CLAIM FORM CASE IN THE COURT OF APPEAL: BAD LEGAL ADVICE NOT A GOOD REASON TO ALLOW SERVICE BY AN ALTERNATIVE METHOD

In Société Générale v Goldas Kuyumculuk Sanayi Ithalat Ihracat AS & Ors [2018] EWCA Civ 1093 the Court of Appeal considered a claimant’s appeal where the judge had refused to allow an alternative method of service or to dispense with service. One of the issues considered was the relevance of bad legal advice in the exercise of the court’s discretion. Things did not go well for the claimant.

“… reliance on negligent or incompetent advice … will seldom be a good reason for ordering alternative service once a limitation period has expired”

THE CASE

The claimant bank issued proceedings against the defendants  who are based in Turkey. at the same time obtaining freezing injunctions. For various reasons, including incorrect advice on Turkish law and valid service in Turkey,  the claimant failed to serve the defendants. The defendants made an application to strike out the claims on the basis that they were not validly served. The claimant made a counter-application:-

“1) to overcome invalid service in Turkey and Dubai by either:
a) an order for deemed service by an alternative method with retrospective effect pursuant to CPR 6.15; or
b) an order dispensing with service pursuant to CPR 6.16.”

Popplewell J dismissed the claimant’s application and the actions were struck out. The claimant appealed to the Court of Appeal.

 

THE RULES

The Court considered the relevant rules:-

“The relevant CPR
    1. The relevant rules are 6.15, 6.16, 6.40 and (although reliance is no longer placed on it) 7.6:-
Service of the claim form by an alternative method or at an alternative place
6.15 (1) Where it appears to the court that there is a good reason to authorise service by a method or at a place not otherwise permitted by this Part, the court may make an order permitting service by an alternative method or at an alternative place.
(2) On an application under this rule, the court may order that steps already taken to bring the claim form to the attention of the defendant by an alternative method or at an alternative place is good service.
Power of the court to dispense with service of the claim form
6.16 (1) The court may dispense with service of a claim form in exceptional circumstances.
(2) An application for an order to dispense with service maybe made at any time and

(a) must be supported by evidence; and

(b) may be made without notice.

Methods of service – general provisions
6.40 (1) This rule contains general provisions about the method of service of a claim form or other document on a party out of the jurisdiction.
(3) Where a party wishes to serve a claim form or other document on a party out of the United Kingdom, it may be served –

(a) by any method provided for by –

(i) rule 6.41 (service in accordance with the Service Regulations);

(ii) rule 6.42 (service through foreign governments, judicial authorities and British Consular authorities) or

(iii) rule 6.44 (service of claim form or other document on a state);

(b) by any method permitted by the law of the country in which it is to be served.

(4) Nothing in paragraph (3) or in any court order authorises or requires any person to do anything which is contrary to the law of the country where the claim form or other document is to be served.
Extension of time for serving a claim form
7.6 (1) The claimant may apply for an order extending the period for compliance with rule 7.5.
(2) The general rule is that an application to extend the time for compliance with rule 7.5 must be made –

(a) within the period specified by rule 7.5; or

(b) where an order has been made under this rule, within the period for service specified by that order.

(3) If the claimant applies for an order to extend the time for compliance after the end of the period specified by rule 7.5 or by an order made under this rule, the court may make such an order only if –

(a) the court has failed to serve the claim form; or

(b) the claimant has taken all reasonable steps to comply with rule 7.5 but has been unable to do so; and

(c) in either case, the claimant has acted promptly in making the application.”

THE COURT OF APPEAL’S REJECTION OF THE CLAIMANT’S ARGUMENTS

Longmore LJ considered – and rejected – the claimant’s arguments that the judge had erred in law.

