England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM
THE ORDER OF DEPUTY MASTER MARK DATED 2 MAY 2014

		12 January 2015

1. This is an appeal from the order of Deputy Master Mark dated 2^nd May 2014 whereby he ordered that service of the Claim Form by email on 3^rd April 2014 be permitted as good service pursuant to Rule 6.15 of the Civil Procedure Rules. The Deputy Master granted permission to appeal and if the appeal is successful the time within which the Claim Form can be served has expired.
2. The Claimant is a banking institution that lends money to organisations and individuals looking for investment for developments, and the Defendant is a construction management company which provides advice to, for example, banks on proposed lending opportunities and, in the event funding is provided, monitors any loans.
3. The events giving rise to the cause of action took place during the period between about June 2006 and December 2008 and in about December 2013 the Claimant apprehended that limitation issues were live. Accordingly a Claim Form was issued on 18^th December 2013 seeking damages for breach of contract and/or breach of duty of care and/or misrepresentation and/or deceit plus interest. According to the Claim Form, the Claimant expects to recover more than £300,000.00.
4. On 3^rd March 2014 the Claimant's solicitors sent to the Defendant, by fax, a copy of the sealed Claim Form dated 18^th December 2013 and a Notice of Issue dated 8^th January 2014. The faxed letter asked for the supply of copies of certain documents, identified in a letter of 25^th February 2014, within the next 7 days.
5. On 5^th March 2014 the Claimant's solicitors wrote to the Defendant a 'Notification Letter pursuant to the Professional Negligence Pre-Action Protocol' and it contained another request for the 25^th February 2014 documents to be provided, this time by Friday 14^th March 2014, and it said that if the documents were not provided then an application would be made to the court at 2pm (or shortly afterwards) on 14^th March. There was a response from solicitors to the Defendant on 12^th March 2014 seeking an extension of time and it was answered, on the 18^th March, by the observation that the documents should be provided by 21^st March 2014 to avoid an application to the court. That letter of the 18^th March also dealt with a request by the Defendant for documents and it stated that all the Claimant's documentation would be provided in due course along with the Particulars of Claim on 17^th April 2014. That date in April was the last date upon which the Claim Form issued on 18^th December could, in the ordinary course, be served.
6. In a letter of response, also dated 18^th March, and in connection with the comment that the Particulars of Claim would be served on 17^th April, the Defendant's solicitors observed that the Claim Form appeared to have been served by way of the faxed letter dated 3^rd March, which, if right, would have the consequence that the Particulars of Claim should be served prior to 17^th April.
7. The response from the Claimant's solicitors was on the 20^th March (and mistakenly referred to a letter of 12^th March rather than that of 18^th March) and was to the effect that the Claim Form had not been served on the 3^rd March and that the copy sent on that date was for information purposes only. Moreover, it went further and sought an extension of time for service of the Particulars of Claim by one month, that is to say, until 17^th May 2014.
8. The Defendant's solicitors responded on 25^th March and dealt with the outstanding request for documents, the issue of whether or not the Claim Form had been served on 3^rd March and the request for an extension of time for service of the Claim Form^[1] and Particulars of Claim. Regarding the document request, the Defendant's solicitors promised to provide some documents by the end of the week and stated that if the Claimant pursued an application for pre-action disclosure, it would be strongly resisted as to costs by reason of the Claimant's failure to comply with the Pre-Action Protocol.
9. Regarding the issue of service of the Claim Form, the Defendant's solicitors stated that they had reviewed the matter further and that they accepted that service had not been effected. It is clear, however, that from the 3^rd March 2014 the Defendant knew that a Claim Form had been issued and it knew its contents. What it did not know was if and when it would be served.
10. Regarding the request for an extension of time for service of the Claim Form and Particulars of Claim, the Defendant's solicitors drew attention to section 6 of thePre-Action Protocol for Construction and Engineering Disputes and the provision therein for the Claimant to apply to the Court on notice for directions. The Defendant's solicitors invited the Claimant to draft an application to the court with a proposed timetable in compliance with the Pre-Action Protocol for them to review, and suggested that the timetable should include relevant deadlines for provision of the Letter of Claim, Letter of Response, etc. as per the Protocol
