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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 (which is still operating) 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 social 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 social distancing measures, albeit at the moment the Health and Safety Authority does not have a public health role.

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       

 

 

The Courts’ Warning to those Financial Institutions who delay in Progressing Court Proceedings

Start Mortgages DAC v Joseph McNamara and Joseph Harris

(Judgment delivered by the High Court on 7 April 2020)

 

Although the Courts are not operating at their normal capacity, judgments are still being delivered by the Courts during these strange times. An (unapproved) judgment was recently delivered by Mr. Justice Power on the 7 April 2020 in the High Court decision of Start Mortgages DAC v Joseph McNamara and Joseph Harris, which makes for an interesting read and is a stark warning to many financial institutions.

Application

The second named Defendant, Mr. Joseph Harris, brought a Motion seeking to have the summary proceedings claim against him dismissed for the following reasons:- (1) want of prosecution; (2) dismissed on the grounds of gross, inordinate and inexcusable delay; (3) dismissed on the basis that the bank’s claim fails to show any sustainable cause of action/or is frivolous/or is vexatious.

Background

Summary proceedings were issued against the Defendants in July 2010 and were before the Master of the High Court on five separate occasions before being adjourned for plenary hearing to the Judges’ Lists and given a return date in the Common Law Motion list for November 2013.

The proceedings were initiated by Irish Life and Permanent PLC T/A Permanent TSB and an application was subsequently made to change the name of the plaintiff to Start Mortgages DAC (“the Bank”).

An Order for Discovery was made against the second named Defendant on the 11 November 2013, in which he had six weeks to discover certain documentation. However, no further steps were taken in this matter until the second named Defendant brought his application to dismiss the Bank’s summary proceedings.

It was noted by the Court during the hearing of Mr. Harris’ Motion that since the Motion was issued, the Bank’s solicitors had filed a Notice of Intention to Proceed and had requested Mr. Harris’ Affidavit of Discovery.

Issue regarding a refinancing arrangement

The Court noted that the summary proceedings had been transferred to the Judges’ Lists for plenary hearing due to a dispute regarding an alleged refinancing arrangement. The Defendants (who were in a business partnership) had obtained a loan from Permanent TSB (who subsequently sold the loan facilities to Start Mortgages DAC) in 2006 to buy four properties.

The partnership subsequently dissolved and the second named Defendant alleged that the Defendants partitioned their debt (the Bank submitted to the Court that it was unaware of this partition arrangement), whereby the Defendants each took over liability for two of the four properties bought while in partnership.  The second named Defendant also submitted to the Court that he had entered into a refinancing arrangement with Permanent TSB, part of the purpose of which was to discharge his liabilities  for the loan obtained while he was in partnership with the first named Defendant.

Consideration of application

While considering the second named Defendant’s application, the Court acknowledged that although Mr. Harris had not engaged in Discovery (as ordered by the Court) in 2013, he (and his solicitors) had contacted the Bank in September 2013 and November 2013 regarding his version of events about the refinancing arrangement entered into with the Bank’s predecessor.

The Bank’s Solicitors stated to Mr. Harris (and his solicitors) that they would revert to him about this, which did not occur.  Accordingly, the second named Defendant was still awaiting the Bank’s replies regarding his version of events about the refinancing arrangement.

The Court noted that if the matter went to plenary hearing, that the second named Defendant would encounter difficulties in securing evidence of relevant witnesses, including his former solicitors and bank personnel (who had since left Permanent TSB) regarding the alleged refinancing arrangement.   Furthermore, the Court also noted that the first named Defendant had left the jurisdiction since the summary proceedings had been issued.

Although the Bank submitted to the Court that if the current proceedings were dismissed, it would re-issue fresh proceedings, the Court noted that the Bank had failed to provide a reason as to why it had failed to prosecute this matter, after it had instituted the proceedings.

Accordingly, the Court was satisfied that the balance of justice required for the Bank’s summary proceedings to be dismissed for want of prosecution and on the grounds of inordinate and inexcusable delay.

Food for thought?

In light of the current Coronavirus situation, many cases are not currently proceeding before the Courts which gives parties an opportunity to carry out some “housekeeping” of their litigation proceedings, whether they are debt recovery proceedings or otherwise, which we would encourage all parties to do.