“Supposed error of principle (1): wrong legal advice
    1. In para 49(5) the judge said there would be focus on whether the claimant could have effected proper service within the validity of the claim form; he said that generally it is not necessary for a claimant to show he has taken all the steps he could reasonably have taken to effect service by the proper method and then added:-
“however negligence or incompetence on the part of the claimant’s legal advisers is not a good reason; on the contrary it is a bad reason, a reason for declining relief Hashtroodi at [20], Aktas at [71].”
It is said that the authorities on which the judge relied for this purpose are authorities on CPR 7.6 which requires a claimant who applies for an extension of the validity of a claim form after the validity has expired to show that he has taken all reasonable steps to effect service. They should not apply to CPR 6.15 which only requires “a good reason” for alternative service. Moreover, Kaki v National Private Air Transport [2015] EWCA Civ 731; [2015] 1 CLC 948 which is an authority on CPR 6.15 is an example of a case where this court upheld a decision by a judge who had not regarded the negligence or incompetence of the claimant’s lawyers as a bar to relief.
    1. The judge was careful to confine his statement of principle to a case where the claimant’s legal advisers had been negligent or incompetent (rather than just erroneous) and he clearly considered that the advice received by Soc. Gen. was negligent or incompetent in this case. Even as so confined, the judge probably put the matter too high by saying that negligent or incompetent advice was always a bad reason for ordering an alternative service. In the context of CPR 7.6 (extension of validity of a claim form before or after its expiry) it is, no doubt, right to say that negligent or incompetent advice is always a bad reason for granting an extension. That is because there is often a disciplinary factor in the decision to extend the validity of a claim form analogous to the disciplinary factor which is commonly found in decisions about relief from sanctions. This accounts for the reasoning in the cases on which the judge relied, Hashtroodi v Hancock [2004] 1 WLR 3206 para 20 per Dyson LJ and Aktas v Adepta [2011] QB 894, para 71 per Rix LJ who said in terms:-
“The negligence of a claimant’s solicitor is no excuse. It is not a good reason for an extension, even where the extension is applied for in time. It is a bad reason, a reason for declining an extension.”
    1. But as Lord Sumption observed in Barton v Wright Hassall para 8 (a decision of the Supreme Court handed down subsequent to the decision of Popplewell J in the present case):-
“CPR 6.15 is rather different. It is directed specifically to the rules governing service of a claim form. They give rise to special considerations which do not necessarily apply to other formal documents or to other rules or orders of the court. The main difference is that the disciplinary factor is less important. The rules governing service of a claim form do not impose duties, in the sense in which, say, the rules governing the time for service of evidence impose a duty. They are simply conditions on which the court will take cognizance of the matter at all.”
    1. It must, I think, follow that in the context of alternative service, it cannot be right to say that negligence or incompetence of the claimant’s lawyers is always “a bad reason”. It does not, of course, follow that it is “a good reason”. That must depend on the facts of the case. It is noteworthy that in Kaki, on which Soc. Gen relied, the time limit for making the claim had not expired, so that the defendants had no accrued limitation defence.
Supposed error of principle (2); the requirement of exceptionality if the reason of alternative service has not impacted on the expiry of the limitation period.
    1. In para 49(8) under the heading of limitation the judge said:-
“(a) Where relief under 6.15 would, or might, deprive the defendant of an accrued limitation defence, the test remains where there is a good reason to grant relief: Abela.
(b) However save in exceptional circumstances the good reason must impact on the expiry of the limitation period, for instance where the claimant can show that he is not culpable for the delay leading to it or was unaware of the claim until close to its expiry: Cecil at [108] and see Godwin at [50].”
    1. In Godwin v Swindon Borough Council [2002] 1 WLR 997 May LJ at para 50 made the point that the rule dispensing with service (now CPR 6.16) cannot extend to extricate a claimant from the consequences of late service of the claim form where limitation is critical and the claimant cannot rely on CPR 7.6 to obtain an extension to the validity of the claim form. It is paragraph 108 of the judgment of Rix LJ in Cecil v Bayat [2011] 1 WLR 3086 which makes the point in relation to CPR 7.6 that:-
