Aujla v Sanghera

LORD JUSTICE THORPE: Lady Justice Arden will give the first judgment.

LADY JUSTICE ARDEN: This is an appeal with the permission of Jonathan Parker LJ from the order of Mr Recorder Goodchild of 14 June 2002. The action was brought by the claimant, who is the respondent in this appeal ("Mr Aujla"), to remove a caution which the appellant ("Mr Sanghera") had placed on factory premises registered in Mr Aujla's name known as New Normanton Mills, Stanhope Street, Derby ("the Mills"). Mr Sanghera's case was that the monies had been provided in part by him for the purchase of this property, alternatively those moneys had been provided by a partnership of which he and Mr Aujla were the sole partners. The partnership was called A & G Garments and its business was the manufacture of garments.

On the appellant's case, in 1989 the firm moved to the Mills and the property became available for purchase. On Mr Aujla's case the partners agreed that the partnership should purchase the freehold for the sum of £400,000. That sum was raised as to the main part by a loan of £300,000 from Barclays Bank, but there were further loans from three individuals: Mr Doil, Mr Atwal and Mr Johnson. The pleaded case was in fact that the loan from Barclays Bank had been some £310,000, £62,000 had been provided by Mr Sanghera personally and £19,000 had been provided by Mr Aujla for the partnership.

Mr Sanghera brought a counterclaim for a declaration that the Mills was partnership property, for dissolution of the partnership and consequential relief, including an order that the property be transferred into the joint names of the partnership.

The learned recorder heard this case over many days. He gave judgment on 8 October 2001. In his judgment he found that there had been a partnership, and that Mr Sanghera had agreed to buy Mr Aujla's share of the partnership. He also found that there had been three lenders for the purchase of the freehold of the factory premises, namely Mr Doil, Mr Atwal and Mr Johnson. I need only read a short extract from the learned recorder's judgment. At page 10, having dealt with the evidence on the purchase by Mr Sanghera of Mr Aujla's share in the partnership, he said:

The parties were able to agree the substance of an order but there was delay bringing the matter back to the learned recorder. It went back to him on more than one occasion but the final occasion was 14 June 2002. The judge then made the order to reflect his judgment. In material part it was in these terms:

When the learned recorder approved the form of order he, as will be apparent from the form of the order, extended the time for appealing to the defendant to 12 July 2002. He took the view that it was the making of the order which constituted the decision and that in those circumstances 28 days was an appropriate period in which to extend time.

The defendant filed an appeal and obtained permission to appeal. The respondent takes the point that the appeal is out of time because the recorder had no power to grant an extension. In response, the appellant seeks that extension of time.

The principal ground of appeal of the appellant for which he was given permission to appeal is that the order made by the learned recorder and reflected in paragraph 3 of the order of 14 June was not directed to any pleaded issue in the case and constitutes a matter on which, accordingly, Mr Sanghera was not heard. Moreover, the lenders, Mr Doil, Mr Atwal and Mr Johnson were not parties to the proceedings and the question of any liability to them was not therefore appropriate to be dealt with by the recorder. The effect of the recorder's judgment is that they have obtained security over the defendant's asset, namely his share in the Mills.

In fact, Mr Sanghera was declared bankrupt in 1994. He has since been discharged, but Mr Sanghera would wish to assert that the liabilities, if any, remaining to the lenders, ought to have been dealt with in the bankruptcy. Moreover, the counterclaim was purchased by Mr Sanghera from the trustee in bankruptcy with the approval of the Creditors' Committee, comprising the three lenders in question.

On this aspect of the case the respondent very properly has taken the view that it does not wish to advance any arguments in opposition to the appeal. As I see it, the appellant is right to say that paragraph 3 did not form any part of an order which the learned recorder should have made. It goes to matters wholly outside those on which the learned recorder had to adjudicate, and for him to make the orders which he did deprived Mr Sanghera of the opportunity to dispute those matters in appropriate proceedings. In my judgment, therefore, the whole of paragraph 3 of his order should be set aside.

However that leaves the question, with which I must now deal, of whether or not the respondent is correct to say that this court is without jurisdiction to hear the appeal because it was not open to the recorder to extend time in the order of 14 June 2002.

I should say that the appellant's counsel, Mr Din, has very properly accepted that the learned recorder was wrong to say that the time for appealing would run from the time when he made the order on 14 June. The Civil Procedure Rules are quite clear that time runs from the decision, and clearly the judgment which the recorder gave on 11 October 2001 was a decision on the issue of the ownership of the property. He found that it was owned 50/50 and there is no appeal against that part of his order.

