MAKING AN APPLICATION BEFORE THE DATE OF DEFAULT SAVES THE DAY: KANERIA -v- KANERIA CONSIDERED
The Mitchell principles govern what happens when a party requires relief from sanctions. An open question remained as to the principles that apply when a party applies for an extension of time before the expiry of the date for compliance. In Kaneria -v- Kaneria  EWHC 1165 (Ch) it was made clear that the Mitchell judgment has no relevance, the principles in Robert -v- Momentum Services  EWCA Civ 229 continue to apply and a party does not require relief from sanctions. In a detailed judgment Mr Justice Nugee gave an extensive consideration of the relevant law and principles. This is likely to remain definitive unless the Court of Appeal decides otherwise. Nevertheless a party applying prospective for an application (an “in time” application) will still have to justify that request.
THE FACTS IN KANERIA: APPLICATION FOR EXTENSION OF TIME TO FILE DEFENCES MADE PRIOR TO DATE DEFENCES WERE DUE
The action is an unfair prejudice petition. At an earlier interlocutory hearing an order was made that the Respondents file and serve a defence by the 14th February 2014. The Respondents made a request for an extension of time to file their defences on certain preliminary issues. No reply was received initially and then the request was refused. On the 11th February 2014 the Respondents made an application for an extension of time.
THE APPLICANT’S OBJECTIONS AND APPLICATION TO DEBAR THE DEFENDANTS FROM DEFENDING
By way of response the Applicant made an application seeking an order debarring the Respondents from defending the preliminary issues.
THE DEFENCES SERVED LATE
The Defences were served on the 14th (and in one case the 15th) March 2014.
DID THE MITCHELL PRINCIPLES APPLY?
The first decision the judge had to make was whether the Mitchell principles applied to the application. The judge held that:
1. If an application has been made “out of time” (that is after the date for compliance) then he had little doubt that the Mitchell principles applied.
2. This was was “in time” application for an extension and different principles applied.
WHY DIFFERENT PRINCIPLES APPLY WHEN AN “IN TIME” APPLICATION IS MADE
- This case by contrast is one of an in-time application for an extension. Mr Jones submitted that once it was accepted that the Mitchell principles applied to an out-of-time application for an extension, it was illogical not to apply the same approach to an in-time application for an extension. I do not agree. Of course if time is due to expire on 14 February, there is little practical difference between an application made on 13 February (or 11 February as in this case) and one made on 15 February. Realistically it is unlikely that an application made on 11 February could be heard before 14 February, and even if the Court could in theory hear it immediately, it would no doubt usually already be too late for the applicant to comply with the original time limit: that is after all the reason why the application is made. One can see the strict logic of saying that in such a case the realistic position is that unless an extension is granted the applicant is inevitably going to fail to comply with the time limit, and should be treated in the same way as one who has already failed to do so.
- But this is not the approach that has been adopted as a matter of precedent, and I can see sound practical and policy reasons for not doing so. So far as precedent is concerned, in Robert v Momentum Services Ltd EWCA Civ 299 (“Robert”), the Court of Appeal expressly held that an in-time application for an extension of time (in that case for service of the particulars of claim) was not, and should not be treated as, an application for relief from sanctions. Dyson LJ (with whom Hale LJ and Sir Andrew Morritt V-C agreed) referred to what Brooke LJ had said in Sayers and continued (at ):
“It is clear that Brooke LJ treated Sayers as a relief from sanctions case, or at least closely analogous to such a case. That is because the time for appealing had already expired when the application for an extension of time was made. I see no reason to import the rule 3.9(1) check lists by implication into rule 3.1(2)(a) where an application for an extension of time is made before the expiry of the relevant time limit. There is a difference in principle between on the one hand seeking relief from a sanction imposed for failure to comply with a rule, practice direction or court order, where such failure has already occurred, and on the other hand seeking an extension of time for doing something required by a rule, practice direction or court order before the time for doing it has arrived. The latter cannot sensibly be regarded as, or even closely analogous to, a relief from sanctions case. If the draftsman of the rule had intended that the check list set out in rule 3.9(1) should be applied when the court is exercising its discretion under CPR 3.1(2)(a) in such a case, then he could and, in my judgment, would have said so. By not spelling out a check list in rule 3.1(2)(a), it seems to me that the draftsman was intending that the discretion should be exercised by simply having regard to the overriding objective of enabling the court to deal with cases justly including, so far as practicable, the matters set out in rule 1.1(2).”
