Is a rise in litigation cases on its way?

Posted On 17 Sep 2020
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Litigation arises out of disputes. And disputes arise out of wrongdoing or differences of opinion; both of which can flourish in trying circumstances. With Covid-19 arguably presenting the most trying set of circumstances for decades, it would be a huge surprise if we were not to see a sudden upsurge in litigation. Neil Williams of Rahman Ravelli outlines the reasons why he expects a huge increase in litigation once Covid-19 has finally gone.

Businesses have faced restrictions on their ability to function to capacity and / or meet their obligations to business partners as a result of Covid-19. Many will be facing problems of cash flow – despite government offers of financial support – and staring at the prospect of insolvency. Others may find themselves facing accusations of unfair pricing or market abuse as, unfortunately, illegal activity is very often a consequence of troubled economic times. And while different business sectors will face differing problems, there are already sectors that are seeing insolvency forming the basis of legal claims, along with others based on issues such as employment rights, breach of contract, insurance cover and other consumer-related issues.

It is impossible to envisage a post-Covid legal landscape that is not dominated – or at least heavily crowded – by litigation that has arisen as a direct consequence of the virus.

As I mentioned, insolvency will account for some of this, despite the government’s Corporate Insolvency and Governance Act amending insolvency and company law to support businesses facing coronavirus-related challenges. For some companies that were already struggling, the pandemic may have given them the final push into insolvency, which will generate litigation. There may even be those who look to test the government’s legislation prompted by the pandemic, which will in itself mean even more litigation. And the raft of temporary measures covering matters as varied as winding-up petitions and rent holidays may have been well intended but they are, in effect, postponing rather than preventing the inevitable action that will be brought by those owed money. The result, once again, will be more litigation.

When those actions are eventually brought, they will create further congestion in what will be an overworked legal system – a system where the consumer as well as the business person will be looking to go to law to claim what is theirs. Losses caused by cancelled travel arrangements and other services, difficulties securing refunds on all manner of purchases and problems relating to insurance – ranging from modest family holiday travel policies through to the huge and costly coverage of corporations’ functions – will all require a legal resolution. The insurance industry has already said that coronavirus may do more damage to it than any other event.

Meanwhile, other industries are having to wrestle with contract disputes, either because they are struggling to meet their commitments to business partners or because those partners are not honouring their side of the contract. In such circumstances, the existence – and the extent – of a force majeure clause in a contract may be subject to intense legal scrutiny, as both sides look to determine if any failure to honour an agreement can be legally justified by the pandemic. Class actions from employees unhappy about changes to working arrangements and from investors who claim they have lost money as a result of the company’s response to the crisis are also likely to prompt litigation that will be targeted at businesses.

In the past decade or so, litigation in the English legal system has undergone a transformation. There is now a bigger body of law in relation to group action claims. Modern-day technology makes it simpler to “sign up’’ those who want to be part of a group action and those who look to fund such litigation are now more astute (and better funded) than was previously the case. It would be a major surprise if this was not reflected by a flood of litigation.

This is probably an appropriate point to highlight the fact that some European countries have seen claims being brought against the authorities in an attempt to hold them responsible for the problems and deaths caused by coronavirus. This is not an option in the UK as a criminal case cannot be brought against a government. But it is not impossible that any eventual inquiry into how the pandemic was handled in the UK may prompt civil or criminal litigation.

The pandemic touches on so many issues of business and finance that it is almost impossible not to foresee a vast increase in litigation related to it once it has finally gone. The challenge for both those bringing the action and those facing it is to ensure they construct their case in the most astute, effective way possible.

And as the pandemic wreaks havoc throughout businesses and society as a whole and the spectre of consequential litigation looms large, it has to be asked where and how the potential explosion in cases will be dealt with.  The courts system is already suffering as a result of the restrictions which have been imposed – it is having to adapt in order to simply clear the existing backlog. With a raft of new cases likely to find themselves heading towards the criminal and civil courts, the ability to hear all of them in a timely fashion may well cause some serious thinking as to whether alternative resolutions can be achieved.