EXTENSIONS OF TIME TO COMPLY WITH CONSENT ORDER: COURT OF APPEAL DECISION

In Safin (Fursecroft) Limited -v- The Estate of Dr Said Ahmed Said Badrig (deceased) [2015] EWCA Civ 739 the Court of Appeal considered the principles relating to extensions of time of a consent order.

KEY POINTS

• The Court has the power to extend time for compliance with a consent order.
• The fact that the order is a consent order is a factor to be taken into account as one of the circumstances of the case. However extending time does not require “unusual circumstances”.

THE CASE

The claimant had obtained possession and forfeiture of a domestic flat, subject to the defendant’s making an application for relief from forfeiture. At a settlement meeting a consent order was drawn up. The terms of that consent order were not complied with and the defendant applied, among other things, for an extension of time. By the time the matter reached the Circuit Judge all the steps required by the consent order had, in fact, been completed.  The Circuit Judge granted the defendant an extension of time. The claimant appealed.

THE JUDGMENT IN THE COURT OF APPEAL

The Chancellor (Sir Terence Etherton) considered the appeal. The Circuit Judge had held that, having regard to the necessity to to justice under CPR 1.1. the power to extend time did exist and he exercised his discretion to give the defendant the opportunity of obtaining relief from sanctions. “

1. I do not consider that the Judge, in granting the defendant an extension of time, made any error of principle or wrongly took into account matters he ought not to have done or wrongly failed to take into account matters that he should have done or that his decision was outside the range within which reasonable disagreement is possible.

2. Pannone is clear authority that CPR r.1.1 (the CPR are a new procedural code with the overriding objective of enabling the court to deal with cases justly), r.1.2 (the court must seek to give effect to the overriding objective when it exercises any power given to it by the CPR), r.1.4 (the court must further the overriding objective by actively managing cases) and r.3.2(a) (the court may extend the time for compliance with any order) conferred on the Judge a real discretion whether or not to extend the time in the Consent Order and not merely a discretion which, as Mr Jourdan submitted, could only properly be exercised as a matter of settled practice as well as on the facts by refusing an extension.

3. Prior to the CPR, under the former Rules of the Supreme Court (“the RSC”), the court’s power to vary a consent order depended on which of two types of consent order was in issue. As Lord Denning MR explained in Siebe Gorman (at p.189), where the consent order gave effect to a real contract between the parties, the court would only interfere on the same grounds as any other contract (such as misrepresentation or mistake); where, on the other hand, the consent order was no more than an order to which the parties did not object, the order could be altered or varied by the court in the same circumstances as any other order made by the court without the consent of the parties.

4. It was Neuberger J in Ropac, who first expressed the view that, following the coming into effect of the CPR, the court had a discretion to extend time limits in both types of consent order.

5. So far as relevant to this appeal, the facts in Ropac were as follows. A landlord claimed summary judgment for possession for arrears of rent. Following negotiations, the landlord and the tenant agreed the terms of a consent order, which provided that unless the tenant on or before 9 December 1998, time being of the essence, paid to the landlord the sum of £1,137.46, representing the balance of the outstanding rents for the period 1 April 1998 to 30 November 1998, there should be an order for possession and for arrears of rent, mesne profits, interest and costs. The tenant having failed to pay the sum on the specified date, a possession order was made in favour of the landlord. The tenant applied for a stay of the possession order and for relief of forfeiture. Both were refused by the master. The tenant appealed. The tenant issued a second application seeking an extension of time for compliance with the consent order and for relief from forfeiture. That application and the appeal were heard together by Neuberger J.

6. At that hearing counsel for the landlord accepted that the court could grant the tenant relief from forfeiture on terms that the tenant paid all the arrears of rent, amounting to some £70,000, within a reasonable time. She said, however, that there was no jurisdiction to grant the tenant an extension of the time for compliance with the consent order.

