COURT REFUSES CLAIMANT’S APPLICATION TO AMEND ITS OWN APPLICATION: THE DIFFERENCE BETWEEN A PROSPECTIVE AND RETROSPECTIVE APPLICATION

There are few judgments in relation to the amendment of applications.  This issue was considered by Deputy Master Francis in Cavadore Ltd & Anor v Jawa & Anor [2021] EWHC 3382 (Ch).  The claimant’s application to amend its application was refused. The claimant succeeded, however, when the Denton criteria were considered.

“… it does not seem to me to accord with the Overriding Objective, in ensuring cases are dealt with expeditiously and fairly, and in enforcing compliance with rules and orders of the court, to permit a party by amendment to salvage at the last minute an application which as brought was misleading, inconsistent and inadequately set out and explained, all the more so where the party seeking such indulgence is doing so in order to take advantage of the less stringent regime which applies to in-time applications for extensions of time, and with a view to avoiding the more rigorous Denton criteria”

RELEVANT WEBINAR

The important distinction between prospective and retrospective applications to extend time is one of the matters considered in a webinar on the 20th January 2022 “Avoiding Procedural Pitfalls in Personal Injury Litigation”, booking details are available here. 

THE CASE

The claimant made an application for an extension of time to comply with an order.  The original application was then amended (twice) to give different dates for complying.

THE IMPORTANCE OF THE DATE OF THE APPLICATION

The claimant wanted to rely on the original application, because the date of the application was critical to how the court would exercise its discretion. The original application, made before the date of compliance, was subject to the less stringent test for ahead of time applications. An application made later was subject to the Denton criteria.

 

  1. On or before 25 September 2021, the Claimants shall pay to the Defendants’ solicitors the outstanding costs order in the amount of £236,871.64 together with the sum of £55,000, (the latter being the sum ordered pursuant to paragraph 5 below).
  1. The Claimants shall pay the costs of and relating to the Defendants’ said application, which costs have been summarily assessed in the sum of £55,000.
  1. These proceedings and all further steps herein shall be stayed until the Claimants have paid (in full and cleared funds) the total sums identified in paragraph 4 above.
  1. That in the event the Claimants fail to pay the costs identified at paragraph 4 above, the claim shall be struck out on 9 October 2021 without further order.
  1. 25 September 2021 was a Saturday.  On the previous day, DMH Stallard sent an e-mail to Lipman Karas (now trading under the style LK Law) at 10.10am stating as follows:-
We understand that funds from our client (pursuant to Deputy Master Arkush’s Order dated 20 September 2021) are currently en route to us.
We are conscious, however, that the deadline fast approaches.  In the event that these funds do not clear in time, are you agreeable to an extension of the deadline until Monday 27 September 2021?
  1.  In response, at 1.24pm LK Law stated that they were seeking instructions but as it was the weekend in KSA it was unlikely that they would obtain them before close of business.
  1. As a result, DMH Stallard issued the first application notice which is before me in the afternoon of 24 September 2021.  This sought an extension of time for payment of the costs under paragraph 4 of the Arkush Order until 27 September for reasons set out in box 10 to the application notice, which stated as follows:-
The Claimants seek permission to extend time to pay the £291,871.64 until 27 September 2021.  This is due to logistical banking delays in receiving the funds from Cyprus from where they are being transferred
  1. On 27 September 2021 DMH Stallard sent a further e-mail to LK Law at 9.41am in the following terms:-
We are instructed that the funds can be with you today as indicated on Friday.  Please now confirm whether your clients will consent to our Application seeking an extension for payment today
  1. However later that same day DMH Stallard issued a second application notice, described as an amended application, bearing the date 24 September 2021, now seeking an extension of time until 8 October 2021.  The reasons set out for that in box 10 were now stated as follows:-
The Claimants seek permission to extend time to pay the £291,871.64 until 8 October 2021.  This is due to logistical banking delays in receiving the funds from Cyprus from where they are being transferred.  The banking facility required to enable the Claimants to make the payment has been approved.  There is a technical difficulty with the security required by the lender, which the Claimants understand will be resolved imminently, enabling payment prior to 9 October 2021 when the claim would be struck out pursuant to paragraph 7 of the Order of Deputy Master Arkush
[underlining as contained in the amended application notice]
  1. In a letter sent to DMH Stallard on 28 September 2021 LK Law requested further information on the alleged facility and the technical difficulties referred to and questioned the inconsistencies between the explanations provided for the delay in the first and second application notices.  On the same day, LK Law wrote to the court expressing its concerns at the deficiencies in the applications, and requested that they should be dealt with at a hearing rather than on paper.  In response to a direction by Deputy Master McQuail, Mr Ford of that firm then prepared a third witness statement dated 5 October 2021 setting out, once again in great detail, the defendants’ objections to the applications, including the paucity of information provided and the inconsistencies in the explanations for the delay between the applications.
  1. In light of the defendants’ opposition, and after some delay on the part of the claimants in the provision of counsel’s dates to avoid, the applications were listed for hearing with a time estimate of 90 minutes on 29 November 2021.  In the meantime the date of 9 October 2021, to which the claimants were seeking an extension of time to make payment, and on which it had been provided by the Arkush Order that the claim would stand struck out, had been and gone, without any payment being made or tendered, or any further explanation provided by the claimants or their solicitors for the delay.
  1. It was only on 23 November 2021 that the claimants then issued a third application notice, now seeking (i) permission to re-amend the first application notice (or amend the second application notice) by extending the requested extension until 22 December 2021, or alternatively (ii) relief from sanctions arising from failure to comply with paragraph 4 of the Arkush Order.  The application was accompanied by draft re-amended application notice in which it was now stated in box 10 as follows:-
The Claimants seek permission to extend time to pay the £291,871.64 until 9 October 2021 22 December 2021.  This is due to logistical banking delays in receiving the funds from Cyprus from where they are being transferred.  The banking facility required to enable the Claimants to make the payment has been approved.  There is a technical difficulty with the security required by the lender, which the Claimants understand will be resolved imminently is in the process of being resolved, enabling payment prior to 29 November 2021 when this application is listed for hearing
[strike-through and red colouring as contained in the re-amended application notice]
  1. The third application notice was accompanied by a third witness statement of Marios Georgallides …

