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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
MANCHESTER DISTRICT REGISTRY
(His Honour Judge Bird)
Claim No. 2141 of 2014
||Royal Courts of Justice
Strand, London, WC2A 2LL
||29 October 2014
B e f o r e :
LORD JUSTICE MOORE-BICK
LORD JUSTICE RYDER
MR. JUSTICE DAVID RICHARDS
|| ALTOMART LIMITED
||- and -
||SALFORD ESTATES (No. 2) LIMITED
Mr. Peter Knox Q.C. (instructed by Vyman Solicitors Ltd) for the respondent
Miss Lesley Anderson Q.C. (instructed by Woodcocks Haworth & Nuttall) for the appellant
Hearing date : 29th July 2014
HTML VERSION OF JUDGMENT
Crown Copyright ©
Lord Justice Moore-Bick :
- This is an application for an extension of time in which to file a respondent's notice under CPR 52.5(2)(b). An application of this kind would normally be determined by a single judge in advance of the hearing of the appeal, or by the court at the hearing, but in this case the Vice-President directed that it be heard in advance by a full court in order to give guidance on the approach to be adopted to applications of this kind in the light of the court's decision in Mitchell v News Group Newspapers Ltd  EWCA Civ 1537,  1 W.L.R. 795. At the conclusion of the hearing we announced our decision to grant the application and indicated that we would give our reasons for doing so at a later date. I now give my reasons for concurring in that order.
- In order to put the matter in context it is necessary to describe briefly the nature of the proceedings and the events which have occurred since His Honour Judge Bird made the order dated 4th March 2014, which is the subject of the appeal.
- On 29th April 1974 a lease was executed of premises comprising part of a shopping precinct in Salford, Greater Manchester. The appellant, Salford Estates (No. 2) Ltd ("Salford"), is the successor in title of the original landlord; the respondent, Altomart Ltd, is the successor in title of the original tenant. As tenant Altomart undertook to pay in addition to the rent service charges and sums expressed as insurance rent. The lease contained an arbitration clause couched in wide terms and in due course a dispute arose which was referred to arbitration. Following the publication of an award in its favour, on 3rd February 2014 Salford presented a winding up petition against Altomart claiming the amount due under the award, a sum due in respect of service charges and a sum due in respect of insurance rent. By the time the petition was presented Altomart had already sent Salford a cheque in respect of the sum due under the award, which was cashed immediately on receipt.
- Once it learned that Salford had started winding up proceedings Altomart applied to have the petition stayed or dismissed on the grounds that the amount due under the award had been paid and that there was a bona fide and substantial dispute about the amounts said to be due in respect of service charges and insurance rent. The disputes in relation to those claims, it was said, should be referred to arbitration, but in any event made it inappropriate for the petition to proceed.
- In support of its argument that the disputes should be referred to arbitration Altomart relied on Rusant Ltd v Traxys Far East Ltd [2013[ EWHC 4083 (Ch) in which Warren J. had held that section 9 of the Arbitration Act 1996 applies to proceedings in the form of a winding up petition and that once a dispute falling within the arbitration clause has arisen, it must be referred to arbitration regardless of its merits. The judge expressed some doubt about the correctness of that decision, but decided that he ought to follow it in the interests of consistency. He concluded that there was no bona fide and substantial dispute in relation to either the service charges or the insurance rent, but stayed the winding up petition in order for the matter to be determined in arbitration in accordance with the decision in Rusant v Traxys.
- With the permission of the judge Salford appealed against that decision. Its notice of appeal is dated 6th March 2014 and was served on 10th March 2014. Accordingly, time for filing a respondent's notice expired on 24th March 2014. At that stage junior counsel (who had not appeared on behalf of Altomart below) was asked to consider whether a respondent's notice should be filed. He advised that there were no grounds for doing so and as a result no further steps were taken in that respect. Altomart's skeleton argument was due to be filed by 22nd April 2014 and in the absence of junior counsel on holiday Mr. Peter Knox Q.C. was instructed at short notice to settle it. He took the view that there were grounds for challenging the calculation of both the services charges and the insurance rent claimed by Salford and that, if the court on appeal held that the dispute should not be referred to arbitration, Altomart should ask the court to uphold the judge's order on those grounds. It is unnecessary for the purposes of this application to describe in any greater detail the nature of Altomart's case, which was fully set out in the skeleton argument filed on 22nd April 2014 and served on Salford the same day. On 24th April 2014 the substantive appeal was listed for hearing on 10th or 11th November 2014. On 29th April 2014 Altomart filed a respondent's notice formally setting out the additional grounds on which it wished to rely. At the same time it applied for the necessary extension of time.
