England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		22 October 2009

Mr Justice Eady :

1. The Claimant in these proceedings is an Icelandic businessman now living in England, who is suing the Foreign and Commonwealth Office ("FCO") for negligence over a failed attempt to serve libel proceedings in Iceland, in September 2004, in accordance with local requirements. Liability has been admitted and there now fall to be determined a number of issues relating to the quantification of his loss.
2. He took the view that he had been seriously libelled in material published on a website, in 2004, by Professor Hannes Holmsteinn Gissurarson, who is a professor of political science in the University of Iceland. He failed to respond to the letter before claim and it was in those circumstances that the Claimant issued proceedings, through his former solicitors, seeking damages and an injunction.
3. A standard court form PF7, being a request for service abroad, was filed on the Claimant's behalf and the Senior Master forwarded the documents to the FCO requesting that they be served "in accordance with the law of the country where the service is effected". The FCO decided to instruct Mr Simon Minshull, who was then Deputy Head of Mission and Her Majesty's Consul in Reykjavik, to serve the claim form on the Professor. Accordingly, on 2 September 2004, Mr Minshull met him and handed over the documents, thereby intending to effect service. Unfortunately, the Professor gave no signed acknowledgment, although it is now common ground that this was a requirement under the local law. Thus, in due course, service was held to have been ineffective.
4. Unfortunately it did not become apparent for some time that the service had been defective and the Claimant's advisers continued to take steps in the libel action. On 23 December 2004, having before him the certificate of service completed by Mr Minshull, Master Whitaker ordered that judgment be entered on liability in default of acknowledgment of service. The months went by and a disposal hearing was listed for damages to be assessed on 13 July 2005, before His Honour John Previté QC. In the meantime, the Professor had taken no part in the proceedings. Damages were assessed at £65,000, a permanent injunction was granted against repeating the defamatory allegations and costs were awarded in the sum of £25,046.45. The intention was that the Claimant's Icelandic lawyers would seek to enforce the judgment against the Professor in Iceland.
5. On 12 January 2006, the Professor made an application in England to set aside the default judgment on the basis that the claim form had not been served in accordance with Icelandic law. Master Turner dismissed this application on 23 May 2006, but on 6 December of the same year Mackay J held that what took place on 2 September 2004 did not constitute good service under the local law. Two weeks later, Mackay J granted the Claimant an order under CPR 6.9 dispensing with service of the claim form and encouraged the parties to proceed to trial on the merits.
6. The Professor then appealed that decision to the Court of Appeal, but it was dismissed on 3 March 2008: [2008] 1 WLR 2016. On 16 June 2008, the House of Lords refused a petition for leave. Despite the encouragement offered by Mackay J in December 2006, the Professor has taken no further steps to respond to the claim against him. It may be that he has taken this course in the belief that the Icelandic courts would be unlikely to enforce a second default judgment.
7. The Claimant now seeks to recover his loss flowing from the negligence of the FCO and has identified the following heads of damage:

i) the loss of the judgment awarded by the court on 13 July 2005 and the consequent award of costs (i.e. £90,046.45 in total);

ii) the costs wasted in attempting to enforce the judgment in Iceland;

iii) the costs he had to pay to the Professor relating to the hearings before Master Turner in May 2006 and Mackay J in December 2006;

iv) the costs of defending the applications made by the Professor including up to the House of Lords;

v) compensation for inconvenience arising from the litigation he has been obliged to undertake (which has been agreed at a token £1,000).

