RELIEF FROM SANCTIONS: LATE SERVICE OF ACKNOWLEDGMENT OF SERVICE: NOT A “SUBSTANTIAL, SERIOUS OR SIGNIFICANT” FAILURE

December 22, 2021 · by · in Avoiding negligence claims, Extensions of time, Relief from sanctions

In Aelf MSN 242, LLC v De Surinaamse Luchtvaart Maatschappij NV DBA Surinam Airways [2021] EWHC 3482 (Comm) Peter MacDonald Eggers QC (sitting as a Deputy High Court Judge) granted a defendant relief from sanctions in relation to late (and then defective) service of the acknowledgement of service.

THE CASE

The defendant company, resident abroad, sought to dispute the jurisdiction of the court.  In order to dispute jurisdiction under Part 11 a defendant has first to file an acknowledgment of service under Part 10. The defendant’s acknowledgment was served late. When it was served it was defective. The court had to grant relief from sanctions in relation to these matters before it could consider the defendant’s substantive application.

THE JUDGMENT ON RELIEF FROM SANCTIONS

The judge found that late service of the acknowledgment of service meant that the defendant required relief from sanctions.  However the defects were not serious nor significant.
    1. CPR rule 11(2) provides that a defendant who wishes to dispute jurisdiction must have filed an acknowledgment of service in accordance with CPR Part 10; in other words, a defendant cannot apply to dispute the Court’s jurisdiction unless the defendant has first filed an acknowledgment of service in accordance with CPR Part 10. An acknowledgment of service which is not served within the time specified in CPR rule 10.3(2)(a) (and CPR rule 6.35) and/or which does not contain an address for service within the United Kingdom as required by CPR rule 10.5(b) therefore is not one which has been filed in accordance with CPR Part 10 as required by CPR rule 11(2).
    1. In these circumstances, the failure of the defendant to comply with CPR Part 10 has the effect of depriving the defendant of the right to apply to challenge the Court’s jurisdiction. Accordingly, in my judgment, an extension of time for the filing of the acknowledgment of service in order to permit the defendant to apply to dispute the Court’s jurisdiction requires the Court to make an order relieving the defendant from sanctions in accordance with CPR rule 3.9.
    1. This conclusion is that drawn by Andrew Baker, J in Cunico Resources FZE v Daskalakis [2018] EWHC 3382 (Comm); [2019] 1 WLR 2881, at para. 94-95 and 115:

“94. I have already said I agree with, and so I am happy to follow, Taylor’s case in deciding that under CPR r 11(2) it is a procedural requirement of an application under CPR r 11(1) to challenge jurisdiction that the defendant first file a timely acknowledgment of service. That means filing either within the time period set under CPR Pt 10 or within an extended period fixed by the court on a successful application (prospective or retrospective) for an extension.

95. Therefore, Mr Daskalakis is not entitled to challenge jurisdiction in the 2018 claim unless he is granted either a retrospective extension of 28 days for filing acknowledgment of service, to cover his lateness in doing so, or relief from sanctions by a waiver of CPR r 11(2) …

115. Mr Choo-Choy accepted that pursuant to the “implied sanction” doctrine, an out-of-time application for an extension of time for filing acknowledgment of service is to be determined by reference to relief from sanctions principles under CPR r 3.9 and Denton v TH White Ltd [2014] 1 WLR 3926 …“

