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Articles | Mon 1st Aug, 2022
Two cases caught our eye this week, both relating to issues around service outside the jurisdiction, which as you would expect has been something of a talking point in the courts since Exit Day. The first involves the unusual situation where a party seeks third party disclosure against an entity based abroad; the second arose out of less uncommonly seen failure to serve proceedings on a foreign Defendant within the lifetime of the claim form.
Somewhere Beyond the Sea: Orders for Non-party Disclosure against Parties Resident out of the Jurisdiction
Can an application for non-party disclosure be made against a party outside the jurisdiction? And when should permission for service out of such an application be granted?
These issues were considered last week in Gorbachev v Guriev [2022] EWHC 1907. One issue in the underlying claim related to how two Cypriot trusts had supported the Defendant. These trusts had engaged English solicitors to advise them, and those solicitors held the documents the Claimant sought. The Claimant sought an order for non-party disclosure against the English solicitors, and the Cypriot trustees. This required the court to grant permission to serve the application on the trustees, out of the jurisdiction. This was granted at first instance. The Cypriot trustees appealed to Jacobs J.
The trustees argued that there was no power to order non-party disclosure against a party out of the jurisdiction; and that if there were such a power the discretion to make the order should not be exercised, because the proper means to bring applications against third parties overseas was by means of the letter of request regime (as explained by Cockerill J in Nix v Emerdata Ltd [2022] EWHC 718 (Comm)).
It was common ground that, for permission to serve out to be granted, the rules for service set out in CPR 6.39 had to be met, notably, the requirement that there was a good arguable case that the application fell in one of the “gateways” in paragraph 3.1 of Practice Direction 6B.
The Claimant relied on Gateway 20 – that the claim was made under an enactment allowing proceedings to be brought, and these not being covered by any of the other grounds.
The judge rejected the trustees’ arguments that this application was not a “claim” or “proceedings”, and also rejected the argument that Section 34 of the Senior Courts Act 1981 did not permit such an application against an overseas third party.
The result was that the court had the jurisdiction to allow service out. But should the discretion be exercised?
In Nix the court noted that service out is an interference with the sovereignty of other countries. Serving out involves courts in this jurisdiction demanding that persons overseas obey the sovereign authority of the courts here. Particular caution should be taken before doing so in respect of conduct outside the jurisdiction, by those overseas.
The judge considered that the Nix case set out “powerful reasons” why, generally speaking, the letter of request route should be used in such cases. However, in this case there were particular reasons why permission should be granted: the documents themselves were in the jurisdiction, held by English solicitors who were officers of the court. The documents were in this jurisdiction because they related to transactions here. They did not require anything to be done overseas other than for the trustees to authorise their English solicitors to release them. And it was desirable that the trustees should be a party to the application for non-party disclosure made against their solicitors.
Finally, the court granted permission for alternative service, by serving the application against the trustees on the English solicitors. Had this not been ordered, the application would have had to be served under the Hague Convention which would have caused delay. It was appropriate to allow alternative service when adding a party to existing proceedings, so as to avoid delay in the hearing of the outstanding application.
This decision is consistent with the current trend of authority that the jurisdiction to permit service out is wide, with the main control measure being the question of discretion. When considering an application for non-party disclosure against a third party outside the jurisdiction, litigants will face the objection that this should be done by way of the letter of request route and will need to muster arguments why that is not suitable in their particular case.
About the Author
Andrew Spencer was called to the Bar in 2004, and is listed in the Legal 500 as a Band 1 practitioner in travel law. He acted for the Claimant in the seminal case of Japp v Virgin Holidays Limited [2013] 11 WLUK 131, in which the Court of Appeal considered the time at which applicable local standards should be determined for the purposes of liability under Regulation 15(2) of the Package Travel Regulations; but he is equally comfortable acting for Claimants and Defendants in all travel related claims.
To Serve or not to Serve? That is the Question
All litigators know that once issued a claim form has a lifetime of four months, or six in the case of forms to be served on Defendants outside the jurisdiction. And there is a long line of consistent authorities reminding practitioners that they should take steps to effect service sooner rather than later if they are not to find themselves in difficulties, particularly when the limitation period has expired (cf for example Hashtroodi v Hancock [2003] 10 WLUK 119, Collier v Williams [2006] 1 WLUK 462, Foran v Secret Surgery Limited [2016] 5 WLUK 92 and Boxwood Leisure Limited v Gleeson Construction Services and Another [2021] 4 WLR 137 (TCC)).
In its recent decision in ST v BAI [2022] EWCA Civ 1037 the Court of Appeal seems to have departed from these authorities, or at least the rationale behind them. In that case the Claimant obtained permission ex parte for an extension of the lifetime of the claim form after the limitation period had expired. The ex parte application did not refer to the expiry of the limitation period and stated that service could not be effected on the Defendant’s registered office in France because all the court bailiffs in the local area were on holiday, but did not mention that an out of area bailiff had offered to effect service but his offer had been rejected on the basis that his fee of £2,000 was thought to be excessive. Registrar Davision duly granted the Claimant’s representatives an extension of time for service of the claim form, and affirmed his decision at an inter partes hearing.