“It is … for the claimant to show that “his good reason” directly impacts on the limitation aspect of the problem, as for instance where he can show that he has been delayed in service for reasons for which he does not bear responsibility, or that he could not have known about the claim until close to the end of the limitation period. If he cannot do that, he is unlikely to show a good or sufficiently good reason in a limitation case.”
Rix LJ does not rule out the possibility of a good reason even if it does not impact on the expiry of the limitation period but the judge can hardly be criticised for saying that such a case would be exceptional.
    1. Soc. Gen. submitted that the judge by using the words “save in exceptional circumstances” was confusing the test under CPR 6.16 for dispensing with service altogether with the test under CPR 6.15 requiring a good reason. I do not so read para 49(8)(b) of the judgment which is merely saying that the requirement that the good reason should impact on the expiry of the limitation period was not an absolute one.
    2. Soc. Gen. also submitted that the requirement that the good reason should impact on the expiry of the limitation period was appropriate for CPR 7.6 but not for CPR 6.15, that in Abela v Baadarani [2013] 1 WLR 2043 the good reason for ordering alternative service did not in fact impact on the expiry of the limitation period and that it should, therefore, be irrelevant whether the good reason impacted on the expiry of the limitation period or not.
    3. I cannot agree with this submission. Once it is clear that the claim is (or is arguably) time-barred, that must be highly relevant to the exercise of the court’s discretion. A failure to serve by the proper method may be permissible if, as Rix LJ says, the claimant did not know he had a claim until close to the end of the limitation period but the requirement of a good reason for the purpose of CPR 6.15 must contemplate an inquiry into the reason for not achieving proper service before the expiry of the limitation period; otherwise limitation becomes irrelevant and that is not the law. The Supreme Court in Abela concluded that the defendant was evading service or “playing technical games” with the claimant, because he had deliberately obstructed service by declining to disclose his address. That shows, to my mind, that the good reason in that case did indeed “impact on the expiry of the limitation period”, even though the phrase itself was not used, see paras 38-39 per Lord Clarke.
    4. The subsequent case of Barton v Wright Hassall also makes it clear that the expiry of any limitation period before application is made to extend the validity of the claim form (or, I might add, for a retrospective order for alternative service) is a highly important matter in the overall exercise of discretion, see paras 16 and 21 per Lord Sumption. In this respect there can be no substantial difference of approach under CPR 7.6 from that under CPR 6.15.
    5. I do not, therefore, accept that para 49(8)(b) of the judgment shows any error of principle in the judge’s approach to limitation.
Supposed error of principle (3): need for “exceptional circumstances” in a Hague Convention case
    1. In paragraph 9 of his judgment, the judge said:-
“(9) Cases involving service abroad under the Hague Convention or a bilateral treaty:
(a) Where service abroad is the subject matter of the Hague Convention or a bilateral treaty, it will not normally be a good reason for relief under CPR 6.15 or 6.16 that complying with the formalities of service so required will take additional time and cost: Knauf at [47], Cecil at [66], [113].
(b) It remains relevant whether the method of service which the Court is being asked to sanction under CPR 6.15 is one which is not permitted by the terms of the Hague Convention or the bilateral treaty in question. For example, where the country in which service is to be effected has stated its objections under Article 10 of the Hague Convention to service otherwise than through its designated authority, as part of the reciprocal arrangements for mutual assistance on service with this country, comity requires the English Court to take account of and give weight to those objections: see Shiblaq at [57]. In such cases relief should only be granted under Rule 6.15 in exceptional circumstances. I would regard the statement of Stanley Burnton LJ in Cecil at [65] to that effect, with which Wilson and Rix LJJ agreed, as remaining good law; it accords with the earlier judgment of the Court in Knauf at [58]-[59]; Lord Clarke at paragraphs [33] and [45] of Abela was careful to except such cases from his analysis of when only a good reason was required, and to express no view on them (at [34]); and although Stanley Burnton LJ’s reasoning that service abroad is an exercise of sovereignty cannot survive what was said by Lord Sumption (with unanimous support) at [53] of Abela, there is nothing in that analysis which undermines the rationale that as a matter of comity the English Court should not lightly treat service by a method to which the foreign country has objected under mutual assistance treaty arrangements as sufficient. That is not to say, however, that there can never be a good reason for ordering service by an alternative method in a Hague Convention case: Bank St Petersburg at [26].”
