnity where the insured’s business was interrupted as whole, and therefore that the disease clause should be regarded as triggered by the spread of the pandemic.
However, the court, applying the analysis made in the test case of FCA v Arch decided by the Supreme Court in late 2020, held that each individual case of covid which was either (a) discovered at an insured location or (b) occurred within the vicinity of an insured location, was a covered event under the Notifiable Disease section, equally effective with every other such case in causing the governmental action and public response thereto that gave rise to BI loss.
Turning to the Enforced Closure section, the court held that each actual closure of all or part of an insured location under the relevant compulsion or instruction was a covered event and trigger of coverage.
Cover for Prevention of Access (Non Damage) – Each of the three insureds also had cover for BI loss resulting from the actions or advice of the police, or another relevant authority, in the vicinity of an insured location which prevented or hindered the use of, or access to, an insured location. It is to be noted that this did not require that the official action should be due to an emergency or danger in the vicinity.
The court held that, under this section, it is the action of the relevant authority, if this prevents or hinders the use of, or access to, one or more insured locations, which is the covered event. The number of covered events is the number of actions and advices (excluding reiterations of the same action or advice), rather than the number of insured locations to which the actions or advices relate.
When are covid-related BI losses arising out of covered events aggregated as a single occurrence?
In respect of BI loss resulting from Notifiable Diseases and Enforced Closure, the policy specified a retention of £100,000 and a limit of liability of £2.5m, any one single business interruption loss (‘SBIL’).
In respect of BI loss resulting from Prevention of Access, the policy specified a retention of £100,000 and a limit of liability of £1m, any one SBIL.
A SBIL was defined, relevantly, as,
‘all Business Interruption Loss and Business Interruption Costs & Expenses … that arise from, are attributable to or are in connection with a single occurrence‘.
The policy thereby included aggregation wording, providing that individual covered events causing BI loss should be aggregated as a single occurrence, with one retention and one policy limit, in a case where the events were connected by a unitary and identifiable occurrence.
The court held that, in order for there to be a unifying ‘occurrence’, it is necessary to identify something that occurs at a particular time and place, in a particular way. The policy contained the usual requirement for a covered event to be the proximate cause of BI loss. However, as to the degree of connection required between the unifying occurrence and the individual BI losses, the court held that the words quoted above require only relatively weak causal linkage. Wording of this type does not, for example, require that the unifying occurrence itself should be the proximate, sole or main cause of the loss. Further, the policy wording clearly contemplated that losses could be aggregated more widely than on a per premises basis. However, in order to be relevant for the purposes of the aggregating provision, the unifying occurrence must not be too remote, geographically or temporally.
As to the relevant time for determining whether losses arise from a single occurrence, given that one of the primary functions of BI insurance is to provide the insured with funds during the interruption, the court held that the relevant point is the earliest time after commencement of loss at which a reasonable person in the position of the insured (also referred to as an informed observer) would seek to decide whether there was one relevant occurrence. This will be a relatively short period after loss starts to be sustained. The determination proceeds on the basis of the best material that would have been known to the informed observer at that juncture.
The insurers proposed various set of circumstances as unifying occurrences in the case of covid-related BI losses. Taking into account the matters in the preceding two paragraphs, the court found as follows.
The first development of the virus, or subsequent specific mutations of the virus (‘the virology options’) – These were rejected as candidates for the unifying occurrence because events of this type were too remote, but also too uncertain. Further, the informed observer would not have been aware of matters of such highly specialist knowledge at the time for making the determination.
The first transfer of the virus to a human or the outbreak of covid in Wuhan – These were rejected because the initial transfer of the virus to a human was too remote. Meanwhile, an outbreak did not qualify as a single occurrence and was also too remote.
The tipping point at which the pandemic became inevitable – This was rejected because the relevant definitions, and assumptions as to possible outcomes in terms of counter-measures and other actions that could have been taken at any given point, prevented the court from identifying an occurrence of this type with sufficient certainty.
Any one single case of covid within the vicinity – The court held that an individual case of covid could not be used as the unifying occurrence with which the insured’s losses from other single cases, being covered events, were connected, because no individual case had more significance as a unifying factor than any other. It was only by reason of there being very many such losses, each equally effective, that individual cases had the relevant causative effect.
The government’s response – The court did not accept the argument put forward in the Greggs action that the government’s co-ordinated response to the pandemic between March and December 2020 was a single occurrence, because as a matter of fact there was no such co-ordinated response across the four nations of the UK, while the purpose of governmental action varied over the period.
However, the court did accept the general submission made by the insurers that a governmental measure which sought to contain the spread of covid and did so in ways which affected the insured’s business constituted a unifying occurrence falling within the terms of the insurance.
Thus, the decision taken at a meeting in the Cabinet Office Briefing Room (‘COBR’) on 16 March 2020, that the public should be advised to avoid pubs, restaurants and clubs, was a unifying occurrence. Alternatively, there were three relevant occurrences, in the form of the announcements of the new advice to the public by the Prime Minister on 16 March 2020 and by the First Ministers of Wales and Scotland, the following day. An informed observer would have regarded the decision of the three governments as a unitary matter which would have an effect on its business throughout the country.
Again accepting the insurers’ submission, the court held further that the government’s instructions given on 20 March 2020 to all pubs, bars and restaurants to close and not reopen the following day was a single occurrence, or alternatively three occurrences, for England, Scotland and Wales respectively.
Further points made in the judgments included the following.
Possibility of further unifying occurrences – It was the insurers who had proposed the occurrences of 16 and 20 March 2020 as unifying occurrences with which individual covered events were connected. The court had reservations as to whether these were the only circumstances which could be characterised as unifying ‘occurrences’ in that period. Thus, it was possible that the announcement of the lockdown on 23 March 2020 was a further occurrence.
However, the review and renewal of the 26 March 2020 regulations in April, May and June 2020 would not be regarded as separate occurrences.
Effect on the recoverability of BI loss in the indemnity period, given that the pandemic was continuing – It would be for the insured to establish that all its BI loss in the indemnity period was caused by covered events occurring in the period of insurance, rather than caused by cases of the disease occurring after the period of insurance. Cases of disease in the vicinity after the end of the policy period could not simply be regarded as the playing-out of the effect of the covered events.
Related actions – (per the judgment in the Greggs case) The BI losses that flowed from a decision to close the whole of a business even though the insured was only required by regulation to close part of the business, could be losses connected with a single occurrence in the form of a governmental measure directed at containing the spread of covid.
When the insured must give credit for Government support – Such support, in the form of business rate relief and grants under the Coronavirus Job Retention Scheme (i.e. furlough payments), would as a matter of general principle reduce the amount of BI loss payable to the extent that such support reduced expenditure payable by the insured out of turnover, albeit that this would depend on the wording of any applicable savings clause in individual policies.
For further information, please contact Wendy Miles, Chris Earl or William Sturge at Lovetts.