11. There was further correspondence on the 27th and 31st March and the next letter in evidence is that of 1st April from the Defendant's solicitors. It is evident that there was a dispute about the extent of the Claimant's compliance with the Pre-Action Protocol and whether there was a legitimate explanation for why it had waited until limitation issues dictated the issuance of proceedings without first engaging the Protocol. It also went on to deal with the request for an extension of time for service of the Claim Form and Particulars of Claim.
12. With respect to an extension of time for service of the Claim Form, this was declined on the basis that the Claimant had not provided any valid reason for not serving the Claim Form within the time prescribed by the rules (CPR 7.5(1)). With respect to the time for service of the Particulars of Claim, it was stated that the Defendant would agree to an extension of time to 5 September 2014 so that the parties could engage with the Protocol. The letter went on to propose a timetable for compliance with Protocol matters and suggested that, if the timetable was acceptable, the Claimant make an application to the Court pursuant to section 6 of the Protocol, and provide a Consent Order reflecting the agreed timetable.
13. Later on 1^st April the Claimant's solicitors provided a draft Consent Order which provided by paragraph 1 that "The Claimant will serve its Claim Form on the Defendant by 4pm on 3 April 2014.". Other paragraphs contained provisions relating to service of the Particulars of Claim, Letter of Claim (to be provided by 30 April 2014), Acknowledgement of Letter of Claim, Response to Letter of Claim and a pre-action meeting. There was disagreement about the costs provisions provided in the Claimant's draft which were eventually sorted out on 3 April when an agreement was entered into. It contained paragraph 1 as drafted by the Claimant and as set out above as well as the other provisions I have noted and a provision for the parties agreeing an extension of time up to 14 days for compliance with any direction without the need to apply to the court. The agreement between the parties made on 3^rd April 2014 was embodied in an order of the court a few days later.
14. Instead of serving the Claim Form on 3^rd April 2014 in accordance with the rules, the Claimant's solicitors emailed a copy of it to the Defendant's solicitors (who had agreed to accept service, albeit not service by email). They also placed a monochrome copy of it in the DX for delivery next day to those solicitors.
15. On 8^th April 2014 the Claimant's solicitors wrote to the Defendant's solicitors seeking agreement for an extension of time to provide the Letter of Claim, with consequential extensions to the time for the Defendant's acknowledgment and response. On 10^th April there was a chaser for a response to the request for an extension of time and a further chaser on 11 April. The Defendant's solicitor's responded on the 14^th April stating that the person to whom the chasers had been addressed was unwell and out of the office and that instructions were being taken with respect to the request. There was a further chaser on the 15^th April but the Defendant's solicitors did not respond substantively until 24^th April when they pointed out that the Claimant had not complied with paragraph 1 of the Consent Order, that it was out of time for service of the Claim Form and, accordingly, the request for an extension of time for service of the Letter of Claim was redundant. It was this letter which precipitated the application to the court and the decision which is under appeal.
16. On 25^th April 2014 the Claimant made an application for an extension of time pursuant to CPR 7.6(3) to serve the Claim Form on the Defendant and/or relief from sanctions pursuant to CPR 3.9. The application was supported by a witness statement of Kate Thompson who is a solicitor with the firm acting for the Claimant. By manuscript addition to the application notice, it was indicated that the Claimant also sought to rely on CPR 3.10 / 6.15 / 6.16 and the witness statement refers to all these grounds save for CPR 6.15.
17. Ms Thompson gives some background to the matter, including a statement to the effect that the Claimant was unable to comply with the Pre-Action Protocol for Construction and Engineering Disputes as a result of 'limitation issues'. She goes on to explain some of the time table and points out that the Defendant did not contact the Claimant following 3^rd April 'to advise that they felt the Consent