- Mr Harty submitted that there was nothing in Mitchell, or the new approach there endorsed, which affected the decision in Robert. Robert was cited in argument in Mitchell, but the Court of Appeal did not refer to it in their judgment and could not sensibly be regarded as departing from it (even if it was open to them to do so). He referred me to the fact that Robert is still cited in the most recent edition of the White Book (Civil Procedure 2014, editor-in-chief Jackson LJ), at §3.1.2 with an editorial comment that it is likely that the distinction between Sayers and Robert remains good law, namely that it is easier to persuade the Court to grant an in-time application for an extension than an out-of-time one.
- I accept this submission. It seems to me that unless and until a higher Court has said that the approach in Robert is no longer to be followed, I am bound by that decision (i) to regard an in-time application for an extension of time as neither an application for relief from sanctions, nor as closely analogous to one, and (ii) to exercise the discretion under that rule by applying the overriding objective rather than the terms of CPR r 3.9.
WHAT EFFECT DOES THE CHANGE TO THE OVERRIDING OBJECTIVE HAVE WHEN CONSIDERING AN “IN TIME” APPLICATION?
The judge then went on to consider the amendments to the overriding objective made by the Jackson reforms, in particular the emphasis on proportionate costs and the need to enforce compliance with rules, practice directions and court orders.
However, one of the other changes caused by the Jackson reforms was to the overriding objective itself. In its current version it now reads as follows (with the amendments in bold):
“(1) These Rules are a new procedural code with the overriding objective of enabling the court to deal with cases justly and at proportionate cost.
(2) Dealing with a case justly and at proportionate cost includes, so far as is practicable –
(a) ensuring that the parties are on an equal footing;
(b) saving expense;
(c) dealing with the case in ways which are proportionate –
(i) to the amount of money involved;
(ii) to the importance of the case;
(iii) to the complexity of the issues; and
(iv) to the financial position of each party;
(d) ensuring that it is dealt with expeditiously and fairly;
(e) allotting to it an appropriate share of the court’s resources, while taking into account the need to allot resources to other cases; and
(f) enforcing compliance with rules, practice directions and orders.“
The new sub-paragraph (f) of course reflects the change to the wording in the new CPR r 3.9.
- In these circumstances it seems to me that the position was well put by Turner J in Kagalovsky v Balmore Invest Ltd  EWHC 108 (QB) (“Kagalovsky”) at :
“There is no reason to doubt that the ratio of this decision [ie Robert] remains good law but the emphasis which Dyson LJ (as he then was) placed in that case upon the importance of the ingredient of prejudice occasioned by the delay in the exercise of the court’s discretion must now be seen in the light of the Jackson reforms. Furthermore the overriding objective applied in Robert has now been reformulated to include considerations calculated to achieve the enforcement of compliance with rules, practice directions and orders.”
- Unlike the new CPR r 3.9 however, it can be seen that the reformulated overriding objective does not give the same prominence to the considerations set out in the new sub-paragraph (f). The guidance given by the Court of Appeal in Mitchell as to the effect of these matters being singled out for specific mention (namely that they should be regarded as “of paramount importance” and “given great weight”: see paragraph 26 above) therefore does not, it seems to me, apply. They are doubtless important considerations, but they do not have the same paramount status.”
REVIEW OF THE CASE LAW: DON’T BE OPPORTUNISTIC
The judge reviewed, in considerable detail, the post -Mitchell cases on the subject and concluded.
