WHAT IS THE APPROPRIATE TEST IF SOMEONE APPLIES IN ADVANCE TO EXTEND TIME TO COMPLY WITH A PEREMPTORY ORDER? HIGH COURT DECISION

In Everwarm Ltd v BN Rendering Ltd [2019] EWHC 2078 (TCC) Mr Alexander Nissen QC (sitting as a Deputy High Court Judge) considered the appropriate test to be applied when the court made a peremptory order and an application was made, ahead of the date set for compliance, for an extension of time.

“Where an extension of time is sought in respect of an “unless” order, it is not an application which should be treated either as, or akin to, an application for a relief from sanctions case pursuant to Rule 3.9 even if, as is likely, the date for the sanction to be engaged will have passed by the date upon which the application for further time is heard.”

THE CASE

The court made an order for the defendant to provide security for costs in relation to a counterclaim. The order including a peremptory provision, requiring compliance by 4th July 2019.  On the 3rd July 2019 the defendant applied to court for an extension of time for compliance.

WHAT TEST SHOULD BE APPLIED?

The judgment contains a detailed consideration of the relevant provisions and case law.  This included whether or not this was an application for relief from sanction and the provisions of CPR 3.9 were concerned.

THE JUDGE’S CONCLUSION
    1. Having considered the authorities cited above, in my judgment the position is as follows:
(a) An application for an extension of time allowed to take a particular step in litigation is not an application for relief from sanctions provided that the applicant files his application notice before the expiry of the permitted period: Robert v Momentum and Hallam Estates.
(b) This is the case even if the court actually deals with the application after the expiry of the relevant periodHallam Estates.
(c) Although there may be little practical difference between an application made just before the expiry of the permitted period and one made just after it had expired, the law has sound practical and policy reasons for distinguishing between the two: Kaneria and Hallam Estates.
(d) An in-time application for an extension of time is neither an application for relief from sanctions nor is it closely analogous to oneKaneria and Hallam Estates.
(e) An “unless” order is an order of last resort. There is a powerful public interest in ensuring that parties recognise the importance of complying with “unless” orders: Sinclair v Dorsey.
(f) However, the power to extend time for compliance with a court order pursuant to Rule 3.1(2)(a) does not distinguish between routine court orders on the one hand and “unless” orders on the other.
(g) Accordingly, when determining an in-time application for an extension of time for compliance with both routine court orders and “unless” orders, the Court applies the overriding objective.
  1. Where an extension of time is sought in respect of an “unless” order, it is not an application which should be treated either as, or akin to, an application for a relief from sanctions case pursuant to Rule 3.9 even if, as is likely, the date for the sanction to be engaged will have passed by the date upon which the application for further time is heard. An in-time application to extend time for compliance with an “unless” order which was in fact heard before the expiry of the time limit could not properly be regarded as one for relief from sanctions. It therefore makes no sense to treat the same application differently because the hearing of it takes place after the sanction would otherwise have bitten. It therefore follows that I accept Ms Piercy’s submission that Eaglesham proceeded on the basis of an erroneous concession in law. I also accept her submission that both Oak Cash & Carry Ltd and Sinclair v Dorsey are both cases which can be distinguished from the present one because they are considering “unless” orders in the context of the application of Rule 3.9, in circumstances where the sanction had taken effect before relief was sought.
  2. The principles I have outlined above are not intended to reduce the undoubted importance which must be attached to the need for compliance with “unless” orders. In that sense, paragraph [38] of Oak Cash & Carry Ltd is directly relevant. The Court is entitled to take into account the need to enforce compliance with prior orders as part of the overriding objective: see Part 1.1(2)(f). It can also take into account the need to conduct litigation efficiently and at proportionate cost because that is also a factor within Part 1.1(2) both generally and specifically within (c), (d) and (e). In the case of a failure to have complied with an “unless” order, the Court can and ordinarily would give those particular factors considerable weight. Those are the two factors which also have particular mention in Rule 3.9.
  3. If an application is in time, that determines Rule 3.1(2) applies, however brief may be the period between the application for more time and the expiry of the time limit (see Kaneria). However, once the correct rule has been identified, the lateness of the application may well be a relevant matter. An in-time application made shortly after the “unless” order was first imposed is likely to be treated differently from one made just before the time allowed for compliance was about to expire. However, that factor may carry less significance in a case where the period for compliance was already short.
  4. To conclude, when applying the principles of the overriding objective in determining an in-time application made pursuant to Rule 3.1(2)(a), the Court is entitled to, and should ordinarily be expected to, take into account that the additional time being sought relates to an “unless” order, in respect of which there is always a powerful public interest in ensuring compliance. The Court should consider both this, and the need to conduct litigation efficiently and at proportionate cost, not because those matters are identified within Rule 3.9 but because they fall within the overriding 

