+353 1 6722233

Warning for Employers who Re-Open Workplaces when Lockdown Restrictions Eased

Many employers are anxiously awaiting directions from the Irish Government as to when they can re-open their businesses and/or operate their businesses at normal capacity.

Employers and employees alike should be mindful that the workplace post-Covid 19 lockdown will be very different to what they are used to and this is highlighted in the recent French case in which Amazon were ordered to stop selling “non-essential” items or else face hefty fines of €1,000,000 a day.

Amazon was sued by a French trade union on foot of some of its employees in France being diagnosed with Coronavirus where one employee was hospitalised as a result of being infected with Covid -19.

A French Court in Paris directed Amazon to establish a health and safety plan to protect its employees and although Amazon has appealed this ruling (which is suspended pending appeal), Amazon has closed six of its warehouses in France.

This case is a warning to Irish employers to ensure that they adequately protect the health and safety of their staff in the workplace and ensure physical distancing is adhered to by employees, suppliers and customers alike in the workplace. Failure to do so could result in employees refusing to attend work (so as to protect their health and safety) leading to a decrease in work production, formal grievances by employees or could even result in personal injury claims against the employer if an employee is infected with Coronavirus as a result of the employer’s failure to adequately protect employees at work.

The Irish Response – Return to Work Safety Protocol

On the 8th May 2020, the Department of Business, Enterprise and Innovation and the Department of Health published the “Return to Work Safety Protocol”, which is designed to support employers and employees to put measures in place to help prevent the spread of Covid-19, when the economy begins to re-open.

The Protocol outlines several measures which employers should implement in their workplaces to reduce the spread of the virus. These measures include updating company policies to outline the procedure for dealing with suspected cases of Covid-19 in the workplace, requiring employees to complete return to work forms prior to returning to work (to confirm that the employee has no Covid-19 symptoms, is not self-isolating or awaiting test results) and ensuring physical distancing in the workplace (for example, staggered breaks and working in small teams, if group work is necessary in work).

Furthermore, businesses will also be expected to implement more stringent cleaning regimes in work which could be an issue for small businesses who may have limited resources to pay for cleaning services.

It is anticipated that as part of the Irish Government’s lockdown exit strategy that the Health and Safety Authority may be given additional powers to inspect workplaces and shut down those workplaces which are not adhering to physical distancing measures.

Comment

In light of the recently published Return to Work Safety Protocol, we would encourage all employers to take this time to carry out workplace risk assessments as well as updating their workplace policies so as to provide guidance to employees as to what measures to take in the workplace post-Covid 19 lockdown, in line with the Protocol.  Employers should engage in this task now before re-opening their businesses and/or operating their businesses at normal capacity.

If you are unsure as to what measures to take or how to go about updating/drafting workplace policies, our Employment Law team are here to help and can guide you through these challenging times.

This Article is not intended as legal advice. For specific queries, please liaise with Cómhnall Tuohy whose details are set out below.  

 

AUTHORS:

 

Cómhnall Tuohy, Partner

E:  ctuohy@kanetuohy.ie

M: 087-2194782

 

Jenny Martin, Senior Associate

E:  jmartin@kanetuohy.ie

M: 087-1184575

 

Rita Higgins, Solicitor

E:  rhiggins@kanetuohy.ie

M:  087-4141509

 

 

Has the State Created a “Moral Hazard” for Directors?

The outbreak of Covid-19 has presented significant challenges for businesses and has caused severe business disruption. The Irish government has introduced new measures in the hope of mitigating the effects of Covid-19 on the Irish economy.

As part of these measures, the Government announced on the 2nd May 2020 that the Revenue will “warehouse” deferred tax debts associated with the Covid-19 crisis to assist small and medium-sized enterprises (SMEs) who may be experiencing cashflow problems and trading difficulties at this uncertain time.

New Revenue Scheme

This new scheme involves the effective parking of any unpaid VAT and PAYE (Employer) tax debts which arise as a result of the Covid-19 crisis, for a period of 12 months after businesses return to trading.  In addition, a year after a business has returned to trading, a lower interest rate of 3% per annum will be placed on such “warehoused tax debts”. The Revenue has stated that it will operate these arrangements on an administrative basis pending the enactment of the required legislation.

Although this is welcome news for Irish businesses, any question arises as to whether these measures could expose directors to a higher risk of breaching their fiduciary duties further down the line.