The Defendant appealed on the grounds that the extension of time should never have been given; the Claimant’s solicitor’s had been unable to serve the claim form only as a result of their own choice not to spend £2,000 on service in the context of a claim pleaded at up to £100,000; and the only reason they found themselves in the position of having to make this choice was their failure to make attempts to effect service until three weeks prior to the expiry of the lifetime of the claim form, in July, in France.
Andrew Baker J allowed the appeal. In doing so he found that the claim form could have been served within its lifetime but that the Claimant’s solicitors had chosen not to do so, and that this was unreasonable and did not constitute a ‘good reason’ for failing to serve in time within the meaning of the authorities.
The Claimant appealed on a second appeal to the Court of Appeal. They were given permission to appeal by Males J, who, rather alarmingly, did so because:
“On the face of things it is surprising that a company running a daily service to an English port should refuse to accept service of proceedings by a passenger.”
This would tend to suggest that Defendants registered abroad but providing services to English residents are in some way at fault if they exercise their right to be served within their own domicile, which was certainly not the author’s understanding of the law hitherto.
The Court of Appeal, in allowing the Claimant’s appeal, dished out more of the same.
Carr LJ, in giving a judgment with which Popplewell and Simler LLJ agreed, was critical of the Defendant’s solicitors for taking a month to extract instructions from the French company as to service of the originating process (we can only assume that in practice she worked only for UK based clients). She went on to describe the characterisation of a £2,000 fee as ‘colossal and completely unrealistic’ as being ‘fully justified’, in the context of a modest (£100,000) claim. The prospect of paying such a fee, so the Court found, justified the Claimant’s solicitors in making an application for an extension of time for service instead (although it has to be said that the costs of their having done so run into many multiples of £2,000). So the failure to identify a means of effecting service at ‘reasonable and proportionate cost’ justified the application for an extension of time, even where active attempts to serve had only begun some five months after issue (because three weeks ought to have been long enough to effect service ‘in normal times’).
Attentive readers will by now have identified that the author writes with a degree of surprise verging on bitterness; and, indeed, the outcome in the Court of Appeal was an unwelcome one for those representing foreign Defendants which might wish to stand on their (hitherto unrestricted) right to be served within their domicile. But it is suggested that it is also problematic for those representing Claimants. If £2,000 is a colossal and completely unrealistic sum, does this mean that such a fee would not be recoverable from the Defendant on assessment of costs? The judgment certainly implies as much. And if so, does this mean that any Claimant faced with such a bill for serving outside the jurisdiction should, instead, apply for an extension of time so that the Foreign Process Section may serve proceedings at a lower cost? Or would they then be in danger of the court at first instance following the line of authorities applying the test in Hashtroodi and refusing any such application on the basis that a Defendant has a right to be served within time? Is it now the case that practitioners may wait until the expiry of the claim form’s lifetime is almost over before beginning to take active steps to serve it, even in France in the summer holidays? Such a course would seem to be imprudent, to say the least.
The author would suggest that it might be best for practitioners to serve proceedings timeously in the way previously recommended, and only to consider relying on this decision if absolutely necessary, at least for the time being.
Sarah Prager and Henk Soede of 1 Chancery Lane acted for the Defendant, instructed by Tozers.
Giles Mooney QC and Linda Nelson of 9 Gough Chambers acted for the Claimant, instructed by Aegis Legal.
About the Author
Called to the Bar in 1997, Sarah Prager has been listed in the legal directories as a Band 1 practitioner in travel law for many years. Together with her colleagues at 1 Chancery Lane, Matthew Chapman QC and Jack Harding, she co-writes the leading legal textbook in the area, and has been involved in most of the leading cases in the field in the last decade. Last year she was named Best Lawyers’ Travel Lawyer of the Year 2020/2021 and the Lawyer Monthly Women in Law Awards 2020: Personal Injury, and she was a member of the Consultative Group of Experts to the UNWTO Committee for the Development of an International Code for the Protection of Tourists, and is a member of the Admiralty Court Users’ Committee. She undertakes purely domestic high value personal injury work as well as cross border work and has a wealth of experience of difficult and sensitive cases.
…And Finally…
Those practitioners hoping that some good might come from the failure of Monarch Airlines and then Thomas Cook Airlines in the form of the implementation of the recommendations of the Airline Insolvency Review should look away now. The government announced in 2019 that it would implement the recommendations, which were designed to protect passengers in the event of another airline insolvency. On 25th April the Transport Committee gave the government a little nudge in the form of a reminder that it has not in fact implemented any of these recommendations, and on 11th July it received a rather frosty response indicating that the government would consider the recommendations and implement those it deems appropriate. Governmental memories are short, it seems; in the absence of greater protection for passengers as suggested by the Review, the cost of the staggering repatriation efforts necessitated by the failure of a large airline has to be borne by the taxpayer, and in these straightened times it may be that when the next insolvency occurs questions will be asked as regards why this remains the case (and is likely to remain the case for the foreseeable future).
