QUEEN'S BENCH DIVISION
Fetter Lane, London, EC4A 1NL
B e f o r e :
|YA II PN LTD||Claimant|
|FRONTERA RESOURCES CORPORATION||Defendant|
Laurence Emmett QC (instructed by Haynes and Boone CDG, LLP) for the Defendant
Hearing date: 11 May 2021
Crown Copyright ©
Mr Justice Butcher:
"1. The Claimant has permission to serve the Claim Form, Particulars of Claim and any other document in these proceedings on the Defendant at its business address at 3040 Post Oak Boulevard, Suite 110, Houston TX 77056, USA (the "USA Address") and its registered address at Maples Corporate Services Limited, P.O. Box 309, Ugland House, South Church Street, George Town, Cayman Islands (the "Caymans Address").
2. In respect of the USA Address, the Defendant has (1) 22 days after the service of the Particulars of Claim to file an acknowledgment of service under CPR Part 10 and/or an admission under CPR Part 14; or (2) 22 days after service of the Particulars of Claim to file a Defence or 36 days after service of the Particulars of Claim to file a Defence, where the Defendant has filed an acknowledgment of service.
3. In respect of the Caymans Address, the Defendant has: (3) 31 days after service of the Particulars of Claim to file an acknowledgment of service under CPR Part 10 and/or an admission under CPR Part 14; or (4) 31 days after service of the Particulars of Claim to file a Defence or 45 days after service of the Particulars of Claim to file a Defence, where the Defendant has filed an acknowledgment of service."
(1) On 6 February 2020 an authorised process server attempted to serve Frontera at the Texas Address stated in my order of 15 January 2020. When the process server arrived, the doors were locked and there was a notice on the door saying that the landlord had changed the locks as the tenant had not paid the rent.
(2) Following that, YA II's US counsel obtained Frontera's public filings, which stated that Mr Zaza Mamulaishvili was Frontera's CEO and Mr Gerard Bono was Frontera's Vice President. In reliance on those filings, an authorised process server attempted to serve Mr Mamulaishvili at 355 Tynebridge Lane, Houston, Texas, USA, on 17 February 2020. The process server was told that Mr Mamulaishvili did not reside there. On 19 February 2020, an authorised process server sought to serve Mr Mamulaishvili at 3102 Newcastle Drive, Houston, Texas. The process server was told that though Mr Mamulaishvili owned the house, he did not reside there and was rarely present.
(3) On 2 March 2020, an authorised process server personally served the Claim Form on Mr Gerard Bono at 10819 Cranbrook Road, Houston, Texas, USA. Mr Bono was not by that time an officer of Frontera but its public filings had not been kept up to date. It is not in issue that on 2 March 2020, Mr Bono received a pack of documents, nor that, on 6 March 2020 Mr Bono informed Mr Steve Nicandros, CEO of Frontera, as to what had happened. On that latter date, Mr Bono sent Mr Nicandros a text saying "Steve, i was served documents related to the attached last week. I am almost sure you have this but just in case in a slim chance you dont i wanted you to be aware of this. There is a deadline to respond." The "attached" was a photo of the cover-page, which said it was a "Citation". The "Citation" is headed with the title to the English proceedings, in a format that falls somewhere between the traditional English and US styles of heading. It then said that it was "Directed To":
"Frontera Resources Corporation
Steve C. Nicandros
Non-Executive Chairman and
3040 Post Oak Blvd., Suite 1100
Houston, Texas, 77056"
This was followed by the following text:
"YOU HAVE BEEN SUED. YOU MAY EMPLOY AN ATTORNEY. IF YOU OR YOUR ATTORNEY DO NOT FILE A WRITTEN ANSWER BEFORE MR JUSTICE BETCHER WITHIN 22 DAYS AFTER SERVICE OF THE PARTICULARS OF CLAIM TO FILE AN ACKNOWLEDGEMENT OF SERVICE UNER CPR PART 10, AND/OR AN ADMISSION UNDER CPR PART 14, OR 22 DAYS OF SERVICE OF THE PARTICULARS OF THE CLAIM TO FILE A DEFENCE OR 36 DAYS AFTER SERVICE OF THE PARTICULARS OF CLAIM TO FILE A DEFENSE WHERE THE DEFENDANT HAS FILE AN ACKNOWLEDGMENT OF SERVICE." (sic)
Mr Nicandros responded, "Jerry…Thanks for sending this. I had not seen/received it. Sorry it darkened your doorstep. When did you receive?"