Preferential Status in Liquidation

The Revenue enjoys preferential status in liquidation (i.e. it ranks ahead of other creditors for certain tax debts). In other words, if a company becomes insolvent and begins the process of winding up, the Revenue will be paid ahead of any other creditors of that company.

This could prove problematic for company directors, who have duties to their creditors. Does their duties to their creditors mean that they should not avail of the State’s assistance?

Directors Duties

Section 228 of the Companies Act 2014 imposes a non-exhaustive list of fiduciary obligations on company directors. These include the duty to exercise the care, skill and diligence which would be expected of a reasonable person in the same circumstances and to act honestly and responsibly in relation to the conduct of the affairs of the company. However, where a company is insolvent or is threatened with insolvency this fundamental principal changes and directors will also owe a duty to act in good faith and to show the utmost care, skill and diligence to the creditors.

If a company avails of the Revenue’s “warehouse” deferred tax scheme and subsequently becomes insolvent, leading to the Revenue becoming a preferential creditor, it could lead to accusations from other creditors that the company’s directors acted in breach of their fiduciary duties. However, the alternative for company’s directors is not to avail of the Revenue’s “warehousing” measures and this could lead to companies going out of business.

Insolvency

If the situation arises whereby insolvency becomes a likelihood for the company, the focus of the company directors shifts from their members to the company’s creditors.

In the current circumstances, many companies find themselves needing to avail of State assistance. Some commentators have expressed concern that this may be seen as an admission of insolvency and (unless a rescue is possible), the company should cease to trade and begin to wind up the company. On reflection, this could be seen as an overly simplistic view of the legal position and illustrates quite a peculiar situation whereby the Government are, to an extent, encouraging a company to continue trading whilst being technically insolvent. It may be more appropriate that a company (and its directors) who avail of State support, to help preserve the company, should not face repercussions for continuing to trade.

Newspaper articles suggest that the Government is being urged to “dial down” our insolvency regulations here in Ireland, and to follow the temporary changes made in the UK to allow companies to continue trading through the crisis and any financial difficulties through inter alia the suspension of a director’s culpability for any worsening of the financial position of the company or its creditors during the period 1 March 2020 to 30 June 2020. Currently, directors in Ireland have personal liability for debt incurred if they are knowingly carrying on business when a company is insolvent. Any proposed changes would need to consider removing the penalties that apply in the event that a company continues to trade while insolvent if the company is merely trying to “weather the current crisis”.

For instance, the Australian Government has temporarily removed the potential for directors to incur personal liability for continuing to trade whilst insolvent, essentially directors are temporarily freed from risks of incurring personal liability and can focus on job preservation.

It is important to emphasise that the law does not penalise directors who have acted honestly and responsibly at the time the company was in financial difficulty. Professional advice from financial and legal experts ought to be obtained if directors do not believe that there is a likely future for their business or if they have concerns as to their liability in allowing their company continue to trade.

It may be the case that, once a new Government is in place in Ireland, further emergency legislation is passed to modify current insolvency laws so that the sanctions for directors trading while they may not be able to pay all of their debts as they fall due would be suspended for a period, provided that they are acting honestly and responsibly.

The Future Concern

The Central Bank of Ireland has announced that the current outbreak of Covid-19 has “triggered an extremely severe economic shock” which is fundamentally different from anything the economy has encountered previously. In its latest Quarterly Bulletin, the Central Bank outlined the possibility that the economy could shrink by 8.3% of GDP in 2020 and that the unemployment rate may rise to around 25% in the coming months.

It is likely that a number of businesses will be unable to pay outgoings due to severe cash flow shortages in the coming months, if not already in trouble and it is no doubt that the tapering off of the implemented subsidies will have a detrimental effect on many SMEs. In reality, the impact of these emergency schemes may be less advantageous than expected, especially for businesses that have experienced significant financial difficulties or have already shut down. It may be the case that businesses may see costs exceed income for many of the VAT periods covered by this deferral, in which case there is unlikely to be any net VAT payable anyway.

Conclusion

The duties of a company director are not absolute and the nature and scope of their obligations relates to their individual context. These duties extend to any commercial decision or strategic response taken by a company’s board of directors in periods of emergency. Naturally, every decision should be considered in depth and have the possible advantages, disadvantages and alternatives contemplated. Any decisions made by the board may be assisted by expert advice and opinion.

