Neglected Proceedings - Lifting the Stay imposed by r.15.11

A claim will be automatically stayed under CPR r.15.11(1) where the claimant allows 6 months to pass from the end of the period for filing a defence, without the claimant applying for or having judgment entered (judgment in default or summary judgment), in circumstances where no defendant has served or filed an admission or filed a defence or counterclaim. Where the claim has been stayed under r.15.11(1), r.15.11(2) permits the claimant (‘any party’)[1]to apply to Court for an order lifting the stay. This article will consider when and in what circumstances, the stay will be lifted. In particular, it will consider three recent cases on r.15.11(2): (1) Football Association Premier League Ltd v O’Donovan [2017] F.S.R. 31 (‘Premier League’); (2) Citicorp Trustee Co Ltd v Al-Sanea [2017] EWHC 2845 (Comm)(‘Al-Sanea’); and (3) McLinden v Lu, unreported 30 April 2018, (‘McLinden’). Update: as well as (4) Bank of Beirut (UK) Ltd v Sbayti [2020] EWHC 557 (Comm) ('Sbayti'); and (5) Bank of America Europe DAC v Citta Metropolitana Di Milano [2022] EWHC 1544 (Comm) ('Citta')

Civil Procedure Rules r.15.11

CPR r.15.11 provides that:

‘Where—

(a) at least 6 months have expired since the end of the period for filing a defence specified in rule 15.4;

(b) no defendant has served or filed an admission or filed a defence or counterclaim; and

(c) the claimant has not entered or applied for judgment under Part 12 (default judgment), or Part 24 (summary judgment), the claim shall be stayed.

(2) Where a claim is stayed under this rule any party may apply for the stay to be lifted.’

Rule 15.11 is structured into two parts. In the first part, r.15.11(1) prescribes the circumstances in which the stay will be imposed. The imposition of the stay is not by the Court by court order, but rather it is imposed by the rules themselves. Where the prescribed circumstances arise, the stay is imposed automatically, without intervention from the Court. In the second part, r.15.11(2) permits any party to the claim to apply to have the stay lifted. Inferentially therefore the Court is empowered to accede to the application and order the matter be unstayed. When drafting r.15.11(2), the Civil Procedure Rules Committee elected not to specify the test to be applied by the Court when faced with a r.15.11(2) application, nor did it specify expressly what factors/circumstances ought (and ought not) to be taken into account when resolving a r.15.11(2) application. Rather, it has been left to the Courts to fashion the test to be applied, and also to identify the relevance and weight of various factors which may feed into that test. Though some small steer might be gleaned from Practice Direction 15, paragraph 3.4, which directs that any application under CPR r.23 to lift the stay imposed by r.15.11(1) '...should give the reason for the applicant’s delay in proceeding with or responding to the claim.'

The Authorities 

The first reported case on r15.11(2) is Premier League, a decision of Chief Master Marsh. The salient facts in Premier League were that the governing body of the association football competition known as the Premier League, issued proceedings on 25 May 2016 against a pub licence holder (the first defendant), alleging that the licence holder had infringed its copyright in respect to corporate logos and onscreen graphics, by screening football matches to customers in the pub though a live feed. No admission, acknowledgment of service nor defence was filed. 6 months passed with no application/request for judgment being made. On 27 December 2016, r.15.11(1) imposed an automatic stay. The application was issued at some point prior to 18 January 2017 hearing. 

In his judgment handed down on 3 February 2017, Chief Master Marsh sought to identify how the Court ought to approach an application under r.15.11(2) to lift a r.15.11(1) stay. At paragraph 11, he said:

‘The purpose served by CPR 15.11 is not immediately obvious other than, perhaps, it encourages claimants to make a decision about what steps to take to pursue a claim and renders inactive claims that might otherwise lie merely somnolent on the court file. It might also, perhaps more in theory than in reality, provide comfort to a defendant that no further action in the claim can be taken save with the court’s permission. However, it seems to me that the rule is not intended to place an especially heavy burden on the claimant to discharge before the court will agree to the stay being lifted. In the usual way, the court must weigh the competing interests of the parties in the balance. 