7. Neuberger J held that the court’s case management powers under the CPR Part 3 included power to extend time under the consent order even though it provided that time was of the essence. He said (at [26]) that under the RSC, the consent order would have been in sufficiently clear terms to have merited interference by the court only in circumstances which would justify interference with a contract but the approach in the CPR is more flexible and the court does have jurisdiction to extend time in such a case. He said (at [30]) that he reached that conclusion “with some hesitation”. He said that the overriding objective in CPR Rule 1.1 is a fundamental and overriding feature of the CPR which “amounts virtually to a public interest factor, which governs the whole of the CPR, and which was not present in the RSC”. In that connection, he referred to the provisions of the CPR governing case management powers and, specifically, the terms of r.1.4 (1) that the court must further the overriding objective by effectively managing cases. He concluded as follows (at [31]) on the question of jurisdiction:

“To my mind, the CPR therefore give the court rather more wide-ranging, more flexible powers than the RSC. In my judgment, those powers are to be exercised not merely to do justice between the parties, but in the wider public interest. Further, the objection to deal with a case justly must, as I see it, sometimes (albeit rarely) require the court to override an agreement made between the parties in the course of, and in connection with, the litigation. I consider that that means that the court has greater power to interfere than before. Having said that, I should add this. Where the parties have agreed in clear terms on a certain course, then, while that does not take away its power to extend time, the court should, when considering an application to extend time, place very great weight on what the parties have agreed and should be slow, save in unusual circumstances, to depart from what the parties have agreed.”

1. In the event, Neuberger J decided that he should not extend the time for compliance with the consent order, primarily because the landlord accepted that the tenant was entitled to have relief for forfeiture on terms that the tenant paid all the rent due and owing. He said (at [33] that in those circumstances, rather than considering extending time under the consent order, the proper course for him to take was to offer the tenant the opportunity of obtaining relief from forfeiture on terms that it paid all the rent within a reasonable period, failing which the lease would be forfeited and the tenant must vacate.

2. Pannone concerned an extension of time for complying with a consent order requiring the claimant to file and serve its Reply and Defence to Counterclaim by no later than 1pm on Monday 26 October, and which stated that, if the claimant did not do so, the claim would be struck out and the defendant would have permission to enter judgment on its Counterclaim. The claimant served its Reply to Defence and Counterclaim by an email sent at 1:02pm and filed the same at court by a fax sent at 1:06pm. The District Judge made an order extending the time, and that was upheld on appeal to the Deputy High Court Judge. The Court of Appeal dismissed the appeal. The principal judgment was given by Tomlinson LJ, with whom the other two members of the court agreed.

3. Tomlinson LJ said (at [4]) that it was not ultimately argued on the appeal that there was no power to extend time under CPR r.3.1(2)(a) where the relevant order has been made by consent but, since the directors of the defendant had appeared in person on the appeal and initially seemed to argue that the power was unavailable in that case, and since it had not before been decided by the Court of Appeal whether the power was available in relation to a consent order, it was appropriate to approach the matter from first principles.

4. Tomlinson LJ referred to the two types of consent order described by Lord Denning MR in Siebe Gorman at p.189. He said (at [27]) that, although Lord Denning’s observations were made in the context of the old RSC, and the distinction between the two types of consent order are no longer relevant so far as concerns jurisdiction to grant relief from the “agreed” consequences of non-compliance with an order, the distinction remains of importance in the context of the court’s exercise of its discretionary power. He said there is a world of difference between a case management decision made at the instance of one party to which the other party makes no objection, such as occurred in the Siebe Gorman case, and a genuine settlement of a substantive dispute as to the parties’ rights. He said that, where a settlement is embodied in an order of the court, it can rarely be appropriate for the court to intervene further than to the extent to which the contract can, by its own terms or pursuant to general contractual principles, be modified or discharged in the light of changed circumstances.

5. Having referred to CPR r.3.1(2)(a), r.3.8 and r.1.1(1), Tomlinson LJ said (at [29]) that he agreed with the conclusion which Neuberger J had reached “with some hesitation” in Ropac as to the change made by the CPR on the jurisdiction of the court to alter a time provision in a consent order. He observed (in [30]) that, unlike the consent order in Pannone, which concerned an agreed modus vivendi in relation to a case management decision in preparation for trial, the consent order in Ropac represented the compromise of a substantive dispute.