“49. The consistent message from these authorities is that a party who needs more time for a procedural step in existing proceedings should not just ignore the problem but should ask the other side for consent, and if consent is not forthcoming, should make an in-time application for an extension; and conversely that the other side should respond positively and in a spirit of co-operation to reasonable requests for consent rather than “cry foul” and seek to take opportunistic advantage of the other party’s difficulties.”
THE MITCHELL PRINCIPLES SHOULD NOT BE APPLIED INDISCRIMINATELY ACROSS ALL ASPECTS OF PROCEDURE
Paragraphs 52 – 56 of the judgment are particularly interesting in relation to the construction of the rules and application of the Mitchell principles. In particular there was a risk of the general application of the Mitchell principles wasting rather than saving court time.
Leggatt J made another point in Summit which is that to apply the Mitchell guidelines indiscriminately to all applications to the Court risks blurring useful distinctions between different kinds of order. In that case, the order for security for costs provided for a stay if the security were not provided but it was not an “unless” order. Leggatt J said that there was a significant difference between an order that provided for a stay on failure to provide security (which he accepted was a “sanction” within the meaning of CPR r 3.9), and an unless order that provided for the claim to be struck out unless security was provided: see at . To apply the Mitchell guidelines in precisely the same way to both cases would be to “collapse the important distinction” between those two different kinds of order: see at .
- If this is the case when considering two different forms of order imposing sanctions of differing seriousness, then in my judgment it is even more clearly the case when considering a form of order such as that made here by Mr Rosen which contains no sanction of any kind. As Mr Harty aptly put it, to apply the Mitchell guidelines to an in-time application such as in the present case would in effect erode the distinction between an ordinary order directing a timetable and an unless order, and turn every order specifying a time for taking a step into an unless order. I do not see any reason to suppose – and as I read Mitchell, there is nothing there to suggest – that this was the intention of the changes to the rules brought about by the Jackson reforms. It would run the risk that ordinary orders setting out timetables would indeed become “trip wires”, which is not the intention of the Jackson reforms: see the 18th implementation lecture by Lord Dyson MR at para 26 (cited and endorsed in Mitchell at -).
- Rather the policy, as I understand it, is one of requiring parties to take orders seriously. As Mr Harty put it, the addition of sub-paragraph (f) to the overriding objective is about respect for rules and orders: it is intended to promote a culture of compliance rather than what Andrew Smith J described in AEI as “indifference to compliance”. But making an in-time application for an extension where necessary is respecting the rules: it is recognising that unless such an application is made, the party will be in default and treating this with the seriousness that it requires. It is not the same as indifference to compliance, or non-compliance.
- So far as practicalities are concerned, it is not difficult to see that if the Mitchell guidelines apply to in-time applications, there is a risk in every case that a request for an extension, however unobjectionable in itself, may be declined by the other party in the hope of persuading the Court to refuse an extension and thereby gain a significant advantage: see the comments of Henderson J in Smailes at the end of , and of Leggatt J in Summit at -.
- My experience in the present case has been the same. As the facts show, a request for an extension was first made by CF to AR on 29 January (and by Hasu on 30 January), and repeated on 5 February, but not replied to by AR until 10 February. Had AR agreed to the request, it would not have cost either side anything (save for the cost of a few letters), and would have had no practical impact on the orderly progression of the proceedings to trial, the CMC having been fixed for mid-June 2014 and the trial itself for March 2015. Nor would it have been necessary to trouble the Court, so it would have had no impact at all on other court users. Even if AR had not consented but required an application to be made, a short unopposed application to the Registrar could have been dealt with without significant disruption to other court users (or substantial cost to the parties). This is in complete contrast to Mitchell where the effect of the default was not only to cause the initial hearing to be abortive, but to require the Court to vacate a half day appointment in order to hear the application for relief, time which had been allocated to deal with claimants who had been affected by asbestos-related diseases: see at .”