If you are concerned about any delays in proceedings in which you or your organisation are involved and how the Start Mortgages decision might impact on that litigation, please contact our Sarah Reynolds or Rita Higgins to discuss.

 

This Briefing Note is not intended as legal advice. For specific queries, please liaise with Sarah Reynolds OR Rita Higgins whose details are set out below.

 

AUTHORS:

Sarah Reynolds

Partner in Commercial Litigation and Data Protection

E:  sreynolds@kanetuohy.ie         M:  087-248433

 

Rita Higgins

Solicitor in the Commercial Litigation Department 

E:  rhiggins@kanetuohy.ie        M:  087-4141509

 

 

Covid-19 – Emergency Legislation

Emergency Measures in the Public Interest (Covid-19) Act 2020

and

Health Preservation and Protection and other Emergency Measures in the Public Interest Act 2020

The Legislation

On 20th March 2020, having been passed by both Houses of the Oireachtas, the Health Preservation and Protection and other Emergency Measures in the Public interest Act 2020, was signed into law by President Higgins. The Following week, on 27th March, the Emergency Measures in the Public Interest (Covid-19) Act 2020 was enacted.

The legislation has been introduced by the Government to make provision for emergency measures to mitigate social effects and economic consequences as a result of COVID–19. On the request of the Ceann Comhairle the legislation was passed with a 30% attendance in the Dáil, split proportionately along party lines, representing a democratic consensus among the TDs which supports the legislation’s validity.

Analysis

There is no doubt that the emergency legislation provides a very sizeable grant of statutory authority; potentially the most significant being the amendment to the Health Act 947 which gives the government ability to issue regulations to prohibit travel to or  from the State; travel within the State; require persons to remain in their homes or other places specified by the government, and prohibit events which could reasonably be considered as posing a risk of infection to the persons attending.

The Public Interest (COVID-19) Act 2020 provides for a three-month cessation of evictions and rent increases, but this time frame can be extended by the Government if it considers it in the public interest. The Oireachtas can annul any such extension within 21 days.

“The Emergency”

Ireland is no stranger to the introduction of emergency legislation and it was almost this time last year that the Omnibus Bill was prepared to be fast-tracked through the Oireachtas to support businesses and jobs impacted by a no-deal Brexit, and to maintain essential services and products across the Irish border.

Comparisons can be drawn between the current situation, and that of the state of emergency which existed in Ireland during the Second World War. During ‘the Emergency’, the Oireachtas passed the Emergency Powers Act 1939 and Offences Against the State Act 1939. These Acts vested the Government with wide-ranging powers, including authority to issue regulations to control private property and economic activity, impose censorship, establish military courts with power to issue the death penalty, and establish internment without trial by Government order. In more recent times, the Oireachtas passed several pieces of legislation giving the Government extraordinary authority to tackle the financial crisis of the late 2000s.

Lawless -v- Ireland[i]

This case was filed by an ex-IRA member who had been arrested and detained under the special powers of indefinite detention without trial under the Offences against the States (Amendment) Act 1940. Lawless claimed that the Irish Government was in violation of Articled 5, 6 and 7 of the European Convention of Human Rights. The case was dismissed because emergency legislation was used[ii].

The Constitution

Under Article 15 of the Constitution of Ireland, the Oireachtas must not enact a law which is incompatible with the Constitution. Therefore, Legislation passed by the Oireachtas for the purpose of tackling a very serious emergency, will not be immune from legal challenge by a plaintiff on the grounds it is unconstitutional.

However, to challenge the constitutionality of legislation, you must show that you have sufficient interest in the proceedings, that is, that the legislation affects you in some real way. You must also show that you have an arguable case, that is, that your case has grounds.

Article 28 of Constitution of Ireland which allows emergency legislation “for the purpose of securing the public safety and the preservation of the State in time of war or armed rebellion”. There is no military aspect to this, however, Article 24 is likely to provide the required justification for this. This Article allows for emergency legislation “by reason of the existence of a public emergency, whether domestic or international”.

A good recent example of how judges respond to challenges to emergency legislation can be seen through their treatment of legislation passed to tackle the financial crisis. As these laws were not passed through reliance on Article 28.3.3[iii], challenges were brought challenging their constitutionality.