(4) In the evening of 2 March 2020, YA II's process server in the USA produced a "Return of Service". It stated that:
"ON Monday, March 2, 2020 AT 6:30 PM, I, Jayme Chacon, PERSONALLY DELIVERED THE ABOVE-NAMED DOCUMENTS TO: FRONTERA RESOUCES CORPORATION C/O GERARD BONO, 10819 CRANKBROOK RD, HOUSTON, HARRIS COUNTY, TX 77042." (sic)
"In accordance with the Order of Mr Justice Butcher dated 15 January 2020 and pursuant to Sec 5.251 of the Texas Business Organizations Code permitting service of a corporation via any of its vice presidents, the documents were personally served on Gerard Bono. Return of Service is attached."
"(1) The claimant may obtain judgment in default of an acknowledgment of service only if at the date on which the judgment is entered –
(a) The defendant has not filed an acknowledgment of service or a defence to the claim (or any part of the claim); and
(b) The relevant time for doing so has expired. …"
"The court must set aside a judgment entered under Part 12 if judgment was wrongly entered because –
(a) In the case of a judgment in default of an acknowledgment of service, any of the conditions in rule 12.3(1) and 12.3(3) was not satisfied …"
Was there valid service?
(1) That the order of 15 January 2020 only gave permission to serve at specified addresses. Service was not effected, and is not said to have been effected, at either.
(2) There was no valid service in accordance with the relevant US law, whether that law was federal or Texas law.
Frontera's case is that, if the court concluded that (1) applied, then there would be no need to consider (2); but that even if (1) were not applicable, there was no good service because of (2). I will accordingly take the two points in turn.
"1. the claimant has permission to serve the claim form on (party) at (address at which party is to be served) or elsewhere in (country in which service is to be effected)…." (bold emphasis added)
In the present case, the order did not include the words "or elsewhere in…", or any equivalent thereof, and was confined to the specified addresses. Furthermore, in paragraphs 2 and 3 of the order, the time for acknowledgment of service was related to service at the identified addresses. Frontera pointed out, correctly, that, on any view, service had not been effected, and it was not contended by YA II that it had been effected, at either of the identified addresses. Accordingly, Frontera argued, service was not in accordance with the order of 15 January 2020 and was irregular.
"(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 –
(c) by any other method permitted by the law of the country in which it is to be served."
YA II's argument was that if there was service by a method permitted by the relevant US law, though at an address different from that specified in the order of 15 January 2020, that would be good service in accordance with CPR 6.40(3)(c). I do not accept that submission. CPR 6.40(3)(c) is subject to any restrictions or limitations which may be imposed by the order. If a place for service has been specified, CPR 6.40(3)(c) does not allow service at another place. If YA II's argument were correct, then an order which had the "or elsewhere in…" wording, and one which did not, would have exactly the same effect, and those words would be unnecessary surplusage. To my mind that is not how the words of formal orders of the court should be understood.
19. Little in the way of authority was cited on this point. The decision in McCulloch v Bank of Nova Scotia  EWHC 790 (Ch), appears to have proceeded on the basis that, in a case in which the order for service out specified an address for service and did not include the "or elsewhere in…" wording, then in the absence of the agreement between the parties that there could be service elsewhere, there would not have been valid service: see paragraphs 10, 30. The point was not, however, decided.
20. Nor was there any decision on the point in Abela v Baadarani  1 WLR 2043. In that case, again, the order for service out specified that the Claim Form could be served out of the jurisdiction on the defendant at a specified address in Lebanon and had not included the "or elsewhere in…" wording. The documents were in fact sent to a lawyer working in Lebanon, who had a power of attorney from the defendant, at an address different from that specified in the order. It is apparent from the judgment of Longmore LJ in the Court of Appeal  EWCA Civ 1571, paragraph 10(1), that it was accepted by the claimant that service on the lawyer was not authorised by the order granting permission to serve out. In the Supreme Court, there was no dispute that that service had not been in accordance with the order for service out, nor that that service had not been good service in accordance with Lebanese law: see paragraph 8. Paragraph 32 of Lord Clarke's judgment was concerned simply to dismiss the notion, which the Court of Appeal had appeared to espouse, that there could only be an order deeming there to have been good service if the judge was satisfied that the method of service was permitted by local law. When Lord Clarke said that "there would have been no need for the declaration", it is to my mind clear that he was considering only whether a declaration was necessary based on the method of service (on the attorney) and not on whether service had been rendered at a place other than specified in the order.