THE COSTS OF THE APPLICATION
Nugee J commented on the length of time the application had taken, it is also interesting to see the costs that had been incurred;
“59. The length and complexity of the hearing naturally also has an impact on the costs of the application. Dilip’s costs alone, according to his schedule of costs, are over £66,000 (including VAT); the Respondents’ costs are very much lower but nevertheless the total costs on all sides exceed £80,000. Again it is a matter of comment that what could have been disposed of by agreement or at a short unopposed hearing at virtually no cost to anyone has led to the parties spending sums of this order.”
THE TEMPTATION TO TAKE THE POINT
The judge recognised that there was a golden prize available for a party who got their opponent debarred on a Mitchell point.
- On the other hand I am not blind to the realities. If Dilip can indeed successfully oppose the Respondents’ application, the prize will be well worth having. It is (at the lowest) well arguable that the consequence of refusing the application would be that the Respondents would be unable to serve any Defences at all, and should therefore be debarred from defending, with the result that Dilip would achieve victory in the preliminary issues by default. I do not propose to consider whether that would in fact follow or not, as this is the subject-matter of Dilip’s cross-application which has not been argued and where the Respondents take a number of objections to the relief sought, but it is certainly a real possibility. I have seen an informal note made by Hasu of Mr Rosen’s judgment in which he said that the extra shareholding which Dilip claims by virtue of the 10% Shareholding Agreement might be worth as much as £4 to £5 million on the basis of one estimate; my note is that before me Mr Harty indicated that the amount in issue was rather more modest but was still more than £1m. If this is right, one can well see that it is entirely rational for Dilip to invest a substantial amount of time and money in opposing the Respondents’ application in an attempt to obtain the extra shareholding without having to go to trial or produce any evidence in support of his claim. It is hardly surprising therefore that he has done just that. Nor is it surprising that the Respondents, who are at risk of losing the preliminary issues (and hence 10% of what appears to be a valuable company) without the chance of proving their case at all, should invest substantial time and money of their own in the face of Dilip’s opposition.
- I would myself have thought that similar considerations are likely to apply in any case where the effect of refusing an extension would be to leave a party either without a pleaded case or the evidence needed to prove it. If the Mitchell guidelines are applicable, even in a slightly watered down version, to an in-time application for an extension, there are likely to be more cases where an extension is refused, or at least where the other party thinks there is a real chance of persuading the Court to do so. In Mitchell the Court of Appeal expressed the view (at ) that once it was well understood that the Courts will adopt a firm line on enforcement, litigation would be conducted in a more disciplined way and there should be fewer applications under CPR r 3.9. It is not for me to question that view, and in any event I would be bound to follow theMitchell guidelines in an application for relief under r 3.9, whatever the practical consequences. But it does not follow that the same is true of applying the Mitchell guidelines to an in-time application under CPR r 3.1(2)(a), and for the reasons I have attempted to give, it seems to me that there is a risk that doing so would mean that instead of parties adopting an attitude of reasonable co-operation in an attempt to make litigation run smoothly, there will be a culture of aggressive non-cooperation which may lead to more, longer and more expensive opposed applications.
- For these reasons, which are essentially those advanced by Mr Harty in his able and well argued submissions, the Mitchell guidelines do not in my judgment apply (either directly or in a slightly watered down version) to an in-time application for an extension of time, at any rate of the kind in the present case. Instead such an application is to be decided by reference to the overriding objective, as reformulated to include the new sub-paragraph (f), but without giving it paramountcy.
APPLICATION OF THE OVERRIDING OBJECTIVE
The judge considered the Overriding Objective.
1. The interests of justice The interest of justice required an extension be granted. There was no prejudice at all to the Applicant in the Respondents’ defences being served on the 14th March rather than the 14th February. The trial was fixed for March 2015. Late service would not have the slightest impact on the parties having sufficient time to prepare for trial. The granting of the extension would not have any effect on other court users at all.
