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New Supreme Court Judgement: Alternative Service Outside the Jurisdiction- How Exorbitant is that?

The following judgment was handed down from the Supreme Court this morning. It has important ramifications in cases about service out of the jurisdiction.
Clive Freedman QC of Littleton Chambers together with Tim Penny instructed by PCB Litigation LLP appeared for the successful appellants in an appeal to the Supreme Court in the case of Abela & Ors v Baadarani [2013] UKSC 44.  Judgment was handed down on 26 June 2013.  The judgment of the Court of Appeal reported at [2012] 1 WLR 1804 has been overturned.  The case is of particular note because of an important shift of emphasis away from the traditional approach to service out of the jurisdiction and considerations of national sovereignty and towards a more practical and pragmatic approach.

The case concerns a claim for fraud where service out had taken place on the Defendant’s Lebanese lawyer without provision to that effect in the original order. Among the issues was whether such service could be validated retrospectively and whether, notwithstanding limitation issues, the claim form could be extended so as to permit prospective alternative service on the Defendants’ lawyers in Lebanon and in the UK.  The Deputy Judge (Sir Edward Evans-Lombe) held that despite the lack of express provision in the CPR, the court did have the power retrospectively to order alternative service abroad.  He also ordered that service on the Lebanese lawyer should be treated as good service and that the extensions of time and order for prospective alternative service on the Defendant’s lawyers should be treated as valid.

Allowing the appeal, the Court of Appeal held that the High Court had been wrong to validate the service retrospectively and to allow extensions of time for the claim form and alternative service thereafter. In the view of the Court of Appeal, the Claimants could have avoided these “retroactive gymnastics” if they had issued the claim form much earlier rather than left it towards the end of the limitation period.

This decision has now been unanimously overturned in the Supreme Court which has ordered the judgment of the High Court to be restored. The leading judgment of Lord Clarke affirmed that CPR rule 6.37(5)(b)(i) is to be construed as conferring the power retrospectively to validate alternative service into the rules governing service abroad. In cases not involving the Hague Service Convention or a bilateral service treaty, the court should simply ask whether, in all the circumstances, there is ‘good reason’ to make the order sought. In answer to this, Lord Clarke found that the Deputy Judge had not erred in principle and was correct in finding good reason that the steps already taken constituted good service.  Lord Clarke, with whose speech the other Justices agreed, held that

  1. The test under CPR Rule 6.15(2) (that is retrospective validation of alternative steps already taken to serve a claim form by an alternative method) required only ‘good reason’, not the higher ‘exceptional’ or ‘very good reason’ suggested by the Court of Appeal;
  2. It was wrong to require the method of service to be good under local law.  If that had been a requirement, then it would not be necessary to make an order about retrospective alternative service: the only requirement was that it did not infringe the local law.  In any event, there was no basis for the finding of the Court of Appeal that service was contrary to Lebanese law;
  3. Save in exceptional circumstances, delay in the issue of a claim form within the limitation period was irrelevant. The sole focus should be on the reason why the Claim Form cannot be served within the period of its validity.

The Supreme Court therefore found that the Court of Appeal had been wrong to interfere with the decision of the Deputy Judge.

Lord Sumption’s speech focused on the Court of Appeal’s finding that 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’. His opinion (with whom the other Justices agreed) was that past concerns relating to sovereignty were now outweighed by ‘a far greater measure of practical reciprocity’. He highlighted that ‘litigation between residents of different states is a routine incident of modern commercial life’ and a lower threshold could be justified ‘in the interests of the efficient conduct of litigation in an appropriate forum’. 

In departing from the strong caution expressed by the Court of Appeal who suggested a high threshold before intervention abroad could be justified, the unanimous ruling of the Supreme Court has signalled a more pragmatic and efficient approach to jurisdiction being taken by the English Court in international disputes.  This marks an important development in service out cases generally.

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