But in case after case, the Courts upheld their constitutionality, and when doing so made frequent references to the dire circumstances the country found itself in, and the leeway they had to give the Oireachtas when tackling emergencies, even if its response had a significant impact on individual property rights. In such circumstances, the Courts said they would give a wide margin to the Oireachtas in deciding what measures were necessary and proportionate to respond to a crisis.

In Horgan v Ireland (2003)[iv] the Dáil was asked whether an aircraft refuelling at Shannon Airport en route to Iraq was deemed participation in war. Here the Court extended a significant margin of appreciation to the Government in this area. Essentially the Court must presume that a decision had been made by the Dail that this was not participation in war.

Remedies under the Human Rights Convention

Article 15(1) of the European Convention on Human Rights (“the Convention”) stipulates that:

“In time of war or other public emergency threatening the life of the nation any High Contracting Party may take measures derogating from its obligations under this Convention to the extent strictly required by the exigencies of the situation, provided that such measures are not inconsistent with its other obligations under international law.”

In March 2020, in the context of the COVID-19 health crisis, Latvia, Romania, Armenia, the Republic of Moldova, Estonia and Georgia notified the Secretary General of the Council of Europe of their decision to use Article 15 of the Convention. To date, eight other States who are parties to the Convention– Albania, Armenia, France, Georgia, Greece, Ireland, Turkey and the United Kingdom – have relied on their right of derogation. Four of those States have had to justify the measures taken, in the light of Convention requirements, namely Greece, Ireland, the United Kingdom and Turkey[v].

It is an undeniable fact of life that many States will, at some stage, be confronted with serious crisis situations, such as wars or other kinds of serious societal upheavals, and that in such situations they may consider it necessary, in order to restore peace and order, to limit the enjoyment of individual rights and freedoms and possibly even to suspend their enjoyment altogether. The result may be disastrous not only for the persons affected by the restrictions but also for peace and justice in general[vi].

It seems that in circumstances of national emergency governments are permitted to deviate from international human rights treaties in certain scenarios. However, States cannot derogate from the following articles of the Convention:

  • Article 2- the right to life;
  • Article 3- the right to freedom from torture and from inhuman or degrading treatment or punishment;
  • Article 4(1) – the right to freedom from slavery and servitude;
  • Article 7- the right not to be subjected to retroactive penal legislation;
  • Article 3 of Protocol No. 6- the right not to be subjected to the death penalty;
  • Article 4 of Protocol No. 7- the principle of ne bis in idem or double jeopardy.

 

What we can do for you

In these unprecedented times, it is important to know your rights. Notwithstanding that the courts in previous cases have given the Oireachtas a wider margin during emergency periods in striking the balance between the common good and individual rights. We are here to help if you feel that the emergency COVID-19 legislation is unreasonably affecting on your rights.


AUTHOR: Anna Hollywood, 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)

 

[i] Case of Lawless v Ireland

[ii] http://www.nuigalway.ie/irish-centre-human-rights/publicpolicyengagement/completedprojects/irelandparticipationininternationalhumanrightslawandinstitutions/

[iii]  Nothing in this Constitution other than Article 15.5.2° shall be invoked to invalidate any law enacted by the Oireachtas which is expressed to be for the purpose of securing the public safety and the preservation of the State in time of war or armed rebellion, or to nullify any act done or purporting to be done in time of war or armed rebellion in pursuance of any such law. In this subsection “time of war” includes a time when there is taking place an armed conflict in which the State is not a participant but in respect of which each of the Houses of the Oireachtas shall have resolved that, arising out of such armed conflict, a national emergency exists affecting the vital interests of the State and “time of war or armed rebellion” includes such time after the termination of any war, or of any such armed conflict as aforesaid, or of an armed rebellion, as may elapse until each of the Houses of the Oireachtas shall have resolved that the national emergency occasioned by such war, armed conflict, or armed rebellion has ceased to exist.

