SERVICE OF THE PARTICULARS OF CLAIM AND THE “TRAP FOR THE UNWARY CLAIMANT”: THE TRAP OPERATED AND RELIEF FROM SANCTIONS NOT GRANTED

November 18, 2019 · by · in Applications, Avoiding negligence claims, Relief from sanctions, Service of the claim form, Uncategorized

The judgment of Chief Master Marsh today in Maggistro-Contenta & Anor v O’Shea & Anor [2019] EWHC 3035 (Ch) is a prime example of difficulties being caused because of a mistake in relation to the rules relating to service.   It is a (rare) example of the court taking the merits of the substantive case into account when the it is considering relief from sanctions.

 

“The requirement in CPR 7.4(2) that particulars of claim must be served no later than the latest time for service of the claim form has been described as a trap for the unwary claimant, and in one sense it is. However, it is a provision of the CPR of which the claimants’ advisers are expected to be wary. The point has been made many times a legal adviser who leaves service of the claim form until the end of the period for service courts disaster.”

THE CASE

The claimant brought proceedings against the defendants. A claim form was issued and served within the four month period for service. The particulars of claim, however, were served outside the four month period for service.   The claimant applied for relief from sanctions, the defendant applied for a declaration that the court had no jurisdiction to hear the claim, by reason of the claimant’s default.

THE PROCEDURAL HISTORY IN DETAIL

In detail

(1) The claim form was issued on 1 March 2019, amended on 4 March 2019, re-amended on 26 June 2019 and re-re-amended on 27 June 2019. Because these amendments were made before the claim form was served, permission was not needed.

(2) The claim form was sent to the defendants’ solicitors, Kennedys LLP, by first class post on 27 June 2019 and was deemed served on 1 July 2019 which was the last day for service permitted by CPR 7.5(1).

(3) CPR 7.4(2) required the particulars of claim to be served by the same date, 1 July 2019.

(4) The defendants acknowledged service of the claim on 12 July 2019 on a conditional basis indicating an intention to dispute the court’s jurisdiction.

(5) The claimant issued her application on 12 July 2019. It was served on 18 July 2019.

(6) On the same date as serving the application notice, particulars of claim were sent to Kennedys by post and were therefore deemed to be served on 22 July 2019.

(7) Although the claimant’s application does not expressly seek relief from sanctions, the application must be considered against the CPR 3.9 relief from sanctions framework.

(8) The timing of the issue and service of the claim do not give rise to limitation issues because the events that are complained about took place in 2014. Therefore, the primary limitation period in contract and in tort of 6 years does not expire until 2020.

TWO IMPORTANT POINTS

The Master started with two important points.
    1. In order to clear away points that do not assist the claimant I observe:

(1) No complaint can be made by the claimant about the defendants having declined to accept service of documents by electronic means. A party is entitled to adopt that approach and in consequence the other party must adapt the way in which procedural steps are handled.

(2) The requirement in CPR 7.4(2) that particulars of claim must be served no later than the latest time for service of the claim form has been described as a trap for the unwary claimant[1], and in one sense it is. However, it is a provision of the CPR of which the claimants’ advisers are expected to be wary. The point has been made many times a legal adviser who leaves service of the claim form until the end of the period for service courts disaster. Furthermore, CPR 7.4(2) is not a provision that is in any sense by design a trap. On the contrary, its purpose is clear. A defendant is entitled to know by the expiry of the period for service, by having received the claim form and particulars of claim, the full extent of the claim that is being pursued by the claimant. If there are genuine difficulties in effecting service or the claimant is unable to formulate the claim in detail due to a delay in receiving papers from the defendant, an application to extend time for service can be made. In this case, there were no difficulties with service. The claimant says the defendants supplied papers late in the day (a point that requires some further examination) but no application to extend time was made.

THE DENTON CRITERIA AND SHOULD THE COURT CONSIDER THE MERITS?

It was common ground that the court should apply the Denton criteria when considering the claimants’ application. The more controversial issue was whether the court should consider the underlying merits of the case.