21. I do not regard my conclusion on this first point as unduly technical or narrow. There is no difficulty in avoiding the problem. It is only because the order sought and granted in this case was not in the standard PF 6B form that the issue arises. Furthermore, even without the "or elsewhere in…" wording, if the Claim Form was delivered to the defendant at another address within the relevant country then the court can, if there is good reason, make an order under CPR 6.15 retrospectively validating the service which was made. Those considerations seem to me to militate against giving to the order in this case, or similarly worded orders, an interpretation or effect other than that dictated by their terms.
(1) The first issue debated was as to what had to be shown. It was not in issue that it was for YA II to show that there had been valid service, but there was an issue as to the standard of proof. YA II's case was that it had to show a good arguable case that there had been valid service; Frontera's case was that YA II had to show it on the balance of probabilities.
(2) The second was as to whether the relevant law was state (Texas) or federal law.
(3) The third was whether there was valid service in accordance with whichever law was applicable.
33. I will consider first state law. In this regard, it appeared to be common ground between the experts that the requirements of Texas law as to what constituted valid service were stricter than under federal law. Ms Poll cited what was said by the Texas Supreme Court in the case of Spanton v Bellah, 612 S.W.3d 314, 316-17 (Tex. 2020): "We indulge no presumptions in favor of valid issuance, service, or return of citation… Service of process that does not strictly comply with the rules' requirements is 'invalid and of no effect'". I nevertheless understood Ms Poll to agree with Mr Haratsis that even under Texas law there did not need to be "obeisance to the minutest detail" in order for service to be valid (see Poll report paragraph 39).
(1) The Citation did not contain the required admonishment that failure to answer could result in a default judgment, as required by Texas Rules of Civil Procedure ('TRCP'), Rule 99.
(2) That the service deviated from the order of this court of 15 January 2020;
(3) That the Return deviated from the name and address in the Citation, in that the Citation required service on Mr Nicandros and the Return referred to service on Mr Bono;
(4) That the street name in the Return does not exist, in that it referred to "Crankbrook Ave" rather than "Cranbrook Ave"; and
(5) The Return did not identify Mr Bono as an authorized representative of Frontera for service purposes.
"You have been sued. You may employ an attorney. If you or your attorney do not file a written answer with the clerk who issued this citation by 10.00 a.m. on the Monday next following the expiration of twenty days after you were served this citation and petition, a default judgment may be taken against you."
38. Secondly, under TRCP 106(a), service may be in accordance with that rule "unless… an order of the court otherwise directs". Ms Poll's evidence is that this court's order of 15 January 2020 would count as a relevant order for these purposes, and that there was clear non-compliance because service was not at the US address specified in that that order. Mr Haratsis does not apparently dispute that this court's order is a relevant order (Haratsis 2, paragraph 17). It appears reasonable to suppose that this court's order of 15 January 2020 should so count, given that the Citation is itself clearly seeking to embody parts of that order (and uses the Commercial Court's reference number, specifies my name, identifies the US address included in that order, and takes the time period of 22 days from that order).
YA II's cross application
"(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."
"8. The Civil Procedure Rules contain a number of provisions empowering the court to waive compliance with procedural conditions or the ordinary consequences of non-compliance. The most significant is to be found in CPR 3.9, which confers a power to relieve a litigant from any "sanctions" imposed for failure to comply with a rule, practice direction or court order. These powers are conferred in wholly general terms, although there is a substantial body of case law on the manner in which they should be exercised: see, in particular, Denton v TH White Ltd (De Laval Ltd, Part 20 defendant) (Practice Note)  1 WLR 3926 (CA), esp at para 40 (Lord Dyson MR and Vos LJ), Global Torch Ltd v Apex Global Management Ltd (No 2)  1 WLR 4495 (SC(E)). The short point to be made about them is that there is a disciplinary factor in the decision whether to impose or relieve from sanctions for non-compliance with rules or orders of the court, which has become increasingly significant in recent years with the growing pressure of business in the courts. CPR rule 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 the service of evidence, impose a duty. They are simply conditions on which the court will take cognisance of the matter at all. Although the court may dispense with service altogether or make interlocutory orders before it has happened if necessary, as a general rule service of originating process is the act by which the defendant is subjected to the court's jurisdiction.
9. 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. This court recently considered the question in Abela v Baadarani  1 WLR 2043. That case was very different from the present one. The defendant, who was outside the jurisdiction, had deliberately obstructed service by declining to disclose an address at which service could be effected in accordance with the rules. But the judgment of Lord Clarke of Stone-cum-Ebony JSC, with which the rest of the court agreed, is authority for the following principles of more general application:
(1) The test is whether, "in all the circumstances, there is good reason to order that steps taken to bring the claim form to the attention of the defendant is good service" (para 33).