6. Although Tomlinson LJ agreed with Neuberger J on the issue of jurisdiction, there was an important aspect of the exercise of the discretion on which he qualified what Neuberger LJ said in Ropac. That concerned Neuberger J’s statement at the end of paragraph [31] of Ropac that the court should be slow, save in unusual circumstances, to depart from what the parties have agreed. Having referred to Ferrotex and certain observations of Tuckey LJ in that case, Tomlinson LJ said as follows (at [32]):

“The presence of “unusual circumstances” is plainly not a prerequisite of the jurisdiction to extend time or to grant relief, which is expressed in the CPR in general terms. In the Ropac case … Neuberger J was, if I may respectfully so put it, feeling his way in the light of the newly introduced procedural code, and he was certainly not, I think, intending to formulate a rule as to the circumstances in which an extension of time might be granted in the face of a consent order. I think he meant no more than to emphasise that appropriate weight should be given to the parties’ agreement.”

1. Tomlinson LJ said (at [33]) that the weight to be given to the consideration that an order is agreed will vary in accordance with the nature of the order and therefore the agreement: where the agreement is the compromise of a substantive dispute or the settlement of proceedings, that factor will have very great and perhaps ordinarily decisive weight, and where the agreement is no more than a procedural accommodation in relation to case management, the weight to be accorded to the fact of the parties’ agreement as to the consequences of non-compliance, while still real and substantial, will none the less ordinarily be correspondingly less, and rarely decisive. He continued:

“Everything must depend on the circumstances, and CPR r.3.9(1) prescribes that on an application for relief from a sanction for a failure to comply with a court order the court will consider all the circumstances, including those enumerated in the following sub-paragraphs. Beyond noting that where an order is made by consent, that is one of the circumstances which the court will take into account, it is not I think necessary to impose any further gloss on the Rules, which are already adequately drafted so as to ensure that all proper considerations must be taken into account.”

1. Tomlinson LJ also referred to a decision of Ramsey J in Chiu v Waitrose Ltd [2011] EWHC 1356 (TCC), in which Ramsey J reviewed the cases to which Tomlinson LJ had referred. He quoted from the judgment of Ramsey J including a passage in which Ramsey J said that the court will be slow to extend time or grant relief from sanctions in relation to an agreed order made in a consent order and will generally hold the parties to the terms of the consent order but that there will be unusual cases where it will be just to extend time or grant relief from a sanction. Tomlinson LJ said (at [34] that, consistently with what he had said earlier, he did not think that it was incumbent on Ramsey J to identify unusual circumstances before being prepared to grant the relief sought. He also doubted whether it can or should be asserted with confidence that the court will “generally” hold parties to the terms of the consent order. He continued:

“No doubt that is the starting point of the debate but, particularly in relation to a case management decision such as under consideration in this case and before Ramsey J, an approach that the parties will “generally” be held to the terms of a consent order is in my view over-prescriptive and capable of detracting from the need to assess what, in the circumstances, is the weight appropriately to be given to the factor of consent.”

1. Lloyd LJ, having agreed that the appeal in Pannone should be dismissed for the reasons given by Tomlinson LJ, said (at [38]) that the appeal provided an opportunity for the court to hold that there is a power of the court to extend the time specified in a consent order, adding that the power is not “limited in any prescriptive way by reference to the existence of “unusual circumstances”. He said that the fact that the order is made by agreement is one of the circumstances of the case which the court is to have regard under r.3.9, and it may be an important factor, but it is not inherently decisive so as to render it unnecessary and irrelevant to examine the other relevant circumstances.

2. Arden LJ only stated that she agreed with both judgments.

3. Mr Jourdan emphasised, as is undoubtedly correct, that the consent order under consideration in Pannone was a case management decision rather than an agreement resolving the substantive dispute between the parties. Strictly, therefore, what the Court of Appeal said in that case about consent orders which dispose of the substantive dispute between the parties is not binding as precedent.

4. Despite the anomaly of paragraph 7 of the Consent Order in the present case, which appears to have envisaged a continuing half life for the defendant’s application for relief from forfeiture, I am content to view the Consent Order as one which gave effect to a contract of the parties disposing of the substantive dispute between them rather than a case management decision to which the parties consented.