8. These proceedings were begun on 7 November 2007 (i.e. before the hearing in front of the Court of Appeal). There was an agreed stay, pending the outcome of the applications to the Court of Appeal and the House of Lords. Subsequently judgment was entered against the FCO by consent pursuant to an order of Master Leslie dated 24 November 2008. This provided that judgment be entered for the Claimant with damages to be assessed and made provision for an interim payment of £63,108. The FCO was also ordered to pay the Claimant's costs of the claim, to be assessed if not agreed, and an interim payment was also ordered in respect of costs (in the sum of £16,892). Moreover, the Claimant was awarded the costs of the application itself, to be assessed if not agreed, and a further interim payment was ordered of £9,000.
9. By the time the matter came before me on 13 October 2009, the parties had reached an agreement as to the next steps to be taken and the issue was narrowed essentially to the question of whether or not the Claimant was acting reasonably in pursuing the FCO at this stage, rather than attempting to mitigate his loss by obtaining a second default judgment in England and taking steps to enforce it in Iceland. Meanwhile, some heads of loss had been agreed as a matter of principle and the only dispute is as to the reasonableness of the amount of the legal fees incurred. In those circumstances, the parties were agreed that the issues should be referred to a costs judge.
10. As recorded in the judgment of the then Master of the Rolls in March last year, at [7], it seems that the Professor had taken advice in Iceland when the libel proceedings were threatened or commenced against him and had been told that it was likely that the case would be dismissed in England for the reason that he was domiciled in Iceland and, in any case, that there would be no difficulty in seeking a retrial if judgment were entered against him. Against that background, he chose not to acknowledge service of the claim form. There is no reason to assume that if Mr Minshull had succeeded in effecting service properly, in September 2004, by obtaining the Professor's signature, he would have received any different advice. It is thus reasonable to suppose that matters would have proceeded much as they did, without his engaging with the litigation or attempting to defend on the merits of his case. In other words, there would probably still have been a judgment against him for damages and costs in or about July 2005.
11. It is quite true that at this stage, service having been dispensed with in December 2006 and the Professor having persistently failed to serve a defence, the Claimant could return to the court in England and obtain a second default judgment. He has received advice, however, to the effect that the Icelandic court is likely to refuse to enforce such a judgment. That is primarily why he argues that it is reasonable for him not to incur the costs of making a second attempt. Furthermore, in the trial of the issue before me, the Claimant called an expert witness, Professor Petur Dam Leifsson of the University of Iceland, who confirmed that in his view a default judgment would not be enforceable.
12. Evidence was also called on the Defendant's behalf by Mr Magnus Thoroddsen, who took the view that such a judgment might well be enforced in Iceland if the judge took account of the English decision to dispense with service, but he agreed in cross-examination that there could be no certainty and that there was room for two differing opinions on the point. In the light of this, it was submitted on the Claimant's behalf by Mr Vinall that it is quite unnecessary for me to come to a conclusion on which of the experts is more likely to be correct, or to try and predict the outcome of hypothetical enforcement proceedings in Iceland. What matters is whether or not the Claimant is behaving reasonably in not pursuing that course, having regard to the advice he has received.
13. For the principles applicable in the context of mitigating loss, I was referred by both parties to extracts from McGregor on Damages (17^th ed) at paragraphs 7-001 to 7-088. In particular, I was reminded by Mr Vinall of the principle stated at paragraph 7-075 to the effect that "[a] claimant need not take the risk of starting an uncertain litigation against a third party".
14. The most frequently cited case in this context is Pilkington v Wood [1953] Ch 770. In 1950 the plaintiff had purchased freehold property and employed the defendant as his solicitor in the transaction. The vendor had purported to convey the property as beneficial owner. Shortly afterwards, when the plaintiff attempted to sell the property, he discovered that the title was defective. The vendor was a trustee and had committed a breach of trust in purchasing it himself. Negligence on the defendant's part was admitted and the only issue was that of quantum. The defendant argued that the plaintiff should, before bringing the claim against him, have sought to mitigate his damage by suing the vendor on the covenant for title; alternatively, that the plaintiff should have taken out a policy of insurance against the consequences of the defect. The argument was addressed by Harman J who made the following observations at p777:

" … I am of opinion that the so-called duty to mitigate does not go so far as to oblige the injured party, even under an indemnity, to embark on a complicated and difficult piece of litigation against a third party. The damage to the plaintiff was done once and for all directly the voidable conveyance to him was executed. This was the direct result of the negligent advice tendered by his solicitor, the defendant, that a good title had been shown; and, in my judgment, it is no part of the plaintiff's duty to embark on the proposed litigation in order to protect his solicitor from the consequences of his own carelessness."