- Salford opposed Altomart's application for an extension of time relying on the court's more rigorous approach to compliance with the rules in accordance with the guidance given by this court in Mitchell. The question thus arose whether those principles ("the Mitchell principles") apply to an application of this kind. Mr. Knox submitted that the decision in Mitchell was primarily concerned with applications under CPR 3.9 for relief from specified sanctions. A good example is an order which directs that the claim be struck out in the event of failure to comply with its terms: see Marcan Shipping (London) Ltd v Kefalas  EWCA Civ 463,  1 WLR 1864. He accepted, however, that similar principles apply in cases where the consequences of a failure to comply with the Rules or an order of the court automatically results in the termination of the proceedings, for example an application to file a notice of appeal out of time. However, he submitted that although in some cases the Rules impose a specific sanction for non-compliance, in most cases they prescribe how proceedings are to be conducted without prescribing the consequences of a failure to comply. For example, CPR 15.4 contains general rules prescribing the time for filing a defence, but contains no sanction for failing to do so. (The claimant may be entitled to enter judgment in default, but that is a matter for him.) Mr. Knox submitted that in cases of that kind it is for the court to decide whether time should be extended having regard to all the circumstances of the case and in accordance with the overriding objective. Since rule 52.5(2)(b), with which this appeal is concerned, prescribes no sanction for a failure to file a respondent's notice in time, it is for the court to decide, having regard to all the circumstances of the case, whether to extend time for doing so. The fact that the order can include terms that will prevent the respondent suffering undue prejudice is usually of considerable significance. However, he submitted that even if the Mitchell principles do apply to an application of this kind, in the light of the further guidance given in Denton v T.H. White Ltd, Decadent Vapours Ltd v Bevan and Utilise T.D.S. Ltd v Davies  EWCA Civ 906 it would not be appropriate to refuse relief having regard to the seriousness and significance of the default and the circumstances of the case as a whole.
- Miss Anderson Q.C. submitted that where there has been a failure to file a respondent's notice in time, the consequent need to obtain an extension of time to enable the grounds to be argued is, or is at any rate analogous to, a sanction and that the application should attract the same degree of rigorous scrutiny. She submitted that the courts have now become less tolerant of failures to comply with the Rules and have adopted a more robust attitude towards them. She submitted that the delay in this case had not been adequately explained and was by no means insignificant. The appellant would be prejudiced by having to deal with additional arguments that had not been raised below or at the proper time. The court should have regard to the importance of adhering to the Rules. It should therefore take a robust approach and refuse the application.
Do the Mitchell principles apply to an application of this kind?
- Although the principles governing the court's approach to applications for relief from sanctions have been explained and refined in Denton, it is convenient in this case to continue to refer to them as the Mitchell principles, since that is how they were referred to in the course of argument. Since the present application is simply an application under rule 3.1(2)(a) for an extension of time, albeit one made after the time prescribed by the rules had already expired, and is not an application for relief from any sanction imposed by the rules, practice directions or any order of the court, the first question for consideration is whether the Mitchell principles apply at all. Rule 3.8(1) provides as follows:
"Where a party has failed to comply with a rule, practice direction or court order, any sanction for failure to comply imposed by the rule, practice direction or court order has effect unless the party in default applies for and obtains relief from the sanction."
Rule 3.9(1) provides as follows:
"On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, . . ."