The Law
    1. It is common ground that the claimant’s application must be considered on the basis of the court’s general discretion to extend time limits under CPR 3.1(2)(a) and against the framework in CPR 3.9 relating to relief form sanctions. The three-stage approach that is derived from Mitchell and Denton is well known.
    2. The only area of controversy between the parties is whether the court should have any regard to the merits of the claim. Mr Smith, who appeared with Mr Cullen for the defendants, relies on the view expressed by Lord Neuberger in Global Torch Ltd v Apex Global Management Ltd and others (No2) [2014] 1 WLR 4495 at [29] to [31]:

“29. In my view, the strength of a party’s case on the ultimate merits of the proceedings is generally irrelevant when it comes to case management issues of the sort which were the subject matter of the decisions of Vos, Norris and Mann JJ in these proceedings. The one possible exception could be where a party has a case whose strength would entitle him to summary judgment. Both the general rule and the exception appeared to be common ground between the parties, although Mr Fenwick seemed to be inclined at one stage to suggest that the exception might be a little wider. In my view, the general rule is justifiable on both principled and practical grounds.

30. A trial involves directions and case management decisions, and it is hard to see why the strength of either party’s case should, at least normally, affect the nature or the enforcement of those directions and decisions. While it may be a different way of making the same point, it is also hard to identify quite how a court, when giving directions or imposing a sanction, could satisfactorily take into account the ultimate prospects of success in a principled way. Further, it would be thoroughly undesirable if, every time the court was considering the imposition or enforcement of a sanction, it could be faced with the exercise of assessing the strength of the parties’ respective cases: it would lead to such applications costing much more and taking up much more court time than they already do. It would thus be inherently undesirable and contrary to the aim of the Woolf and Jackson reforms.

31. In principle, where a person has a strong enough case to obtain summary judgment, he is not normally susceptible to the argument that he must face a trial. And, in practical terms, the risk involved in considering the ultimate merits would be much reduced: the merits would be relevant in relatively few cases, and, in those cases, unless the court could be quickly persuaded that the outcome was clear, it would refuse to consider the merits. Accordingly, there is force in the argument that a party who has a strong enough case to obtain summary judgment should, as an exception to the general rule, be entitled to rely on that fact in relation to case management decisions.” [my emphasis]

    1. The case management decisions to which Lord Neuberger referred were summarised in paragraphs [3] to [8] of his judgment. The decision of Vos J directed that the parties were to personally sign the statement of truth on the disclosure statement. Norris J made an unless order and Mann J refused to vary the order of Vos J on the basis that there had been a change of circumstances. Later, Mann J handed down a judgment refusing relief from sanctions. By an accident of timing, the judgment of Mann J dealing with relief from sanctions was handed down on 29 November 2013 following a hearing on 11 and 12 November 2013. The Court of Appeal handed down its judgment in Mitchell on 27 November 2013. Unsurprisingly, Mann J’s judgment does not refer to Mitchell and the decision long pre-dates the review of the grant of relief from sanctions the following year in Denton.
    2. The question of whether the merits are relevant in an application for relief from sanctions was touched on in the last paragraph of the judgment of Arden LJ (with whom McFarlane and McCombe LJJ agreed) in the Court of Appeal. She said:

“Mr Fenwick submits that Mann J did not take into account the merits of the defence. He cites CIBC Mellon Trust Co v Stolzenberg [2004] EWCA Civ 827 at [30] where I approved a dictum of Etherton J (as he then was) that when granting relief from sanctions the court could and should take into account the merits of the case. However, that does not mean that the merits should be taken into account in every case, especially where, as here, the strength of the case depends on disputed facts.”