Order had not been complied with'. After some more general material she turns to the Grounds for the Application.

18. First she points out that the application was made immediately notice was received from the Defendant's solicitors that they did not consider the Claim Form to have been served correctly.
19. Secondly, she states that the Claimant contends that the alleged breach is trivial in circumstances wherein the Defendant's solicitors had agreed to accept service and had received copies by email and DX and had previously received a copy by fax (on 3^rd March).
20. Then she asserts that granting the extension sought, or dispensing with the requirement for service, would not cause any prejudice to the Defendant. "By stark contrast", she says, "the Claimant would suffer enormous prejudice in the event that this application were refused: the Claimant's claim against the Defendant (which is valued at £3,000,000^[2]) would not be able to proceed and the primary limitation period has arguably now expired in relation to some of that claim".
21. In her evidence on the application Ms Thompson gives no explanation at all as to why the purported service was by email and not by any of the means set out in the rules.
22. The only subsequent events worthy of note are that the Claimant did not serve its Letter of Claim in accordance with the Consent Order or at all, and in May 2014 it issued a fresh Claim Form and has contended in correspondence that there are no limitation issues after all.
23. The application came before the Deputy Master on 2^nd May 2014 and he made his decision in favour of the Claimant under CPR 6.15 with regard to the purported service by email. There is no Respondent's Notice and accordingly I do not have to consider the other routes by which the Claimant sought to regularise its position.
24. It is common ground that service by email was not good service. Moreover, the Deputy Master (i) considered that it was plain that the Claimant's solicitors were well aware, and if they were not they ought to have been well aware, that it was the actual Claim Form which should have been served, (ii) found as a fact that there was ample time on the 3^rd April after the contract embodied in the consent order had been entered into for the Claimant to effect proper service in accordance with CPR 7.5 and (iii) found as a fact that there was no explanation as to why the Claimant's solicitors did not serve the actual claim form properly by 4pm on the 3^rd April. None of these matters were challenged before me.
25. I turn now to the law. CPR 6.15, in so far as is material, is in these terms:

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.

(3) An application for an order under this rule -

(a) must be supported by evidence; and

(b) may be made without notice.

26. It is evident from the language of CPR 6.15 that an application for an order permitting service by an alternative method or place will only succeed if (a) it appears to the court that there is a good reason to authorise such alternative service, and (b) the court decides to exercise its discretion in favour of permitting such alternative service.
27. These matters were considered by Andrew Smith J in Brown v Innovatorone plc [2009] EWHC 1376. He concluded that:

(i) the fact that the CPR expressly require that there be a good reason for the court to exercise the power to permit service by an alternative method and do not simply confer a discretion to permit it emphasises that the power should not be exercised over-readily ([41]),

(ii) it is necessary in the interests of certainty that the courts allow a litigant to depart from the rules about service only where there is a sufficiently compelling case made out so to do ([44]),

(iii) the court should adopt a rigorous approach to an application by a claimant for indulgence and should examine with some care why it has come about that it is being asked to make an order ([40]),

(iv) the mere absence of prejudice to a defendant will not usually in itself be sufficient reason to make an order under CPR 6.15 ([40]),

(v) 'exceptional circumstances' were not required to make an order, but that there must be a good reason ([39]), and

(vi) there is no proper basis for confining the circumstances in which there is 'a good reason' for making an order under CPR 6.15 to specific and limited categories of cases; the expression is a general one ([41]).

28. Brown v Innovatrone was considered by the Court of Appeal in Power v Meloy Whittle Robinson [2014] EWCA Civ 898 and no adverse comment was made about Andrew Smith J's approach. Moreover, it seems to me to be the right one.
29. My attention was drawn to cases where the facts did or did not justify an order under CPR 6.15, but, as Lord Clarke pointed out in Abela v Baadarani [2013] UKSC 44, these cases depend on their own facts and the court should simply ask itself whether, in all the circumstances of the particular case, there is a good reason to make the order sought.
30. Lord Clarke also pointed out that the most important purpose of service is to ensure that the contents of the document served, here the Claim Form, are communicated to the Defendant. Of course, that is not the only purpose. Dyson LJ in Hoddinott v Persimmon Homes [2008] 1 WLR 806 at [54], a case under CPR 7.6, identified three purposes, (i) to notify the Defendant that the Claimant had embarked on the formal process of litigation and to inform him of the nature of the claim, (ii) to enable the Defendant to participate in the process and have some say in the way in which the claim is prosecuted, and (iii) to enable the court to control the litigation process. In my view another purpose of proper service is the certainty that it gives to the parties with respect to any of the Civil Procedure Rules with which, they have to comply or, for example, any limitation defences which might be available.
31. Turning to the facts of the present case, the Deputy Master reached this conclusion:

"It seems to me just, very marginally, that bearing in mind the absence of prejudice, which is not enough by itself, but looking also at the fact that all that was intended was that steps should be taken which would have certain consequences in terms of time, etc.' and everybody being fully aware of what was going on, that I should waive the defect, but on terms as to costs...."

and he gave permission to appeal and his reasons were 'whether the matters found to be good reasons under CPR 6.15 are capable of so being'.