- In my view it is clear from the language of rule 3.8 that it is concerned with a sanction imposed by the very rule, practice direction or order of which the applicant is in breach, hence the use of the words "imposed by the rule, practice direction or court order." In such cases the consequences of default are spelled out; a classic example is an "unless" order. Rule 3.9 does not repeat the words "by the rule, practice direction or court order", but Rule 3.8 provides the context in which rule 3.9 has to be read and in my view it is also directed to sanctions in the sense of consequences imposed by the rule, practice direction or order of which the applicant is in breach. Most rules, practice directions and orders, however, do not provide specific sanctions for their breach, leaving it to the court to decide what, if any, consequences should follow. In my view rule 3.9 does not, therefore, apply to such cases and an application for an extension of time is not one that falls within the scope of rule 3.9, either expressly or by analogy. Such applications are governed by rule 3.2(1)(a).
- This very question arose for consideration in A-G of Trinidad and Tobago v Matthews  UKPC 38, to which Mr. Knox drew our attention. In that case the Privy Council considered rules 26.6 and 26.7 of the Civil Procedure Rules of Trinidad and Tobago, which were materially the same as CPR 3.8 and 3.9. The defendant had applied, after time had expired, for an extension of time for filing his defence. The claimant argued that, since the application had been made out of time, it was necessary for the defendant to apply for relief from sanctions under rule 26.7. The Privy Council rejected that submission. Lord Dyson giving the opinion of the Board pointed to the similarity of language used in rules 26.6 and 26.7, which were materially indistinguishable from that used in CPR 3.8 and 3.9, and held that both were directed to rules which themselves imposed or specified the consequences of a failure to comply. "Sanctions imposed by the rules", he said, "are consequences which the rules themselves explicitly specify and impose."
- In Mitchell itself, however, the sanction from which relief was sought had not been prescribed as a consequence of default by any rule practice direction or previous order of the court. It was a sanction imposed by the court in the exercise of its discretion for a failure to comply with a rule that itself prescribed no sanction for default. To that extent it might be thought that the case did not fall within the natural ambit of rules 3.8 and 3.9. Liberty to apply for relief from that sanction appears to have been given in order to allow fuller argument at a later date when more time could be made available; otherwise one might have thought that an appeal against the order imposing it would have been the more appropriate course. Nonetheless, the application proceeded under rule 3.9 and laid down principles which are intended to govern applications under that rule. The question remains, however, whether they were intended to govern applications, such as the present, for extensions of time where no sanction is prescribed for the default.
- The consequences of failing to file a respondent's notice within the prescribed time are not spelled out in the rules, so on the face of it there is no sanction within the meaning of that expression in rules 3.8 and 3.9 from which the respondent needs relief. However, in a number of cases dating back more than a decade the courts have recognised the existence of implied sanctions capable of engaging the approach contained in rule 3.9 and therefore now the Mitchell principles. The first was Sayers v Clarke Walker  EWCA Civ 645,  1 WLR 3095, in which the court considered the approach to be adopted to applications for permission to appeal out of time. The notice of appeal in that case, which included an application for an extension of time, should have been filed within 14 days of the decision, but was nearly 8 weeks out of time. Brooke L.J., with whom Kay L.J. and Sir Christopher Staughton agreed, noted that the court's power to extend time is contained in CPR 3.1(2)(a), which is worded in broad terms, giving judges little help in identifying relevant considerations. It appears that over the course of time judges had begun to formulate their own "check lists" of relevant factors, leading to inconsistency of decision-making and a distortion of the Rules. Having referred to rule 3.9 Brooke L.J. said:
"21. In my judgment, it is equally appropriate to have regard to the check-list in CPR 3.9 when a court is considering an application for an extension of time for appealing in a case of any complexity. The reason for this is that the applicant has not complied with CPR 52.4(2), and if the court is unwilling to grant him relief from his failure to comply through the extension of time he is seeking, the consequence will be that the order of the lower court will stand and he cannot appeal it. Even though this may not be a sanction expressly "imposed" by the rule, the consequence will be exactly the same as if it had been, and it would be far better for courts to follow the check-list contained in CPR 3.9 on this occasion, too, than for judges to make their own check-lists for cases where sanctions are implied and not expressly imposed."