  1. I have emphasised two passages in paragraph 30 of Lord Neuberger’s judgment in Global Torch v Apex Management because the appeal to the Supreme Court was based principally on the whether the case management decisions I have summarised were correctly made and not on whether the decision to refuse relief from sanctions should have been granted. Although both Lord Neuberger and Lord Clarke refer to Mitchell and Denton, they do so only in passing to make clear that nothing in their judgments seeks to undermine those decisions. It seems to me that Lord Neuberger’s remarks, and those of Arden LJ, are therefore not directly focussed on whether the court, when looking at all the circumstances of the case under CPR 3.9(1), should or may consider the merits.
  2. There are, of course, case management decisions made under the CPR where the rules require the court to consider the merits. [2] And there are applications that conventionally involve some assessment being made of the merits such as security for costs[3] and applications seeking permission to amend[4]. There are strong practical reasons in prohibiting a review of the merits unless it is required by the CPR, it is conventional to do so or the circumstances are exceptional. It is clear, however, that if the merits are such that a party has no real prospect of success it would be most odd to ignore this fact.
  3. The practical difficulty created by considering the merits to the Part 24 standard, other than the hearing of an application under that rule, is that the court cannot usually determine the prospects of success without considering not just the statement(s) of case but also evidence from the parties. There is a fair degree of chicken and egg involved. Without the evidence the court cannot consider the merits even if they point firmly one way or the other; with the evidence the hearing will be lengthened. This suggests strongly that the merits must be clear from a brief (or at least relatively brief) review of the case. And a party wishing to raise the merits must give adequate notice to the other party of the submission that will be made. If this is not done the court is unlikely to entertain it.
  4. In this case, there are two discreet points that are relevant to the application. First, the merits are flagged by the unsatisfactory nature of the details of claim on the claim form which signal that all may not be well with the claim. Secondly, Mr Jones volunteered that the particulars of claim will need amendment, without a draft amendment having been provided. I consider that these factors taken singly or together amount to an invitation to review the merits. The claimant is applying for an extension of time, albeit one that requires the court to have regard to the approach adopted when considering relief. A decision by the court to refuse an extension has the effect of preventing the claimant from pursuing this claim. It seems to me that it would be highly artificial when considering, at this very early stage of the claim, whether the claimant’s application should be granted, and thus the claim may proceed despite the failure to comply with an important provision of the CPR, to ignore the merits if the claim if there are, or are not, real prospects of success. If the claim is so weak that it would be likely to fall at the Part 24 hurdle, there is really no purpose in granting the extension. It is also hard to believe that the court would be right to grant the extension if the claim appeared to have a high probability of failure, although it could not be said the prospects of success were fanciful.
  5. In the course of his submissions, Mr Jones also referred me the decision of the Court of Appeal in Hannigan v Hannigan [2000] 2 FCR 650 CA. In that case which was decided shortly after the CPR came into force, the claimant’s solicitor failed to comply with a substantial number of procedural requirements including issuing the claim using the wrong form, failing to verify the statement of case with a statement of truth and incorrectly naming the first defendant. There were also errors of form in the claimant’s witness statement. However, the substance of the claim was set out adequately. Perhaps unsurprisingly, the Court of Appeal allowed an appeal against an order striking out the claim and at [37] Brooke LJ remarked that “… the old turf wars between solicitors over technicalities were being superseded by a new climate in which the emphasis was the achievement of justice …”. I do not find the decision in that case to be of assistance in light of (a) the nature of the failings in that case, (b) the change to CPR 1.1(2) and CPR 3.9 in 2013 and (c) the development of the jurisprudence in relation to relief form sanctions in Mitchell and Denton.