5. I do not agree, however, with Mr Jourdan’s submission that we should not apply the reasoning of the Court of Appeal in Pannone in the present case. It seems to me perfectly plain that both Tomlinson LJ and Lloyd LJ were stating unequivocally in Pannone that, not only is there jurisdiction under the CPR to extend any time limits in a consent order, including an order which resolved the substantive dispute between the parties and even where the parties have stated expressly that time is of the essence, but also that the discretion is not limited to the existence of “unusual circumstances”. Rather, the weight to be given to the fact of the parties’ agreement will depend on all the circumstances, of which the fact that the agreement was one disposing of the substantive dispute rather than a case management decision will always be highly important and often decisive.

6. In view of the care and detail of the Court of Appeal’s analysis in Pannone of both types of consent order discussed in that case, previously described by Lord Denning in the passage in Siebe Gorman quoted above, we should accept and apply that analysis in the present case unless satisfied that the Court of Appeal in Pannone failed to take into account relevant law and argument. The underlying thrust of Mr Jourdan’s submissions is that Tomlinson LJ did fail to do so.

7. The Court of Appeal in Pannone did not refer to case law on the power of the court to discharge or vary undertakings to the court, which is relied upon by Safin on this appeal. Di Placito, in which the Court of Appeal considered Eronat Tabbah [2002] EWCA Civ 950 and especially the observations of Mance LJ at paragraphs [20] and [21] of that case, is authority that the discretion of the court to discharge or modify a time limit contained in a voluntary undertaking can only be exercised if there are “special circumstances”. As was explained in paragraph [31] of Di Placito by Potter LJ, with whom the other two judges of the court agreed, that means that the discretion is not simply a discretion at large but is to exercised only in a situation where circumstances have subsequently arisen which, by reason of their type or gravity, were not circumstances intended to be covered or which ought to have been foreseen at the time the undertaking was given.

8. Potter LJ said (at [33]) that in relation both to undertakings given to the court required by, or offered to, the court independently of the agreement of the other party (as in the case of undertakings required by, or offered to, the court as the price of obtaining a particular form of relief) and undertakings which are part of a collateral bargain between the parties (as, for example, part of, or pursuant to, the freely agreed comprise of an action) the question is whether there are “special circumstances” in the sense of circumstances so different from those which may properly be regarded as contemplated or intended to be governed by the undertaking at the time it was given that it is appropriate to release the undertaker from the burden of his undertaking.

9. I do not consider the line of authority about the jurisdiction to discharge or modify voluntary undertakings, and Di Placito in particular, to be relevant to the present case any more than it was relevant to the analysis in Pannone. The jurisdiction to discharge or modify undertakings is an inherent jurisdiction of the courts. It does not depend on, and it predates, the CPR. It is not necessary to explore in any detail on this appeal the reasons for the case law’s more restrictive approach to the exercise of such an inherent jurisdiction when compared to the exercise of the court’s case management powers under CPR 3.2(a) to extend the time for compliance with any court order, even a consent order. One explanation may be that an undertaking to the court carries a special seriousness reflected in the fact that an application for committal for breach of an undertaking may be made even though the order containing the undertaking is not endorsed with a penal notice. Another may simply be that the inherent jurisdiction was developed in the light of the potentially serious consequences for even relatively minor non-compliance with an undertaking to the court but the principles for its exercise were developed at a time when, as shown by what Lord Denning MR said in Siebe Gorman (at p. 189), there was no power to vary an order which embodied or gave effect to a contract save on the ordinary grounds on which the court would be able to interfere with any other contract. If that is the reason, then it will be a matter for consideration, but not on this appeal, whether a less restrictive approach is now appropriate in view of the overriding objective in CPR 1.1 to deal with cases justly.

10. Tomlinson LJ also did not refer to the line of authority, of which S v S forms part and which is relied on by Safin, limiting the grounds for setting aside a consent order for ancillary relief in divorce proceedings to (1) cases in which there was at the date of the order an erroneous basis of fact, such as misrepresentations or misunderstandings as to position or assets, and (2) cases in which there has been a material or unforeseen change in circumstances after the order so as to undermine or invalidate the basis of the consent order, known as a supervening event.