    1. Soc. Gen. submitted that, in the light of the finding at para 72 of the judgment that attempts at service (in this case on a Neighbourhood Executive Officer in the case of the first and second defendants and on a gentleman who had previously accepted service of other proceedings in the case of the third defendant) were not positively prohibited under Turkish law but were simply not steps which constituted good service, the court could rely on CPR 6.40(3)(b) and/or 6.40(4) to order that the attempts at service could constitute alternate service pursuant to CPR 6.15. That was what happened in Abela where the attempts at service had not been prohibited by Lebanese law. If “comity” (to use the judge’s word in para 49(9)(b)) permitted alternative service in that case, so should it in this case.
    2. Since Lord Clarke was at pains in Abela to say (paras 33-34 and 45) nothing about the position where the Hague Convention applied and expressly referred to paras 65-68 of Cecil v Bayat [2011] 1 WLR 3086 on which the judge relied, without expressing any disapproval of them, I cannot accept Soc. Gen’s submission. In para 65-66 Stanley Burnton LJ said:-
“65. In modern times, outside the context of the European Union, the most important source of the consent of states to service of foreign process within their territory is to be found in the Hague Convention (in relation to the state parties to it) and in bilateral conventions on this matter. Because service out of the jurisdiction without the consent of the state in which service is to be effected is an interference with the sovereignty of that state, service on a party to the Hague Convention by an alternative method under CPR r 6.15 should be regarded as exceptional, to be permitted in special circumstances only.
66. It follows, in my judgment, that while the fact that proceedings served by an alternative method will come to the attention of a defendant more speedily than proceedings served under the Hague Convention is a relevant consideration when deciding whether to make an order under CPR r 6.15, it is general not a sufficient reason for an order for service by an alternative method.”
The phrase “interference with the sovereignty” might now be re-phrased in the light of Lord Sumption’s judgment in Abela but the essential reasoning of Stanley Burnton LJ (with whom Wilson LJ and Rix LJ agreed) remains binding on this court so that service by an alternative method is to be permitted “in special circumstances only.”
    1. Soc. Gen submitted that alternative service (if there was otherwise good reason) should only be refused if such service subverted and was designed to subvert the Hague Convention. But, although that was in fact the position in Knauf GmbH v British Gypsum Ltd [2002] 1 WLR 907 which was one of the cases on which the judge relied, there is no indication in Cecil that any such subversion is required. I do not, therefore, see that the judge made any error of principle in para 49(9)(b). If any change to the approach of the court to applications for application for alternative service is to be made in Hague Convention cases, that is a matter for the Supreme Court, rather than this court.
    2. I would therefore only uphold Soc. Gen.’s submission that the judge made an error of principle to the limited extent of saying that he was wrong to say that negligence or incompetence of the claimant’s lawyers must always be a bad reason for making an order for alternative service. Does this error vitiate his evaluation of the case as a whole?
Evaluation vitiated?
    1. The judge in my view is to be congratulated on his attempt in para 49 to distil nine essential principles from an ever-increasing number of authorities of ever-increasing complexity. It is not likely that a small error in enunciating one of those principles is likely to vitiate his overall evaluation and this court should not be too ready to say that it does. As Lord Sumption said in para 9 of Barton v Wright Hassall
“what constitutes “good reason” for validating the non-compliant service of a claim form is essentially a matter of factual evaluation, which does not lend itself to over-analysis or copious citation of authority.”