THE CLAIMANT SHOULD HAVE BEEN MORE OPEN: THE MASTER REFUSED PERMISSION TO AMEND

The Deputy Master refused the application to amend.

  1. Pausing for a minute, I should note that the claimants would be in a much stronger position if they had been open and transparent in September and October 2021 as to the source of funding for the intended payment, the hurdles which needed to be overcome to enable the financing to be completed and the likely timescale for this.  It is surprising that no attempt has been made by the solicitors who prepared the first and second applications to explain, and apologise for, the misleading and incomplete information provided therein.
  1. The third application notice and Mr Georgallides’ accompanying statement were only served on LK Law on 24 November 2021, three business days before the listed hearing of the applications on 29 November 2021.   The defendants objected strongly to the late production and service of this application and evidence, which significantly altered the nature of the relief and the substance of the grounds for granting it.   At the commencement of the hearing on 29 November 2021 Ms McFarland urged me to disregard it and to deal with the first and second application notices as the only matters properly before the court which, without more, were moribund and should be dismissed, leaving the third application to be determined separately as a free standing application for relief from sanctions alone at a further hearing some time in the future.  I declined to adopt that course because I considered as a matter of case management that all three applications should be heard and dealt with together as soon as possible.  However, conscious that the defendants had not had proper opportunity to respond to the third application, I adjourned the hearing until 3 December 2021 with directions for the defendants to file and serve any further evidence on which they wished to rely in opposition to the third application by 10am on 2 December 2021.
  1. Mr Ford took up that invitation by preparing and serving a fourth witness statement on that date, containing the same detailed critique of the claimants’ evidence and conduct that has characterized his previous statements.  At times in those statements he trespasses into comment and submissions, which would be better left to counsel’s written or oral argument, but this is symptomatic of the high stakes which this satellite litigation carries for both sides to this dispute, where the fate of a claim for £23 million or more hangs in the balance.

