CPR 3.9 AND EXTENSIONS OF TIME TO CHALLENGE REGISTRATION OF FOREIGN JUDGMENT: HIGH COURT CASE CONSIDERED

Mr Justice Jay considered CPR 3.9 and the Denton criteria in Satellite Communications Network Limited -v- Faisal Islamic Bank of Khartoom [2015] EWHC 4500 (QB). It deals with important points in relation to extensions of time under CPR 74.7

THE CASE

There were a number of applications before the court in relation to a judgment obtained in Uganda. One of the applications was to set aside registration of the Uganda judgment. That application was dealt with first.

KEY POINTS

  • The court does not have a power to extend time outside the ambit of CPR 74.7.
  • If the judge did have a discretion to extend time or grant relief from sanctions he would not have exercised it.
  • Allegations of fraud do not, in themselves, amount to “exceptional circumstance”

THE NEED FOR AN EXTENSION OF TIME

The defendant needed an extension of time to make the application. CPR 74.7 requires an application to be made within 28 days. The application was made outside that time.

THE JUDGMENT ON THE EXTENSION OF TIME

46. The next stage is to consider Mr de Vecchi’s application for an extension of time. His immediate hurdle is the language of the governing rule which is rule 74.7 of the CPR.  It provides:

“(1) An application to set aside registration under the 1920 … 1933 Act must be made within the period set out in the registration order. [That period expired on, I believe, 11th May 2014, in any event it was a period of 28 days]

(2) The court may extend that period; but an application for such an extension must be made before the end of the period as originally fixed or as subsequently extended.

(3) The court hearing the application may order any issue between the judgment creditor and the judgment debtor to be tried.”

47. Mr de Vecchi’s submission is that there are three essential ways by which FIB may claim an extension of time. His first route is that rule 74.7 must be read in conjunction with rule 3.1(2) of the CPR.  In those circumstances he submits there is a general discretion to extend time.

48. His second submission (and here, if he may forgive me for doing so, I am re‑ordering his submissions), is that CPR rule 3.9 applies in any event and that what his client in effect seeks is relief from sanction. Applying the principles recently explained by the Court of Appeal in Denton v. TH White Limited and others [2014] 1 WLR 3926 Mr de Vecchi submits that his client should be granted relief against sanction.

49. His third submission is that I should apply the exceptional circumstances jurisdiction recognised in cases such as Pomiechowski v District Court of Legnica, Poland [2012] 1 WLR 1604 and Adesina v Nursing and Midwifery Council [2013] 1 WLR 3156 and conclude that FIB have been able to demonstrate exceptional circumstances in the somewhat unusual circumstances of this individual case.

50. I propose to address these submissions in the order in which I have identified. The first submission engages rule 3.1(2) of the CPR which provides:

“(2) Except where these Rules provide otherwise, the court may –

(a) extend or shorten the time for compliance with any rule, practice direction or court order (even if an application for extension is made after the time for compliance has expired)”.

51. My understanding of Mr de Vecchi’s submission was that the rules do not provide otherwise and that the language of rule 74.7(2) is not clear enough, as it were, to disapply the effect of the general rule in rule 3.1(2)(a). In my judgment that submission ignores the clear and mandatory terms of rule 74.7(2).  The rule in effect could not be clearer.  An application for an extension must be made before the expiry of the period as originally fixed or as subsequently extended.  The use of the mandatory “must” in my view makes clear, for the purposes of rule 3.1(2)(a), that the rules indeed provide otherwise.

52. Mr William Edwards, on behalf of SCNL, submitted that this consequence is not surprising having regard to the legislative history. The Administration of Justice Act 1920 was introduced to enable a degree of comity of enforcement across His Majesty’s dominions and colonies.  We are after all dealing with legal systems which bear considerable similarities with those of the United Kingdom.

53. The policy may be tracked through the rules of the Supreme Court and Mr Edwards’ researches took me to the 1999 edition of the Supreme Court Practice and RSC order 71, rule 5, which is in very similar terms to the current iteration of the rule in the CPR. It follows that there is every good reason for construing rule 74.7(2) according to its terms and no other.  I note that this approach was favoured by Hildyard J in Bank of St Petersburg OJSC & Anor v Vitaly Arkhangelsky & Anor [2012] EWHC 2842 (Ch.), noting as I do that the point may not have been as fully argued as it was before me today.  It follows that I must reject Mr de Vecchi’s first submission.