Applying the facts in Premier League to this weighing of '...competing interests of the parties in the balance', Chief Master Marsh said, at paragraph 11:

Here, there is an adequate explanation of the delay and the claimant has a claim with real prospects of success. These two factors are closely linked because the claimant wishes to amend its claim to bring it into line with changes that have occurred since the claim was issued. The delay has been largely caused by steps being taken to give effect to those changes. So far as the merits are concerned, having already dealt with a considerable number of similar claims, I am aware that most other similar claims have not been contested. In any event, the amended claim demonstrates a claim based upon reasonable grounds. Added to that, there has been an almost complete lack of engagement by the first defendant and part of the delay has been caused by the defendant himself. On the other side of the balance, there is no obvious prejudice to the defendant caused by the delay of six months and I note that steps were taken to revive the claim within that period. In all the circumstances I am satisfied that it is appropriate to lift the stay.’

From this it is possible to discern that, when applying the test of ‘appropriateness’, Chief Master Marsh considered the following as some of the important factors in the balance:

1. Whether the claimant had an adequate explanation for the delay;
2. Whether the claimant’s claim has (at least) a real prospects of success;
3. The defendant’s behaviour, and including his engagement with the court process, and whether any delay was caused by the defendant’s actions; 
4. The nature and extent of any prejudice the defendant would suffer in the event that the stay is lifted;
5. Whether any attempts were made by the claimant, within the 6 months, to ‘revive’ the claim. 

The second authority is Citicorp Trustee Co Ltd v Al-Sanea [2017] EWHC 2845 (Comm)(‘Al-Sanea’) a decision of Peter MacDonald Eggers QC sitting as a High Court Judge. He heard a number of applications, including an application under r.15.11(2). The facts in Al-Sanea were complex, but for present purposes it is sufficient to note that on 12 October 2016 two claims were issued against two defendants.  Service was affected on 20 January 2017. Very significant efforts were then made by the claimants to bring the existence of the proceedings to the attention of the defendants. At paragraph 43, the Deputy High Court Judge said, 

‘In these circumstances, I have no hesitation in holding that the Claimants have done all that was reasonably required to bring the proceedings to the attention of [the Defendants]’.

The defendants in Al-Sanea did not engage at all with the Court process. The period for filing the defence expired on 3 February 2017. When 6 months was allowed to pass (to 3 August 2017) without judgment being entered or application/request made for judgment, r.15.11(1) was triggered and a stay was imposed (see paragraph 54). On 4 September 2017, 1 month later, the claimants applied to lift the stay under r.15.11(2).

In approaching the application, the Deputy High Court Judge applied the reasoning in Premier League. At paragraphs 56 to 58, the Deputy High Court Judge noted the submissions, and then determined the application. He said:

‘[Counsel for the Claimants] submitted that the stay should be lifted because (a) the delay in issuing the application after the stay was short, (b) the delay is reasonably explicable, (c) there would be no prejudice to the Defendants, and (d) the Claimants' claims plainly have a good prospect of success.

I have no hesitation in ordering that the stay be lifted. The delay in issuing the application after the imposition of the stay was short…The current applications were issued on 4th September 2017, one month after the stay took effect. The delay leading to the imposition of the stay, such as it was, was explained … that the interim period was taken up by the steps taken to serve the proceedings on the Defendants and to bring them to the attention of the Defendants, by consultations with the Certificate holders, who had the real economic interest in the transaction, and by taking legal advice with respect to the interaction between the English proceedings and the proceedings in the KSA.

In addition, I cannot see that there is any prejudice to the Defendants. By contrast, there would be considerable prejudice to the Claimants if the stay were not lifted, especially as, as I decide below, the Claimants have valid claims against each of the Defendants.’

