England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Rolls Building, London, EC4A 1NL
		26/06/2014

Mr Justice David Richards :

1. There are two applications before the court. First, the first defendant applies for a declaration that the purported service of a claim form dated 7 August 2013 and the accompanying particulars of claim on 20 January 2014 was not valid and for an order dismissing the proceedings as against the first defendant. The claimant opposes this application, submitting that the claim form was duly served on 20 January 2014. The second application is made by the claimant in the event that service of the claim form was not duly effected. In that event, the claimant applies either for an extension of time under CPR 7.6(3) to comply with the rules for serving the claim form on the first defendant or for an order under CPR 6.15(2) that the steps already taken are sufficient to have brought the claim form to the attention of the first defendant.
2. A claim form is valid for service within the jurisdiction for 4 months after the date of its issue or, if it is to be served out of the jurisdiction, for 6 months after the date of issue. This is the effect of CPR 7.5 which provides (omitting the table in 7.5(1)):

"(1) Where the claim form is served within the jurisdiction, the claimant must complete the step required by the following table in relation to the particular method of service chosen, before 12.00 midnight on the calendar day four months after the date of issue of the claim form.

(2) Where the claim form is to be served out of the jurisdiction, the claim form must be served in accordance with Section IV of Part 6 within 6 months of the date of issue."

3. The problem in the present case arises in this way. Although the claim form was issued on 7 August 2013, no attempt had been made to serve it on any of the defendants by December 2013 when there was a change in solicitors acting for the claimant. The claim form gave two addresses for the first defendant, an individual, one in Switzerland and one in London. The claimant's evidence is that it understood that the Swiss address was the first defendant's residential address and the London address was his office address. The claimant's new solicitors "had doubts" (correctly) that an office address would be a valid address for service and considered that he ought to be served at the Swiss address. In fact, the first defendant was resident in London and had been since about January 2011. He had resided at the Swiss address for two years or so but moved back to the London flat where he had previously resided for over 20 years. Therefore, at all times from the issue of the claim form, the first defendant resided in England, not Switzerland.
4. On or about 9 January 2014 the first defendant received from the court a copy of an order giving permission for service out of the jurisdiction of the claim form on three defendants with addresses in the United States. He instructed solicitors, Dechert LLP, who wrote to the claimant's solicitors, informing them of his residential address in London and stating that they had instructions to accept service on his behalf. The claimant's solicitors sent the claim form by way of service to the first defendant's solicitors. They raised objections to its late service, on the grounds that no steps to serve it had been taken within the period of four months allowed by CPR 7.5(1).
5. The issues are therefore, first, whether service of the claim form was duly effected within the time limits prescribed by CPR 7.5 and, if not, whether the court can and in its discretion should exercise powers under CPR 7.6(3) or 6.15(2) so as to make effective the service of the claim form on the first defendant's solicitors in January 2014.
6. The claimant is American Leisure Group Limited, a company incorporated in the British Virgin Islands. On or about 13 August 2007, the claimant issued ordinary shares by way of a placing to institutional and other investors and all its ordinary shares were admitted to trading on the Alternative Investment Market operated by the London Stock Exchange. Proceedings have been commenced in Florida against, amongst others, the claimant seeking damages in respect of investments made as a result of what are alleged to have been misrepresentations concerning the financial position of the claimant contained in the offering documents. The claimant is defending the proceedings in Florida and denies the allegations made but has issued the present proceedings for damages or compensation by way of indemnity against any liability that may be established in the Florida proceedings. The first to sixth defendants were directors of the claimant at the time of the public offering and the seventh defendant was a consultant to the claimant, providing services in relation to the offering. The claim is that, if the offering documents contained misrepresentations, the defendants were in breach of fiduciary and other duties in causing those documents to be issued.
7. It is likely to be argued that the limitation period for the claims made in the English proceedings was six years ending in August 2013.
8. The claim form issued on 7 August 2013 gives, as required by the rules, addresses for each of the defendants at which he may be served: CPR 6.6(2). The addresses for the second to fourth and seventh defendants are outside England and Wales, three being in the United States and the other in Switzerland. The addresses given for the fifth and sixth defendants are in England. Unusually, as mentioned above, two addresses were given for the first defendant.
9. The claim form was stamped "Not for service out of the jurisdiction". Permission under CPR 6.36 would be required for service of the claim form in the United States. As the English court has power to determine the claim under the Lugano Convention and as Switzerland is a party to the Lugano Convention, permission was not required to serve the claim form in Switzerland. However, in those circumstances, CPR 6.34 applies, which provides:

"(1) Where the claimant intends to serve a claim form on a defendant under rule 6.32 or 6.33, the claimant must –

(a) file with the claim form a notice containing a statement of the grounds on which the claimant is entitled to serve the claim form out of the jurisdiction; and

(b) serve a copy of that notice with the claim form.

