EXTENSION OF THE CLAIM FORM: A RARE SUCCESS FOR A CLAIMANT (BUT IT HAS GOT A LOT TO DO WITH CONDUCT)

Most cases relating to extensions of time for service for the claim form end badly for the claimant. The decision of Mr Justice Roth in The Khan Partnership LLP -v- Infinity Distribution Limited [2016] EWHC 1390 (Ch) is an exception.  However it is an exceptional case. The court found that there was no good reason for the time for service of the claim form to be extended.  The best advice for a claimant is almost always serve well within the four month period. Relying on the court’s discretion to extend time is described in this case as  “incompetent” and, more kindly, as “well-intentioned but misguided”. As many of the cases set out in the links below show claimants are not always so fortunate.

“The delay in serving the application is an important consideration where the court is bound to take account of the claimant’s failure to comply with CPR 7.5, which requires that the claim form should be served within a four-month period, and the reasons for it. Compliance with the CPR is now an important part of the overriding objective, However, where the defendant has blatantly ignored a different provision of the CPR in bringing an application to set aside an order which is intended to cure the claimant’s non-compliance, it is to be expected that the court’s sympathy for the defendant will be much reduced. Indeed, in some cases it may be sufficient to permit dismissal of the application out of hand.”

KEY POINTS

  • There had been no good reason for the court to grant the claimant an extension of time for service of the claim form.
  • However the judge upheld the decision not to set aside the order extending time in full.
  • The defendant’s conduct was a relevant factor. The defendant had delayed in serving the application to set aside the order.
  • The obligation on a party making an application is to serve it “as soon as practicable”.
  • The defendant’s delay in serve was a relevant factor in the Master refusing to set aside the extension (save for the small part of the case that was statute barred) and the judge’s decision to uphold the Master.
  • The case highlights the importance of complying with the CPR and serving any application as soon as practicable.

THE CASE

The claimant retained the defendant as solicitors in relation to a VAT  appeal which was successful. It was alleged that the defendant increased the success fee after the event and then taken a percentage of the repayments. The company went into administration and the action was brought by the administrators.

  • The claim form was issued on the 14th July 2014 because of concerns about limitation.
  • The claimant’s solicitors wrote to the defendant attaching draft Particulars of Claim.
  • In response the defendant wrote directly to the administrators seeking permission to issue proceedings against the company for £670,000 which it was alleged was due. The administrators refused to give consent because of lack of particularity.
  • On the 30th October 2014 the claimant issued an application for an extension of time. The defendant was given notice of this and put in a letter of response and that letter was considered by the Master on the 7th November 2015 when an extension of time was granted up to the 30th January 2015.
  • A copy of the order was served on the claimant.

THE CLAIMANT’S APPLICATION TO SET ASIDE THE ORDER

  • The claimant issued an application to set aside the order on the 27th November .
  • However the claimant was not informed of this.

The chronology and conduct thereafter is of some relevance.

  1. On 28 November 2014, TKP issued an application to set aside the order. The application expressly relied on the fact that the extension would deprive TKP of limitation defences. The application was accompanied by a lengthy witness statement made on 27 November 2014 from a Mr Amish Patel, a solicitor at TKP. That also referred to being deprived of limitation defences in general terms, but without giving any details. A good part of the witness statement was concerned with allegations about the settlement by Infinity of its costs claim with HMRC, and complaint about the conduct of an individual (Mr Mahoney) who had previously been a consultant to TKP and subsequently worked for Infinity’s previous solicitors. It is difficult to see what relevance any of that had to the question of an extension of time.
  2. Pursuant to CPR r 23.7(1), the application should have been served “as soon as practicable after it has been filed.” In breach of that rule, it was not served until four weeks later, on 23 December 2014, when it was sent by email around midday. I shall return to consider the implications of that below. In the meantime, on 18 December 2014, TKP sent a 14-page letter to Infinity’s solicitors which went into considerable detail in responding to the allegations in the draft Particulars of Claim, as well as making serious allegations that Infinity had been engaged in money laundering and misleading HMRC and the Court regarding its VAT affairs and complaining about the conduct of Mr Mahoney. The letter made express reference to Infinity’s issue of proceedings and the application before and order of Chief Master Marsh of 7 November. The penultimate paragraph of the letter stated:
“In the circumstances, we consider the claims advanced by you and your client to be highly opportunistic and if continued, will incur a waste of the Court’s time and unnecessarily increase legal costs between the parties. Should these proceedings be served upon us, we reserve the right to seek an Order for wasted Costs against your firm.”
  1. Remarkably, nowhere in this lengthy letter is there any reference to the fact that TKP had just a few weeks earlier issued an application to set aside the Chief Master’s order allowing an extension of time for service, which application was awaiting a hearing. Since that application had not yet been served, Infinity’s solicitors would obviously not have been aware of it. The letter also does not refer to the possibility of a claim by TKP for fees of over £600,000 which had been raised in its letter to the administrators of 22 October.
  2. In early January 2015, there was further solicitors’ correspondence in which Infinity’s solicitors complained about the late service and reserved their client’s rights. On 23 January, TKP’s application to set aside was heard by the Chief Master.

