If the reservation system subsequently becomes active, that is a grey area. It is unclear if Condition 19 means a passenger is required to regularly check a display, but I would suggest not. I would suggest some reasonableness would have to be applied by people affected in this case.
But if the system remains down, then it is clear to me the train does not have reservations, and that's what East Coast and TransPennine always do every time I'm on one of their affected trains.
Compensation may be available if passengers who reserved a seat have to stand. The Train Manager may, at their discretion, upgrade such a passenger to 1st class if it's viable to avoid that problem (I've known that happen).
XC seem quite unique in their application of invisible reservations, where TMs appear to be encouraged to ask people vacate apparently unreserved seats, but can't actually make them move and are also required to avoid conflict, despite being asked to apply a policy that clearly causes conflict by imposing unreasonable requests on unsuspecting passengers.