APPLYING THOSE PRINCIPLES TO THE FACTS OF THE CURRENT CASE

  1. I am satisfied on the evidence that bona fide attempts were made by BN to comply with the order for security made by Cockerill J and, thereafter, by O’Farrell J. Criticisms were made by Everwarm both in the letter to the Court of 4 July 2019 and in Ms Morgan’s sixth witness statement. There is force in the submission that Ms Boland-Shanahan’s witness statement lacked sufficient explanation of what was being done. I agree BN should have provided much more detail than it did. Ms Morgan’s witness statement expressed real scepticism as to whether Mr Gordon’s agreement to lend money would actually be successful, there being too many conditions and “ifs” attached to it. But I cannot shut my eyes to the fact that, in the end, it actually happened. This supports the conclusion that, throughout the period, BN was not stalling or seeking to avoid the need to comply. It was trying to do so. I do not criticise it for trying to raise money by other means first without the need to borrow money from Mr Gordon personally. Indeed, that option only became available in the period after 3 July 2019 when Mr Gordon had received the proceeds of sale from his house.
Application of the Test
    1. Having regard to the need to deal with this case justly and at proportionate cost in the ways mentioned in Part 1.1(2), I am satisfied that it is appropriate to grant the extension of time sought. Indeed, it is fair to say that Mr Quirk only faintly pressed the contrary submission if I was against him on the legal test to be applied.
    2. In my judgment, the following factors are material:
Unless Order
(1) As set out above, an “unless” order is of a special character. It is an order of last resort which usually reflects the fact that a party has already been in breach of a prior order. But the Unless Order in this case has three particular characteristics. First, BN was not in breach of the prior Order made by Cockerill J. It made an in-time application for further time before time for compliance had expired. Second, the period set by O’Farrell J within the Unless Order was short. This was necessarily dictated by the need to have security in place before the trial began, itself a product of the relatively late application for security. If the application for security for costs had been made earlier and the parties had been further away from trial, I can conceive of circumstances in which a party such as BN would have been given a more generous period of time within which to comply with the Unless Order: see Radu v Houston [2006] EWCA Civ 1575 at [18]. In this regard, I note that because of the impending trial the periods of time given to BN to obtain security were less than allowed in two of the cases cited to me. In Sinclair, six weeks was given in the first place and a further month was then allowed. In Radu v Houston [2006] EWCA Civ 1575, the initial period given was also about six weeks. In the present case, the initial period given to BN was three weeks and, subsequently, two further weeks will have been sought. Third, there was no history of prior disobedience by BN with other court orders. I accept the application was made at the last minute but in this case the whole period for compliance with the Unless Order was only one week anyway so this factor is less important than might otherwise apply in other cases.

Compliance

(2) Most obviously, BN has ultimately provided security, albeit late. This means that Everwarm is now fully protected to the extent required by the Court. It has exactly what it was entitled to. It is true that it has received the security later than ordered, but that is a question of prejudice, which I consider below. Ms Piercy was right to rely on Radu v Houston [2006] EWCA Civ 1575 at both [18] and [20]. In that case, Walker LJ said at [18]:

“The making of an order for security is not intended to be a weapon by which a defendant can obtain a speedy summary judgement without a trial”.