11. Again, I do not consider that line of authority, and S v S in particular, to be relevant. The facts in S v S bear no comparison with those of the present case. A more appropriate analogy to the present case would be an application for an extension of time in divorce proceedings to pay a lump sum specified in an order or in an agreement. The court can extend time in such a case under its inherent jurisdiction where a lump sum order made  pursuant to the Matrimonial Causes Act 1973 s 23(1)  is to be payable at one time  or,  in relation to a lump sum payable by instalments, under  its statutory power to grant such an extension under the Matrimonial Causes Act 1973 ss. 31 and 35. The court has greater latitude to vary the order as to timing in such a case than the limited circumstances of a supervening event as specified in S v S at [4].

12. The other cases cited by Mr Jourdan on this issue provide no assistance.

13. In Fivecourts Gray J refused to extend the time specified in a consent order for carrying out certain work on the demised property as a condition of relief from forfeiture. Gray J, who had only a Lawtel note of Neuberger J’s decision in Ropac, stated that the court had jurisdiction to extend the time but would only do so in “exceptional circumstances”. He concluded, on the particular facts of the case, that it would be wrong not to enforce the terms of the consent order. So far as concerns the point of principle as to whether the court can only extend the time in a consent order, including one disposing of the substantive dispute, if “unusual” or “exceptional” circumstances are shown, what Gray J said on the basis of Ropachas been overtaken by the judgments in Pannone.

14. In Ferrotex the Court of Appeal refused to extend the time within which the appellant was required to provide security for the respondents’ costs of the appeal under the terms of an “unless” order made by consent. The court did not consider it necessary to consider Neuberger J’s decision inRopac because the parties had not expressly or impliedly agreed by the consent order to oust the jurisdiction of the court to extend time for compliance with the order if the circumstances justified it. On the facts, the court was not persuaded that time should be extended under its inherent jurisdiction. Once again, so far as concerns both the existence, and the manner of exercise, of the court’s power under the CPR to extend time limits in a consent order, Ferrotex has been overtaken by Pannone (in which Ferrotex was cited, as mentioned above).

15. O’Sullivan v Andrews [2012] EWHC 4327 is a very short unreserved judgment of Mr Justice Eady, in which he refused to extend the time for paying the debt due to the claimant specified in a consent order giving effect to a negotiated settlement of the substantive dispute between the parties. The transcript of the judgment does not contain any elaboration of the facts. Eady J referred to Pannone and to S v S. It appears from the transcript that counsel for the claimant relied on the fact that there was no material change of circumstances after the date of the order such as to justify the court’s intervention. Eady J said that the matters to which attention had been drawn by the defendant’s counsel were matters which were very much before the parties’ attention at the time of the agreement and the consent order. There is no clear indication, however, from the short judgment that Eady J thought that what was said in Pannone was subject to the approach in S v S in the case of a consent order which gave effect to a contract to settle the substantive dispute between the parties. If and insofar as Eady J did think that, I respectfully consider that he was wrong.

16. For all those reasons Judge Mitchell was entirely correct in the present case to consider that he had power to extend the time limits in the Consent Order and that his discretion should be exercised in accordance with the principles and guidance in Pannone.

17. He rightly acknowledged that the power to extend time should be exercised sparingly in such a case as the present. He was also right, however, to take into particular account that the context was one in which a tenant sought relief from forfeiture, as Neuberger J had done in Ropac. It is well established that the court regards a condition of re-entry under a lease as merely being security for the rent. That is why, where the court has granted relief from forfeiture on condition of payment of arrears of rent or other action by the tenant by a specified date, the court will grant further time if it would be just and equitable to do so. As Lord Greene MR said in Chandless-Chandless (at p.323):

“The court, in exercising its jurisdiction to grant relief in cases of non-payment of rent is, of course, proceeding on the old principles of the court of equity which always regarded the condition of re-entry as being merely security for payment of the rent and gave relief if the landlord could get his rent. If an order of this kind, in which relief is granted on terms to be observed within a limited time, is to be treated as one which the court has no jurisdiction to modify in point of time even though circumstances justify modification, then the order becomes as vicious as the original forfeiture clause itself. I hold the view without hesitation that notwithstanding the omission of the words “liberty to apply” an order of this kind, which gives relief on terms to be performed within a specified time, is one in respect of which the court retains jurisdiction to extend that time if circumstances are brought to its notice which would make it just and equitable that extension should be granted.”