Directors who adopt appropriate corporate governance and good decision making, during the crisis will find themselves and their company in a better position to manage the challenges which lie ahead. Albeit strange, it is probable that the Irish Government will follow the approach that has been taken in both the UK and Australia whereby they encourage many businesses to continue trading whilst being ”balance sheet” insolvent. There is no doubt that the impending economic crisis will heighten the difficulties faced by companies but seeking advice from an expert can bring clarity to decision-making that preserves value.

Kane Tuohy Solicitors have a strong corporate recovery department which has experience acting in high profile liquidations, examinerships and receiverships. Kane Tuohy can provide assistance to your business in developing short-term and long-term strategies in response to this Covid-19 pandemic.

If you are concerned about as to how you can “future-proof” your business, please feel free to contact our office.

 

AUTHORS:

Anna Hollywood, Trainee Solicitor

Ciara Lennon, Trainee Solicitor

 

This Briefing Note is not intended as legal advice. For specific queries, please liaise with your usual contact in Kane Tuohy or with Hugh Kane (hkane@kanetuohy.ie / 087-9726164)

 

 

Covid-19: The Virtual Courtroom Trialed

The outbreak of Covid-19 has resulted in unprecedented levels of disruption to the Courts Service and to   the administration of justice.

In the face of this disruption on the 20th April 2020, for the first time ever, the Courts in Ireland sat with all parties being present in the Court via remote video technology. It is hoped that such virtual courtrooms will add to the various social distancing measures which have been introduced by the Courts Service in response to the Covid-19 pandemic.1

While it has been the Courts Service’s intention to modernise the Courts for some time, including the development of virtual courtrooms over the next decade, the current, Covid-19 pandemic, has accelerated the introduction of virtual courtrooms.2

Addressing the Court by remote video link on 20th April 2020, the Chief Justice commented,

Remote hearings will be suitable for some types of proceedings in the High Court and a limited number of cases in the District and Circuit Courts. The Court Presidents and the Courts Service are exploring ways in which to increase the number of cases which can be dealt with in physical hearings.3

In preparation for this new way of hearing matters, the Courts Service have set up virtual meeting rooms (VMR’s) for the purpose of each Court sitting. They operate via a VMR service which uses a video streaming app called PEXIP. Parties to the proceedings can join a PEXIP VMR session from various streaming services which include Skype, Zoom, Cisco Webex and Teams. The in-Court technology is that which is usually used for video-link to prisons and video conference with remote witnesses.

Following on from the historic events on 20th April 2020, the Court Service released a statement on 8th May 2020 setting out that the Courts will extend the use of virtual remote Court hearings, and organise more physical hearings in the coming weeks.In addition, the Court Service have stated that works have commenced to adapt courtrooms to facilitate physical distancing. The hope that the adaption of the courtrooms coupled with the staggering of Court hearings will allow for a safe environment to increase the number of cases that can be heard in the coming weeks.4

It is not just the Courts Service that is changing the way it operates in the face of the challenges posed by the Covid-19 crisis. Statutory bodies such as the Residential Tenancies Board are utilising video link facilities for the hearing of disputes between landlords and tenants.5

The Workpace Relationship Commission and the Labour Court too are reviewing the way they operate in light of the current pandemic.

The Workpace Relationship Commission – while currently postponing adjudication hearings, face-to-face conciliations and mediations – is still providing mediation of individual complaints by telephone and conciliating collective disputes in like manner. In addition, the WRC is preparing a white paper on the consideration of remote hearing. Meanwhile, the Labour Court has decided that virtual hearings will now be offered to selected cases and has selected a number of cases for hearing in a virtual court-room setting.

Undoubtedly, the Covid-19 pandemic has posed challenges for the Court Service in the administration of justice and for other statutory bodies in carrying out their functions. However, these bodies are reacting and adapting to the issues posed in light of this pandemic.

Kane Tuohy LLP Solicitors remain ready and willing to assist clients with any legal issues they encounter during this difficult time. Should you wish to contact us to discuss any issue you may encounter, please do not hesitate to contact any member of our team.