(2) Service has a number of purposes, but the most important is to ensure that the contents of the document are brought to the attention of the person to be served (para 37). This is therefore a "critical factor". However, "the mere fact that the defendant learned of the existence and content of the claim form cannot, without more, constitute a good reason to make an order under rule 6.15(2)" (para 36).
(3) The question is whether there is good reason for the Court to validate the mode of service used, not whether the claimant had good reason to choose that mode.
(4) Endorsing the view of the editors of Civil Procedure (2013), vol i, para 6.15.5, Lord Clarke pointed out that the introduction of a power retrospectively to validate the non-compliant service of a claim form was a response to the decision of the Court of Appeal in Elmes v Hygrade Food Products plc  EWCA Civ 121; (2001) CP Rep 71 that no such power existed under the rules as they then stood. The object was to open up the possibility that in appropriate cases a claimant may be enabled to escape the consequences for limitation when a claim form expires without having been validly served.
10. This is not a complete statement of the principles on which the power under CPR rule 6.15(2) will be exercised. The facts are too varied to permit such a thing, and attempts to codify this jurisdiction are liable to ossify it in a way that is probably undesirable. But so far as they go, I see no reason to modify the view that this court took on any of these points in Abela v Baadarani. Nor have we been invited by the parties to do so. In the generality of cases, the main relevant factors are likely to be (i) whether the claimant has taken reasonable steps to effect service in accordance with the rules and (ii) whether the defendant or his solicitor was aware of the contents of the claim form at the time when it expired, and, I would add, (iii) what if any prejudice the defendant would suffer by the retrospective validation of a non-compliant service of the claim form, bearing in mind what he knew about its contents. None of these factors can be regarded as decisive in themselves. The weight to be attached to them will vary with all the circumstances."
"If one party or the other is playing technical games, this will count against him … This is because the most important function of service is to ensure that the content of the document served is brought to the attention of the defendant… The strength of this factor will depend upon the circumstances in which such knowledge is gained. It will be strongest where it has occurred through what the defendant knows to be an attempt at formal service. It may be weaker or even non-existent where the contents of the claim form become known through other means…"
"(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 , Cecil at , .
(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 . 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  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 -; Lord Clarke at paragraphs  and  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 ); 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  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 .
This was approved by the Court of Appeal in that case:  EWCA Civ 1093, at paragraphs 32-33, where Longmore LJ said that "special circumstances" were required to justify validating a method of service to which a Hague Convention country had not consented.
(1) The Claim Form, and accompanying documents were delivered to Mr Bono, and he brought them promptly to Mr Nicandros's attention. Mr Bono warned that a response was required. Frontera, by Mr Nicandros, had been made fully aware of the Claim Form, its nature and contents, by early March 2020, and knew that there had been an attempt at formal service.
(2) The reason why personal service was not effected on a current officer of Frontera, but rather on Mr Bono, who had ceased to be such at the time of service, was because Frontera had not updated its public filings, as it should have done, and because none of the addresses provided for Mr Mamulaishvili was his current address. The address provided for Mr Nicandros in Frontera's public filings was Frontera's office address, which had been found locked.
(3) The method of service is one which is permitted under the Hague Convention. Although there were defects in the way in which it was effected, it was an attempt at "service of judicial documents directly through the judicial officers, officials or other competent persons of the State of destination", which is allowed for under Article 10 of the Convention.
(4) No prejudice will be caused to Frontera by the retrospective validation of service. This is not, for example, a case in which any question of limitation arises.
What is the consequence for the default judgment?
"If a defendant has never become under a valid obligation to acknowledge service, either as specified under the rules or by order of the court, I do not see how it can be that a judgment can be entered against him in default of such acknowledgment. He is simply not in default at all."
"In those circumstances where, ex hypothesi, a defendant cannot know that he has been validly served, to deprive him thereafter of any period during which he can acknowledge service in the usual way seems to me unfair and unjust. In effect it denies a defendant part of the due process involving the ability to contest a claim once the claimant has established, through a CPR 6.15(2) order, that the mechanism requiring him to respond if he is to contest the claim has been triggered."
(1) I find that the service when initially effected on Mr Bono on 2 March 2020 was invalid;
(2) That service is retrospectively validated under CPR 6.15;
(3) Judgment in default is set aside; and
(4) The period for filing an acknowledgment of service will be 7 days from the date of the hand down of this judgment.