Here then, were factors similar to those that proved relevant to the determination in Premier League. Particular weight was given in Al-Sanea to:

1. the reason for the delay leading to the stay being imposed;
2. the length of delay in applying to have the stay lifted; 
3. the reason why the application to lift the stay was not made earlier. What were the claimants actions and why. 
4. The respective balance of prejudice, between granting and dismissing the r.15.11(2) application; 

The last of the three authorities is McLinden v Lu (‘McLinden’), 30 April 2018 (unreported), a decision of Butcher J. In McLinden, the claim form was served on the defendant on 7 June 2017 and by 3 July 2017 the defendant had failed to file an admission, defence or acknowledgement of service. The claimant not having requested/applied for judgment in default/summary judgment, r.15.11(1) automatically imposed a stay on 3 January 2018. On 9 April 2018, just over 3 months later, the claimant applied for an order lifting the stay. 

When considering the correct approach on a r.15.11(2) application, Butcher J stated that he drew ‘assistance’ (paragraph 6) from Premier League and Al-Sanea cases[2]before quoting expressly paragraph 11 in Premier League.  He then applied the principles from the Premier League and Al-Sanea cases[3].

Firstly, Butcher J in McLinden noted that the application to lift the stay was unopposed. At paragraph 7, he said: 

‘…the first point to note is that the application to lift the stay has not been opposed by the Defendant. That of itself is a significant point in relation to the determination as to what is the appropriate course.

Secondly, Butcher J looked at what else had been going on in the litigation. On 14 June 2017, the claimant had obtained a freezing order against the defendant (continued on 28 June 2017), with the order being served on the defendant on 2 November 2017. Moreover, as Butcher J put it at paragraph 3:

‘During the period between the failure of the Defendant to [file either an admission or defence or an acknowledgement of service within 23 days] and the imposition of the stay which occurred on [3 January 2018], there have been steps taken in the action of which the Defendant was or certainly ought to have been aware.’[4]

Thirdly, the Judge took into account whether, after 3 January 2018, the defendant had thought that the claim against him had been abandoned, and also whether there was any good reason for the claimant failing to issue his r.15.11(2) application sooner. Central to both these factors was the existence of a letter sent by the defendant to the claimant, after 3 January 2018. Butcher J noted this, at paragraph 4:

‘It is also significant to record that after the imposition of the stay on [3 January 2018], on [15 January 2018] the Claimant received a letter from the Defendant saying that he would be hearing from her solicitors in relation to the Oxford property, Westminster Way. That has the significance that, firstly, it indicates that the Defendant did not at that stage think that the claim against her had gone away and, secondly, it gave rise to what the Claimant says was or appeared to him to be a possibility that the case might be resolved and for that reason he allowed a certain amount of time to pass in order to see whether there would indeed be a resolution. In fact nothing happened.’

He considered the length of the delay until the r.15.11(2) was issued, and whether its length was ameliorated by the claimant’s actions during that time. At paragraph 7, he said:

It is true that in relation to the extent of the delay there has been a period of some four months after the imposition of the stay. On the other hand, in context, that was not a period in which the claim was simply somnolent. There were steps being taken during that period in relation to the claim, in the sense that there was service of the freezing order. It is clearly not the case that the Defendant believed – she certainly had no good reason to believe – that the claim had been abandoned.

Accordingly, although the period of four months is, as I say, longer than that in the two cases which have been cited, it does not seem to me that the period is one which precludes the grant of a lifting of the stay.

A further reason was tendered for why time was allowed to pass before the r.15.11(2) application was made - that the claimant was not aware of the r.15.11(1) stay rule itself. That was not a particularly good reason, as Butcher J said, at paragraph 9:

As to the explanation for the delay which is given, which is that the Claimant did not know of the existence of the rule, that may be said, in a sense, not to be a particularly good reason given that the rule has existed for some time. 

