COULD CPR 3.10 BE THE LITIGATORS NEW BEST FRIEND? THE IMPLICATIONS OF INTEGRAL PETROLEUM CONSIDERED (AND THEY ARE ENORMOUS)

In Integral Petroleum SA -v- SCU Finanz AG [2014] EWHC 702 (Comm) Popplewell held that the provisions of CPR 3.10 meant that  service of the particulars of claim by e-mail could be good service and the default judgment entered thereafter a regular one.   This case could have important implications for litigators.

THE FACTS OF INTEGRAL

The parties had agreed an extension of time for service of the particulars of claim. This was sent by e-mail to the defendant’s solicitors. The defendant did not file a defence within 28 days and judgment was entered in default.

THE DEFENDANT’S ARGUMENTS IN RELATION TO THE JUDGMENT BEING DEFECTIVE

The defendant put forward two arguments in relation to the judgment being defective:

  • Service of the particulars was defective because it took place by electronic means and the defendant had not indicated that it accepted service by electronic means.
  • The particulars of claim were served outside the period of the agreed extension

THE CLAIMANT’S RESPONSE: RELIANCE UPON CPR 3.10.

CPR 3.10 provides:

“Where there has been an error of procedure such as a failure to comply with a rule or practice direction –

(a) the error does not invalidate any step taken in the proceedings unless the court so orders; and

(b) the court may make an order to remedy the error.”

The claimant relied upon this rule to argue that the judgment was regular.

THE JUDGE’S DECISION 3.10 APPLIED

  1. of the instant case, in my view the error of procedure in serving the Particulars of Claim by e-mail was a failure to comply with a rule or practice direction which falls within CPR 3.10. Accordingly under CPR 3.10(a) such service is a step which is to be treated as valid, so as to commence time running for the service of the defence, and disentitle SCU-Finaze in this case to bring itself within CPR 13.2. In reaching that conclusion I have taken into account the following considerations.
  1. Phillips v Nussberger establishes that CPR 3.10 is to be construed as of wide effect so as to be available to be used beneficially wherever the defect has had no prejudicial effect on the other party. The instant case is a good example where such beneficial use is called for. Service by e-mail on Maitre Cohen was sufficient to bring the Particulars of Claim to his attention. He was SCU-Finanz’s chosen lawyer appointed for the purpose of receiving the document. The document reached the appropriate destination in just the same way as if it had been sent by post to the Paris address given in the acknowledgement of service which would have constituted good service. He ought reasonably to have known, as a European accepting the burden of acting for a client in English High Court proceedings, that particulars of claim required to be answered by a defence, and that in default judgment might be entered. What was effected was purported service, not merely transmission for information only (cf Asia Pacific (HK) Ltd v Hanjin Shiping Co Ltd [2005] EWHC 2443 (Comm)).
  1. Service by e-mail is a permitted method of service under CPR 6.20, albeit that what is permitted is service in accordance with the requirements of Practice Direction 6A. The error is therefore more readily characterised as a failure to comply with a practice direction than a rule. But however characterised, the substantive defect is in using a method which English procedural law regards as a permissible method in circumstances where the formalities necessary to make it a permitted method had not been concluded. Maitre Cohen had been identified as the chosen legal representative for the Defendant and he had corresponded with the Claimant’s solicitors about when the Particulars of Claim should be served from the very e-mail address to which they were then sent. I can envisage circumstances in which purported “service” by a method which is not permitted by the rules at all is sufficiently distant from what is required by the rules as arguably to fall outside CPR 3.10. Moreover I should not be thought to be endorsing any proposition that CPR 3.10 can be used as a matter of course to circumvent service out of the jurisdiction of originating process by effecting service on a firm of solicitors or other lawyers as a matter of practical convenience without seeking an order for service by an alternative method. But I would not accept Mr Collins QC’s submission that any defect in the method of service is outside CPR 3.10. The method of service applied in this case, namely service by e-mail, is one which in the 21st century is a common and effective way of transmitting a document and one which the Rules envisage may be used, albeit with certain conditions which are set out in the practice directions.
  1. This case is not concerned with service of originating process but service of particulars of claim. To my mind this is a significant distinction. A narrower approach to CPR3.10 is justified when it is sought to be applied to the service of originating process, because such service is what establishes in personam jurisdiction over the defendant. Phillips v Nussberger indicates that even for service of originating process the rule is to be given a wide effect, and that is so where the application of the rule affects the establishment of in personam jurisdiction in one of two competing jurisdictions. But the effect to be given to CPR 3.10 is even wider when concerned with documents which are other than those by which the proceedings are commenced. What the rules are concerned with in relation to the service of such subsequent documents is simply bringing them to the attention of the other party in circumstances in which that other party knows or should realise that a step has been taken which may have procedural consequences. This contrasts with the service of originating process which fulfils other functions: it establishes in personam jurisdiction, and it is what engages a wide range of powers in the Court, such as those under s.37 of the Senior Courts Act 1981 and under an inherent jurisdiction. CPR 3.10 is particularly apposite for treating as valid a step whose whole function is to bring a document to the attention of the opposing party where such function has been fulfilled. It prevents a triumph of form over substance
  1. It may be said that the effect of treating service of particulars of claim as being valid is no less significant than the effect of treating service of a claim form as being valid in the context of the present application, because a failure to respond by way of defence or acknowledgement of service respectively can lead to the same consequences of judgment being entered in default without consideration of the merits. But nevertheless given that the purpose of service of documents subsequent to proceedings having been validly commenced is essentially limited to bringing their contents to the attention of the other party as a procedural step, there is in my view every reason to give CPR 3.10 very wide application so as to be capable of application where that purpose has been fulfilled.
  1. That is particularly so in the current context where the issue of service governs whether there is an absolute right to have set aside a judgment in default of defence. The regimen in place in CPR 13.3 ensures that there will be no injustice to a defendant by the validation of such service where he has a defence with a real prospect of success, or there is some other good reason for setting aside the judgment or allowing the claim to go to trial, and where justice requires the exercise of the discretion to permit this to occur. Therefore treating service of particulars of claim by e-mail as effective ought not to prejudice a defendant in any material respect even if (which is not this case) the service was not sufficient to bring the document to the attention of the defendant or his chosen legal representative. Conversely, however, to treat such service as outside the scope of CPR 3.10 so as to entitle a defendant to set aside judgment under Rule 13.2 as of right would confer an unjustified benefit on a defendant who could rely upon a technical defect which has had no practical effect, and caused no prejudice, so as to deprive the claimant of a judgment to which, on the present hypothesis, he is entitled.
  1. These reasons apply with even greater force to the applicability of CPR 3.10 to the other deficiency relied on in relation to service of the Particulars of Claim, namely that it was 5 days out of time.

THE PRACTICAL SIGNIFICANCE OF THIS: IT HAS ENORMOUS IMPLICATIONS

The practical significance of this may be enormous.

1. In many cases where a party has breached the rules and, on the face of it, requires relief from sanctions, the party may in fact be saved by CPR 3.10.

2. The observation that  “CPR 3.10 is to be construed as of wide effect so as to be available to be used beneficially wherever the defect has had no prejudicial effect on the other part” is of considerable importance.

3.  Also the passage

” CPR 3.10 is particularly apposite for treating as valid a step whose whole function is to bring a document to the attention of the opposing party where such function has been fulfilled. It prevents a triumph of form over substance”

4.   It is difficult for a party to “stand on their rights” if service has taken place by e-mail or fax or some other means. A wide construction of 3.10 means that the service could be taken to be valid.