The current lock down caused by the ongoing Coronavirus crisis has led to inevitable changes in the handling and posting of important business documents such as contractual notices, claims forms and statutory demands. Here we take a look at the usual rules, the current guidance and the steps you can take to protect yourself and mitigate risk.
What are the usual rules?
Often, as a matter of law or contract, documents and notices are deemed to have been received or served by reference to the number of days after they have been posted, not received. That means that documents which are later discovered in the post boxes of empty registered offices are typically still effective.
Most contractual notices will have their own provisions about deemed receipt and may be very important documents such as termination or acceleration notices.
The other documents that are likely to cause the most concern are Claim Forms and Statutory Demands. Whilst service of documents in ongoing litigation proceedings may also be a concern, lawyers who are on the record are more likely to know what is coming and to try to prepare for it.
Claim forms are generally (though there are exceptions) deemed served on the second business day after they are put in the first-class post to a business' principal or normal office. Critically, judgment in default can be sought by the claimant if an Acknowledgement of Service or Defence is not filed within14 days.
Statutory demands against companies simply have to be left at the company's registered office. While it is up to the creditor to prove that the demand has been served, there is no formal requirement for that to be done in any particular way. Creditors could prove service by having someone drop a demand in the post box at a registered office or by way of a notice of delivery from the Royal Mail. A debtor may automatically be deemed to be unable to pay its debts if it does not respond to a statutory demand 21 days after service, giving creditors a clearer right to present a winding up petition against the company.
Current guidance (or the lack of)
So far there is no new guidance from the courts or government about how, or whether, parties should serve time sensitive notices or documents in an alternative way during the current crisis. The normal rules still apply. We have seen a largely pragmatic approach from other law firms, being more open to service by email and more open correspondence, but that is of no use where a party may be looking to exploit the circumstances to gain a tactical advantage.
It is likely that the courts will adopt a more lenient approach to any application for relief from sanctions (needed when a court deadline is missed) where documents have been served slightly out of time during ongoing proceedings, or where documents have not come to the attention of the recipient, if it can be demonstrated that COVID-19 caused the delay or oversight. Indeed, any default judgments may well be set-aside. However, it will be for the company which has missed a deadline to apply for relief as soon as it reasonably can, and applications can be made now, electronically, irrespective of the current restrictions on movement. The courts may well also expect larger businesses to put in place procedures to identify and deal with important documents if possible.
As to changes to the rules on statutory demands and the insolvency process, it is a question of watching this space. As my colleagues Joanne Rumley and Sian Philips have commented in their article Proposed Changes to UK Insolvency Laws, things may change soon, but for the moment the existing rules apply.
Practical steps to protect yourself
Unless and until there are changes to the rules for service then there is a risk. If something is posted to or arrives at your offices, you will still be deemed to have received it at the usual time and time limits will start to run.
To mitigate that risk, you could consider:
- Engaging with any party likely to serve you with a document in advance. If you can agree to copies or service by email that may solve the problem. The courts are likely to take a dim view of any party which knows its document won't be read trying to gain a tactical advantage. Consider carefully whether to contact another party as, in some circumstances (e.g. real estate), you may not wish to highlight a forthcoming deadline to serve notices;
- Physical notices on site. If your office or site is closed, keep a notice in a prominent location at the front entrance setting out whether and when post is being reviewed and instructions about alternative methods of contact (i.e. email). This may not stop post being delivered, but it may hinder parties trying to prove service of statutory demands, as they or their agents will have been told that the document hasn't been received;
- Training of any skeleton staff left on site to recognise and scan or forward important time sensitive documents to make sure they get to the relevant people as a matter of urgency;
- Updating your website, email signatures etc to confirm that the office is closed and provide alternative contact details. You may wish to note that you will accept service by email for a defined period; or
- Temporarily redirecting your post if that is feasible given confidentiality and volume issues.
For most businesses a combination of the above options would be prudent. Engagement is likely to remove a large part of the risk of missing documents as a result of counterparties simply acting as if it is business as usual. Where there may be a risk of parties looking to gain an advantage from the current situation then educating skeleton staff to know what to look out for (e.g. claim forms and statutory demands - the format of which are available online) will be critical.
Even if you act more slowly than you would usually, then the courts are likely to show more leniency, and be fairly unimpressed with parties which can be shown to be trying to use the current crisis to their advantage. However, the courts' leniency will only stretch as long as you act promptly to take action when documents are discovered. That may be an application to the court to set aside default judgment or obtain relief from sanctions, or it may be engaging with a creditor.
Closing your letterbox or changing your registered office is not a good idea. Other than causing confusion, claim forms and similar documents are deemed served when posted (not received). There is also the risk that documents will simply be left anywhere else that postmen/couriers can find, which could lead to lost documents, confidentiality and data protection issues to name a few.
If you are accepting documents by email and furloughing staff, there is an additional concern. The email accounts of furloughed staff that may receive important documents will need to be monitored and out of office replies will need to provide clear alternative contact details.
If you have any questions, then please contact the team at [email protected], or your usual contact at Foot Anstey LLP.