2. Dealing with the case at proportionate costs The extension itself did not cause any significant extra costs. The CMC or trial date did not slip, nor were the costs of preparing for trial increased. The application itself had been fought at considerable expense, however this was not caused by the extension as such. Rather it was due to the Applicant’s decision to oppose it with such vigour.
3. Ensuring the parties are an equal footing
“Sub-paragraph (a) refers to ensuring that the parties are on an equal footing. Save that it could be said that it is unequal to award victory in the case to Dilip without his having to prove any facts, and to take away the Respondents’ ability to defend themselves without being able to prove any, I do not see that this has any particular relevance here. Sub-paragraph (b) (saving expense) and (c) (dealing with the case proportionately) do not I think add anything to what I have already said about the aim of dealing with the case at proportionate cost. Sub-paragraph (d) refers to ensuring that it is dealt with expeditiously and fairly. So far as “expeditiously” is concerned I have already said that granting the extension will have no impact on the hearing date either for the CMC or the trial itself; so far as “fairly” is concerned, I do not see that this is any different from dealing with it justly, which I have already dealt with. Sub-paragraph (e) refers to allotting to the case an appropriate share of the court’s resources: I have already in effect referred to this under the heading of justice to other court users. In short, I do not see that any of these considerations points towards refusing the extension.”
4. Enforcing compliance with rules, practice directions and orders.
The new culture means that parties cannot expect to get an extension simply by asking for it. A party has to explain to the court why they need it and the Court will scrutinise the reasons put forward. The judge examined the explanation in detail and was critical of the Respondents’ delays. However he concluded:
To my mind therefore there is some force in Mr Jones’ criticisms of the reasons put forward for an extension both by the First to Fourth Respondents, and by Mrs Patel. I accept that sub-paragraph (f) of CPR r 1.1(2) is engaged, and that the rigorous scrutiny which is required has exposed some shortcomings in the attitude taken by the Respondents.
- Nevertheless I accept that both sets of Respondents did by the end of January genuinely need an extension; they did ask for an extension by consent which elicited at first no reply from AR (a failure for which no explanation has been given); and they have made an in-time application. It is not their fault that although issued on 11 February it was not in the event heard until 25 March; and indeed AR’s letters indicating the (un)availability of their counsel rather blunt the accusation of delay by the Respondents.
- As I have said, in applying the overriding objective, sub-paragraph (f) is not given the paramount status that it has in an application under r 3.9. As I understand it, this means that I have to weigh up the desirability of reinforcing the new culture of not tolerating “the relaxed approach to civil litigation which the Jackson reforms were intended to change” (Mitchell at ) with the substantial and prima facie unjust prejudice to the Respondents in not being able to serve their Defences.
- I have already said that I regard the penalty of losing the ability to defend the claim as a wholly disproportionate penalty to impose. In circumstances where Mr Rosen’s Order set out a timetable but did not specify any sanction for failing to comply with it, where there are no adverse consequences of any substance of granting the extension either to Dilip, or to the timetable for hearing the preliminary issues, or to other court users, and where the adverse consequences to the Respondents of refusing it are so overwhelming, it seems to me that despite the matters I have referred to, the least injustice is caused by granting an extension of time sufficient to enable the Defences that have been served to stand, and the issues to be tried on their merits in March 2015 as intended, rather than to enable Dilip to obtain the relief he seeks without a trial.
SUMMARY: IF YOU CANNOT COMPLY THEN MAKE AN APPLICATION BEFORE THE DATE FOR BREACH: EVEN THEN IT IS NOT CERTAIN THAT AN APPLICATION WILL BE GRANTED
It is clear that “in time” applications are not subject to the rigorous Mitchell criteria.
- However they are subject to the new overriding objective.
- A party applying for an extension will have to explain the reasons for that extension to the court.
- The court will consider the entire overriding objective.
- The principles set out in 1.1(2)(f) (ensuring compliance) are considered but are not an overwhelming, or dominant feature of an “in time” application for an extension.