(2) Where the claimant fails to file with the claim form a copy of the notice referred to in paragraph (1)(a), the claim form may only be served –

(a) once the claimant files the notice; or

(b) if the court gives permission. "

In this case, the claimant did not file with the claim form a notice in accordance with CPR 6.34(1)(a) and so would have to comply with CPR 6.34(2) before the claim form could be served in Switzerland. Accordingly, even leaving aside those defendants with addresses in the United States, the claim form was correctly stamped "Not for service out of the jurisdiction" when it was issued.

10. Unless personal service was effected, the correct place for service of the claim form on the first defendant, as an individual, was his "usual or last known residence": CPR 6.9(2). The address in Switzerland was given as one of two addresses for the first defendant because his letter of resignation as a director of the claimant dated 29 January 2009 gave it as his address. The first defendant was at that time residing in Switzerland and it was his last communication to the claimant. The address in London was given because communications had in the past been sent to him or received from him at that address.
11. On 16 December 2013 the claimant applied for permission to serve the claim form on those defendants with addresses in the United States. Permission was granted by an order made on 3 January 2014. The order was sealed on 7 January 2014 and copies were sent by post by the court to the defendants, including the first defendant at the London address provided for him in the claim form. The first defendant first learnt that the claimant had brought proceedings against the former directors on or about 10 or 11 December 2013 in the course of a conversation with the fifth defendant, who had been served in England on 7 December 2013. The first defendant does not believe that he was then aware that he himself had been made a party to those proceedings but he nonetheless spoke to Dechert on or about 10 or 11 December 2013 with a view to their possible retainer as his solicitors. On 19 December 2013 Dechert was sent a copy of the claim form which had been served on the fifth defendant and a copy of the particulars of claim in the context of considering whether they might be instructed by the fifth defendant. Dechert did not send these documents or discuss their contents with the first defendant at that time. He was admitted to hospital for some serious heart procedures on 19 December 2013 and remained in hospital for several days. He is 75 years old and has suffered a number of health problems in recent years. Mr Andrew Hearn, a partner with Dechert, had telephone discussions with the first defendant on 6 January 2014. Mr Hearn believes that it likely that he told the first defendant that he had seen the claim form and the particulars of claim, that the first defendant was named as a defendant and that the addresses given for him in the claim form were the London and Swiss addresses.
12. Immediately following receipt of the order dated 3 January 2014 from the court on about 9 January 2014, the first defendant instructed Dechert to act for him. On 15 January 2014 they wrote to the claimant's solicitors, informing them that the first defendant had received the order and stating that he had not yet been served but was resident at an address in London and further stating that Dechert were instructed to accept service.
13. The claimant's solicitors responded by a letter dated 16 January 2014, stating that they "were about to arrange service on your client in Switzerland under the Lugano Convention" and enclosing the claim form by way of service. The letter was sent by DX and the deemed date of service was 20 January 2014. The claimant's solicitors stated that "We appreciate the requirement to have written a pre-action protocol letter of claim but protective proceedings had to be issued as a result of a possible limitation issue". They suggested that the first defendant should acknowledge service and agree to stay the proceedings pending the outcome of the proceedings in Florida.
14. Dechert wrote to the claimant's solicitors, disputing that the claim form had been validly served and carefully setting out their reasons. They pointed out that the claim form could not have been served in Switzerland because the first defendant had not lived there for some 3 years and that no attempt had been made to serve or contact him at the address in London given in the claim form or, it appeared, to make any enquiries as to current place of residence.