 

AUTHOR: Ciara Lennon, Trainee Solicitor

 

This Briefing Note is not intended as legal advice. For specific queries, please liaise with your usual contact in Kane Tuohy or with Hugh Kane (hkane@kanetuohy.ie / 087-9726164)

 

 

 

1 https://beta.courts.ie/content/virtual-remote-courts-piloted-ireland-morning

 

2 https://www.dilloneustace.com/legal-updates/covid-19-virtual-courtrooms-to-be-trialed

 

3  https://beta.courts.ie/content/virtual-remote-courts-piloted-ireland-morning

 

4 https://beta.courts.ie/news/gradual-and-careful-planning-creating-pathway-opening-some-courts-courts-statements- friday-may

 

5 https://www.mccannfitzgerald.com/knowledge/disputes/covid-19-litigation-and-dispute-resolution-update

 

 

COVID19 and the Continuation of Administration of Justice in Ireland

The Future of Litigation – Remote Court Hearings?

 

A joint statement was released on 31st March 2020 by Chief Justice Frank Clarke and the Presidents of each of the Court jurisdictions which stated that “a considerable amount of work has been done” on facilitating remote court hearings which were set to be piloted on 20th April 2020, in order to guarantee the continuation of administration of justice during the coronavirus restrictions, particularly with the pandemic thought to be a long road ahead. There have been significant updates and developments since then.

On 20th April 2020, the Irish Courts sat with all parties present via remote video technology. On this date both the Supreme Court and Court of Appeal heard matters on individual cases with judges, practitioners and parties appearing over video technology from remote locations. Each case was displayed in mainly empty court rooms on video screens for any members of the media present. At this point, it was emphasised that there will be steps made eventually for press to gain access to these cases remotely through secure and password protected links which would facilitate the press continuing to be the eyes and ears of the public.

Subsequent to this, the Courts Service released a statement on the 8th May 2020 stating that “Courts will extend use of virtual remote court hearings, and organise more physical hearings in the coming weeks.” Court rooms will be laid out in a manner to respect social distancing and cases themselves will be listed at staggered time slots. The implementation of these virtual courtrooms will facilitate an increased number of cases to be heard in the coming weeks and will deal with the necessity of decreasing the substantial backlog of cases.

The Chief Justice stated that these measures in relation to virtual remote court hearings and social distancing hearings may well continue to be in play to until the second half of 2021. He further stated that “important as these measures are, they will not allow a throughput of cases on the scale which operated prior to restrictions being put in place. It remains unrealistic to anticipate that all courtrooms in all courthouses will be able to operate at or near the level which existed prior to the crisis. Even if additional suitable venues can be identified there will still be significant limitations. It is for that reason that the use of remote hearings in those cases for which they are suitable, must remain an important part of the medium-term solution”.

 

Angela Denning, CEO of the Courts Service spoke about the practicalities of the implementation of measures to ensure every courtroom allows access to justice while also maintaining social distancing and safety. Ms. Denning stated that “the Courts Service has fitted out a prototype courtroom in Naas. … Screens will be provided for Judges, staff and witnesses, along with floor marking, two-meter distancing signage etc.” Ms. Denning announced that the Courts Service have created a new position and a full time Health and Service Officer has been appointed who will be responsible for reviewing any proposed measures to ensure that the Courts Service are compliant with all legislation and public health advices in relation to COVID19.

How can parties gain access to these virtual courtrooms and is there an ease in accessibility?

From a practical standpoint, the technology being used by the Courts Service to enable e-courtrooms is widely adaptable for anyone who will need to be involved in cases. A Virtual Meeting Room (VMR) is set up for the purpose of each individual court sitting. VMR uses a video streaming application called PEXIP. Parties who need to be involved in a particular case can join a PEXIP VMR session from other well-known and easily accessible video streaming services such as Skype and Zoom without the requirement that all parties  must use the same application. This will facilitate the ease of accessibility for all necessary parties to have access to these e-courtrooms.

Remote access and its downfalls?

While remote hearings are expected to be rolled out over the coming weeks, there are concerns with regards to virtual courtrooms. Mr. Justice Barniville of the High Court who has presided over a number of commercial court hearings held remotely, has told the Irish Times that these remote hearings were “a way of tiding us over until we get back to physical hearings”. This poses a question as to whether remote access to virtual courtrooms is a sufficient replacement for physical court hearings going forward?

Mr. Justice Barniville raised concerns in relation to remote access in that “you can’t get a good picture of the other person, the opponent, while the other side is speaking, or of the clients, or the solicitors, because they are relegated to a little box at the bottom of the screen. Quite often you want to see how a submission is going down, what the reaction of the other side is to it. So you miss all of those.” It could be further argued that the lack of a face to face experience in Court could also diminish the seriousness of offence that has been alleged to be committed. It would cause us to wonder whether people will treat a court hearing with the same degree of seriousness when they do not have to physically come to court and appear before a judge.