32. I think the Deputy Master fell into error and the first thing he failed properly to take into account or examine is why it was that it had come about that he was being asked to make the order (see Brown and paragraph 27 (iii) above). Had he done so he would immediately have appreciated that the Claimant had provided no explanation whatsoever for not serving the Claim Form properly in accordance with the rules. After all, they had agreed that this is what they would do, they had consented to an order requiring them to do it and there was plenty of opportunity for them to do it.
33. Counsel for the Claimant invited me to infer that his instructing solicitors had made a simple mistake and pointed to the circumstances in which a potentially large claim was at risk of being defeated by limitation issues. When I asked him why I should infer that, when it would have been so easy for the solicitors to have explained the position in the evidence served on this application, he pointed to the fact that they may have made other mistakes as well and that the only plausible explanation was simple mistake. I do not think that is good enough in a case where a claimant seeks the indulgence of the court and where his solicitor has an opportunity to explain why the relevant circumstance has come about but has chosen not to do so.
34. The Deputy Master pointed out in his judgment that there was no explanation from the Claimant as to why the Claim Form had not been served properly. But he then said

"On the other hand, I am unclear as to why [the Claim Form] need to be served at all or what difference it made and no explanation has been offered at all. This is not a case in which there was any uncertainty that the claim had been issued. Indeed the provision for it to be served on the 3^rd was incorporated in a consent order in the actual case."

35. I think there is an error here as well. It seems to me to be clear why the Claim Form needed to be served; without service the formal process of litigation does not begin. Moreover, the relevant uncertainty in the present context is not whether the Claim Form has been issued, but whether or not and when it has been served. Of particular importance in the context of a claim which may be defeated by limitation is whether service is within the 4 month period prescribed by the rules or not.
36. The Deputy Master also referred to absence of prejudice to the Defendant, a matter which he accepted was not enough on its own. However, he appears to have assumed that there was in fact no prejudice to the Defendant and this raises the question of what kind of prejudice is needed, is it prejudice in an ability to defend the claim or does prejudice in not having a limitation defence available count as well?
37. The Claimant's solicitors evidence was to the effect that granting the order sought would cause no prejudice to the Defendant but, in stark contrast, if the order were not granted, the Claimant would suffer enormous prejudice since the primary limitation period for part of its claim had arguably expired. I found the logic of this not easy to follow and counsel for the Claimant accepted that the Defendant would be prejudiced if a CPR 6.15 order were made and it had the effect of rendering a limitation defence unavailable. Accordingly, on the evidence of the Claimant's witness, there is arguably 'enormous prejudice' to the Defendant if the order is made; the question is whether or not that kind of prejudice may be taken into account.
38. The matter was considered by the Court of Appeal, in the context of CPR r6.16^[3], in Kuenyehia v International Hospitals [2006] EWCA Civ 21 and Neuberger LJ said:

33 ... In our view... the time limits in the CPR , especially with regard to service of the claim form where the limitation period may have expired, are to be strictly observed, and extensions and other dispensations are to be sparingly accorded, especially when applied for after time has expired. While there may be exceptional cases, we consider that prejudice is only relevant in this sort of case to assist a defendant, where the court would otherwise think it right to dispense with service. In other words, prejudice to the defendant is a reason for not dispensing with service, but the absence of prejudice cannot usually, if ever, be a reason for dispensing with service.

35 Service on the defendant's solicitors was ineffective under the CPR, and it cannot be said to have been a "minor departure" from the permitted methods of service to serve on solicitors who had not been nominated by the defendant. In any event, for the reasons already given, this would not have been an exceptional case. Quite apart from any other point, it can fairly be said that it would have been only too easy for the claimants' solicitors to ask the defendant, with whom they had been in fairly close contact, to nominate its solicitors' address as its address for service in accordance with r6.5(2) , but they never did so.