PERMISSION TO AMEND APPLICATIONS

  1. As set out in the White Book 2021 at paragraph 23.6.3, the power under r.17.1 of the Civil Procedure Rules to permit amendments to statements of case does not apply to application notices as these are not statements of case as defined in r. 2.3 (1).   However the court has a general power within r. 3.1 (2) (m) to permit such an amendment for the purpose of managing the case and furthering the overriding objective.
  1.  There is little authority on the amendment of application notices.  That is no doubt because the need rarely arises; in most cases a party can simply issue a fresh free-standing application.  However the need did arise in Agents Mutual Ltd v Moginnie James Ltd [EWHC] 3384 (Ch), a case where Roth J had ordered that certain aspects of a claim be transferred to the Competition Appeal Tribunal, and that the claimant should bring any application for summary judgment on the balance of the claim in the Chancery Division by 16 August 2016 with the remainder of that claim then stayed.  Having issued their summary judgment application in time on one specific ground which had been mooted before Roth J when he made his original order, the claimants subsequently sought permission at the hearing to amend the application to rely on two different and wholly new grounds.  Master Matthews considered that he had power to permit an amendment of the application under r. 3.1 (2) (m), which should be exercised in accordance with the Overriding Objective.  However, he declined to permit the proposed amendments because they had not been averted to when Roth J made his original order and it was unclear what he would have done had they been, and because they were raised very late in the day, such that it would be necessary to adjourn the hearing to accommodate them.
  1. In this case I have come to a clear conclusion that I should not permit the original application notice to be re-amended as sought by the third application notice.  My reasons are as follows:-
a)the application has been brought late in the day, when it could and should have been brought much earlier; I consider that the claimants should have sought permission to re-amend the application notice as soon as they became aware of the likely delay in procuring the removal of the existing bankruptcy restrictions, and at any rate when they learnt of the new bankruptcy restriction entered in respect of the petition which had been presented in early October;
b)the application as originally brought was misleading and the information provided sparse and inadequate, and as explained above the position was hardly rectified when the application was first purportedly amended by the second application notice; where an applicant subsequently seeks to amend the application to put it on a proper and accurate footing properly supported by evidence it behoves that applicant to provide some explanation for the inadequacies in the application as originally brought; as already noted, none has been provided here;
c)the proposed amendments significantly alter the nature and substance of the application; it is, in reality, now brought on a very different basis from that originally set out; I do not find persuasive or realistic Mr Hope’s attempts in his written argument to brush off the extent of the changes to the substance of the application in acknowledging simply that “reasons stated in support of the original … application were not explained satisfactorily” and “the nomenclature used was not ideal”; the changes to my mind are much more fundamental;
d)ultimately, it does not seem to me to accord with the Overriding Objective, in ensuring cases are dealt with expeditiously and fairly, and in enforcing compliance with rules and orders of the court, to permit a party by amendment to salvage at the last minute an application which as brought was misleading, inconsistent and inadequately set out and explained, all the more so where the party seeking such indulgence is doing so in order to take advantage of the less stringent regime which applies to in-time applications for extensions of time, and with a view to avoiding the more rigorous Denton criteria.”

 

THE CLAIMANT SUCCEEDED ON THE DENTON CRITERIA

The claimant’s application for an extension of time was successful.