THE DECISION OF THE MASTER

The Chief Master decided that the defendant had been made aware in the clearest possible terms of the nature of the case, having been sent the draft Particulars of Claim. Further the limitation defence only extended to the success fee claims – about 11% of the total claim. These claims were easily severable.  The judge cited from the Master’s judgment:-

The defendant’s abusive behaviour weighs heavily in the balance when put alongside the claimant’s well-intentioned but misguided approach. As I have already remarked, the conduct of the claimant’s solicitors cannot be characterised as being incompetent, and they may have been lulled into a false sense of well-being by the common practice of granting extensions of time for service where both parties request it. Even if, which I doubt, the defendant’s behaviour may not have had any relevant causative effect in relation to the claimant’s application, it is not right just to ignore it. The defendant’s letter, dated 22nd October 2014, was a blatant attempt to frighten off the administrator. Had there been any merit in the claim for fees, it would have been pursued or at least some explanation for not doing so provided to me. The letter was sent during the period in which the claim was live and immediately preceded the defendant’s belated notification that it would not comply with the shortened protocol deadline. The timing of the two events is not a coincidence. The letter is compounded by the defendant’s subsequent decision to breach CPR 23.7(1), a breach which was deliberate and designed to gain tactical advantage for the defendant by serving the application to set aside the order at the most inconvenient possible time.
The delay in serving the application is an important consideration where the court is bound to take account of the claimant’s failure to comply with CPR 7.5, which requires that the claim form should be served within a four-month period, and the reasons for it. Compliance with the CPR is now an important part of the overriding objective, However, where the defendant has blatantly ignored a different provision of the CPR in bringing an application to set aside an order which is intended to cure the claimant’s non-compliance, it is to be expected that the court’s sympathy for the defendant will be much reduced. Indeed, in some cases it may be sufficient to permit dismissal of the application out of hand.”

The Master varied his original order to extend time for service of the claim form excluding the success fee claims, but dismissed the balance of the order to set aside.

THE DECISION ON APPEAL

The judgment contains a comprehensive review of the authorities relating to extension of time. The judge then considered how those authorities applied to the present case.

“The present case
  1. The reason why Infinity’s solicitors did not serve the claim form within the prescribed four months was that they wished to resolve matters so far as possible in correspondence without the necessity to commence proceedings. While laudable in one sense, once it became clear that TKP would not provide a substantive response within the four months period, this does not constitute a good reason in the light of the clear authorities on the strict approach to extension of time. As the Chief Master said, their decision to seek an extension was not incompetent but it was a serious error of judgment.
  2. Reference was made in argument before me to the Pre-Action Protocol on Professional Negligence. While in general seeking to promote the resolution of claims through correspondence, para B8.1 of the Protocol as then in force stated clearly:
“B8.1 Unless it is necessary (for example, to obtain protection against the expiry of a relevant limitation period) the Claimant should not start Court proceedings until:

(a) the Letter of Response denies the claim in its entirety and there is no Letter of Settlement (see paragraph B5.5 above); or….”