The Court distinguished ignorance of the rule, from a deliberate decision to delay applying (perhaps for tactical reasons) - with the latter likely to render an application to lift a stay, less meritorious. Butcher J said, at paragraph 9:

On the other hand, this was not a case of some tactical decision or deliberate choice not to take steps within that period. It was a situation in which the claim was being progressed in the way that I have referred to, even though there was not actually the making of an application for default or summary judgment as required by the rules. In those circumstances, the explanation which is given is again one which I do not consider should preclude the grant of a lifting of the stay...'

Lastly, the balance of prejudice to the respective parties from acceding, or dismissing, the application, proved an important factor. Butcher J said, at paragraph 10:

'...I can discern no prejudice to the Defendant in the lifting of the stay. The Defendant has not been engaging with the litigation and there is no clear reason to think that the Defendant will be in any worse position by reason of the matter being dealt with now than she would have been if the application for summary judgment or default judgment had been issued before [3 January 2018]. On the other side, there would be significant prejudice to the Claimant if the stay were not lifted. The claim has at least reasonable prospects of success as indeed has been considered to be the position by Popplewell J in the grant of the freezing order, and it is a claim for a significant amount - some £300,000. In those circumstances, it seems to me that the prejudice to the Claimant would very considerably outweigh any possible prejudice to the Defendant…

In conclusion, Butcher J in McLinden applied the ‘appropriate’ test and acceded to the r.15.11(2) application, stating at paragraph 10 that:

‘Here, it seems to me that the balance is clearly in favour of a lifting of the stay' and 

'…in those circumstances, it seems to me that the appropriate order is for the stay to be lifted'[5a]

As will be apparent, factors that proved important in Premier League and Al-Sanea were also important in McLinden. The relevant factors in McLinden, included: 

1. Whether the application to lift the stay was opposed by the defendant;
2. The extent of the delay between the stay being imposed, and the application to lift the stay;
3. Whether between the stay being imposed and the application to lift the stay being made, the claim was simply somnolent;
4. Whether the defendant believed, or perhaps had good reason to believe, that the claim had been abandoned;
5. Whether the delay before applying to lift the stay was because of some tactical decision or deliberate choice, taken by the claimant, not to take steps within that period, or whether delay resulted from the claimant being ignorant of r.15.11(1) and its automatic stay provision;
6. The balance of prejudice as between acceding to, or dismissing the application to lift the stay;
7. Whether the claim had at least reasonable prospects of success and the size of the claim.

Update 1: Bank of Beirut (UK) Ltd v Sbayti [2020] EWHC 557 (Comm) ('Sbayti')

There is now an additional authority in this area, though it is of limited assistance. The case is Sbayti, a decision of Judge Mark Pelling QC on 14.2.20 sitting in the Circuit Commercial Court (a specialist court, part of the Business and Property Courts of the High Court of Justice).

The authority is of only limited assistance for a number of reasons:

(1) none of Premier League, Al-Sanea, McLinden, were cited to the Judge. As a result, after stating 'The question ... arises as to whether the stay imposed by CPR rule 15.11 should be lifted in accordance with the power conferred on the court by rule 15.11(2)' (paragraph 4) the Judge wrongly stated that 'There is no case law as to how this ought to be approached.' (paragraph 4)[5b]

(2) the Judge expressly stated that 'the issue has not been fully argued before me' (paragraph 5).