54. Mr de Vecchi’s second submission is that rule 74.7 must be read in the light of the relief from sanctions jurisdiction set out in CPR 3.9. I need first of all to address Mr Edwards’ objection and that rule 74.7(2) simply cannot be read in that way at all.  Mr Edwards’ submission is that this could not have been the intention of the draftsman.  If one is right in construing 74.7(2) as being not subject to the general rule to extend time in rule 3.1(2), then it would make no sense whatsoever to say that the relief from sanctions jurisdiction in rule 3.9 can somehow apply.

55. In my judgment that submission must be correct. It is not a question of construing these rules purposively, but they must be envisaged as a comprehensive code.  This case really hinges on the inter‑relationship between the general power to extend time, if it exists, and rule 74.7(2).  The matter cannot be finessed by approaching the issue from a side‑wind and bringing in the relief from sanction jurisdiction.

56. In case I am wrong about that, and I can see that the point is not entirely free from doubt, let me proceed on the basis that the relief from sanctions jurisdiction is available to FIB in all the circumstances of this case. On that hypothesis I, of course, apply the principles laid down by the Court of Appeal in Denton I have regard to the seriousness and significance of the breach, why the default occurred and to the justice of the case having regard to all its circumstances.  Mr de Vecchi submitted that this was not a serious or significant breach because there has been very little prejudice to SCNL.  The funds after all have now been frozen.

57. In my judgment one has to look at the matter in the round and consider the quantity of delay which is very substantial and to its knock‑on effects. The consequences of the delay are that SCNL have incurred costs in relation to the application to apply for the interim third party debt order and they now face the prospect, if Mr de Vecchi is right, of having to expend far more costs.  There is a public interest in certainty and finality and I have to say that in my view this was and is a serious and significant breach.

58 As for why the default occurred I fully take Mr Flack’s point, developed in his very careful witness statements, that the issue of fraud has to be advanced on a proper evidential basis, and such allegations cannot be fired off on exiguous evidence. This was far from being a straightforward investigation.

59. However, in my view one has to consider all the circumstances of the case. When I say all the circumstances I do disregard, for present purposes, any delay which has occurred in Uganda since I can see that although that may be relevant to the issue of fraud and to the underlying merits of the case, it is probably irrelevant to the delays arising in the context of the registration order in this case.

60. The fact remains on the evidence I have seen that there was an inadequate response by FIB to the registration order when it was served in Khartoum on April 2014. FIB was slow in instructing solicitors.  FIB is a commercial entity.  It has bank accounts in the United Kingdom and has access to legal advice in the United Kingdom.  In my view it should have got its metaphorical skates on much earlier than it did.

61. As for the delay between early July 2014 and 5th September 2014, although I accept that the matter had to be investigated it is unclear to me why an application was not made for an extension of the 28 day period specified in the order even out of time. That is the application which is contemplated under rule 74.7(2).  Instead the matter proceeded on entirely the wrong basis, namely seeking to contend that it would be inequitable to make the interim third party debt order final.  That was a collateral attack on the underlying judgment which had been registered.  It was not a proper basis for seeking to defend the making final of the interim order.

62. Mr de Vecchi made submissions based on paragraph 4 of Mr Flack’s first witness statement and appeared to suggest that one way or another FIB, through its solicitors, were asking for more time in connection with the application to set aside registration. I do not read the witness statement in that way at all.  Moreover, there was delay after 5th September 2014.  As I have already said, by that stage the case in fraud, if it was a good case, was wholly substantiated.  I am not ruling out the obtaining of subsequent evidence to buttress that case but I have already observed that Mr Flack’s latest witness statement scarcely takes the matter any further.

63. Instead the matter was advanced on the somewhat unsatisfactory basis that FIB would make an application unless SCNL advanced a good explanation. In my view that was not the right course.  FIB was already extremely late and an application should have been made immediately.  For the avoidance of doubt my view is that an application for an extension should have been made before.

64. Overall therefore, having regard to those factors, FIB as a commercial entity, admittedly based in the Sudan and not in the United Kingdom, has not advanced a good reason for its default. Denton also requires me to have regard to all of the circumstances.  Mr de Vecchi submits, having regard to the merits, that there are very serious issues here which fall to be tried and that it would be quite unjust for FIB to be barred.

