Corporate

One of the many concerns of businesses is to ensure that they’re not on the receiving end of litigation. There are lots of ways to mitigate that risk including having robust terms and conditions of trading and good financial management procedures.

But if the worst comes to the worst, and someone wants to sue your business, you’re always going to get plenty of notice of that and a chance to settle things out of court, right?

Wrong.

There are some kinds of actions – for “urgent” or emergency relief – where the person suing you can go to court and the first thing you hear about it is when the court has made an order stopping your business from doing something.

For example, a company selling a product might suddenly receive an order prohibiting them from selling that product, on the grounds that a third party alleges that it infringes their trade mark or design rights. The company might ultimately be able to resolve the dispute and even get compensation if the court decides that the order never should have been granted in the first place. In the meantime, however, it can’t sell its product. This can obviously have dire consequences for cash flow and business reputation.

This may seem like a remote risk for many – but there is a simple low cost way to make sure you’re always notified if this kind of application is made.

It’s called “a caveat”.

It is possible to file a document (a caveat) at any Scottish court. A caveat obliges that court to give advance notice to your solicitor of any application made by a third party for most types of urgent or ‘interim’ order (including interim interdict, the Scottish equivalent of an interim injunction).

Of course, lodging a caveat doesn’t mean you’ll successfully defend the court application. But it does mean you will have a chance to oppose it It’s generally easier to oppose an interim order and prevent it from being granted than it is to persuade a court to recall it after the event.

For this reason, we strongly recommend that anyone with property interests or business activities in Scotland considers having caveats put in place. This will ensure that they do not miss their chance to be heard at any interim orders hearing.

Caveats are lodged in specific courts. We generally recommend that clients with business or proprietary interests in Scotland should:

  • lodge a caveat at the Court of Session, which has jurisdiction across the whole of Scotland; and
  • consider lodging a caveat in each local Sheriff Court where their registered office, place of business or real estate is situated.

Scotland is divided geographically into 39 Sheriff Courts, which currently hear all civil cases with a value of £5,000 or less. However, this will change from 22 September 2015 from when actions with a monetary value of £100,000 or less will have to be brought in a Sheriff Court.

As a result, we expect a substantial increase in the number of cases being brought in the Sheriff Courts throughout Scotland rather than the Court of Session. This makes it important to consider where your business might possibly be sued to ensure that you are protected in all relevant courts.

How can Brodies help?

We can arrange for caveats to be lodged in the Court of Session and in Sheriff Courts throughout Scotland on your behalf. Caveats last for one year and can be renewed yearly thereafter. As part of our caveat service, we are happy to issue a reminder in advance of expiry, to seek instructions on renewal.

Key contact:

For more information, please get in touch with Joyce Cullen or your usual Brodies contact.

Fiona Beal

Practice Development Lawyer at Brodies LLP
Fiona is a practice development lawyer in Brodies' corporate team. She provides support and knowledge management services in the field of company and corporate law including management of the department styles and know-how bank
Fiona Beal