  1. I have been referred by Ms McFarland in her thorough and very helpful skeleton arguments to a welter of first instance and Court of Appeal decisions in which the Denton criteria have been considered and applied.  I have read those decisions, but I shall not lengthen this judgment by setting them all out.  Ultimately the task I have to undertake is one which is specific and highly sensitive to the facts of this case, so other decisions provide me only with guidance in weighing up the various countervailing factors to which I should have regard.
  1. It is accepted by the claimants that the failure to comply with paragraph 4 of the Arkush Order is a serious and substantial breach.  The claimants plead in mitigation that it arose due to unknown and unforeseen matters affecting Mrs Georgallides’ ability to obtain the loan, but the letter of 20 September 2021 to which I have referred above indicates that, even at that stage she knew or should have known that the loan would be unlikely to be completed until early November 2021, regardless of what was subsequently discovered about the new bankruptcy restriction.  In any event, as observed by Coulson LJ in Diriye v Bojaj [2020] EWCA Civ 1400 at paragraph 46, there is no room at this first stage of the Denton test to apply fine gradations as to the gravity of the breach; serious is serious.
  1. The claimants also accept, realistically, that there is no good reason for the breach.  I would add that, notwithstanding the difficulties which Mrs Georgallides has encountered in completing the funding arrangements, the claimants have brought the present situation upon themselves by their failure to be open and transparent at the outset as to the likely delay in completing those arrangements.
  1. I have therefore to consider, on the third stage of the Denton test, all the circumstances of the case in order to deal with the application justly, including the need for litigation to be conducted efficiently and at proportionate cost, and the need to enforce compliance with rules, practice directions and courts orders.
  1. There are a number of powerful factors which militate against the grant of relief:-
a)the bulk of the costs which were the subject of paragraph 4 of the Arkush Order are ones which are unsatisfied from the first claim and have been outstanding for a considerable period of time;
b)the gravity of the claimants’ previous default in paying such costs, coupled with their decision to pursue a further claim whilst those costs remained unsatisfied, was recognised by the parties and the court in imposing in agreed terms the strike out sanction in paragraph 6 of the Arkush Order in the event of further default in their payment;
c)unless orders should mean what they say; litigants cannot lightly breach the requirements of an unless order and expect to be relieved the consequences thereof: see e.g. Eaglesham v Ministry of Defence [2016] EWHC 3011 (QB) per Andrews J at paragraph 46;
d)in originally seeking extensions of time for compliance in their first and second application notices, the claimants presented accounts of the reasons for such extension which were misleading, confused and incomplete, as already set out above;
e)the claimants thereafter delayed until 22 November 2021 before attempting to rectify the position and seeking relief; true it is that it was only on that date that Mrs Georgallides finally obtained the dismissal of the bankruptcy petition and so was in a position to progress the financing arrangements, but that did not prevent the claimants from providing a proper explanation to the defendants and the court of the position some weeks prior to that as part of a properly considered application for permission to re-amend the original application notice or seek relief.
a)if relief is refused, the claimants face the loss of a very valuable claim for estimated sums of at least £23 million; the claim appears on its face properly arguable and is one which is properly brought in this jurisdiction; the substantive defences to the claim are yet to be pleaded, but there is nothing to suggest that the claims are defective or face any obvious weakness;
b)it is no real answer to say that the claimants can simply bring another claim seeking the same relief, as Ms McFarland suggests in her supplemental skeleton argument; the claimants are rightly concerned that any such further claim would be met by the argument that it constitutes an abuse of process: see the cases digested at paragraph 3.4.8 of the White Book 2021; when asked whether the defendants could confirm that they would not take such a point, Ms McFarland understandably declined to do so;
c)whilst the defendants have been kept out of their costs not just for the period since 25 September 2021, but for many months previously following the issue of the default costs certificate in May 2020, the prejudice which they may have suffered from that will be mitigated by their entitlement to interest at the judgment rate on those costs; no evidence is put forward on the defendants’ behalf in this regard of any particular financial or other loss to which they have been subject by reason of the delay for which the entitlement to statutory interest is not adequate compensation;
d)despite the misleading and inadequate way in which the funding position was set out in the first and second application notices, it does appear from Mr Georgallides’ third statement that Mrs Georgallides has made concerted efforts since September 2021 to obtain and progress the financing arrangements which will yield more than adequate funds to enable the defendants at last to be paid their outstanding costs in full.
  1. I have anxiously considered all the factors which weigh in the balance on either side.  The decision is not an easy one.  However, I have concluded that relief ought to be granted.  I am impressed in particular by the fact that the prejudice to the claimants arising from the loss of their claim, if relief is refused, would be disproportionate to the default for which they are responsible, serious though that is.  In contrast I consider that any prejudice to the defendants from the grant of relief will be adequately met by the payment of judgment interest on the unsatisfied costs to which the defendants are entitled, together with an order that the claimants pay the defendants’ costs of all three applications.  I am perturbed by the manner in which the claimants have pursued the applications to extend time for compliance with paragraph 4 of the Arkush Order, but ultimately satisfied that Mrs Georgallides has made genuine and concerted efforts to progress the funding arrangements and the claimants should be given a final opportunity for those efforts to be brought to fruition for the defendants’ benefit.
Disposal
  1. Accordingly, I grant relief from sanctions and will extend time for compliance with paragraph 4 of the Arkush Order until 22 December 2021.