I agree that, in circumstances where security has now been provided, which is the very thing which the Court ordered, Everwarm’s pursuit of its objection to further time should be regarded as the deployment of a weapon. Rather than keep the security which the court had ordered, Everwarm would now prefer to have the benefit of the sanction. In the absence of prejudice, that is unacceptable. At [20], Walker LJ said:

“In my experience, if a court has ultimately made an unless order, and even if judgment has been entered pursuant to it, the security not having been paid, if a claimant within a short period of time has come to court with the right sum, the court is and indeed should be willing to consider granting relief and setting the judgment so obtained aside.”

The present case is a fortiori, as the application for more time was made before judgment would have been entered.

Prejudice

(3) Realistically, Mr Quirk did not suggest that there had been any prejudice caused to Everwarm as a result of the delay in compliance with the Unless Order. Necessarily Everwarm had to continue with its preparations for trial, including the Counterclaim, because it could not be confident that security would not be provided within the time limit. Before the time limit expired, an application for an extension of time was made. Once again, there was no suggestion that, in the intervening week before this application was heard, Everwarm’s subsequent preparations for trial were impaired in any way by the uncertainty over whether the extension would retrospectively be granted.

Overriding objective

(4) I now turn to the specific factors that are worthy of mention. As to (a), if more time is granted, the parties will be on an equal footing. Everwarm has the protection of security which Cockerill J ordered. By contrast, if I refuse more time, BN will never have its Counterclaim determined in circumstances where the degree of overlap between the issues raised in defence of the Claim and Counterclaim is potentially significant. As to (c), the Counterclaim is worth nearly £2m in circumstances where, as subcontractor, BN is the weaker financial party. As to (d), the case can be dealt with fairly and expeditiously if more time is allowed. It would be fair to allow the Counterclaim to be heard. There is no delay to the trial and none was sought. No prejudice is alleged to have flowed from the additional time required. As to (f), it is important to have regard to the fact that it was an Unless Order, but it was one with the characteristics mentioned above. BN did not ignore the Order. It tried to comply with it but under-estimated the length of time it needed in order to comply.

    1. Balancing these factors, I am wholly satisfied that the extension of time should be granted. Accordingly, as set out above, the consequence is that in retrospect the Counterclaim is treated as never having been struck out at all.
Rule 3.9
    1. For the reasons I have given, I do not consider this to be a Rule 3.9 case nor akin to it. However, for completeness, I will very briefly state the conclusions which I would have reached had I been satisfied that the Rule effectively applies.
    2. In my view, a breach of an “unless” order will almost always be regarded as serious and significant. I also agree that the starting point must be that the sanction was properly imposed for breach of it. The fact that BN did not wilfully neglect or disobey the order is not material. Thus, I proceed on the basis that the first stage of the Denton test is made out.
    3. Has a good or bad reason for non-compliance been given? I have accepted the explanation given. In my judgment, from the outset, and subsequently, BN under-estimated the time that would properly be needed to obtain security and therefore gave an inaccurate view about its ability to comply when originally asking for more time. It was not dilatory in seeking to comply. In that sense, the reason for non-compliance was that, despite acting with sufficient diligence, it was not possible to comply within the time that had been allowed.
    4. I turn to consider the third stage: all the circumstances of the case. Much of the reasoning above applies. A key factor is the effect of the (assumed) breach. As set out above, there has been no effect. Everwarm has not been prejudiced in its preparations for trial. The litigation has not been delayed and no other court users are affected. A second key factor is the importance of compliance with orders. BN’s conduct is very different from the type of behaviour considered in the cases cited to me in this context. In addition, the Unless Order in this case had the particular characteristics mentioned above. Other relevant factors are that an in-time application for more time was made and that BN has now complied, albeit late. As a result, Everwarm is now using the “unless” order as a weapon: Radu. In Sinclair, Popplewell J said it would be a comparatively rare case in which the applicant can persuade the court, absent a material change of circumstances, that it would now be appropriate to grant relief from sanctions. I accept Everwarm’s submission that there was no material change of circumstances but I do consider this to be one of those rare cases in which it would be appropriate to grant relief.
    5. Accordingly, I would also have granted relief from sanctions had that been the relevant test.
Conclusion
  1. For the reasons given above, I extend time for compliance with the Unless Order of O’Farrell J until 4pm on 18 July 2019.