65. In my view those submissions prove too much. If they were right almost any extension of time would be justified.  I appreciate that a substantial amount of money is at stake and that fraud is being alleged, but they weigh very little in the overall balance in FIB’s favour.  What is more important is the seriousness and significance of the breach in the absence of an adequate explanation.  Having regard to all of the circumstances, even if the relief from sanction jurisdiction were available to me, I would be ruling against FIB.

66. I turn now to address the third point, which is exceptional circumstances. As I pointed out it is founded on a line of cases beginning with Pomiechowski decided in 2012.  Those were all cases involving statutory or regulatory time limits which were fixed, which on one view were shorter than the time limits way applied in the instant case.  Moreover, rule 74.7(2) is not quite as strict as the adamantine time limits which applied in Pomiechowski and Adesina.  That said, in his short but very fair submissions, Mr Edwards accepted that there probably was jurisdiction in this sort of case to consider exceptional circumstances since otherwise capricious and wholly unjust results might be achieved. In those circumstances, I am content to proceed on that premise.

67. Let me consider first of all Mr de Vecchi’s primary point that fraud is an exceptional circumstance per se. He relies on cases such as Abouloff v Oppenheimer & Co (1882) 10 QBD 295, Owens Bank Ltd v Bracco [1992] 2 AC 443 and Barons Bridging v Sarah Nadiekioe [2012] EWHC 2817 (Comm).  In the famous case of Abouloff, Lord Coleridge CJ said in effect that there is an immutable rule that where there is a prima facie case of fraud the English courts cannot entertain arguments based on want of jurisdiction.  Brett LJ, in equally familiar passages, expanded similar principles.

68. The difficulty, however, is that in that case the defence alleging fraud was submitted in time, according to the then extant version of the rules of the Supreme Court. No issue, therefore, arose as to any need for an extension of time.  All that the Court of Appeal were saying was that the allegation of fraud which was not demurrable amounted to a proper defence, notwithstanding that a judgment had been obtained in the Russian court where the same issues were explored.

69. In Owens Bank Lord Bridge of Harwich said this:

“In the decisions in Abouloff v Oppenheimer and Vadala v Lawes the common law courts declined to accord the same finality to foreign judgments, but preferred to give primacy to the principle that fraud unravels everything.”

70. The principle to which Lord Bridge is giving primacy has to be seen in context. The issue was whether finality should be accorded to foreign judgments, not whether an extension of time should be granted in the absence of exceptional circumstances.

71.Finally, in the case of Barons Bridging I would agree with Mr de Vecchi that the judge went much further and effectively said that there was a general principle that in a fraud case an application could be made four years out of time to set judgment aside. In my judgment no authority appears in the relevant part of the learned judge’s judgment (which is paragraph 12) and I would decline to follow it.  It goes too far.

72. In my judgment fraud is not per se an exceptional circumstance. It is one of the circumstances of the case but no more than that.  The entirety of case has to be considered in the round, in particular the reasons for the delay. Even in an exceptional circumstances jurisdiction, the issue of the causes of the delay, the reasons for it and prejudice to the other party are central considerations.  I am prepared to have regard to the fact that the issue of fraud required meticulous investigation and could not be asserted without some substantiation, but that is a much weaker consideration than the range of circumstances Mr de Vecchi prayed in aid.

73. Are there exceptional circumstances in this case? In my judgment plainly there are not.  The delay is very substantial.  The reasons for the delay are unsatisfactory.  The matter did require to be investigated but some sort of application could have been made on a protective basis under rule 74.7(2), and it was not.  Instead the matter proceeded on the wrong procedural basis altogether.  We are far from the sort of case where exceptional circumstances might provide a lifeline to FIB.

74. Overall, therefore, on all of the three bases Mr de Vecchi advanced I must refuse his application for an extension of time. It follows that the Ugandan judgment as registered must stand, and it also follows, on my understanding of Mr de Vecchi’s oral argument but it is my finding in any event, that he cannot oppose the making final of the interim third party debt order, but I am prepared to hear further argument on that point for the avoidance of any doubt.

75. It seems to me, however, in line with my earlier findings that what FIB seek to do in the context of the third party debt order proceedings is advance a collateral attack on the underlying judgment and that would be an abuse of process. Subject to anything else Mr de Vecchi has to say on that point I refuse his applications.

76. I grant the claimant’s application for the order to be made final and there is no need for consideration of the other matters such as FIB’s application for security for costs and further directions since the matter has been exclusively determined.

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