APPLYING THE DENTON TEST

The Master considered the Denton test in detail.
(1) The seriousness and significance of the breach
    1. For the reasons I have already given, it is important that a defendant is able to know the case that has to be met by the time the period for service expires. There is no special rule that applies in the case of claims for professional negligence. It is however possible to highlight two points. First, the defendants are right to point out that the claimant’s case as it was put forward in correspondence was not consistent. The allegation made in the letter of claim dated 1 January 2019 that Mr O’Shea may have worked in collusion with or in a conspiracy with Mr Messuti was a serious allegation that was not withdrawn when challenged. Instead, Ms Kane stated that her client was not alleging fraud. It is all the more important in such circumstances that the defendant knows exactly what is alleged in a timely fashion. Secondly, the claim form was not a model of drafting clarity but included claims under a welter of retainers. Again, the defendants, with an eye to the extent of their insurance cover would wish to know how the claim was put.
    2. Even without these additional factors, a delay of 21 days was both serious and significant. Ms Kane accepts that the breach was serious.
(2) Why the default occurred?
    1. Ms Kane has made a witness statement candidly admitting that the default was the result of an error by her. She believed that the particulars of claim had to be served within 14 days of service of the claim form. She goes on to explain how the error came about. Before dealing with the chronology of events Ms Kane says she has gone through a period of tremendous disruption in her personal life. She underwent major gender surgery giving rise to both physical and psychological trauma as well as the necessary realignment demanded by her new life. However, the evidence she provides is general in nature and it does not provide much assistance to the claimant’s application. She does not say that the period of disruption in her life is a good reason for the default.
    2. On 24 June 2019 counsel was instructed at a conference to redraft the claim form and to draft particulars of claim within 14 days. On 9 July 2019 counsel was alerted that an extension of 14 days was needed. Ms Kane says; “As a result, Counsel became guarded, and claimed conflict of interest, and ceased to act.” Mr Jones was instructed the following day. The reason for the change of counsel is not spelled out and the summary provided by Ms Kane is not easy to follow.
    3. Evidence is provided about the time that was taken to obtain the LLP’s papers. Ms Kane came to be instructed because the London office of Giambrone Law which had acted for the claimant ceased to be regulated by the SRA. Ms Kane made an application in the Queen’s Bench Division for pre-action disclosure and obtained an order on 22 November 2018 requiring the LLP to preserve the “conveyancing files” for the sale of 21 Harley Street and 5 Cavendish Square. The application was resolved by the LLP agreeing to pass over the files and a substantial quantity of files were provided on 4 December 2018. This led to the letter of claim being sent on 1 January 2019. However, further files were disclosed at the beginning of May 2019 relating to the LLP’s retainer with ACE Ltd and were disclosed voluntarily. On the same date, Kennedys provided a further four lever arch files containing general correspondence saying that they believed the contents had already been disclosed. Finally, the New Quadrant Partners probate was passed over later on in May.
    4. The vast bulk of the documents were in the claimant’s possession in December 2018 and they sufficed for Ms Kane to write a lengthy letter of claim. The ACE Ltd documents will have added little and the correspondence disclosed in early May 2019 largely duplicated that which had already been provided. I accept that the additional documents had to be reviewed but there is nothing in the evidence to suggest that there was difficulty in finalising the particulars of claim due to the arrival of the later tranches of documents or that the conduct of the defendants was a contributory factor to the late service of the particulars of claim.
    5. Mr Jones submitted that the defendants’ solicitors were guilty of playing “litigation games” and that the claimant’s ability to serve the particulars of claim was impeded by the defendant’s failure to comply with the order for disclosure made in the Queen’s Bench Division. I do not consider that these submissions are sustainable. Ms Kane acknowledges that had she known of the requirement to serve the particulars of claim with the claim form she could and would have done so. The defendants were not playing a litigation game. They were acting in a manner than is permitted by the CPR and professional obligations.
3. All the circumstances of the case
    1. The two factors that are set out in CPR 3.9(1)(a) and (b) are of particular importance and should be given particular weight.
    2. The failure to serve the particulars of claim with the claim form has undoubtedly affected the conduct of the litigation and has resulted in additional cost. It is right to observe, however, that the disruption and additional expense are not major because the claim is in its infancy.
    3. The second limb of CPR 3.9(1) applies with rather more force. As I have already explained, the provision requiring a party to serve the particulars of claim with the claim is an important one. If it is a ‘trap for the unwary’, it is not one that is hidden or illogical. It is important that a defendant knows the case it has to meet. In this connection, there are two factors that have a bearing on the relative importance of CPR 7.4(2) as it applies to this case.

(1) The LLP had professional indemnity cover of only £3 million whereas the claim had been variously valued at figures between £10 and £18 million. The choice of purchasing cover over the compulsory minimum sum is a for the law firm concerned. Whether it was wise not to do so when dealing with transactions with a value well in excess of the minimum cover is not a matter for the court.

(2) The claimant joined Mr O’Shea as a defendant and has sought to craft a claim against him with somewhat unpromising material. It is clear that the limitation on liability of £3 million in the LLP’s terms and conditions had not escaped the attention of the claimant’s legal advisers.

