Extending time to comply with an unless order?

Overview

In this case, the High Court considered a last minute request to extend the time to comply with an unless order. The company subject to the unless order is in administration, and its administrators explained that they were concerned about pursuing the litigation and were working on securing third party funding for any adverse costs over and above the security for costs already provided by the company. The application was made three minutes before the deadline and was missing a key document.

The Court considered a variety of issues — including whether the application was made in or out of time, whether a deliberate decision (rather than a mistake) can constitute an error, and the potential prejudice to the parties — and granted the request to extend the time to comply with the unless order. Significantly, the sums payable under the unless order were paid only 7 days after the due date, and the non-compliance did not have any effect on the litigation.

Background

Lloyds Developments Limited owned a building in Glasgow that was to be converted into a 17-storey hotel. Accor HotelServices UK Limited was the hotelier. A dispute arose between the parties, with each alleging that the other's conduct amounted to a repudiatory breach of the agreements between them. Lloyds commenced proceedings in January 2022.

Lloyds is now in administration. Geoffrey Jacobs and Blair Nimmo of Interpath were appointed as joint interim managers in December 2023 and joint administrators in January 2024.

Trial had been fixed for March 2024, but Accor successfully applied for an adjournment due to changes in Lloyds’s case. Lloyds was ordered to pay Accor’s costs of the application assessed at £120,000, but failed to pay by the deadline. The Court then made an unless order which required payment by 4pm on 8 March, failing which the claim would be struck out and judgment entered against Lloyds.

Lloyds did not pay by 4pm on 8 March. At 3.57pm, Lloyds filed an application for an extension of time to comply with the unless order. The application was incomplete — it stated that a witness statement would follow — and included certain errors.

At 4.26pm, Accor filed an application for judgment to be entered against Lloyds.

The following day, on Saturday 9 March, Lloyds filed a corrected application accompanied by a draft order and a witness statement signed by one of the joint administrators.

On 15 March 2024, Lloyds paid the sums owing under the unless order.

The Court’s Decision

The Court emphasised that the manner in which Lloyds made its application was “undoubtedly unsatisfactory” and “the cause of considerable waste of time and money in relation to both applications”. Nevertheless, it ultimately granted the extension finding that, on balance, the interests of justice militated in favour of permitting the claim to proceed.

Was the application to extend made in time?

The first issue before the Court was whether Lloyds’ application to extend time 3 minutes before the deadline and with defects was made in time, or whether it should be treated as having been made out of time.

Accor argued that the application did not comply with CPR Part 23.6, which requires the applicant to provide brief reasons for seeking the order, and therefore was not a valid application.

Lloyds agreed that “witness statement to follow" did not amount to reasons and that there was a procedural error in the application. However, it relied on CPR Part 3.10 to argue that the failure to provide reasons for the application was a procedural error which did not invalidate the application.

In response, Accor took the position that Part 3.10 can only be used to cure errors related to steps in the proceedings rather than the application itself. Accor further submitted that, in this case, there was no procedural error, but rather a conscious decision to omit the witness statement. Consequently, Accor argued that this should be treated as an application for relief from sanctions under Part 3.9.

The Court disagreed with the limited interpretation of Part 3.10 advanced by Accor. The Court also clarified that an “error” includes a failure to comply with a rule or practice direction, and is not limited to accidental failures. The Court can take the explanations given for the error into account in deciding whether to rectify it, but should not sensibly have to determine the quality of the error.

Here, the Court found that the failure to provide even the briefest of reasons for the application to extend time was a procedural error and that Part 3.10 applied to the facts of this case.

The Court noted that this was not an application made just to get a foot in the door before time for compliance expired. The administrators had a settled intention to apply for an extension of time and were working on securing third party funding for any adverse costs order over and above the £900,000 in security for costs already provided by Lloyds. It was regrettable that Lloyds' solicitors did not explain what had happened or that no steps were taken sooner to make the application. But neither of these matters was a sufficient reason to treat the application as invalid.

As a result, the Court concluded that the application to extend was made in time and should not be treated as an application for relief from sanctions under CPR Part 3.9.

The relevant legal principles

The Court then set out the principles applicable to applications to extend under Part 3.10, including:

1. 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.

2. An in-time application for an extension of time is neither an application for relief from sanctions nor is it closely analogous to one.

3. 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. 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.

5. 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.

6. The court is entitled to take into account the need to enforce compliance with prior order as part of the overriding objective. It can also take into account the need to conduct litigation efficiently and at proportionate cost. In the case of a failure to have complied with an unless order, the court can and ordinarily will give those particular factors considerable weight.

The Court’s analysis

Here, the fact that the application was an application to extend time to comply with an unless order was of considerable significance, not only because of the public interest in securing compliance with such orders, but also because there was a history of failure to comply with orders of the Court.

The application to extend time was made almost literally at the last minute and without a finalised witness statement, despite the fact that it must have been obvious for some time that there was a significant risk that such an application would need to be made. The failure to comply with the order was also a deliberate decision on the part of the administrators, which was a strong factor militating in favour of not granting the extension. However, this was ameliorated to some extent by the reasons given by the administrators for the delay, including their concerns about adopting the litigation in light of funding viability and a potential adverse costs order.

In addition, the sums payable under the unless order were paid only 7 days after the due date, and the Court likely would have acceded to a request to make the payment a week later given the issues facing the administrators. This raised the question of whether it would be just and fair to refuse an extension of time where the non-compliance has had no impact on the progress of the case, but the effect of refusal would be judgment being entered against Lloyds.

Conclusion

Balancing all of these factors, the Court concluded that the interests of the just and fair disposal of the litigation militated in favour of, in effect, permitting the claim to proceed and, therefore, granting the 7-day extension for compliance with the unless order. The Court concluded its decision with a warning that any further application of this nature is unlikely to have the same outcome.

Judge: Mrs Justice Jefford

Counsel: James Bowling of 4 Pump Court (instructed by Spencer West) for Lloyds; Robert Blackett (instructed by Haynes and Boone CDG) for Accor; and Burness Paull for the administrators