    1. In his application of the principles to the facts of the case, the judge began (para 52) by saying that Soc. Gen.’s failure to effect valid service both in Turkey and in Dubai was culpable and that negligent Turkish advice did not absolve Soc. Gen. from culpability for that failure. I can see nothing wrong so far. Wrong or negligent advice, even if as the judge held (para 70(4)) reliance on Turkish law was necessary and reasonable, will seldom be a “good reason” for ordering alternative service. If no limitation period has expired and the claimant can thus begin his proceedings again, it may be that (as in Kaki) the erroneous (or even negligent or incompetent) advice can be put to one side as irrelevant or of minimal importance. But once a limitation period has expired and a defendant has an accrued (or even arguably accrued) defence of limitation, the picture changes. It is very difficult to see that negligent or incompetent advice should be a good reason for making a retrospective order for alternative service which has the effect of depriving a defendant of that defence unless there is some reason which impacts on the expiry of the period in some such way as Rix LJ indicated in Cecil v Bayat.
    2. It is true that in the next sentence in para 52, the judge says that the negligent advice
“is not a good reason for granting relief but rather a reason for not doing so.”
But he does not here use the objectionable phrase that it is a “bad reason” and it seems to me that when limitation is taken into account the judge can scarcely be criticised for observing that negligent advice is a reason for not granting relief. In the context of limitation, negligent advice is not a neutral factor or at least cannot amount to a good reason for granting the relief sought. The judge then went on to say that Soc. Gen. ignored the Goldas defendants’ assertion that service had not been effected which then gave Soc. Gen. the opportunity to make an application at that time for alternative service before the limitation period had expired. Soc. Gen. did not do so because it had decided to warehouse the English proceedings which could not itself excuse the failure to make an application at that time. All this cannot be criticised.
    1. So even if it was an error to say that the negligent advice was a reason for not granting relief (which I do not think it was), it was an immaterial error in the light of the judge’s applications of his principles to the facts as a whole. Indeed, quite apart from the points about negligent advice and the accrual of a limitation defence the judge also relied on the fact that Turkey was party to the Hague Convention and on what he called Soc. Gen.’s abusive behaviour in failing expeditiously to progress the English proceedings, after obtaining the freezing injunctions and putting the entire proceedings on hold. Soc. Gen.’s only response to this aspect of the matter was to say that such abuse should not be permitted to outweigh the good reasons it submitted to exist. But since the judge held that there was no good reason that submission goes nowhere, unless his whole evaluation is discredited and this court has to conduct its own evaluation.
    2. That is not the case; the judge’s minor error goes nowhere near vitiating his evaluation of all the factors in the case; in the context of the case as a whole any error was immaterial and this court should not interfere with what is a balanced and careful judgment. It certainly cannot be said that the judge was plainly wrong.
    3. In these circumstances I need not address the matters on which Soc. Gen. relied as constituting good reason if this court was to say that the judge’s evaluation was based on an error of law or principle or was plainly wrong. I would only repeat that reliance on negligent or incompetent advice
1) will seldom be a good reason for ordering alternative service once a limitation period has expired; and
2) that Soc. Gen. disavowed any apparent contention to the effect that the Goldas defendants had deceived the Turkish courts; the contention was that they had not explained that their case was that they could not be liable in England since they had never been properly served and would now plead that any claim was time-barred. We were taken through some of the detail of the Turkish proceedings but I was unpersuaded that the conduct of the Goldas defendants was so unmeritorious that it could itself constitute a good reason for now permitting alternative service. It was always open to Soc. Gen to inform the Turkish court of the true position in England if they had wished to do so. Nor do I consider that there is anything unconscionable in a defendant relying on an English jurisdiction clause or on the fact that proceedings are taking place in England without explaining that he is taking points about service or otherwise has a strong defence which may well succeed if there is a trial.”