What developments are expected from our Courts system in the coming weeks, remote access or otherwise to ensure continued administration of justice in Ireland during COVID19?

The 18th May 2020 will be the start of the implementation of several number of practices to ensure the administration of justice within our Courts system:

  • The President of the High Court, Mr. Justice Peter Kelly has said that there will be an expansion of both the type and number of cases to be heard from Monday, 18th May 2020;
  • The High Court will continue to sit throughout the Whit recess/vacation;
  • Three courts will be available for remote virtual hearings daily;
  • Seven additional courts in the Four Courts complex will be available for physical distancing hearings daily;
  • Until further notice it will not be possible to hear cases which require oral testimony;
  • The Criminal Courts of Justice will facilitate the virtual remote hearings of criminal appeals;
  • Certain Jury Trials are to resume in many cases in the Circuit Court in September 2020;
  • District Court Appeals will proceed where Defendants are in custody;
  • Family Law cases will be given a hearing date as soon as possible and may be dealt with remotely if possible;
  • Civil cases in the Circuit Court which were adjourned since March 2020 will be given a hearing date as soon as possible; and
  • District Courts throughout the country will continue to hear urgent cases and these urgent cases now include areas of criminal, family and childcare law.

Without doubt COVID-19 has brought forward the necessity of technology in the future of administration of law in Ireland, particularly in the use of e-courtrooms. However, having regard to the Courts Service Strategic Plan 2017-2020 in Ireland, plans were already being initiated to increase the role of technology in our Courts system before COVID-19.

There is no doubt though that the challenges faced in progressing litigation in past weeks and in the coming weeks due to the COVID-19 restrictions, and the flexibility illustrated by the legal professionals as a whole and similarly the Courts Service in responding to same, provides a positive argument that our jurisdiction is ready to embrace technology regardless of the obstacles. Real change in the future of Irish Court business may only be beginning with e-courtrooms but there will be a significant development for the future of our legal system.

We are here to help if anyone has any queries about this article or would like to discuss its impact on their litigation proceedings. Please contact the author of this article or alternatively a member of our team at Kane Tuohy for any queries.

 

AUTHOR: Tanya Davis, Trainee Solicitor

This Briefing Note is not intended as legal advice. For specific queries, please liaise with your usual contact in Kane Tuohy or with Hugh Kane (hkane@kanetuohy.ie / 087-9726164)

 

Another Liquidation Precipitated by Covid-19 Pandemic

Re Mahalo Limited [2020 138 COS]

Adhering to social distancing requirements in the Courtroom, Counsel for Mahalo Limited (the “Company”) presented a Petition to the High Court seeking an order for the winding up of the Company and for the appointment of a Provisional Liquidator.

The Petitioner stated that the Company’s online ordering app known as Bamboo was launched in 2018 and allows professionals to order and pick-up meals located near their place of work.

The Company partnered with over 100 hundred restaurants in Dublin, Cork and Galway and earned a small commission on orders placed with such restaurants.

The Company’s sales were projected to increase dramatically in 2020, however, as a result of the Covid-19 pandemic there is very little, if any, business currently being conducted through the Bamboo app.

The Petitioner advised the Court that it became clear that the Company was insolvent when it was no longer able to rely on the support of its principal investor to finance its cash outflows, and they were unable to obtain alternative support.

Notwithstanding the insolvency, the directors believe that the Bamboo software and app developed by the Company has significant value.

In such circumstances, Paul McCann of Grant Thornton was appointed as Provisional Liquidator to wind up the affairs of the Company and seek to sell the Bamboo platform.

The Petition has been made returnable for Monday 25th May 2020.

It is noteworthy, that in the current environment, before a Petition is issued, the Petitioner must satisfy the Central Office that the application is of sufficient urgency to be listed for hearing and have the application papers reviewed and approved by appointment with the Central Office.

 

This Briefing Note is not intended as legal advice. For specific queries, please liaise with Hugh Kane OR Owen Henson whose details are set out below.

 

AUTHORS:

Hugh Kane

Partner in Corporate Recovery/Commercial Litigation

E:  hkane@kanetuohy.ie

 

Owen Henson

Solicitor in Corporate Recovery/Commercial Litigation

E:  ohenson@kanetuohy.ie