[iv] Horgan v Ireland [2003] 2 IR 468

[v] https://www.echr.coe.int/Documents/FS_Derogation_ENG.pdf

[vi] https://www.ohchr.org/Documents/Publications/training9chapter16en.pdf

 

Force Majeure

In light of the rapidly increasing number of Covid-19 cases worldwide, many businesses are facing interruptions to their business, for example, businesses’ suppliers are unable to fulfil their contractual obligations due to countries being placed on lockdown, meetings/events are being cancelled and businesses are being forced to close for an indeterminate period of time.

In such circumstances, businesses may naively believe that they will be covered by their insurance for such business interruptions on the basis that Covid-19 is a “force majeure” event. However, you may want to think again!

Force majeure may be defined as “an event or effect that cannot be reasonably anticipated or controlled”[1].  In other words, it is an event that a person may not have foreseen.

Although businesses may not have anticipated a scenario like the Covid-19 pandemic, many insurance policies will have foreseen such a pandemic, particularly where there have been previous flu epidemics – albeit not to the scale of the Covid-19 pandemic.

Insurance policies may exclude and/or limit liability for such events, to include any direct or indirect losses caused to the business as a result of business interruptions.

However, some insurance policies provide for pandemic/epidemic coverage and businesses may be able to recover some and/or all of their losses incurred as a result of business interruptions, if they are covered for such scenarios.

We would advise all businesses to have their insurance policies reviewed at this time to establish what they are covered for and what they are not covered for, particularly where businesses may be able to recoup some and/or all of their losses by claiming through their insurance.

If you would like to find out more about how we can help you during the Covid-19 crisis, please contact us.

Kane Tuohy LLP,

 

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://www.merriam-webster.com/dictionary/force%20majeure

Covid-19 – Briefing Note on OMC AGMS and Service Charges

Briefing Note on OMC AGMS and Service Charges – Challenges Presented by Covid-19

The Covid 19 pandemic touches society in many ways. No group or activity escapes its effects. The purpose of this briefing note is to explore one particular issue of practical importance which is affected by the present crisis namely, service charges and how an OMC can protect its source of funds for the benefit of its membership generally.

Issues arise not only by complications arising from AGMs not proceeding but the implications for service charges generally and their recovery to enable the continuing provision of much needed services in particular.

AGM

An AGM must be held once in each year and not more than 15 months may elapse between two AGMs. Financial statements and reports must be presented at the AGM, not later than 9 months after the OMC’s financial year end.

Business cannot be transacted at an AGM unless a quorum of members is present in person at the venue specified in the notice. Unless the company’s constitution states otherwise, the quorum required is two members present in person or by proxy.

An OMC’s constitution should always be checked to ascertain the relevant quorum for that OMC.

Notice of AGM- to give or not to give

Where notice has already issued convening a general meeting of the OMC, it cannot unilaterally postpone that meeting, in the absence of an express power to do so under its constitution.

While a general meeting can be adjourned, generally the power to do so is vested in the Chairperson of the meeting and is invariably exercised where there is an insufficient quorum but can with the consent of the members be adjourned (again subject to the constitution).

Accordingly, where a convened general meeting cannot proceed because of the Covid 19 crisis, the directors should communicate with the members in advance, outline their intentions concerning an adjournment and the (obvious) reasons why, namely public health, notify the members of an intention to adjourn the meeting immediately upon its opening, do so and notify the members of the adjourned date.

Where notice has not yet been given, the holding of the general meeting can be delayed, bearing in mind the time constraints outlined at the start of this note.

Service Charges

If the AGM is delayed, what implications will this have for service charges?

Section 18 of the Multi Unit Developments Act 2011 (“the MUDS Act”) provides that the annual service charge in respect of a multi-unit development relating to a particular period shall not be levied unless it has been considered by a general meeting of the members concerned.

Section 18(4)(b) provides that where the service charge proposed to the general meeting is disapproved by not less than 75 per cent of the persons present and voting, the proposed service charge shall not take effect but the charge applying to the previous period shall continue to apply pending the adoption of a service charge in respect of the period concerned.

Section 18(5) provides that where the proposed service charge is disapproved and no service charge applied in the previous period, the directors of the OMC may determine a scheme to operate for a period of four months from the date of the meeting, and such charges may be levied and recovered as if such scheme had been approved by the members.