- Miss Anderson submitted that the court in that case was equating an application for an extension of time in which to file a notice of appeal with an application for relief from sanctions. I think that is correct, as far as it goes, although the court's purpose in doing so was to ensure that judges adopted a consistent approach to applications of that kind, rather than to equate applications for extensions of time with applications for relief from sanctions for all purposes. Until the more rigorous approach to applications under rule 3.9 was approved in Mitchell, it was of little significance in practice whether an application for an extension of time under rule 3.1(2)(a) was regarded as analogous to an application for relief from sanctions, since similar factors fell to be considered in similar ways in both cases. However, the passage has since been treated as equating an application for an extension of time for appealing as tantamount to an application for relief from sanctions. That was the view expressed by this court in Robert v Momentum Services Ltd  EWCA Civ 299, although it declined to import the check-list in rule 3.9 into rule 3.2(2)(a) in a case where an application for an extension of time had been made before the expiry of the relevant time limit, since at that stage there had been no default and therefore no implied sanction.
- In Mitchell itself the court made it clear at paragraphs 49-51 that it considered that similar principles applied in other cases of failure to comply with the rules, describing an application for an extension of time for service of particulars of claim as being in substance an application for relief from sanctions under CPR 3.9, and since then the concept of the implied sanction has played a prominent part in a number of decisions, as noted by Burton J. in Mid-East Sales Ltd v United Engineering and Trading Co (Pvt) Ltd  EWHC 1457 (Comm), whose judgment contains a useful survey of the earlier authorities, including A-G of Trinidad and Tobago v Matthews. In Baho v Meerza  EWCA Civ 669 the appellant sought an extension of time to file a notice of appeal. The court (Treacy and Underhill L.JJ.) held that the Mitchell principles applied to such an application and declined to grant relief, even though the application was no more than 7 days out of time. Accordingly, I think it is now established that an application for permission to appeal out of time is analogous to an application under rule 3.9 and is therefore to be decided in accordance with the same principles.
- The reason given by Brooke L.J. in Sayers v Clarke Walker for treating an application for permission to appeal out of time as analogous to an application for relief from sanctions was that without such an extension the appeal could not proceed. Mr. Knox submitted that an application for permission to file a respondent's notice out of time is different because the proceedings will continue in any event. That is certainly true, but in my view that is not a significant ground of distinction. The purpose of the respondent's notice is to enable Altomart to rely at the hearing of the appeal on grounds for upholding the judgment that were not before the court below. If an extension of time is not granted it will be unable to do so. To that extent that area of dispute will not come before the court. In my view for a respondent to be prevented from pursuing the merits of a case it wishes to pursue on the appeal is no more or less of an implied sanction than it is for an appellant to be prevented from pursuing its case on appeal. In my view, therefore, the Mitchell principles apply with equal force to an application for an extension of time in which to file a respondent's notice.
The Mitchell principles
- In Mitchell itself the court was concerned with the claimant's failure to file a costs budget seven days before the hearing at which it was due to be considered. The pilot scheme then in force in relation to defamation proceedings contained in Practice Direction 51D prescribed no sanction for a failure to comply with its requirements, but an amendment to the Rules which became effective on 1st April 2013 and extended costs management to claims of all kinds provided that, if a party fails to file a costs budget within the prescribed time, it would be treated as having filed a budget comprising only the applicable court fees: see rule 3.14. The Master considered that that was the appropriate sanction for the claimant's default and made an order in those terms. At a subsequent hearing she dismissed his application for relief against the sanction she had by her earlier order imposed. An appeal against her orders was dismissed. In relation to the approach to applications for relief from sanctions the court emphasised that greater weight should be given to the two considerations specifically mentioned in rule 3.9, namely, the need for litigation to be conducted efficiently and at proportionate cost and the need to enforce compliance with the rules. A debilitating accident or illness might provide a good reason for the delay, but not excessive pressure of work, much less mere oversight.
- Nonetheless, in subsequent cases the courts recognised that enforcing compliance with the rules is not an end in itself and that it is not part of their function to impose sanctions merely for punitive purposes. Thus, in Chartwell Estate Agents Ltd v Fergies Properties S.A.  EWCA 506 this court upheld an order giving relief from sanctions for failing to serve witness statements in time, even thought the defaults were not trivial and there was no good reason for them, because it considered that the interests of justice must ultimately prevail.
