Case number: BL-2024-001074 - [2025] EWHC 2954 (Ch)

Para 7 of Deputy Master Linwood’s order of 8 January 2025 provided that:-

“The Defendants (or any of them) are entitled to apply to set aside paragraphs 1, 2 and 4 of this order pursuant to rule 23.10 of the Civil Procedure Rules 1998 within 28 days of service of this order upon them or (in the case of any Defendant that is currently dissolved) within 28 days of the date of their restoration, whichever is the later.”

On the basis that Mr. Hill was served with that order on 25 January 2025, he was out of time by 12 days (8 working days) in making his application. The first question is therefore whether the court should extend time to allow him to make that application.

There was some debate before the court as to the applicable principles it should apply in extending time in such circumstances. Mr. Hill submitted that this was not a relief from sanctions case, relying on three recent Court of Appeal cases: Lufthansa Technik AG v Panasonic Avionics Corpn [2024] 1 WLR 2012; Yesss (A) Electrical Ltd v Warren [2024] EWHC Civ 14; and Viegas v Cutrale [2025] 1 WLR 1467.

The Trustees on the other hand argued that Mr. Hill had to satisfy the Denton principles in order to satisfy the court that time should be extended. The difference as explained in the Lufthansa case [para 23] is that “the characteristic feature of applications for relief from sanctions is not these factors as such, it is the fact that the application arises in circumstances in which the sanction is already properly in place and the applicant is seeking to disapply it.”

The Lufthansa case involved an Island Records order made in an intellectual property case, but although the facts are a distance from the facts before me, it established that it was not the case that breach of any rule, practice direction or court order which required something to be done within a specified time required an application for relief from sanctions under CPR 3.9.

In the Yesss case the Court of Appeal made clear that for CPR 3.9 to be applicable there needed to be an express sanction or a sanction which could be implied although it was made clear that there was a very high hurdle for sanctions to be implied and made reference to the limited circumstances in which the Court had done so, such as Salford Estates v Altomart [2015] 1 W.L.R. 1825and Sayers v Clarke Walker [2002] EWCA Civ 645 (Appellant and Respondent notices out of time).

As for the third case, Viegas, Mr. McCourt Fritz candidly accepted that it was a problem for him but suggested that it appeared to be at odds with Yesss. That case involved an application to set aside amendments made under CPR 17.1 (without the permission of the Court) to the claim form. CPR 17.2 provides that such an application must be made within 14 days of the service of a copy of the amended claim form and the application to disallow the amendments was made outside that period. The Court of Appeal held that there was no express or implied sanction for non-compliance with the time limit, and therefore the correct approach was to determine whether time should be extended by reference to the overriding objective, and not to the Denton principles.

Newey LJ said at para 58:

“It is evident from Yesss that the scope for identifying further implied sanctions is "very narrow". I do not think the "high" "hurdle for identifying something as an unexpressed but implicit sanction" can be surmounted in the case of CPR 17.2(2). In my view, therefore, CPR 17.2(2) is subject to neither an express sanction nor an implied one. That being so, the question whether a defendant should be permitted to make an application under CPR 17.2(2) after the period specified in it has expired must be determined by reference to the overriding objective. It may still be relevant to consider the matters reflected in the Denton three-stage test (seriousness and significance of the delay, the reasons for it and other relevant circumstances), but, unlike an application for relief from sanction, the matter should not be approached on the basis that the "starting point" is that "the sanction has been properly imposed and complies with the overriding objective" (to use words of Lord Dyson MR in Mitchell v News Group Newspapers Ltd (Practice Note) [2013] EWCA Civ 1537, [2014] 1 WLR 795, at paragraph 45 ).

I do not consider that there is any difference of approach in the Yesss case and Viegas. Newey LJ rightly considered that Yesss established that the scope for finding implied sanctions was narrow and apart from established cases such as appellants’ and respondents’ notices, the Court would be slow to find one.

Mr. McCourt Fritz argued that paragraph 7 of Deputy Master Linwood’s order included an express sanction but I am unable to see what it is. It seems to me that this is a situation where a time limit has been imposed, there is no express sanction for it and (as in the Viegas case) no grounds to imply one.

In those circumstances, the starting point is not that a sanction applies. Instead there is an application of the overriding objective which includes of course enforcing compliance with rules, practice directions and orders as well as dealing with a case justly.

Mr. Collings argued that Mr. Hill’s late application was not in reality that late, particularly as it had taken 7 months for it to be listed. There is no satisfactory evidence from Mr. Hill as to why he did not apply in time as he did have solicitors (Russell Cooke) acting for him but it is clear from his evidence and the correspondence that he changed to his current solicitors whose first letter was on 20 February. It seems there was a consultation with counsel on 4 March and as a result there was a change of tack and the 6 March application was issued which for the first time indicated a challenge to jurisdiction.

The grounds for extending time in terms of there being a good reason (change of legal advice) are not compelling but the period of delay was not unduly long and application was made relatively quickly after new solicitors were on board. I consider that to shut Mr. Hill out from being heard on an application which the Trustees took the risk of bringing ex parte would be unduly harsh. Mr. Hill does not have to satisfy the court in respect of the higher Denton hurdles and I consider that to deal with the case justly, if he had been able to contest jurisdiction, I would have extended time so that his arguments could be heard.

I turn therefore to the arguments as to why time should not have been extended in case it should prove anything more than academic. Both parties accepted that I was approaching the matter afresh and considering the merits of the application.

Deputy Master Linwood was referred to the Court of Appeal decision in ST v BAI (SA) [2022] EWCA Civ 1037 at paragraph 62 of which Carr LJ set out the applicable principles:-

i)

The defendant has a right to be sued (if at all) by means of originating process issued within the statutory period of limitation and served within the period of its initial validity of service. It follows that a departure from this starting point needs to be justified;

ii)

The reason for the inability to serve within time is a highly material factor. The better the reason, the more likely it is that an extension will be granted. Incompetence or oversight by the claimant or waiting some other development (such as funding) may not amount to a good reason. Further, what may be a sufficient reason for an extension of time for service of particulars of claim is not necessarily a sufficient reason for an extension for service of the claim form;

iii)

Where there is no good reason for the need for an extension, the court still retains a discretion to grant an extension of time but is not likely to do so;

iv)

Whether the limitation period has or may have expired since the commencement of proceedings is an important consideration. If a limitation defence will or may be prejudiced by the granting of an extension of time, the claimant should have to show at the very least that they have taken reasonable steps (but not all reasonable steps) to serve within time;

v)

The discretionary power to extend time prospectively must be exercised in accordance with the overriding objective.

Mr. Collings points to the fact that there was no good reason for the Trustees not serving Mr. Hill in time and funding issues are not a good reason (Cecil v Bayat [2011] 1WLR 3086 (CA)). Mr. McCourt Fritz accepted that service could have taken place earlier.

Mr. McCourt Fritz invites the Court to take into account what has happened in the period between the order of Deputy Master Linwood and now on the basis that I am considering the matter afresh on the merits. While there is an air of unreality about that, it is clear that in Hoddinott the Court of Appeal considered that the setting aside of the ex parte order was wrong on the basis that the claim was not even by then time barred (a matter in this case which I will deal with below) and a copy of the claim form had been sent to the defendant within the four month period (para 58). I therefore consider that I can have regard as to what has occurred since Deputy Master Linwood made his order.

Notwithstanding all of this, it is clear that the main focus of the attack on the extension is that a limitation period may have expired. That is reflected in the order (which relates only to certain paragraphs of the particulars of claim and not all the relief sought against Mr. Hill). It is clear that the court does not have to determine the limitation question with finality (City & General (Holborn) Ltd v Royal & Sun Alliance Plc [2010] EWCA Civ 911 at paragraph 7).

This is a claim made under s. 423 of the Insolvency Act 1986 amongst other things. It appears to be accepted that there are no applicable limitation periods in respect of the sham trust claims. In respect of the s. 423 claims as far as Mr. Hill is concerned (and the court of course is only looking at matters from his perspective) the applicable limitation period depends on whether the claims under s. 423 are money claims (therefore governed by s. 9 of the Limitation Act 1980 with a 6 year limitation period) or a claim on a speciality (section 8) where the limitation period is 12 years: Hill v Spread Trustee Co Ltd. [2007] 1 W.L.R. 2404.

Having examined the particulars of claim, there are no money claims brought against Mr. Hill. At the moment the relief sought against him is declaratory or injunctive. Mr. Collings invited Mr. McCourt Fritz to concede that the Trustees would not seek a money judgment against Mr. Hill in the future. Mr. McCourt Fritz was not prepared to do that but it seems to me that the Trustees’ statement of case would require amendment if they did seek to do so in the future and at that point limitation issues might well present a difficulty for them.

However, although I am very conscious of the fact that the test is only that there may be a limitation defence, I do not consider that there is an arguable one. Insofar as Mr. McCourt Fritz indicated before Deputy Master Linwood that he had to show exceptional circumstances in light of a possible limitation defence, I accept that he made it clear that he reserved his right to argue otherwise on an inter partes basis. He was also seeking an extension of time in respect of a whole host of defendants including Mrs.. Hill who might well have had limitation defences.

I further rely on the fact that since the order extending time was granted:-

In the circumstances, if I had to consider the matter of whether to set aside the order of Deputy Master Linwood, I would not have been inclined to do so for the reasons set out above.