(3) the Judge did not have the benefit of opposing counsel arguing out the matter. The claimant bank was represent by counsel, but the defendant did not attend and was not represented;

(4) the Judge said he was going to approach the legal test 'as if' the Denton critieria applied (from Denton v TH White Ltd [2014] EWCA Civ 906, [2014] 1 W.L.R. 3926), but without deciding that that is the correct legal test. He said, at paragraph 5 '...I propose to approach it as if the Denton criteria applied to the application, though without deciding whether or not that is so...' Reference is made to Independent Schools Council v Charity Commission [2012] Ch 214, wherein it was stated, at paragraph 92,

'...As matter of general law, a decision of a court does not give rise to a legally binding precedent where a point of law has been assumed or not debated even where that point of law is a necessary component of the decision: see per Sir Nicolas Browne-Wilkinson V-C in In re Hetherington, decd [1990] Ch 1, 10g, subsequently approved by the Court of Appeal in R (Kadhim) v Brent London Borough Council Housing Benefit Review Board [2001] QB 955'.[6]

In the author's view, Sbayti is therefore not an authority for the proposition that Denton critieria applies to the question of whether a r.15.11(1) stay should be lifted under r.15.11(2).

It is noteworth though that:

(1) the Judge considered that the Denton criteria, if applied, '...would impose a higher threshold on the [claimant] than would be imposed if one simply approached the exercise as an overall exercise of discretion.' (paragraph 5), and

(2) on the facts, the Judge lifted the stay, despite there being about a 3 year + 3 months delay between the imposition of the automatic stay and the application by the claimant bank to lift it (c.15.9.16 (paragraphs 3 and 1) to 13.12.19 (paragraph 6)). The main reason was that during the period the claim was quiescent (i.e. in a state or period of inactivity or dormancy), the defendant was making the 'various payments' (paragraph 3) towards the debt. These various payments continued after the issue of the claim, through to 31.1.20 (paragraph 3). Thereafter, though further payments were not received, the defendant made various promises (paragraph 4). For the full reasons for lifting the stay on the Denton criteria, see the footnote[7]. Perhaps more importantly than the Judge's conclusion applying the Denton criteria, the Judge also stated that 'If, contrary to the assumptions I have so far made, the Denton criteria do not apply and what is required is simply an exercise of discretion, as the Bank submit is the appropriate approach, then it is manifest that the stay should be lifted, for all the reasons that I have identified. In those circumstances, I conclude that the Bank is entitled to the order it seeks under CPR Part 15.11(2) and for the stay that applies to be lifted.'(paragraph 8)[bold added]

Update 2: Bank of America Europe DAC v Citta Metropolitana Di Milano [2022] EWHC 1544 (Comm) ('Citta')

Foxton J in Citta, after quoting CPR r.15.11, identified the purpose behind the imposition of the automatic stay (where no defendant engages), at paragraph 5, that:

'The clear purpose of CPR 15.11 is to avoid there being claims which continue in being but are not being progressed nor otherwise subject to judicial case management. It will be noted from the language in (1)(b) ("no defendant") that in a case with more than one defendant, the fact that one defendant does not file an admission or defence will not lead to the claim against that defendant being stayed in the absence of an application by the claimant for default or summary judgment, provided that at least one other defendant has filed an admission or defence. That is presumably because, in those circumstances, the case will come before the court, giving the court the opportunity to manage the case appropriately.'

The focus though in Citta was the nature of the automatic stay, as it affected the test for when it might be lifted. Foxton J in Citta summarised the dispute before him as:

'whether an application under CPR 15.11(2) is to be characterised as an application for relief against sanctions so as to engage the test in Denton v TH White Ltd [2014] EWCA Civ 906 (the Denton test), or whether a less onerous test falls to be applied.' (paragraph 6)

This broke down into 2 questions:

(1) the extent to which the imposition of the automatic stay was a 'sanction' for which relief from that 'sanction' was required (question 1); and

(2) 'whether it is a sanction 'imposed for a failure to comply with any rule, practice direction or court order' within the meaning of CPR r.3.9' (paragraph 20), so as to engage the test in r.3.9 (question 2).