36 In summary, this is a case of a claimant's solicitor who waited until the very last day to serve a claim form, and then, despite knowing the address of the defendant's offices and being able to effect service in accordance with a method permitted by r6.2, failed to do so, and, after the time for service had expired sought the assistance of the court under its power to dispense with service. The court should not accord such relief, where there is nothing exceptional about the facts, and it is not even a case where there can be said to have been no more than a minor departure from a permitted method of service or that there was an ineffective attempt to serve by a permitted method within the time limit.

39. In my judgment this passage is as applicable to CPR 6.15 as it is to CPR 6.16 but, perhaps, it is more relevant to the exercise of discretion under CPR 6.15 than to whether or not there is a good reason to make an order.
40. The Deputy Master asked counsel for the Claimant, as I did, what was the good reason under CPR 6.15. The answer given to the Deputy Master, and to me, was that it would create certainty, in effect that it would grant a stamp of approval to what happened on the 3^rd April in the circumstances of that day when the Defendant was expecting proper service to take place in accordance with the agreement of the parties to be enshrined in a consent order of the court.
41. I do not think that is a good reason at all. It may be true that the Defendant was expecting proper service to take place on the 3rd April, but that did not happen, and the certainty which proper service would have created did not arise; instead the Defendant could have been certain that the formal process of litigation had not been engaged.
42. Indeed, it is not easy to find any reason why a CPR 6.15 order should be made, other than that it would suit the Claimant to avoid a possible limitation defence, it would retrospectively pardon the Claimant for breach of a consent order and it might save a small amount of costs^[4].
43. In any event, in my view the case falls far short of being sufficiently compelling (using the language of Andrew Smith J) for the court to permit the Claimant to depart from the rules of service.
44. In conclusion, I think the Deputy Master was wrong to conclude that on the facts of this case there was a good reason to make an order under CPR 6.15.
45. In case I am wrong about whether or not there was a good reason to make the order, I must go on to consider whether or not I should make the order as a matter of discretion. There are two reasons why I would not exercise my discretion in favour of granting the order.
46. The first is that the Claimant has given no explanation at all as to why it is that the order was not served properly in accordance with the rules. In my view, if a litigant seeks the indulgence of the court to regularise a position which is irregular as a result of something which he has either done or not done then it is incumbent on that litigant to give a candid explanation as to how the circumstances which he wishes to avoid have come about. In my view, when seeking to persuade a court to exercise a discretion in his favour and so regularise something, it is simply not enough for a litigant to say; 'I have not done what I should have done, please put it right'. He must go further and explain to the court the circumstances why it is that the position has arisen. For it is only then that the court has material with which to form a view as to how the discretion should be exercised.
47. The second reason for not exercising discretion in favour of the Claimant is the prejudice which might be caused by denying the Defendant a limitation defence. On the material before the court, it is not easy to assess the magnitude of that prejudice save to note that the Claimant's evidence was that it would suffer enormous prejudice if the order sought were not granted. The inference from this is that the Claimant would be deprived of huge sums of money if the order were not granted, money which the defendant would have to pay. That is evidence from which I can infer there would be real prejudice to the Defendant if the order were granted.
48. Accordingly I allow the appeal.
49. In fact, there are two appeals in two actions and each arises out of advice provided to the Claimant by the Defendant during the 30 month period before December 2008. It was agreed by counsel that the appeals are identical in all material respects and that I need consider only the facts and circumstances of one of them in order to deal with both and that is what I have done.

Note 1   It appears that there was another letter of 20th March from the Claimant’s solicitors which contains a request for an extension of time for service of the Claim Form.    [Back]

Note 2   but note that the Claim Form states that the Claimant expects to recover an order of magnitude less than this (and this point is not lost because there are two actions - see later)    [Back]

Note 3   The court may dispense with service of a claim form in exceptional circumstances.    [Back]

Note 4   perhaps unlikely bearing in mind the costs of making an application under CPR 6.15    [Back]