Practice and procedure – Extension of time – Respondent’s notice – Appeal from judge’s order staying winding-up petition in order for dispute to be decided in arbitration – Respondent filing respondent’s notice out of time – Whether extension of time to be granted under CPR 3.2(1)(a) – Whether application governed by principles in Mitchell v News Group Newspapers Ltd – Application allowed
The appellant was the landlord and the respondent was the tenant under a lease of premises in a shopping precinct in Salford, Greater Manchester, under a lease dating from 1974. A dispute over the appellant’s entitlement to service charges and insurance rent was referred to arbitration pursuant to an arbitration clause in the lease. An award was issued in favour of the appellant, which then presented a winding-up petition against the respondent claiming the sum due under the arbitration award. By that time, however, the respondent had already sent a cheque to the appellant for that sum, which the appellant cashed immediately on receipt.
The respondent 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. It further contended that the dispute should properly be referred to arbitration, as a dispute falling within the arbitration clause in the lease. The judge accepted that argument and, while he found that there was no bona fide and substantial dispute over either the service charges or the insurance rent, he stayed the winding-up petition for the matter to be determined in arbitration.
The appellant appealed against that decision. Time for filing a respondent’s notice expired in late March 2014. Junior counsel advised the respondent that there were no grounds for filing such a notice but more senior counsel later advised that there were grounds for challenging the calculation of the service charges and insurance rent, in the event that the appeal court held that the dispute should not be referred to arbitration. In late April 2014, the respondent therefore filed a respondent’s notice and applied for the necessary extension of time in that regard.
The appeal court considered the approach to be adopted to such applications in the light of the decision in Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537; [2014] 1 WLR 795, in which a rigorous approach had been applied to applications for relief from sanctions.
Held: The application was allowed.
CPR 3.9, dealing with “relief from any sanction imposed for a failure to comply with any rule, practice direction or court order”, was, when read in the context of CPR 3.8, directed to sanctions in the sense of consequences imposed by the rule, practice direction or order of which the applicant was in breach. Most rules, practice directions and orders did not provide specific sanctions for their breach, leaving it to the court to decide what, if any, consequences should follow. CPR 3.9 did not apply to such cases and an application for an extension of time did not fall within the scope of CPR 3.9 either expressly or by analogy. Such applications were governed by CPR 3.1(2)(a): Attorney-General of Trinidad and Tobago v Matthews [2011] UKPC 38 applied.
Although the application in Mitchell had proceeded under CPR 3.9 and laid down principles that were intended to govern applications under that rule, they were capable of applying to an application under CPR 3.2(1)(a). CPR 3.1(2)(a), containing the court’s power to extend time, was worded in broad terms and gave little help to judges in identifying relevant considerations. However, an application for an extension of time could be regarded as being, in substance, an application for relief from sanctions. While the rules did not spell out the consequences of failing to file a respondent’s notice within the prescribed time, there were implied sanctions that were capable of engaging the approach contained in CPR 3.9 and thus the Mitchell principles: Sayers v Clarke Walker (a firm) [2002] EWCA Civ 645; [2002] 1 WLR 3095 applied. The purpose of the respondent’s notice was to enable the respondent 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 was not granted, it would be unable to do so and that area of dispute would not come before the court. For a respondent to be prevented from pursuing the merits of a case that it sought to pursue on the appeal was an implied sanction. The Mitchell principles therefore applied with equal force to an application for an extension of time in which to file a respondent’s notice.
Under those principles, the two considerations specifically mentioned in CPR 3.9, namely, the need for litigation to be conducted efficiently and at proportionate cost and the need to enforce compliance with the rules, should be given greater weight than other matters when determining an application for relief from sanction. Nevertheless, enforcing compliance with the rules was not an end in itself and sanctions should not be imposed merely for punitive purposes. The court should proceed by: (i) identifying and assessing the seriousness and significance of the default; (ii) identifying its cause; and (iii) evaluating all the circumstances of the case, including those specifically mentioned, so as to enable it to deal with the application justly. If the default was not serious and significant, relief was likely to be granted. A default that did not disrupt the progress of the litigation, or the business of the courts more generally, might well not be regarded as serious or significant. Moreover, even if there was a serious and significant default, for which no good reason could be given, the application would not automatically fail. Although the factors mentioned in CPR 3.9 were of particular importance, they were not of overriding significance: Denton v TH White Ltd [2014] EWCA Civ 906.applied.
Applying the relevant principles to the instant case, it was appropriate to grant the extension of time sought by the respondent. The delay in filing the respondent’s notice, while considerable, was likely to have had little, if any, effect on the course of the proceedings. In those circumstances, the delay could not properly be regarded as serious or significant. Although the explanation given for the delay was not very persuasive, that was not significant given that the delay itself had had no real effect on the proceedings and had caused no substantive prejudice to the appellant. The respondent 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 the grant of relief and it would not be appropriate to refuse relief simply as a punitive measure.
Lesley Anderson QC (instructed by Woodcocks Haworth & Nuttall, of Bury) appeared for the appellant; Peter Knox QC (instructed by Vyman Solicitors Ltd) appeared for the respondent.
Sally Dobson, barrister
Read the transcript here: Altomart Ltd v Salford Estates (No 2) Ltd