- More recently the rigour of the decision in Mitchell has been tempered by the decision in Denton. In that case the court recognised that Mitchell had been the subject of criticism and, while holding that the guidance it provided remained substantially sound, sought to explain in rather more detail how it should be interpreted and applied. In doing so it identified three stages of enquiry: (i) identifying and assessing the seriousness and significance of the default which engages rule 3.9; (ii) identifying its cause; and (iii) evaluating all the circumstances of the case, including those specifically mentioned, so as to enable the court to deal with the application justly. The court clearly contemplated that if the default is not serious and significant, relief is likely to be granted. For these purposes a default which does not disrupt the progress of the litigation or the business of the courts more generally may well not be regarded as serious or significant. The court did not consider it appropriate to elaborate on the second stage, given the range of circumstances likely to arise. One of the most significant aspects of the decision, however, is to be found in paragraph 31, in which the Master of the Rolls makes it clear when dealing with the third stage that, even if there is a serious and significant default for which no good reason can be given, the application will not automatically fail. Although the factors mentioned in rule 3.9 are of particular importance, they are not of overriding significance.
- The approach that is now to be taken to an application under rule 3.9 is summarised in paragraphs 35-36 as follows:
"35. Thus, the court must, in considering all the circumstances of the case so as to enable it to deal with the application justly, give particular weight to these two important factors. In doing so, it will take account of the seriousness and significance of the breach (which has been assessed at the first stage) and any explanation (which has been considered at the second stage). The more serious or significant the breach the less likely it is that relief will be granted unless there is a good reason for it. Where there is a good reason for a serious or significant breach, relief is likely to be granted. Where the breach is not serious or significant, relief is also likely to be granted.
36. But it is always necessary to have regard to all the circumstances of the case. The factors that are relevant will vary from case to case. As has been pointed out in some of the authorities that have followed Mitchell, the promptness of the application will be a relevant circumstance to be weighed in the balance along with all the circumstances. Likewise, other past or current breaches of the rules, practice directions and court orders by the parties may also be taken into account as a relevant circumstance."
The application of the Mitchell principles to this case
- A number of points of some significance emerge from the history of the present proceedings. The first, and most obvious, is that the respondent's notice was issued well out of time; it was 36 days late, a substantial delay, given that 14 days is allowed for that step. The second, however, is that when the application for an extension of time was made the appeal was unlikely to be heard for some months. There was no application for expedition and in the event it was listed for hearing over 6 months later. The third, which follows close on the heels of the second, is that there is no reason to think that Salford would then, or indeed will now, suffer any undue prejudice if the extension of time is granted, other than having to meet arguments on the merits that were not advanced before the judge. There is no reason to think that it will be any less able to respond to them than would have been the case if the respondent's notice had been filed in time. The question for us, therefore, was whether Altomart should be granted an indulgence in order to enable it to take advantage of the advice of newly-instructed counsel, or whether the application should be refused in the interests of encouraging more rigorous compliance with the requirements of the rules and promoting a more disciplined approach to litigation generally.
- Applying the Mitchell principles as expounded in Denton, the first question for consideration was the seriousness and significance of the breach of the rules which had given rise to the need for the application. In terms of the lapse of time the delay was considerable, but it was clear that it was likely to have had little, if any, effect on the course of the proceedings. Neither party suggested, for example, that it would lead to an adjournment of the hearing and there was no reason to think that the need to allow additional time for argument would be likely to interfere with the court's other business. In those circumstances I did not think that the delay could properly be regarded as serious or significant in the sense in which those expressions were used in Denton. That suggested that relief should probably be granted: see Denton, paragraph 28.
- As I have already said, it did not seem to me that the explanation given for the delay was very persuasive, but, since the delay itself had had no real effect on the proceedings and had caused no substantive prejudice to Salford, I did not consider that to be of great significance. Altomart accepted that it should bear the costs occasioned by its need to seek the court's indulgence. There was nothing else in its conduct of the proceedings or in the circumstances more generally that militated against granting relief and it would not have been appropriate to refuse relief simply as a punitive measure. I was therefore satisfied that the application should be granted.
Lord Justice Ryder :
- I was of the same opinion.
Mr. Justice David Richards :
- I was also of that opinion.
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