15. Mr Vinall prays that reasoning in aid here and submits that it is no less apt to the present circumstances. Indeed, he argues that his client's case is, if anything, stronger than that of Mr Pilkington because he had the protection of an indemnity in respect of the proposed litigation. Here, by contrast, the Claimant's advisers, in September of this year, sought an indemnity from the FCO. This was refused. Accordingly, any steps which the Claimant might be required to take with a view to obtaining or seeking to enforce a second default judgment would have to be at his own expense, certainly in the short term, and there would be no guarantee of full recovery if he were to fail.
16. Before I come to a conclusion on the merits of these arguments, it is appropriate for me to consider in a little more detail the rival contentions between the parties as to the approach an Icelandic court would be likely to take.
17. Iceland is a signatory to the Lugano Convention and it has been incorporated within Icelandic law. Attention was focused particularly on Article 27(2). It is expressed in these terms:

"A judgment shall not be recognised:

…

2. Where it was given in default of appearance, if the defendant was not duly served with the document which instituted the proceedings or with an equivalent document in sufficient time to enable him to arrange for his defence;

… "

18. Professor Leifsson is of the opinion that an Icelandic court would take a strict view, even allowing for any English or ECJ authorities, and decide, quite simply, that the Professor has not been "duly served with the document which instituted the proceedings or with an equivalent document". That would not be surprising, perhaps, in the light of the fact that Mackay J (upheld by the Court of Appeal) dispensed with the need for service. It is not provided in Article 27 that there should be any exception to the effect, for example, " … unless service has been dispensed with".
19. It was faintly argued that notice of Mackay J's order, dispensing with service, should be regarded as "an equivalent document" for the purposes of Article 27(2). I cannot see, however, that an order dispensing with service can be regarded as being equivalent to "the document which instituted the proceedings" (i.e. in this instance the claim form in the defamation proceedings). An example of an equivalent document might be a translation of the claim form into the language of the proposed recipient. That would convey the sense of the document to be served. The order dispensing with service, on the other hand, would convey none of the information contained in the claim form.
20. Mr Thoroddsen drew attention to the policy considerations underlying the service requirements in Article 27 (and its Icelandic equivalent). He said that it was regarded as desirable that a proposed defendant should receive information in sufficient time to enable him to prepare a response or defence to the claim against him. In this case, there is no doubt that the Professor has been well aware of the existence of this libel action for some years. It seems to me, however, impossible to argue that knowledge of that kind can be equated to "due service". A similar argument was rejected, for example, by the ECJ in Isabelle Lancray SA v Peters und Sickert KG, reported in the European Court Reports for 1990 at page I-02725, at paragraph 18-20. The point was addressed there, in the context of the Brussels Convention:

"If the sole issue were whether the document came to the defendant's attention in sufficient time, plaintiffs would be tempted to ignore the prescribed forms for due service, the requirements of which have in any event been considerably relaxed by international agreement."