15. On 22 January 2014 the claimant filed form N510 pursuant to CPR 6.34(2)(a). On 3 February 2014, the claimant sent the claim form by FedEx addressed to the first defendant at the address in Switzerland stated in the claim form. The tracking report contains the entry for 5 February 2014 "Delivery exception. Incorrect address – recipient moved". In light of Dechert's earlier letters, this result cannot have come as a surprise to the claimant or its solicitors.
16. On 11 February 2014 the first defendant issued the application for a declaration that the claim form had not been validly served.
17. The first defendant submits that time for service of the claim form on him is governed by CPR 7.5(1). The claim form was, or was purported to be, served on his solicitors within the jurisdiction but the claimant took none of the steps required by CPR 7.5(1) within the period of 4 months after the date of issue of the claim form allowed by that provision. It was not therefore validly served and the first defendant is entitled to a declaration to that effect and to an order for the dismissal of the proceedings as against him.
18. The claimant submits that the case is governed by CPR 7.5(2). It submits that the claim form was "to be served out of the jurisdiction" and therefore service could validly be effected within 6 months after the date of its issue. This was duly achieved by sending it to Dechert, who had instructions to accept service. The claimant's case is that, provided that the claim form was one which was to be served out of the jurisdiction, the time for service was 6 months from the date of issue, whether within or out of the jurisdiction. Although the claim form had been stamped "Not for service out of the jurisdiction", it was properly to be regarded as one to be served out of the jurisdiction because one of the addresses given for the first defendant was in Switzerland. Service will still be in time under CPR 7.5(2) in cases where the requisite pre-conditions to service out of the jurisdiction, such as filing a notice under CPR 6.34(2) or obtaining permission to serve out of the jurisdiction, are not satisfied until after the expiry of 4 months from the date of issue of the claim form. This would be so even if the address given in the claim form was originally within the jurisdiction. Although such a claim form is no longer valid for service under CPR 7.5(1), it is nonetheless possible "to breathe new life into a claim form after the four month period": National Bank of Greece SA v Outhwaite [2001] CLC 591 at [41]-[46].
19. In my judgment, the claimant's submission cannot be sustained. CPR 7.5(2) is not concerned with, and does not permit, service of a claim form within the jurisdiction. It requires service of the claim form in accordance with Section IV of Part 6 within 6 months of the date of issue. Section IV of Part 6 is concerned exclusively with service out of the jurisdiction. A claim form is served in accordance with Section IV only if it is served out of the jurisdiction. The scheme of CPR 7.5 is clear. Paragraph (1) is concerned with the service of a claim form within the jurisdiction and paragraph (2) is concerned with its service out of the jurisdiction. This is made clear not only by the words in 7.5(2) to which I have drawn attention but also by the opening words of 7.5(1), "[w]here the claim form is served within the jurisdiction…".
20. Mr Sinclair, appearing for the claimant, sought to meet this point by reliance on CPR 6.40(3)(c) which permits service "by any other method permitted by the law of the country in which it is to be served". As the claim form was to be served in England on the first defendant's solicitors, Mr Sinclair submitted that such service was a method permitted by the law of England. This submission ignores that CPR 6.40(1) provides that the rule "contains general provisions about the method of service of a claim form or other document on a party out of the jurisdiction" and that paragraph (3) begins "Where a party wishes to serve a claim form or other document on a party out of the United Kingdom it may be served…". It is, in my view, clear that this provision is concerned exclusively with service out of the jurisdiction and cannot assist the claimant in this case.
21. It follows, for these reasons, that the claim form was not served within the time limit imposed by CPR 7.5. It is therefore necessary to turn to the application made by the claimant.
22. The claimant seeks an order under CPR 7.6(3) for an extension of time to comply with the rules for serving the claim form on the first defendant. It is right to see that provision in the context of the whole of CPR 7.6 which provides:

