dispute resolution webinar covid contracts and …...2020/07/21 · contracts where specific...

Covid Contracts and Corporate

Solvency Issues - what you need

to know as a director

Dispute Resolution Webinar

Have you tried to withdraw,

or are you considering

withdrawing, from a contract

as a direct consequence of

COVID-19? Poll

Has another party tried to

withdraw from a contract

with you as a direct

consequence of COVID-19 Poll

Content 1. A look at Government Guidance on dealing

contractual obligations

2. Our recommendations for safely navigating contract

disputes

3. Withdrawing from a Contract: termination, Force

Majeure and other considerations

4. Attempts to withdraw from a contract – some case

studies (e.g. Cineplex -v- Cineworld)

5. Your liability as a director under the new Corporate

Insolvency and Governance Bill. Beware the Company

Directors Disqualification Act and personal liability of

directors

Government Guidance on

dealing with contractual

obligations J R Compton, LLB, LLM, Solicitor, Barrister, Member Hon Soc Gray’s Inn, MCIArb

6

First guidance given by Cabinet Office and Infrastructure and Projects Authority 7 May

2020

Second Guidance/ updated 1st July 2020

In summary, the Government is strongly encouraging all individuals, businesses

(including funders) and public authorities to act responsibly and fairly in the

national interest in performing and enforcing their contracts, to support the

response to Covid-19 and to protect jobs and the economy

The guidance is not statutory

The guidance does not override the contractual provisions

It is not intended to override specific contracts whose primary purpose is to make

express and clear provision for, and allocate risks in respect of, the effects of

global or national public health emergencies or pandemics, especially contracts of

insurance, although the Government would encourage responsible and fair

behaviour where possible


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1. Requesting and giving relief for impaired performance

Time of delivery – extension of time, alternative delivery methods

Payment terms – late payment, reduced payment, increased costs of delivery

What goods can and cannot be delivered – alternative and/or substitute goods

2. Remedies

Reduced claims for damages

Return of deposits

Court remedies discouraged in favour of mediation

Incidents of responsible and fair behaviour


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3. Variations

Changes in pricing

Changes in timings scope of works or

Goods

But the guidance only applies where the contract is materially affected by C19 – not otherwise

The Construction Leadership Council is expected to offer further guidance

Incidents of responsible and fair behaviour

(2)


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1. Contracts effected by C19 and

2. Contracts where specific provision is lacking to deal with such an emergency

The guidance is not statutory and the courts will not use the guidance to alter a contract

or a remedy

Subject to…. the Corporate Insolvency and Governance Act….

The Guidance is limited to


Our recommendations for safely

navigating contract disputes Robert Ganpatsingh

11

Know your contracts before disputes arise

Don’t take hasty action; carefully consider your options before taking

irreversible steps

Get advice before you act

Work collaboratively with your commercial partners

Take heed of the Government guidance on contractual obligations

Be prepared to quote it

Recomendations


Terminating a Contract:

termination, Force Majeure and

other considerations Robert Ganpatsingh

13

The wording of the contract

The events giving rise to an alleged right to terminate

Has there been a breach by either party?

Has any breach been waived?

Terminating a contract – key factors


14

No longer convenient – e.g. contract no longer profitable

Minor breach

Material, substantial, or repeated breaches

Repudiatory breach

Insolvency With effect from 26 June 2020, it has become difficult or impossible for a supplier to terminate many contracts for the

supply of goods and services on grounds that the customer has entered a formal insolvency procedure (or even on other, pre-existing

grounds), under the Corporate Insolvency and Governance Act 2020.

Death or incapacity

Can you terminate in these instances?


https://www.legislation.gov.uk/ukpga/2020/12/contents/enacted

15

Dissolution

Change of control of one of the parties

Covid-19 – Force Majeure & Frustration

Can you terminate in these instances? (2)


Attempts to withdraw from a

contract – some cases studies

(e.g. Cineplex -v- Cineworld) Robert Ganpatsingh

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In December 2019 Cineworld announced it had agreed

$2.1bn takeover of Cineplex

Cineworld terminated the agreement citing:

Material Adverse Change

Certain unremedied breaches of contract

Cineplex is claiming $1.1billion damages and alleges

Cineworld has buyers remorse

Cineplex -v- Cineworld


18

Company X Entered into a three year IT managed services

agreement

Express termination provisions only allow for termination in

the event of :

Breach that is not remedied within 14 days

Insolvency of other party

There is no force majeure clause

Company X has no revenue as a result of Covid-19 and

wants to get out of the agreement

The Holiday Company


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Company must look closely at wording of the contract and

consider:

Have there been any unremedied breaches of the

agreement

If the IT company has had an insolvency event – a

CVA may be sufficient

If no grounds for terminating on express terms:

Consider frustration – unlikely to work on these facts

Discuss with IT company and seek an agreed

outcome

The Holiday Company


Your liability as a director under

the new Corporate Insolvency

and Governance Bill J R Compton, LLB, LLM, Solicitor, Barrister, Member Hon Soc Gray’s Inn, MCIArb

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Royal Assent 26.06.2020

The most far reaching reform in recent years

In the first part of our discussions we saw how the UKGOV guidance will not alter the

remedies available to contracting parties

The CIGA completely changes the field

Corporate Insolvency and Governance Act


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Winding up petitions are out. No Corporate insolvency proceedings until 30.09.2020

The cause of the Insolvency must be Covid related. CIGA SCH 10

Instead a company can apply for a new ‘Moratorium’ with similar protections to the US

CHAPTER XI

20 business days

Plus 20 business days (but Directors must confirm debts will be met)

One year with consent of creditors

Winding Up Petitions and


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All debts: Rent, wages, commercial debts are restricted according to the terms of the

moratorium

In effect, a payment holiday during the period

Monitor appointed

CIGA 2020 Chapter 4

Winding Up Petitions


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Insolvency Act 1986 as amended sections 214 to 246ZB provide that a delinquent director

can be forced to make a contribution to the assets of an insolvent company to pay to

creditors

Suspended by CIGA for worsening trading conditions between 01.03.2020 and ending

30.09.2020

Duties remain unaffected under Companies Act 2006 sections 171 et seq.

Directors still required to act responsibly

BUT BEWARE CDDA, section 15A, which still remains in force.

Directors Duties and Wrongful trading


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The Moratorium

The suspension of winding up petitions

The suspension of IA1986 section 214 to 246ZB

But basic duties on directors remain intact…

And beware CDDA S15A……

Measures brought in to protect companies

and Directors


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Jonathan Compton

Speakers


Partner, Dispute Resolution

01483 467433

[email protected]

Robert Ganpatsingh Partner, Dispute Resolution

01293 605000

[email protected]

dispute resolution webinar covid contracts and …...2020/07/21 · contracts where specific...

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