Did you know it was possible in Scotland to receive advance notice of someone trying to raise certain court orders against you or your business, in the form of a caveat?
What are caveats?
Caveats are an 'early warning system' unique to Scotland. In England, an interim (immediate) court order can be sought without any notice being given to the party against whom the order is sought (unless there has been an agreement between the parties, usually via their solicitors, that such orders will not be sought without notice being given).
In Scotland, however, things are a little different.
Caveats can be lodged at the Court of Session (equivalent to the High Court) and at any of the Sheriff Courts (broadly equivalent to County Courts) on behalf of companies, individuals, firms, partnerships and trusts. They last for one year from the date of lodging and can be renewed every year for as long as required.
Wherever a caveat is lodged in the name of a party, that court must give that party's solicitor advance notice (although this may only be 24 hours or so) before any application for an interim court order against that party can be heard, so that the party has the chance to attend the hearing and oppose the order. The types of applications which would trigger a caveat include an application for interim interdict (like an injunction) or other interim order (including an order appointing a provisional liquidator); and an application for an order for service of a petition to wind up a company or appoint an administrator. Although, it should be noted that the court does not have to give notice of any out of court administration appointment. As such, the lodging of a caveat gives an opportunity to oppose the granting of certain orders which are capable of stopping the party from trading or causing it difficulties as a result of the advertisement of pending insolvency proceedings.
Further, as of 31 July 2020, it is possible for a caveat lodged in the Court of Session to provide warning of an order being sought to permit commencement of a class action by multiple pursuers (using Scotland's new opt-in group proceedings procedure introduced by the Civil Litigation (Expenses & Group Proceedings) Act 2018).
Without a caveat in place, no notice of a hearing would be given and there would be no opportunity to oppose an application. In those circumstances, a court order can be granted in the party's absence.
While interim orders can be recalled (reversed), the saying that prevention is better than cure applies as much here as anywhere else. In particular, interim orders can have catastrophic results for the party the order is granted against, even if they are recalled shortly thereafter. For example, a court order prohibiting a business from trading or a person from working for their new employer could result in substantial financial loss to that party.
If a caveat is in place and the application is successfully opposed, not only would that party be saved from having to comply with the court order, it is also cheaper and easier to defend your position at the initial hearing than it is to try and recall the order at a later date.
Why has the threat of a Sheriff Court action increased?
As there is a cost for lodging each caveat, the decision is often taken to rely solely on a Court of Session caveat. However, changes to the court rules introduced in recent years mean that any action with a value of £100,000 or less must be brought in a Sheriff Court. Due to the lower costs involved in raising a sheriff court action, this increases the likelihood of an action being raised in a Sheriff Court rather than the Court of Session.
Indeed, as the costs involved in raising a Sheriff Court action are lower than in the Court of Session, it may be more attractive to a pursuer seeking interim orders to do so in the Sheriff Court. With that in mind, it is worth considering whether caveats should be lodged in all of the Sheriff Courts in which an action could realistically be raised. For example, a court action could be raised in the Sheriff Courts covering the following, which may all be different:
- the location of any property owned;
- any place in Scotland where you conduct business; or
- the location of your registered office or any other offices or branches.
How can we help?
We can arrange for caveats to be lodged at courts throughout Scotland, and a solicitor from Brodies' Dispute Resolution team is always on call in case a caveat is triggered. Caveats are inexpensive and last for one year once lodged. We also employ a free caveat renewal monitoring system, to ensure that your caveats, once lodged, do not expire, by contacting you annually to seek instructions to renew those caveats.
Should you require any more information, including regarding the costs of lodging a caveat, please do not hesitate to get in touch.