"(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.

(4) An application for an order extending the time for compliance with rule 7.5 –

(a) must be supported by evidence; and

(b) may be made without notice."

23. As the claimant's application is made outside the period specified by CPR 7.5 for service of the claim form, an order to extend the time for compliance with that provision may be made only if, in this case, the claimant satisfies the requirements of sub-paragraphs (b) and (c) of 7.6(3).
24. Taking first the requirement of CPR 7.6(3)(b), that it has taken all reasonable steps to comply with rule 7.5 but has been unable to do so, the claimant submits that it was entitled to give the first defendant's Swiss address as his address for service in the claim form and to proceed on the basis that it was his address for service, because it was the last address from which it had received any communication from the first defendant. Although his letter of appointment as the non-executive chairman of the claimant dated 8 August 2007 was addressed to him at the flat in London which was then, and is now, his residential address, his letter of resignation dated 29 January 2009 gave his address in Switzerland. I was also informed that his Swiss address was stated in the claimant's register of directors. In those circumstances, it is submitted that the claimant was entitled to treat his Swiss address as his last known address and to proceed on the basis that service was to be effected at that address. Although CPR 6.9(3) requires a claimant who has reason to believe that a defendant's last known residence is not an address at which he any longer resides to take reasonable steps to ascertain his current residence, it was submitted that this provision did not apply in the present case because the claimant did not have reason to believe that the Swiss address had ceased to be the first defendant's residence.
25. I am unable to accept this submission. The fact that the claimant included, unusually, not only the Swiss address but the London address in the claim form indicates that there was doubt or concern on the part of the claimant as to where the first defendant should be served. Mr Cohen QC, appearing for the first defendant, demonstrated that the most elementary enquiries would have revealed that the first defendant was resident in London, not Switzerland. An enquiry made of the first defendant at the London address would have disclosed this fact, as shown by what occurred following receipt at that address of the order giving permission to serve the claim form out of the jurisdiction on those defendants resident in the United States. Moreover, simple enquiries made by a solicitor on his computer, such as a search on the Companies House website or on one of the easily accessible commercial websites for tracking addresses, would immediately have disclosed the current residential address of the first defendant in London. In circumstances where the claimant has actually given an address within the jurisdiction on the claim form and where simple enquiries would elicit whether he was or was not currently resident within the jurisdiction, but no such steps have been taken, the claimant is in my judgment unable to establish that it has taken all reasonable steps to comply with CPR 7.5 as required by 7.6(3)(b).
26. Further, no attempt at all had been made to serve the claim form on the first defendant by 15 January 2014. If the claim form was to be served in Switzerland, it would have to be effected under the Hague Service Convention and Switzerland requires service via the respective Central Authorities. This can take a considerable time. Mr Cohen informed me that enquiries made of the Foreign Process Section at the Royal Courts of Justice indicated that service in Switzerland would take approximately 2 months and that if the process for service had commenced on 15 January 2014 it was highly unlikely that it would be completed by 7 February 2014. Mr Sinclair did not dispute this but suggested that in that event an application would have been made under CPR 7.6 for an extension of time for service.
27. The fact that under CPR 7.5 service is valid if made within 4 or 6 months does not mean that a claimant may with impunity leave to a late stage in the relevant period attempts to effect service. If the claimant had taken reasonably prompt steps to effect service on the first defendant even in Switzerland following the issue of the claim form, it is likely that it would have become apparent that the first defendant no longer resided in Switzerland, and that he in fact resided in London. Mr Hearn stated in his witness statement that it appeared from the letter dated 16 January 2014 from the claimant's solicitors that "the decision not to contact Sir David in any of the ways listed above was a deliberate and tactical one to abstain from serving what they described as protective proceedings issued to avoid a limitation issue." In his witness statement, the claimant's solicitor does not deal at all with this and gives no explanation as to why no steps were taken to effect service on the first defendant until January 2014.
28. Accordingly, I consider that the claimant has not shown that it took all reasonable steps to comply with CPR 7.5, and so an order for the extension of time under 7.6(3) cannot be made in its favour.
29. Mr Cohen further submitted that the claimant was unable to satisfy the requirement of sub-paragraph (c), that the claimant had acted promptly in making the application. He pointed out that the application was not issued until 1 April 2014, well over 2 months after the first defendant's solicitors had objected to the service of the claim form and nearly 2 months after the first defendant's application declaring service to have been invalid. I would not reject the claimant's application on this ground. I accept the submission of Mr Sinclair that the claimant understood that it had a good case under CPR 7.5 and that its application under 7.6 was issued only as an alternative measure in the event that it failed as regards the correct application of 7.5. The issue of the claimant's application on 1 April 2014 did not result in any delay in determining the issue of service.
30. The claimant's alternative application is made under CPR 6.15 which makes provision for the following orders:

"(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."

31. In my judgment, CPR 6.15 is not in point in the circumstances of the present case. It is concerned with permitting service by a method or at a place not otherwise permitted by Part 6. The present case is not concerned with either the method by which or the place at which service was effected, both of which were in accordance with the express provisions of Part 6. The issue is the time at which service was effected which, as appears above, is governed by CPR 7.5 with the power to extend time being conferred by CPR 7.6. CPR 6.15 is not a means by which time can be extended, and would certainly not be a means by which time could be extended where it has been or would be refused under CPR 7.6.
32. As is common on applications of this sort, the claimant submitted that success for the first defendant would produce a windfall for him and reward the playing of technical games. In my view, neither of these points is accurate or fair. The first official notification of these proceedings received by the first defendant was the copy of the order for service out of the jurisdiction in January 2014. He promptly took steps to engage with the proceedings. The present situation has occurred only because the claimant took no steps to effect service of the proceedings on the first defendant for over five months. There is nothing technical about a defendant insisting on service of a claim form within the period for its validity set down in the Rules and resisting an extension of that time when it is not justified on the facts. It is as well to bear in mind the observation of May LJ in Vinos v Marks & Spencer [2001] 3 All ER 784 at [20] that:

"There is nothing unjust in a system which says that, if you leave issuing proceedings to the last moment and then do not comply with this particular time requirement and do not satisfy the conditions in r 7.6(3), your claim is lost and a new claim will be statute barred."

I say nothing as to whether new proceedings against the first defendant would be statute-barred but, if they are, the responsibility for the claimant's inability to pursue a claim against the first defendant would not lie with him.

33. I will therefore dismiss the claimant's application dated 1 April 2014 and make a declaration on the first defendant's application that the purported service of the claim form and accompanying particulars of claim on the first defendant in January 2014 was not valid, together with such further orders as are appropriate. I will invite counsel to agree the terms of an order, if possible.