In view of the wording used, there are certain minimum steps that must unfold for the statutory scheme regulating service charges to come into being: –

  • The annual charge must have been considered; to be considered, the general meeting must have been convened and proceeded. If the general meeting cannot proceed because of the current crisis, it follows the service charge has not been considered;
  • If considered, it must be disapproved by 75% or more of those attending and voting and, in that event, the preceding year’s service charge applies;
  • If disapproved and where there was no previous service charge, the directors can set one for four months;
  • The proposed service charge must therefore be expressly “disapproved” in order for the service charge relating to the previous period to apply or for the directors to determine a scheme which would operate for four months;
  • In order for it to be “disapproved”, members need to vote at the meeting;
  • Members cannot vote if the meeting does not convene or is adjourned.

Accordingly, absent approval or disapproval (which obviously requires a vote) the statutory scheme envisaged by the MUDs Act cannot be invoked. This means the OMC has no statutory entitlement to levy a service charge based on the charges which applied in the previous period. If it did there would be a question mark over their validity and hence over their lawful enforcement, based on a statutory claim (see further).

The predicament for the OMC is obvious; it cannot charge based on its budget as it has not been approved because no vote has taken place but equally it cannot base its charge on the previous year’s budget as no vote (disapproving the intended charge) has taken place.

Alternative Grounds; the Scheme of the Development

Practically speaking, this makes no sense, but only if considered solely in a statutory framework. While the MUDs Act creates a helpful statutory framework, importantly it does not (nor could it) dispense with the pre-existing and continuing (alongside the statutory framework) scheme of the development (“the Scheme”).

The Scheme is the legal framework created by the Scheme documents, typically the Lease, the Management Company Agreement (i.e. the agreement to transfer the common areas) and the Deed of Transfer of the common areas. These documents, in particular the Lease, not only create an interest in property but as importantly create mutually binding covenants on the part of the owner and the OMC. In summary, the unit owner covenants to pay service charges and the OMC covenants to provide management services.

It is for this reason namely, there being both a statutory framework and the Scheme, that it is prudent when pursuing arrears of service charges that the legal claim is framed by reference to both.

For present purposes, this dual entitlement gives an OMC some comfort that if being unable to raise service charges demands based on a statutory entitlement as no vote has taken place, the OMC is still entitled to raise service charge demands based on the Scheme and to rely on the Scheme if forced to pursue such charges through the court process.

It is also open to an OMC to pursue arrears (which lack a statutory framework or in rare cases where the Scheme is not applicable to the unit owner in question) based on a claim in “quantum meruit” ie a claim for the value of the services supplied. While more involved in terms of the proofs which must be produced in court, it offers a “braces and belt” approach where an OMC may be understandably concerned for the underlying validity of its charges in these uncertain times.

Summary

  • If the OMC cannot consider (and hence vote) on the service charge budget, continue to invoice on the basis of the preceding year’s budget;
  • Given the consequent question mark over its statutory basis, when raising demands, refer to the scheme of the development in your demands;
  • If challenged by an owner, explain the OMC’s entitlements under the Scheme;
  • If unpaid by the owner and the OMC is obliged to issue court proceedings, ensure the claim is drafted to include alternative claims under the statutory framework created by the MUDs Act, the Scheme of the development and in quantum meruit.

 

Kane Tuohy LLP,

This Briefing Note is not intended as legal advice. For specific queries, please liaise with your usual contact in Kane Tuohy or with Cómhnall Tuohy (ctuohy@kanetuohy.ie / 087 2194782)

 

James Latham acquisition of Abbey Wood Agencies Ltd

James Latham acquisition of Abbey Wood Agencies Ltd

James Latham acquisition of Abbey Wood Agencies Ltd


 

Sarah Reynolds of Kane Tuohy acted for James Latham Plc. in its recent acquisition of Abbey Wood Agencies Limited (“Abbey Woods”).

James Latham Plc. is based in the UK and is a leading importer and distributor of wood based panel products, natural acrylic stone, door blanks, hardwoods, high grade softwoods, cladding, decking and plastics.

Abbey Woods is a leading timber merchant company in Ireland with depots in Dublin and Cork.

This is the first acquisition by James Latham Plc. outside of the UK since its inception over 200 years ago.

VIEW SARAH’S PROFILE

 


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