1. Lord Greene MR observed (at pp. 324-325) that a tenant who obtained relief on conditions has to show good grounds to get further indulgence and that tenants must not think that they are entitled to be slack or casual about the performance of terms of the order. He continued, however:

“but in a case where on all equitable grounds a period limitation ought in fairness to be extended and its extension will do no more than apply the principle that the condition of re-entry is nothing more than security for the rent, there is no reason why equity should not lend its aid notwithstanding the original order.”

1. A similar approach was taken in Starside Properties in the context of a contract for the sale of a house, under the terms of which the defendant’s breaches of the contract entitled the plaintiff to rescind the contract and forfeit the deposit and other sums paid by the defendant. The defendant was in occupation of the house as a licensee pending completion. In proceedings by the plaintiff the county court judge made an order for possession and postponed it for three months to enable the defendant to raise the money to buy the property at the contract price. The defendant, having failed to pay within the three months, applied to the court for a further extension of time. The Court of Appeal allowed the defendant’s appeal from the decision of the county court judge that he had no jurisdiction to vary the order.

2. Edmund Davies LJ said (at pp. 823-824) that, certainly in relation to the jurisdiction of the court to vary an order granting an extension of time by granting a further extension, no distinction is to be drawn between cases of relief against forfeiture for non-payment of rent and other cases where the relief against forfeiture is sought. He said the following (at p.824):

“The common feature in all these cases is that a penal provision is involved and the court grants relief against the forfeiture which would otherwise follow from it in such circumstances as justice requires, and it grants relief on such terms as are equitable in those circumstances. If it should later appear that the relief by way of an extension of time first granted ought to be extended, and that in fairness to the other party that can be done, I see no difficulty in holding that the court has the jurisdiction to do that which the justice of the case is seen to require. Naturally enough, the court will scrutinise with particular care an application for further relief and will be more reluctant to grant it than in the case of a first application, but that goes to the likelihood of the later application succeeding and not to the court’s jurisdiction to entertain it.”

1. In the context of relief from forfeiture Mr Jourdan referred to Inntrepreneur Pub Co (CPC) v Langton [2000] 1 EGLR 34 but I cannot see how that case can be of any assistance. It was a decision of Arden J refusing relief from forfeiture. It turned on its own facts, in particular that the matters relied upon by the tenant to persuade the court that she would be able to raise the money to pay the arrears of rent were too uncertain.

2. Critical facts in the present case, relevant to the exercise of the power to extend the time limits in the Consent Order in the context of relief from forfeiture, were that the application for the extension was made before expiry of the time limits; all the conditions in the Consent Order had been satisfied by the time the application was heard; and the forfeiture was in respect of a long lease of residential premises, the value of which was almost £1m more than the £90,000 or so due to Safin. I consider that Judge Mitchell was fully entitled, in the light of those factors, to exercise his discretion in favour of extending the time limits.

3. I do not accept that the Judge’s decision was fatally flawed by the various matters which Mr Jourdan submitted were not taken into account or were not given sufficient weight. It is elementary that the Judge’s decision must be read as a whole. He specifically referred in his judgment to the long running litigation between the parties over the defendant’s failure to pay the rent and service charge, the clear terms of paragraph 7 of the Consent Order stating that time was of the essence for complying with the conditions, Mr Gaunt’s account of all the steps taken by Mr Badrig since the Consent Order was made, the fact that Safin might have achieved more if it had contested the application for relief from forfeiture rather than enter into the Consent Order, Mr Duckworth’s contention that nothing that had occurred since the Consent Order which had not been within the reasonable contemplation of the parties, and Mr Duckworth’s submission that the defendant had failed to give sufficient details about the loan offers he turned down or to give good reasons for turning them down.

4. With respect to Mr Jourdan, it is obvious that the Judge had all those matters in mind when he stated his conclusion, emphasising as he naturally did at that point the particular factors which tipped in favour of an extension. He was not obliged to re-state one by one all those points to which he had already referred in his judgment provided it was reasonably clear, as it was, that he had them in mind.

Conclusion

1. For those reasons I would dismiss this appeal.”

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