  1. Therefore, the LLP was facing a claim well above the limit of its cover and Mr O’Shea was facing a very large claim without any cover to fall back on. Even without Mr O’Shea’s witness statement explaining the effect of the claim on him the worry caused by not knowing whether the claim was being pursued and appeared to have merit would have been obvious.
  2. The court is required to consider whether the effect of a refusal to grant an extension of time is proportionate to the breach. The application seeking an extension was issued promptly and there is no history of a failure to comply with rules and orders. The claimant might wish to point to the need for the application made in the Queen’s Bench Division for delivery up of the LLP’s files as a factor that balances her default. However, even if it were right to bring such a counterbalance into play, which I doubt, the circumstances in which the application was made, and its necessity, are contentious. The defendants say the documents would have been produced without it and it is notable that the only order made by the court was for preservation, not delivery up.
  3. The claimant says that the effect of refusing to grant an extension of time is merely to delay the progress of her claim. It is not subject to limitation and she will be free to issue a new claim although she will have to pay a new court fee. It seems to me in light of her position, the invitation to consider the merits ought not to be resisted, particularly bearing in mind Mr Jones’ acceptance that the claim requires amendment to include a claim against Mr O’Shea in his capacity as ‘quasi-administrator’ (whatever that may mean). If the court comes to the view that this claim lacks merit, the claimant’s ability to issue a new claim is one that militates in favour of refusing the extension, not against it. The claimant would then have an opportunity to consider whether a more focussed claim can be crafted, or whether the reality is that the claimant’s claim lies against Mr Messuti, not these defendants.

THE MASTER’S CONCLUSION

The Master conclude that the merits, or rather lack of merit, in the claimants’ case were an important factor in this case where, normally, relief from sanctions woul dbe granted.

  1. The starting point is that the court is asked to exercise its discretion to extend time. If that decision were to be taken in isolation, and without regard to the factors in CPR 3.9 and the merits of the claim, it is likely the extension would be granted even though the court is asked to approve an extension of time after the period expired. The application was made promptly and the period of the extension is not a long one. If the claimant’s case had real prospects of success at a trial, there would to my mind be a good basis granting the extension.
  2. I am satisfied, however, that the circumstances that arise on the claimant’s application are such that it is right to have regard to the merits of the claim as it is pleaded. The merits of the claim against Mr O’Shea, or rather the lack of merit, are clear without the need for a review of the documents. The chronology of events speaks for itself. To my mind, when considering all the circumstances of the case and whether to grant the extension of time, it is strictly unnecessary to review the merits of the claim against the LLP. In my judgment it is not appropriate for this claim to be permitted to proceed with the claim against Mr O’Shea in its current form. It would not be right to have regard to the possibility that it might be improved by amendment without the claimant having provided any real indication of what the amended claim might look like.
  3. I had some initial concerns about the exercise that has been undertaken in respect of the claim against the LLP. However, it seems to me that the application made by the claimant, made at the very outset of the claim, provides a proper framework for the merits to be reviewed. Importantly, the claimant was put on notice in the clearest terms that the defendants intended to invite the court to review the merits and the claimant was given an ample opportunity to provide all the evidence she wished to rely on. As with the hearing of a Part 24 application, the court is entitled to assume that the respondent has put forwarded its best case. The evidence the claimant and Tindaro produced lacks a focus on the issues as they are pleaded and ignores facts that are inconvenient. For example, the claimant ignores the retainers she signed with the LLP and the express instructions she gave to Mr O’Shea. Tindaro’s statement makes a number of wild allegations that are unrelated to the claim and unhelpfully to his mother’s case says he could not be bothered to read many of the emails from Prince Bahar’s lawyers.
  4. The review of the events that I have summarised earlier in this judgment shows that the claimant gave instructions to Mr O’Shea to sell 21 Harley Street. Her real complaint lies not against Mr O’Shea and the LLP but against Mr Messuti and the way the finances of ACE Ltd and ACE 2 Ltd were operated by him on her behalf. So far as the settlement with Prince Bahar is concerned, her disappointment with its terms have been informed by hindsight. Her claim as it is drafted seeks to impose duties on the LLP that are far outside the normal terms of a solicitor’s retainer.
  5. The defaults that are relied on by the defendants in their application merely bolster the position they have taken on the claimant’s application. They are not sufficient to warrant making an order striking out the claim.
  6. I will dismiss the claimant’s application and grant a declaration that the court has no jurisdiction to try the claim.
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