    1. In considering an application for relief from sanctions, the Court undertakes a three-stage inquiry laid down by the Court of Appeal in Denton v TH White Ltd [2014] EWCA Civ 906; [2014] 1 WLR 3296:
(1) First, the Court must identify and assess the seriousness and significance of the “failure to comply with any rule, practice direction or court order“. If the failure is not serious or significant, the Court should generally grant the relief from sanctions, although it should still consider all of the circumstances of the case in the exercise of its discretion.
(2) Second, the Court must consider why the default occurred and the explanation for the default provided.
(3) Third, the Court must evaluate all the circumstances of the case, so as to enable the Court to deal justly with the application including the objectives referred to in CPR rule 3.9(1)(a) and (b).
    1. The first question is whether SLM’s failure to comply with CPR Part 10 in filing its First Acknowledgment and/or Second Acknowledgment was serious or significant failure. In my judgment, it was neither a serious nor a significant failure, because:
(1) SLM sought to file its acknowledgment of service with the Admiralty and Commercial Registry within the time specified by Bryan, J’s order, albeit on the final day of this period.
(2) The acknowledgment of service was rejected by the Court on Friday 25th June 2021 because it was purportedly filed by email and not e-filed. This lapse occurred against a background of SLM not having yet retained English solicitors and the Response Pack required the acknowledgment of service to be returned to the Admiralty and Commercial Registry. The failure to instruct solicitors earlier is a ground of criticism by AELF, but there is no obligation on a defendant to instruct solicitors and in circumstances where it lacks the benefit of legal advice within the forum, it is reasonable – even if possibly misguided – for a defendant to comply with the instructions included in the Response Pack.
(3) Immediately after receiving notification of the rejection, SLM e-filed the First Acknowledgment on Monday 28th June 2021, the next business day.
(4) The First Acknowledgment did not include a physical address within the United Kingdom but did include a physical address in Surinam as well as an email address. Contrary to SLM’s submissions, I consider that this did not comply with CPR rule 6.23, because rule 6.23(2)-(3) requires an address to be specified which is within the United Kingdom; rule 6.23(5)-(6) do not alter this requirement in that rule 6.23(5) requires the fax number to be located at the physical address within the United Kingdom and rule 6.23(6) deems the email address to be at the physical address for service. Indeed, the acknowledgment of service form states that “the business address of your solicitor … or your own residential or business address within the UK …” should be included (although I note that the form does not allow for the third possibility contemplated by CPR rule 6.23(3)). Further, I do not consider that Bryan, J’s order permitting service of the Claim Form, the Particulars of Claim “and any other document in these proceedings” on SLM in Surinam is concerned with the provision of an address for service under CPR rule 6.23, but with the service of originating process (and associated documents), and not with any document in the proceedings, such as all application notices. In addition, this order was not an order for service by an alternative method as contemplated by CPR rule 6.23(8).
(5) Even though the physical and email addresses included in the First Acknowledgment did not comply with CPR rule 6.23, they still provided an effective means by which documents and applications could be served on and communicated to SLM. Indeed, CPR rule 6.23(6) and CPR Practice Direction 6A, paragraph 4.1 contemplate that service at an email address is a permitted method of service on a party to the proceedings.
(6) SLM was not aware of the defect in the First Acknowledgment in not including a physical address within the United Kingdom until 22nd July 2021 (see Part C of SLM’s application for an extension of time to file an acknowledgment of service and relief from sanctions). SLM then issued its Second Acknowledgment, curing this defect, on 26th July 2021.
(7) There is no delay comparable to the delays of 64 days and 28 days, which were regarded as serious or significant, respectively in Taylor v Giovani Developers Ltd [2015] EWHC 328 (Comm), para. 20 and Cunico Resources FZE v Daskalakis [2018] EWHC 3382 (Comm); [2019] 1 WLR 2881, para. 116(i). The First Acknowledgment was filed on the first business day after the expiry of the 22 day period allowed for filing of the acknowledgment of service and the Second Acknowledgment was filed four days after SLM became aware of the defect in the First Acknowledgment.
    1. I cannot regard the steps taken by SLM as a substantial, serious or significant failure on the part of SLM to comply with the Civil Procedure Rules. At all stages, SLM sought to comply with the requirements of the Civil Procedure Rules, but was defeated either by the lack of advice from English solicitors or forgivable errors which did not have a substantial impact.
    1. Ms Brown QC submitted that I should take into account the fact that the grounds of SLM’s jurisdiction challenge (based on section 12 of the State Immunity Act 1978) are without merit in disposing of the application for an extension of time and relief from sanctions. In the circumstances of this case, I do not consider that I should accede to this invitation. This is for two related reasons. First, SLM did not attend the hearing with a view to arguing the application of section 12 of the 1978 Act. Second, Henshaw, J directed that only one aspect of the jurisdiction challenge be determined at this hearing, namely whether SLM has submitted to the jurisdiction. This meant that section 12 would not be the subject of argument at this hearing. In these circumstances, I think it would be unfair to take into account the merits of the argument based on section 12 in connection with the extension and relief from sanctions application. I should add even if AELF is correct that the argument based on section 12 is likely to be or is without merit, I would still have acceded to the application for an extension of time and relief from sanctions, given that SLM’s failure to comply with the relevant rule was both insignificant and forgivable.
  1. Having regard to all of the circumstances of the case including the factors referred to in CPR rule 3.9(1), and the circumstances by which SLM found itself in its current predicament, I have no hesitation in granting SLM’s application for an extension of time for the filing of its acknowledgment of service to 26th July 2021 and relief from sanctions.
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