21. I was told in the evidence of Professor Leifsson that the concept of dispensing with service is alien to Iceland's law and procedure. That being so, it is unlikely that a court in that jurisdiction would seek to circumvent a requirement for "due service". There is no decided case in Iceland which determines the matter, but he does draw attention to the strict approach generally adopted towards matters of construction.
22. It is accepted by both experts that Icelandic law would require the court to take account of English decisions made in a similar context, but that would not necessarily mean that the court would go so far as to adopt the approach taken by Mackay J and the Court of Appeal.
23. Mr Thoroddsen's analysis merely showed that an argument could be constructed to the effect that a less technical approach should be adopted. He could not say that it would succeed.
24. The argument on Article 27(2) fell into two main sections. First, there is the issue of whether a second default judgment could be regarded as having been "given in default of appearance" at all; if not, obviously the provision would have no application. If that test is satisfied, the next question for consideration would be whether Professor Gissurarson is to be regarded as "duly served".
25. On the first point, Mr Thoroddsen would argue, since the Professor made an application to set aside the first default judgment, that the hypothetical second default judgment should not be regarded as "in default of appearance" – as he has long been aware of the proceedings.
26. I cannot accept this argument for two main reasons. In the first place, the reason why the English court would have granted the second judgment would be the failure to serve either an acknowledgment of service or a defence. That position cannot be affected by his application and appeal, which related to procedural and jurisdictional matters rather than the substantive merits. Secondly, there is ECJ jurisprudence which demonstrates that similar reasoning has been adopted with reference to the Brussels Convention: see e.g. Klomps v Michel [1981] ECR 1593 and Maersk Olie and Gas A/S v Firma M de Haan and W de Boer [2005] 1 Lloyds Rep 210. It does not seem to me likely that an Icelandic court would come to the opposite conclusion.
27. As to the second argument, I have already indicated that I find it counter-intuitive that either non-service could be categorised as "due service" or that Mackay J's order dispensing with service can be equated with the claim form. But an Icelandic court would be approaching matters in the context of Article 83 of its own Civil Procedure Code, which prescribes and defines the only possible methods of service. The evidence before me indicates that those requirements are strictly interpreted. I have no solid reason to believe that a different approach would be taken in this case or that Professor Gissurarson's knowledge of the proceedings would provide a reason for by-passing the strict requirements by which "due service" would be determined.
28. It is provided by Article 46 of the Lugano Convention that a party who seeks to enforce a judgment in a particular jurisdiction must produce to the enforcing court a document which establishes service of the document instituting the proceedings (i.e. in this instance the claim form) or an equivalent. That cannot be achieved here for reasons I have already identified. Mr Kovats for the FCO has, however, drawn my attention to the power contained in Article 48 to dispense with the production of these documents if the court considers that it has sufficient information. Whether it would in fact be exercised can only be a matter of speculation.
29. In so far as it is necessary at all for me to come to a conclusion about the likely approach of an Icelandic court, I consider that enforcement of a second default judgment is most unlikely. I prefer the evidence and the reasoning of Professor Leifsson.
30. It was recognised that if an attempt were made to enforce a default judgment in Iceland in the next few months, there would be a further delay of about 12 months while a decision was tested in the Supreme Court. Given Professor Gissurarson's track record in this jurisdiction, it is reasonable to suppose that he would take an adverse decision in Iceland as far as he could.
31. If I were to take the view that the Claimant was behaving unreasonably in proceeding at this stage against the FCO, rather than going for a second default judgment, it would be sensible for me to postpone any assessment of damages until the outcome of an Icelandic application was known. There would be no point in my making my own assessment of the risks and compensating on that unsatisfactory basis. That approach is supported by the decision of the Court of Appeal in BMA v Chaudhary [2007] IRLR 800.
32. I am invited by Mr Vinall, however, to come to the conclusion that the Claimant's stance is eminently reasonable in the light of his own legal advice and the expert evidence.
33. I would accept the submission that the Claimant has not acted unreasonably in seeking to recover his loss and, in particular, in respect of the judgment and costs awarded in July 2005. He should not be required to undertake uncertain litigation against a third party with a view to enforcement in Iceland – especially having been refused an indemnity by the FCO. I regard such proceedings as likely to fail, in the light of the evidence and submissions made at the hearing, but I need not go that far. I am quite satisfied that the outcome is uncertain. The cost is likely to be substantial and probably more than on the last occasion when, I understand, the Claimant spent nearly £20,000 on the exercise.
34. Mr Vinall makes the point en passant that Professor Gissurarson is likely to have received similar advice, which may explain why he has at no stage sought to engage with the litigation on its merits. I need not speculate about that. It would be inappropriate to do so, since what matters is the evidence before me. That concludes the matter firmly in favour of the Claimant.