  1. In favour of Infinity, there is the fact that its solicitors had served full Particulars of Claim on TKP in draft. Thus they were fully informed of the case against them and of Infinity’s intention to pursue its claim. What Lord Clarke described as the most important objective of the rule on service was therefore fulfilled. Nonetheless, in the light of the authorities concerning the approach where a limitation defence may be prejudiced, I doubt that, as at 7 November 2014 when the original order was made, this alone would be sufficient to justify an extension for service of even the interest fee claim beyond 23 December 2014. I note in that regard that TKP had said in its letter of 24 October that it would be providing its ‘Letter of Response’ under para B4.1 of the Protocol by 18 December.
  2. However, the present appeal is brought not against the order made on 7 November 2014 extending time for service but the order of 23 February 2015 dismissing TKP’s application to set aside. As Hoddinott‘s case shows, the fact that the original extension of time should not have been granted does not necessarily mean that a subsequent application to set aside must succeed: there may be other relevant circumstances which have arisen. To give a simple example, if the order granting an extension of time for service of the claim form requires an application to set aside to be made within 7 days but the defendant makes its application only after 21 days, the court may well dismiss that application (or refuse to extend time for it) although the original order extending time for service of the claim form was flawed.
  3. The Chief Master’s order of 7 November provided that an application to set aside should be made within 7 days of service of the order. In that regard, it followed the terms of CPR r. 23.10(2). The purpose of this short time period, coupled with r. 23.7(1) requiring an application to be served as soon as practicable is that the party which had obtained the order will know promptly whether it can proceed on the basis that the order made by the court will stand.
  4. Here, TKP issued its application to set aside on 28 November 2014 (the last day permitted under the order) but in clear breach of the rules did not serve it on Infinity’s solicitors until midday on 23 December. That was of course the day before Christmas Eve, when the limitation period for the interest fee claim expired.
  5. Ms Mulcahy urged strongly that the Chief Master was wrong to find that this was a deliberate, tactical delay by TKP (a finding he made even without appreciating the effect on limitation). She submitted that such a serious finding was inappropriate without hearing evidence on this point from the solicitor who was involved. There is in fact no written evidence explaining the delay even now, despite the strictures of the Chief Master regarding this matter in his judgment. But he was told by counsel for TKP that the failure to serve the application was an oversight due to the fact that TKP’s “focus” was on putting in a full response to the letter of claim, and that explanation was again relied on before me.
  6. I have to say that I find that explanation surprising. Given that TKP’s application and accompanying witness statement were filed with the court on 28 November, it was a simple and obvious step then to serve them by post on Infinity’s solicitors. Moreover, as I have observed above, it is striking that the full letter of response which was sent on 18 December makes no mention of the fact that this application had been issued although the solicitor working on that letter could hardly have been unaware of that fact. Nonetheless, for the purpose of this appeal I am prepared to accept that this was no more than a glaring oversight.
  7. Ms Mulcahy then submitted that this should not affect the resolution of TKP’s application for two reasons. First, she said that since the application was served at midday on 23 December and the limitation period expired on 24 December, Infinity could still have issued a second claim form in time. However, I regard it as wholly unrealistic to have expected the solicitors in a case like this to give the necessary consideration to the matter (including taking instructions from the administrators) and then issue a claim form just before or on Christmas Eve. And in any event, I understand that the offices in both the Rolls Building and the Royal Courts of Justice were closed on 24 December so that it would have been difficult in practice for the solicitors to issue a second claim form even if they had acted with alacrity.
  8. Secondly, it was submitted that as a matter of fact the delay had no causative effect. Ms Mulcahy pointed out that although advanced in argument from counsel, the witness statement from Mr Candey of Infinity’s solicitors does not say that if the application had been served in accordance with CPR r 23.7, Infinity would then have issued a protective claim form. Indeed, it appears that Infinity did not even accept that limitation for the interest fee claim expired on 24 December.
  9. However, the fact remains that by failing to serve its application until 23 December, TKP effectively deprived Infinity of the opportunity to protect its position as regards its major claim by issuing a second claim form before the limitation period expired. By mid-December, Infinity and its advisors could reasonably assume that no application to set aside the order extending time would be made, and all the more so once they received TKP’s detailed letter of 18 December which made no reference to such an application. I do not think it is appropriate to speculate on what would have happened if TKP had served its application in accordance with the rules. For example, it may well be that Infinity’s solicitors would then have instructed Counsel on the application who would have advised of the need to issue a second protective claim form, even if the solicitors themselves had not realised this. In my view, it would not be right to decide this appeal on the basis that Infinity’s legal representatives would have failed to do what any competent solicitors would have done.
  10. Coupled with the fact that full Particulars of Claim had been served in draft on TKP on 28 August 2014, the failure by TKP, in flagrant breach of the rules, to serve their application to set aside until 23 December 2014 just as the limitation period for the interest fee claim was on the point of expiry, constitute very exceptional circumstances which, in my judgment, mean that the extension of time for service as regards the interest fee claim should not be set aside. Far from being contrary to the approach prescribed by Cecil v Bayat, I consider that this is fully in accordance with it. Stanley Burnton LJ was careful to allow for the possibility of exceptional circumstances which could justify the prejudice to a limitation defence (see at para 43 above), and to adopt Rix LJ’s formulation (see at para 48 above) the reason for refusing to set aside the extension here directly impacts on the limitation aspect of this case.
  11. Ms Mulcahy also challenged the jurisdiction of the court or the propriety of allowing what was in effect a partial extension of time. It is not altogether clear from the judgment of Judge Walden-Smith giving permission to appeal whether she thought that this was an independent basis on which the Chief Master’s decision could be impugned or whether she considered that it was erroneous because it was based on a mistaken view that the limitation period in respect of the interest fee claim had not expired. But in any event, I see no reason in principle why such an approach is impermissible where it is clear that the relevant limitation affected only a discrete part of the claim. The Chief Master had regard to what Longmore LJ said in City & General v Royal & Sun Alliance [2010] EWCA Civ 911, [2010] BLR 639, at [7], but those observations, which were obiter in that case, do not seek to preclude such an approach where the severed claims are distinct and do not relate to the question of when the remaining claim became time barred. Such an approach seems to me entirely sensible and in accordance with the overriding objective.
  12. I should add that in the light of my conclusion it is unnecessary to address the further consideration relied on by the Chief Master concerning the conduct of TKP in writing to the administrators on 22 October 2014 raising a claim for over £600,000, which was thereafter not pursued. Although the circumstances of that letter are rather curious, I was told by Ms Mulcahy that the claim was not pursued because of subsequent advice from counsel, and I place no weight on this factor.
Conclusion
  1. It follows that, albeit for reasons that somewhat differ from those relied on by the Chief Master, I would uphold his order. TKP’s application is accordingly dismissed.”

RELATED POSTS: SERVICE OF THE CLAIM FORM

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