Extension of time applications or dealing with excessive costs – guidance on what courts will accept

A recent High Court judgment set some markers down for how judges in commercial litigation will approach repeated extension of time applications and how costs incurred will be  assessed; the judgment makes clear that excesses in either area will be questioned at least.

His Honour Judge Pelling QC provided some useful guidance in the case of Various Airfinance Leasing Companies and others v Saudi Arabian Airlines Corporation [2021] EWHC 2475 (Ch) in relation to an application for extension of time to comply with deadlines previously set at a case management conference (CMC).

The extension of time application

In this case, the defendant applied to the court for an extension of time to serve witness statements, with a deadline having been fixed at a CMC previously. Before making this application, they had failed to comply with seven previous extensions of time to file their evidence.

The defendant argued that the extension was necessary because:

• Covid-19 restrictions had affected its representatives travelling to and from Saudi Arabia
• not all of the defendant’s witnesses were in its control
• the working week is not aligned between the UK and Saudi Arabia
• their defendant’s legal representatives were involved in another trial shortly before the current deadline.

The judge held that any extension of time application should be justified by unanticipated developments in the conduct of the case, usually after the CMC had taken place, and was critical of the justifications provided by the defendant in support of its application.

Covid-19 restrictions had been in place throughout the case and could not justify an extension. Similarly, the lack of control over its witnesses and mismatch of working weeks were factors which the defendant should have considered when the CMC was held. The involvement of the defendant’s legal representatives in another trial was found to be insufficient as an excuse in the context of such litigation, which involved global law firms instructed in relation to a large commercial dispute.

The judge did, however, grant the defendant the extension (although he came very close to refusing the application) with some conditions. These were:

• that if no witness statements were served by the new deadline, the defendant would be unable to put forward any oral evidence at trial
• the defendant would not be entitled to rely on evidence from any particular witness whose statement had not been provided by that date and time
• the claimants were then at liberty to apply to strike out the defendant’s pleadings if no witness statements were served, or certain parts of its pleadings by reference to any witness statements which were served.

The summary assessment of costs

Because of the criticisms levelled at the defendant’s conduct in bringing the application, including its previous failures to meet deadlines and a lack of acceptable reasons for the extension application, the judge awarded the claimant’s costs of the application on the indemnity basis.

This meant that the court would resolve any doubt about whether costs were reasonable in favour of the receiving party when assessing costs. But this did not give the claimants free rein over their own costs for opposing the application. For example, seven fee-earners attended the application hearing on the claimants’ behalf, and three of them charged at rates in excess of £1,000 per hour for work done – well above London guideline rates. The judge found the number of fee-earners in attendance unreasonable, and that the hourly rates charged were excessive – he allowed the attendance costs of only one fee earner and reduced the costs awarded significantly.

The lessons to be learned

• Parties to litigation should prepare thoroughly for the CMC; they should comply with directions made and the timetable ordered up to trial unless there has been an unforeseen change of circumstances. They should be prepared to maximise their time and efforts at the start of proceedings, in line with the recent trend towards front-loading of work in commercial litigation.
• When applying for an extension of time, the court will assess the merits of the application against unforeseeable developments in the case when directions were made at the CMC.
• When assessing costs, the court will question whether those are reasonable, even if awarded on an indemnity basis. It is still open to the court to reduce the costs awarded even if the costs could be viewed as proportionate.
• When deciding what costs are reasonable, the court will look at the nature of the application and the costs sought, not on the value of the litigation as a whole.