England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM LEEDS DISTRICT REGISTRY
HIS HONOUR JUDGE KAYE QC

		Royal Courts of Justice Strand, London, WC2A 2LL
		15/05/2012

Lord Justice Longmore:

Introduction

1. On 25^th June 2007 the river Foulness burst its banks at Shiptonthorpe near York as many other Yorkshire rivers did. Numerous houses suffered flood damage in particular the home of Mr and Mrs Yeates at Riverside, Town Street. Naturally enough they looked to their insurers to settle a substantial claim for damage to their property.
2. Mr Yeates decided he would incorporate himself into a company called Pro Man Restorations Ltd ("PMR") which would offer services as a project manager or main contractor. He says that he intended the company to provide services for anyone who needed such services after the flood, as the company's website stated. In fact, however, it has never provided any services to anyone except to himself and his wife. He procured PMR to produce and submit to insurers a Damage Report and Specification for repair to the house. PMR also produced a Bill of Costs in the sum of £220,245 plus VAT which included a project management fee of £12,150 plus VAT. He never informed the insurers or their loss adjusters, Cunningham Lindsey Ltd, that PMR was just himself in a corporate guise and insurers made various payments to Mr Yeates on account of his loss. However in due course they discovered the position and maintained that he had put forward a fraudulent claim or had used a fraudulent device in support of his claim; they not only refused to make further payments but sought to recover the sums already paid by them on the basis that Mr Yeates had forfeited his claim entirely.
3. This caused Mr Yeates to institute proceedings. The insurers served a defence but also applied for summary judgment on the basis their defence to the claim was so certain that no trial was necessary. HHJ Kaye QC, sitting in the Leeds Mercantile Court, agreed with the insurers and accordingly gave judgment in their favour on 23^rd September 2012. He gave Mr Yeates permission to appeal on the basis that the law as to fraudulent claims and devices was in a state of development and his decision had serious consequences for the claimant.
4. 7 months passed before Mr Yeates decided to serve a notice of appeal, his time for serving that notice of appeal having expired on 14^th October 2010. His first explanation of this delay in June 2011 was that he was unaware of the time limit. It was only in February 2012 that Mr Yeates disclosed (with appropriate redactions) a letter from Carrick Read (who had been acting for him at the hearing) explaining that the time limit for appealing did indeed expire on 14^th October. The first issue for this court is whether in those circumstances Mr Yeates should have an extension of time for appealing. Shortly after the enactment of the Civil Procedure Rules it was decided in Sayers v Clarke Walker [2002] 1 WLR 3095 that the court must not only take into account the overriding objective in C.P.R. 1.1 of enabling the court to deal with cases justly but also the checklist of considerations listed in C.P.R. 3.9(1) as circumstances to be considered on an application for relief from sanctions. These are

a) the interests of the administration of justice;

b) whether the application for relief has been made promptly;

c) whether the failure to comply was intentional;

d) whether there is a good explanation for the failure;

e) the extent to which the party in default has complied with other rules, practice directions and court orders …

f) whether the failure to comply was caused by the party or his legal representative;

g) whether the trial date or the likely date can still be met if relief is granted;

h) the effect which the failure to comply had on each party; and

i) the effect which the granting of relief would have on each party.

5. The present case is different from Sayers in one important respect because in that case the judge had not himself granted permission to appeal. This court therefore had to consider whether to extend the time for service of the notice of appeal (by about 2 months) so that an application for permission to appeal could be made. Having heard argument for over an hour on that question (see para 38) they reserved judgment for about a month and, having decided that an extension of time should be granted, they then adjourned the application for permission to appeal itself to a later date for a further 30 minute hearing. The Weekly Law Reports do not record the fate of that application. In the present case by contrast the judge himself gave permission to appeal and it was therefore agreed before us that Mr Yeates has a real, as opposed to a fanciful, prospect of success on any appeal. In these circumstances the Civil Appeals Office asked a supervising Lord Justice for listing directions; Richards LJ on 8^th July 2011 confirmed an earlier direction of Deputy Master Meacher to list the application for an extension of time with appeal to follow, if granted, since what the learned Lord Justice called "the merits" were in any event "going to be in play in the application for an extension of time" and efficiency required a "final disposal" of the matter. One day was estimated for this exercise; in the event argument on the extension of time with some reference to the merits took more than half a day and left us in a position in which it was necessary to reserve judgment, in any event, on that question. We therefore proceeded to hear the appeal but in a slightly truncated form since time limits had to be imposed to enable the appeal to be determined within the allotted estimate, if an extension of time was to be granted. In these circumstances it is appropriate to say something more about the facts of the case.

The Facts

6. The flood occurred, as already stated, on 25^th June 2007. On or about 5^th September 2007 Mr Yeates sent insurers a damage report and repair specification from PMR who described themselves as "Project Managers/Main Contractors" who would hand the keys back to the "client" after "they" were satisfied. On 26^th September PMR submitted an invoice for their services in the sum of £9,745.81 plus VAT stating that any queries should be addressed to their "accounts department". Insurers paid this bill but, since PMR had no bank account at that stage, the money found its way (in circumstances which neither counsel could elucidate for us) into Mr Yeates' personal account. On 8^th October Mr Yeates sent a purported alteration to the specification under cover of a letter from PMR which identified Mr Yeates as their "client". A subsequent prospective bill of costs submitted to the insurers by PMR included a charge of £12,150 plus VAT for project management services.
7. On the face of them, these documents constituted representations that PMR was a corporate entity with an accounts department rendering business services to Mr Yeates who was the client. In fact PMR was to all intents and purposes the same as Mr Yeates. It had no clients other than Mr Yeates who was the same as PMR and had no "department" whether for accounts or otherwise. Mr Yeates could not, as insured, charge for time and energy spent by him in relation to his insurance claim; if, however, PMR was a genuine third party company charging for proper services such charge might be recoverable from insurers as a legitimate part of a claim for substantial damage to his property.
8. As against all this, it can be said that the PMR report of 5^th September refers to damage to "Riverside" and at the bottom of the title page there is an address given of

"Riverside Town Street"

which might lead an alert and intelligent reader to inquire whether that address was merely a reference to the property which was the subject of the damage report or was intended to be a reference to the address of PMR itself which might then lead such reader to a further inquiry whether PMR and Mr Yeates shared that address and whether there was any relationship between them.

9. Moreover the first page of the repair specification which states that the project managers are to be PMR also states

"Proprietors: Mr and Mrs Ian Bartley Yeates."

Again an alert and intelligent reader might be prompted to ask himself whether Mr and Mrs Yeates are being referred to as proprietors of the damaged property or as proprietors of PMR or perhaps both.

10. The judge dealt with all this documentary material by saying (para 20) that, subject to what he called the two above "exceptions", the documents

"were intended to and did give the impression that [PMR] was a company wholly separate and apart from Mr and Mrs Yeates."

He then said (para 42) that, when he took into account the above exceptions, they

"were at best from the claimant's point of view ambivalent or at least equally capable of being construed as a reference to either the property which was the subject of the report or to the policy holders."

I therefore do not read the judge's reference to the "exceptions" in para 20 as ultimately qualifying his conclusion that Mr Yeates intended to and did give the impression to insurers that PMR was wholly separate and apart from Mr and Mrs Yeates.

11. For my part I would agree with that conclusion and do not consider that any contrary conclusion could, as a matter of fact, be seriously arguable.

Substance of any appeal

12. That conclusion would not, however, inevitably mean that any appeal would be dismissed, since it may be arguable that not every representation made in relation to the presentation of a claim constitutes a fraudulent claim or a fraudulent device of a kind which would at common law defeat an otherwise good claim. In Agapitos v Agnew [2003] QB 556, 569 para 30 Mance LJ said:-

"A fraudulent claim exists where the insured claims, knowing that he has suffered no loss, or only a lesser loss than that which he claims … A fraudulent device is used if the insured believes that he has suffered the loss claimed, but seeks to improve or embellish the facts surrounding the claim, by some lie."

13. Mr David Pliener, who has appeared pro bono for Mr Yeates (since his solicitors at the summary judgment hearing have come off the record) and to whom the court is considerably indebted for his clear and forceful submissions on Mr Yeates' behalf, submitted in relation to the merits of any appeal:-

i) it was no lie for Mr Yeates to incorporate a company rendering services to himself or for that company either to refer to Mr Yeates as a client or to charge a management fee for its services;

ii) the judge did not ask himself whether Mr Yeates' actions were knowingly dishonest but only whether Mr Yeates was open with insurers about his relationship with PMR which was the wrong question;

iii) the question whether Mr Yeates intended to deceive the insurers should not be decided on an application for summary judgment; if it could in theory be decided, then the only permissible conclusion was that dishonesty had not been shown to the requisite Derry v Peek standards;

iv) there was no evidence that insurers had actually been misled; the fact that they had paid a sum on account was attributable to the fact that there was a genuine claim;

v) the claim for a project management fee (which was in fact never paid) was for only 3% of the claim and should be treated as immaterial.

14. It is against this background that Mr Yeates' application for an extension of time for appealing has to be determined.

Extension of Time: The Facts

15. HHJ Kaye QC gave judgment dismissing Mr Yeates' claim and entering judgment on the insurers' counterclaim for damages to be assessed and granted permission to appeal on 23^rd September 2010. Mr Yeates had been represented by Messrs Carrick Read who had instructed Ms Claire Jackson on his behalf. He was evidently alive to the possible consequences of the judgment since, on the same day, he gave notice of severance of the joint tenancy in respect of his house which he enjoyed with his wife. Pursuant to CPR 52.4(2)(b) he had 21 days to serve any notice of appeal; the time for doing so expired on 14^th October. No notice of appeal was served.
16. The insurers' counterclaim related to the sums which they had paid on account and interest on those sums. Naturally enough Messrs Greenwoods (who were acting on their behalf) pressed for payment of those sums and costs totalling £169,923 but on 10^th January 2011 Carrick Read informed them that they were no longer acting for Mr Yeates who would from then on be acting in person.
17. In these circumstances Greenwoods had to correspond with Mr Yeates in person and had to apply to the court for an order for repayment of the sums paid and interest. That application came before HHJ Behrens on 19^th April 2011 and Mr Yeates appeared in person. He informed Judge Behrens that he had permission to appeal and persuaded the judge that any order for payment should be subject to a stay to enable him to pursue his appeal even though no notice of appeal had been served. The judge ordered payment of £148,027 but stayed his order until 10^th May 2011 to enable Mr Yeates to apply for an extension of time and serve a notice of appeal which would then be nearly 7 months out of time. On either 10^th May or 11^th May an incomplete notice of appeal was served. It was returned because it was not in proper order; Mr Yeates put it in proper order on 9^th June 2011 when it was issued and sealed by the Civil Appeal Office ("the Office") now nearly 8 months out of time.
18. Meanwhile Mr Yeates had served a copy of his unsealed notice of appeal on Greenwoods. On 20^th May 2011 they wrote to the Office pointing out that, although Mr Yeates had ticked the box in Part B of Section 9 of the unsealed notice applying for an extension of time he had not (as required by that Part) given any reasons for the delay in serving the Notice. They gave reasons for inviting the court to dismiss the application for an extension of time and marking it as "totally without merit", observing that Mr Yeates would have to establish that the legal representatives, appearing for him at the hearing, did not advise what steps were necessary for the purpose of appealing the judgment.
19. Mr Yeates was asked by the Office to explain the delay but he confined his initial response of 3^rd June 2011 to the reasons for the delay since 11^th May. He said that he was unaware that the Office had returned his notice of appeal until he had been prompted, by Greenwoods' renewed indication of enforcement, to telephone the Office on 3^rd June 2011.
20. On 15^th June 2011 the Office specifically asked Mr Yeates to explain the reasons for his delay from September 2010 in appealing and on 17^th June he gave the reasons. They deserve to be set out in full but it is perhaps the second reason that could, in theory, be the most persuasive reason to extend the time for appealing:-

"1. I was extremely shocked after the decision of the judgment in favour of the defendant summary judgment application, and this had a detrimental effect to my state of mind for some considerable period of time.

2. I was not aware that there was a time limit of 28 days for an appeal to be lodged.

3. My financial situation was (and still is) in a very precarious position as a result of this. I have a large liability to my former solicitor.

4. I was and continue to be under a large amount of stress and worry over my future as a result.

5. During the months following the judgment, my work commitments had me working overseas for most of what was the rest of the year.

6. My solicitor instructed me to discharge his company in the new year. Following this, correspondence then took place with the defendant's solicitor directly, this continued until the hearing of the 19^th April 2011, during this hearing before HHJ Behrens, I stated my wish to appeal the original judgment on 23^rd September 2010 and that permissions to appeal had been granted.

7. HHJ Behrens granted a stay of execution for me to file my appeal.

8. The appeal was submitted to the office of the court of appeals within the time of the stay of execution.

9. I have had to produce the bundle and all other documentation unaided due to my inability to finance any other party to act on my behalf."

21. On receipt of this explanation, the Office provided Mr Yeates with a copy of Greenwoods letter of 20^th May and invited his comments. Mr Yeates provided comments under cover of a letter of 2^nd July the substance of which was to refer, in relation to the delay in serving his notice of appeal, to his earlier reasons for granting him an extension of time.
22. By 9^th January 2012 Mr Yeates had been able to instruct Mr Pliener through the Bar Pro Bono Unit and on that date a new skeleton argument was provided in amplification of (and effective replacement for) Mr Yeates' own skeleton argument of 7^th May 2011. That skeleton repeated that Mr Yeates did not appreciate the relevant time limit. That prompted Greenwoods to write to Mr Yeates on 20^th January 2012 for his authority to allow them to contact Carrick Read to ask them whether they had informed him about the time limit for appealing, warning him that, if he declined, they would ask the court to infer that he had been so informed. On 24^th January Mr Yeates told Greenwoods that he would serve a witness statement dealing with the point. That witness statement (now Mr Yeates' fourth explanation after his statement of 3^rd June and letters of 17^th June and 2^nd July 2011) said this:-

"12. Since obtaining representation from the Bar Pro Bono Unit I have been invited to go through all the correspondence with my solicitors in the relevant period. I have set out most of it above. However, I have very recently come upon a letter dated 1^st October from my solicitors in which I now see they advised me an appeal notice needed to be filed by 14^th October 2010. …."

Extension of Time: Submissions

23. In these circumstances Mr Shail Patel for the insurers submitted that an extension of time for appealing should not be granted since all the circumstances which the court is enjoined to consider pursuant to CPR 3.9(1) save (e) and perhaps (i) pointed against Mr Yeates and in favour of insurers:-

a) the interests of the administration justice required the appeal to be dealt with promptly in accordance with relevant time-limits;

b) the application had not been made promptly;

c) since Mr Yeates had been told of the time limit for appealing he must have decided not to appeal so that his failure to comply with the time limit was intentional;

d) if it was not intentional, there was no satisfactory explanation for allowing 7 months to elapse; it was only insurers' attempts to enforce their judgment on the counterclaim and in respect of costs that caused Mr Yeates to take any action at all;

f) it was now clear that the failure was that of Mr Yeates himself and not that of his legal representatives;

g) if an extension of time was granted and the appeal allowed, any trial date would be occurring 6 years after the loss;

h) insurers, like any other defendant must be allowed to assume that their files could be closed once the time for appealing had elapsed;

i) the granting of an extension would result in an indefinite postponement of the ascertainment of the parties legal rights.

He also submitted that there was no public interest in allowing a late appeal which on any view raised difficult issues when Mr Yeates, even if not guilty of positive misrepresentation, had (in the judge's words) at best made ambivalent representations and been less than honest in his pre-action disclosure, particularly when that lack of openness or honesty had continued in his initial explanations of his delay in appealing.

24. Mr Pliener submitted that CPR 3.9(1) was subject to the overriding objective in CPR 3.1.1 of doing justice between the parties. If an extension of time was not granted Mr Yeates would not only be deprived of an important and valuable right of appeal (already held to be a realistic and not a fanciful right) which would in all probability succeed but would also be left with a severely damaged and scarcely habitable home which would have to be sold (for whatever it might fetch) to satisfy the judgment in insurers' favour. He further submitted that, although neither the merits of the underlying case nor the consequences of the refusal of relief were expressly mentioned as relevant circumstances in CPR 3.9(1), both must be relevant considerations in the overall exercise of discretion. He also stressed the factors mentioned in Mr Yeates' letter of 17^th June about which Mr Yeates had provided a witness statement namely the state of shock in which the judgment below had left him and that he had acted promptly once HHJ Behrens had emphasised the importance of serving a notice of appeal and given him the opportunity to do so. He also submitted that it was particularly unfair that Mr Yeates had effectively been branded a fraudster on a summary judgment application without being given the opportunity to give evidence on the critical question of whether he had intended to deceive the insurers.

Extension of Time: Disposition

25. Despite Mr Pliener's excellent submissions, I have come to the conclusion that it would not be right to extend the time for appealing in the circumstances of this case. Sayers v Clarke Walker emphasised the new and stricter criteria which apply to extensions of time after the Bowman report on the practice of the Civil Division of the Court of Appeal and the new Civil Procedure Rules. Under the old practice the merits of the proposed appeal were, in practice, the most important consideration. Paragraph 54 of the Bowman report said that it was about time that rules about time limits were strictly complied with and that there should be a strong presumption that time limits should not be extended save in exceptional circumstances, regardless of the chances of success. That philosophy was endorsed by this court in Sayers. Brooke LJ accepted that the sanction in relation to a failure to serve a notice of appeal in time (namely that no appeal will take place if an extension of time is not granted) was implied rather than express but said (para 21) that nevertheless the check-list in CPR Rule 3.9 should be followed. It should be noted, however, that that check-list makes no express reference either to the merits of the appeal or to the prejudice which will be suffered by a prospective appellant if an extension is not granted. These two considerations are often two different sides of the same coin (as they largely are in the present case). In relation to the merits of any prospective appeal, Brooke LJ said in terms in Sayers (para 34) that they will have to be considered when the question of extending time is itself difficult to resolve. That has recently been followed in Bank of Scotland v Pereira [2011] WLR 2391 per Lord Neuberger MR at para 64. For my part I do not consider the question of an extension of time particularly difficult to resolve in this case.
26. In the first place, like many a litigant, Mr Yeates did nothing to pursue his right to appeal until his successful opponent took steps to enforce the judgment which it had obtained. Burying one's head in the sand can very seldom lead to this court exercising a discretion in one's favour, even if the reasons for so burying one's head are understandable in human terms. Otherwise an extension of time will be too often granted.
27. Secondly it is of the highest importance that any would-be appellant is full and frank with the court. It may be a legitimate argument that mere failure to be open with an insurer should not enable the insurer to invoke the harsh common law rules about fraudulent claims and fraudulent devices. But it is quite another thing when it comes to asking the court to grant a substantial extension of time. In this case Mr Yeates did not only not reveal that his solicitors had advised him that any notice of appeal had to be served by 14^th October 2010 but he sought positively and falsely to assert that he was not aware of any time limit at all for serving his notice of appeal. That is the sort of conduct which will almost inevitably lead the court to decline to exercise its discretion in favour of a would-be appellant regardless of the merits of an appeal.
28. Moreover, the merits of the proposed appeal are highly debatable. The starting point has to be that, as the judge found, Mr Yeates intended to and did give the false impression to insurers that PMR was wholly separate from himself and his wife. Although Mr Yeates has in theory the legal arguments which are recorded in paragraph 13 above, they are arguments of doubt and difficulty which start from a distinctly unmeritorious premise.
29. In these circumstance there is no reason why the court should lend its aid to a doubtful and difficult appeal which is now well out of time.
30. Before the enactment of the new CPR, the civil courts were often criticised in relation to the delays litigants encountered in obtaining justice. If that criticism is now less often heard, it is largely because there is a new culture that the rules as to time must be obeyed in all but unusual cases. It is important that that culture should be upheld and that must lead to the conclusion that in this case the necessary extension of time for the purpose of appealing should be refused.

Conclusion

31. I am therefore not persuaded that Mr Yeates' application, for an extension of time within which to appeal, should be granted. The result of this is that there can be no appeal and the debatable points of law which Mr Yeates wants to air will have to be debated and decided (if at all) in some other case.

Lord Justice Rimer:

32. I agree.

Lord Justice Kitchin:

33. I also agree.