Commercial Brief January 2019: market insights

A summary of recent developments and commercially impactful court decisions, raising issues in relation to the new disclosure pilot scheme for commercial disputes, the HMRCs reinstatement as a secondary preferential creditor, a voluntary capped costs pilot, vicarious liability of employers, a Scottish consultation on success fee costs in employment and commercial disputes, and the latest video hearings pilot scheme.

Disclosure pilot

A mandatory pilot scheme for disclosure commenced in the Business & Property Courts on 1 January 2019 as part of the ongoing court modernisation process. The pilot will run for two years and parties are now expected to disclose documents right at the start of proceedings. Disclosure must be in electronic form and is limited to only those documents that are relevant and proportionate to the issues in dispute.

Whilst the scheme is to be welcomed, we do remain cautious that it may only address issues relevant to the higher value disputes and therefore could unnecessarily frontload costs in lower value disputes.

Contact: John Colvin

Related item: Will the future of document disclosure in commercial disputes change this?

HMRC to be reinstated as a secondary preferential creditor from 2020

Philip Hammonds third Budget Report included the announcement that Her Majesty’s Revenue and Customs will once more become a secondary preferential creditor in businesses insolvencies from 2020.

This will be of concern, not only to ordinary suppliers and small medium enterprises, who will be pushed down the pecking order and left out of pocket, but there are wider concerns that it will deter banks from lending to companies.

Contact: Laura Smith

Related item: HMRC to be reinstated as a secondary preferential creditor from 2020

Cost capping pilot in the Business and Property Courts

A voluntary capped costs pilot, effective from 14 January 2019, will run for two years in London, Manchester and Leeds, in certain business and property courts, for cases valued between £100,000 and £250,000. The aim of the pilot is to lower the costs of litigation and to increase certainty of costs exposure in commercial disputes. Being voluntary, the pilot will provide an indication of how many business and property court users wish to take advantage of the new regime.

This pilot follows Sir Rupert Jackson’s recommendations to reduce the cost of litigation made in 2017, which have until now, been aimed predominantly at personal injury claims.

Contact: Reuben Berg

Company liable for the actions of their employees

WM Morrison Supermarkets PLC v Various Claimants [22.10.2018]

The Court of Appeal upheld the High Court decision to hold Morrisons vicariously liable for the criminal actions of its employee in posting almost 100,000 of its employees’ personal data on the web, even though it seemed that those actions were designed to harm the company.

This case involved an employee posting personal details of 99,998 Morrisons' employees on a file sharing website. The employee was subject to criminal proceedings, after which 5,518 employees claimed compensation against Morrisons as having both primary liability, for its own actions and secondary (vicarious) liability for the actions of one of its employees harming his fellow workers.

Contact: Fiona Morgan

Related items:

Video hearings pilot scheme – part of the court modernisation process

A new pilot scheme was introduced to test online hearings on 30 November 2018. The pilot involves applications to set aside county court default judgments heard in Manchester and Birmingham and the parties and judge will attend the hearing using an internet-enabled video-link.

This pilot supports the ongoing reform programme to modernise the court system and will run until 30 November 2019.

Contact: Clare Johnston

Consultation on success fee agreements in Scottish employment and commercial disputes

On 8 November, the Scottish Government opened its consultation into Part 1 of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018, which deals with the regulation of success fee agreements and damages based agreements. The main purpose of the consultation is to determine the correct level of cap for cases, including employment and commercial disputes. Proposed caps include up to 35% for Employment Tribunal cases and up to 50% for commercial actions.

The consultation, which Kennedys is responding to, closes on 31 January 2019. The Scottish Government proposes to implement the new provisions on 1 April 2019.

Contact: Frank Gill

Related item: How the Expenses Act 2018 will shape the future of personal injury in Scotland

Read other items in Commercial Brief - January 2019