After setting out the arguments either way, from paragraphs 7 to 15[8], Foxton J concluded:

As to question (1), at paragraph 16:

'The automatic stay of a claimant's claim following from its failure to ensure that the case remained subject to judicial management would, as a matter of ordinary language, be described as a "sanction". Such a claimant loses the unfettered right to pursue its claim, and must instead obtain the exercise of a court's discretion in its favour, which might be refused or granted on unfavourable terms.' As Jonathan Parker LJ observed of the PD51 stay in Audergon in the passage quoted at [11] above, "there can be no doubt that, in ordinary parlance, the automatic stay … may aptly be described as a sanction".

(see footnote 8 for the quoted passage from Audergon)

As to question (2), at paragraphs 20 to 23:

'The answer to that question is not as clear as it might be. But while legal philosophers have been happy to debate whether you can have a legal obligation without a sanction, the idea that the CPR might impose a sanction where there is no breach of an obligation is very counterintuitive. Further, it is clear from Audergon that, in this context at least, the court will look at the purpose, as well as the letter, of a rule, for the purpose of determining whether there has been a breach.

There are a number of clear judicial statements that if a claimant wishes to place a claim it has commenced "on hold," it must reach an agreement with the other party(ies) to that effect (and obtain court approval for that agreement, where required) or obtain a stay from the court. In Asturion Foundation v Alibrahim [2020] EWCA Civ 32, [61], Arnold LJ observed that "a claimant who wishes to obtain a stay of proceedings for a period of time should seek the defendant's consent or, failing that, apply to the court" (and see also [78]). There is a statement to similar effect in Arbuthnot Latham Bank Ltd v Trafalgar Holdings Ltd [1998] 1 WLR 1426, 1477 .

Those statements are consistent with the overriding objective, and in particular with ensuring that a case is dealt with "expeditiously and fairly" (CPR 1.1(2)(e)), the court's duty actively to manage cases so as to give effect to the overriding objective (CPR 1.4) and the parties' duty "to help the court further the overriding objective" (CPR 1.3).

In my view, adopting the approach approved by the Court of Appeal in Audergon , the stay imposed when the conditions of CPR 15.11(1) are met will result from the failure of the parties to perform their obligation to help the court further the overriding objective by bringing the case before the court for case management, and therefore a breach of the CPR. If I am wrong in that conclusion, then the circumstances which engage CPR 15.11 are sufficiently close to a breach of a "rule, practice direction or court order" to justify the court applying the Denton test by analogy to applications (by a claimant or a defendant) to lift the stay.

However, I am doubtful whether the debate about the appropriate test will prove as significant in resolving the applications as the parties' submissions presuppose. The Denton test is sufficiently flexible to take account of those features of CPR 15.11 which distinguish it from the more conventional case where a rule or practice direction requires a party to take a particular step by a particular date and it fails to do so: the fact that it is a combination of the failure of both parties to take a particular step which brings the automatic stay into operation, and the difficult choice which a claimant who has brought proceedings in order to anticipate a claim which a defendant has intimated but not commenced may face if the defendant chooses not to engage in those proceedings. For that reason, the question of whether the Denton test applies under CPR 15.11(2) may well be one of those procedural points destined to live out its litigation life in a limbo of obiter observations.'

Foxton J then went on to consider the 3 Denton v White factors in relation to the application to lift the stay (paragraphs 24 to 52).

Costs of the Application to Lift the Stay

One view might be that granting an order lifting a stay is an indulgence, akin to the Court granting a party relief from sanctions. Consequentially, the party seeking the Court’s indulgence, the applicant, ought to pay the other side’s costs of the application, unless the other side’s resistance to the applicant had been unreasonable [9]. Consistent with such a view, Butcher J in McLinden provisionally [10]considered that the successful applicant/claimant ought to pay the costs of the respondent/defendant. At paragraph 11, Butcher J said: 

‘In circumstances…where the stay has come about only by reason of the Claimant's failure to comply with the six month period, it would seem to me…that the Claimant should bear the costs of that application.’

SIMON HILL © 2018-2022

BARRISTER

33 BEDFORD ROW

NOTICE: This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole.