UK Supreme Court Blog

EDITORS: Dan Tench, Emma Cross, Zainab Hodgson, Francesca Knight, James Warshaw and Natalie Haefner (CMS)
Hugh Tomlinson KC, Matthew Ryder KC, Nandini Bulchandani and Daniel Rudd (Matrix)

On 10 and 11 April 2013, the Supreme Court heard an appeal against the Court of Appeal’s judgment in Abela & Ors v Baadarani [2011] EWCA Civ 1571.

Issues

A Supreme Court consisting of Lords Neuberger, Clarke, Sumption, Reed and Carnwath considered what principles govern:

1. an application for retrospective validation of alternative service out of the jurisdiction;
2. an application for an extension of time for service of a claim form; and
3. an application to dispense with service.

Facts

The underlying action concerned the purchase of shares in an Italian company in 2002 by the appellants from the Mr Baadarani.  When the Italian company was subsequently shown to be worth substantially less than the purchase price, the appellants issued proceedings alleging that they were persuaded to enter into the contract as a result of fraud by Mr Baadarani in concealing the true finances of the company.

The claim form was issued in April 2009 and an application for permission to serve the claim on Mr Baadarani out of the jurisdiction was made and granted in September 2009.  An extension of time for service was granted and an order for alternative service on Mr Baadarani at an address in Beirut was also made.  However, in the event, the claim was delivered to Mr Baadarani’s Lebanese lawyer in Lebanon in October 2009.  Whilst the Lebanese lawyer had no instructions to accept service on Mr Baadarani’s behalf, he did hold a general power of attorney which conferred the power to take delivery of documents on Mr Baadarani’s behalf.

In December 2009 a further extension of time for service was granted.  In April 2010 the High Court further extended the time for service and gave the appellants permission to serve the claim by alternative means on Mr Baadarani’s English and Lebanese solicitors.  Service was duly effected on Mr Baadarani’s English solicitors.

High Court judgment

In May 2010, Mr Baadarani applied to set aside the order permitting service by alternative means on Mr Baadarani’s English and Lebanese solicitors and the orders extending the time for service of the claim form.  The claimants cross-applied for a declaration that there had been good service of the claim form on Mr Baadarani.

The court considered, among other issues, whether the court has the power to order service of a claim form by alternative means out of the jurisdiction.

Where a claim form is to be served within the jurisdiction, under CPR 6.15(2), the court may order that steps already taken to bring the claim form to the attention of a defendant by an alternative method or at an alternative place is good service.  However, where a claim form is to be served out of the jurisdiction, there is no equivalent provision in the CPR and, therefore, uncertainty remained as to whether the power to order alternative service also applied in cases where a defendant is resident abroad.

The court decided that it did hold the power to retrospectively order that good service has taken place where a defendant is resident abroad by virtue of either:

1. implying such a power into the rules governing service abroad; or
2. construing CPR 6.37(5)(b)(i), which allows the court to give directions about the method of service when giving permission to serve a claim form out of the jurisdiction, so as to confer the power under CPR 6.15(2) on the court dealing with service abroad.

In this case, the judge retrospectively validated the appellants’ actions in delivering the claim to Mr Baadarani’s Lebanese lawyer in Lebanon in October 2009 as good service on Mr Baadarani for the following key reasons:

• Service through consular and judicial channels, requiring translation into Arabic, was impractical, costly and caused delay.
• In refusing to disclose his address in Lebanon, Mr Baadarani had shown that he was unwilling to co-operate with service of the proceedings.
• Most importantly, on the facts, it was clear that Mr Baadarani was fully apprised of the nature of the claim through his advisors.

Court of Appeal judgment

The Court of Appeal overturned the order permitting retrospective alternative service of the claim form out of the jurisdiction on Mr Baadarani’s lawyer in Lebanon and held that there should be no extension for service of the claim form.  Accordingly, the claim was dismissed.

The decision was based on the fact that the Lebanese lawyer had no authority to accept service under a general power of attorney and thus service was not valid under Lebanese law.  Since service was not valid, the appellants argued that there was still a good reason to retrospectively validate it under CPR 6.15.  However, the court rejected the appellants’ arguments that the difficulties of service through diplomatic channels and their attempts to effect service by an invalid method constituted good reasons on the evidence available.  Crucially, it was held that had the claim form been issued in good time service might well have taken place, serving as a reminder to act promptly when commencing proceedings.

The judgment included several key points of law and confirmed the cautious approach of the courts towards serving out of the jurisdiction:

• The court may order alternative service out of the jurisdiction under CPR 6 and may make such an order with retrospective effect.
• Claimants seeking retrospective validation of an alternative means of service abroad must ‘usually‘ demonstrate that the method of service also amounts to good service under local law.  If not good service under local law, a judge should only retrospectively validate service if there is ‘very good reason to do so‘.
• The power to order service out of the jurisdiction by an alternative method is an exorbitant power and must be ‘exercised cautiously…and should be regarded as exceptional’.
• In this case, the only reason to retrospectively validate service was to avoid the claim being time-barred.  This in itself is not a good reason for preserving a stale claim.
• The weaker the reason for an extension to serve the claim form, the less likely it is to be granted.  Preservation of a stale claim which was not served in time due to a last-minute application for permission to serve out does not constitute a sufficient reason for extension.

Supreme Court Appeal

In the Court of Appeal judgment, Longmore LJ confirmed the reluctance of the court to order service out of the jurisdiction, let alone by an alternative method since ‘the exercise of this power is liable to make what is already an exorbitant power still more exorbitant‘.  This is understandable given that permission to serve out constitutes intervention with the sovereignty of another state.

Case law following the Court of Appeal’s judgment has confirmed that alternative methods of service are permitted out of the jurisdiction if a good reason exists.  It is therefore likely that future case law will focus on the exercise of the court’s discretion in determining whether a good reason to permit an alternative method of service does indeed exist but whether the Supreme Court will offer some guidance in this respect remains to be seen.