I now turn to the provisions of the Civil Procedure Rules which deal with time for appealing. I start with Civil Procedure Rule 52.4:

For my part, I do not think that that a reference to 14 days has to be read in to 54.4(2)(a). The words of that paragraph should be given their meaning as drafted, namely, that the lower court has power to extend the period for appealing from a decision and that that power is, subject to what I next say, exercisable outside the 14-day period.

There is nothing in CPR 52.6 to indicate that this is not the correct construction of CPR 52.4. The opening words of section 52.6 refer to a variation of the time limit for appealing, and the words "the time limit" are appropriate to refer to either the expiry of the 14 days or the expiry of the further date fixed by the lower court. That construction is supported further by the reference to the lower court in CPR 52.6(2)(c). There is nothing in CPR 52.6 to indicate that the order of the lower court must have been made within 14 days of the decision against which the appellant wishes to appeal.

In those circumstances my conclusion is that it is open to the lower court to grant an extension of time even if the application is made to it after the expiry of 14 days. However, some words of caution are necessary. First, the court should bear in mind the policy behind the limitation of the period for appealing in 52.4(2)(b) to 14 days and 14 days only. This matter was considered by this court in Sayers vClark [2002] 1 WLR 3095, and it is clear that a short time has been set deliberately. The lower court should therefore bear in mind that it is not appropriate, except for good reason, to extend the time beyond the 14 days, although of course there will be cases, such as those referred to in the commentary in the White Book to CPR 52.4(1), where an extension is clearly appropriate.

Next, the lower court should certainly not exercise its discretion to grant an extension of time if an appellant's notice has in fact been lodged with the appeal court, albeit out of time. The reason why I say this is that the appeal court is then seized of the matter of the appeal and it is appropriate for it to consider any application for an extension of time.

Next, the lower court should always take into account that it is open to it to decline to grant an extension and leave the question of any extension to the appeal court.

Lastly, the lower court should bear in mind the guidelines laid down in Sayers v Clark, above. In simple cases the court may be able to deal with the question of extension of time simply on the reasons given in the application notice. In more complex cases it should take what Brooke LJ described as the more sophisticated approach of going through the criteria in CPR 3.9.

In my judgment, the overall result of this interpretation of the rules leads to a practical and sensible result. There will be cases where the parties will have a good reason for a short extension of time, and it is easier and more cost-effective for the trial judge to deal with the application even if the 14-day period has already expired. It may be that at the time the matter was before the judge it was not appreciated that an extension would be required, for instance because a party has been taken ill in the 14-day period. Of course, as I have endeavoured to stress, extensions of time should be scrutinised carefully. At the end of the day, however, my overriding concern is that procedural rules should be the hand maiden of justice and not prevent a sensible method of proceeding. Accordingly, in my judgment, the learned recorder had jurisdiction to extend time on 14 June 2002.

So far as the exercise of his discretion is concerned the recorder was apprised of the relevant considerations. Mr Howllet, for the respondent, has made the point that the order was to all intents agreed in the preceding October, and that the first indication of an appeal was given in June 2002. However the compelling factor, in my judgment, is that, quite properly Mr Howllet does not oppose the substance of the appeal which has been very fairly and economically put to us in this court. In those circumstances, it seems to me that the learned recorder was right to grant an extension, and that this court should, if he had not had jurisdiction, have granted an extension itself.

In those circumstances I would allow the appeal to the extent of setting aside paragraph 3 of the learned recorder's order and I would dismiss the respondent's cross-appeal in relation to the lack of jurisdiction in the recorder to grant the extension of time.

There is one final matter to which I must deal and that is the question of the title. In his particulars of claim Mr Sanghera sought an order for the transfer of the property into the joint names of Mr Aujla and himself. The learned recorder found that the Mills was owned by the parties in equal shares. However, he refused to grant an order, as sought by Mr Sanghera, that the property should be transferred into joint names. Accordingly, the property is at the present time registered in the name of Mr Aujla only. In my judgment, the order could not be resisted. The learned recorder unfortunately gave no reasons. Mr Howllet submits that the parties are not at idem and that there is likely to be difficulty in managing the property. However, this is a case where the learned recorder has also ruled that the partnership between the partners has been dissolved. It may very well be, therefore, that the property has to be sold in any event as part of the winding up of the partnership. The order must be expressed to be without prejudice to the rights of Barclays Bank Plc as mortgagee of the Mills.

In those circumstances it seems to me that the order sought for the transfer of the property should have been made and that it ought, therefore, to be made by this court by way of variation of the learned recorder's order.

MR JUSTICE PARK: I agree.

LORD JUSTICE THORPE: I also agree. It seems to me that the parties have been ill-served by the process of trial in the county court. They were entitled to a clear judgment on the issues raised by the pleadings that they manifestly did not receive. They should also have been spared the Recorder's findings and conclusions on issues that neither party had pleaded.