Quick updates on procedural issues for those dealing with disputes - Autumn 2020


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Service of a Claim Form at Multi-Occupancy Buildings – Getting it Right, and Wrong

Delivery of the claim form to the correct mailbox in an apartment block was required

Ivanchev v Velli [2020] 1917 (QB) 2020


Mr Stansilav Ivanchev (C) failed to obtain judgment in default against Mr Velli (D) on the basis that D had not acknowledged service of the claim form. C had clipped D's car, and a series of heated email exchanges between the two followed. C subsequently issued proceedings for libel, harassment, misuse of private information and breach of data protection rights. 

C's lawyer emailed D twice for confirmation that he was either; (1) happy to accept service by email, or (2) to provide an address at which legal documents could be served. No address was provided by D itself, but a tracing agent provided a potential address, post code and flat number. A process server then attended D's building, but was unable to deliver the claim form to the flat as he was told that D no longer lived there. He allowed a security guard to post the documents into a mailbox, but, crucially, could not see which one was used, or which flat it belonged to. 

D maintained that he had not been served with a claim form, did not recognise any of the names used by C to refer to him, and had never lived at flat 1607 whose mailbox had been used. 

Key Legal Points
  • D's "usual or last known residence", for the purpose of service of a claim form, could not be a property at which D have never lived. D must have lived there at some time for the then CPR 6.5(6) to be satisfied.
  • What constitutes good service for a multi-occupancy building will turn on the facts of the case. In this instance, it was material that:
    • this was a large building comprising of autonomous residential units, each with its own mailbox and postal address;
    • the documents in question were not addressed correctly, as to both D's name and his address; and
    • C had not taken the "reasonable steps" required by CPR 6.9(3) to ascertain where D was living. Further emails should have been sent to D, failing which, an application for alternative service should have been made pursuant to CPR 6.15. 

Claim form left at the reception desk of a multi-occupancy office was valid service

BEC CONSTRUCTION LIMITED V MELT HYTHE LIMITED [2020] EWHC 907 (TCC)


Claimant building contractor, BEC Construction (C) validly served the claim form on property developer Melt Hyde Ltd (D) by delivering it to D's registered office, even though a separate business was operating from the premises. Consequently, D failed to have judgment in default set aside. 

C's representative (B) delivered the claim form to the address that C understood to be D's principal place of business. This was the address in the contract between the parties, and was also D's registered address. A dental practice was being run from the same building, with one of its directors also found to be a director of D. 

B delivered the claim form to reception, and gave D's name to the dental practice employee that was on the desk (M). M signed for the documents and they were left in her custody. D failed to file its Acknowledgement of Service in time, arguing that the service of the documents was invalid. D's Application to set aside  C's default judgment failed. 

Key Legal Points
  • What is required for "delivery" of the documents under CPR r.7.5 (1) can be as little as leaving the documents at the address.
  • C went above and beyond what is legally required for good service. It was material that:
    • the receptionist accepted delivery, and this is a normal function of receptionists; and
    • the fact that there was more than one business in the building was a result of the way in which D managed its affairs. The employer of the receptionist was therefore immaterial. 
Commentary 

When serving claim forms at multi-occupancy addresses, these decisions highlight that claimants must be particularly careful. The claim form must be served at the specific "usual or last known residence" for the defendant. Delivery to the building itself may in some cases be sufficient, but this will not always be the case. As Ivanchev v Velli shows, where a defendant lives at an address that includes a separate mailbox number, the claim form must be delivered there. However, following BEC Construction Ltd v Melt Hythe Ltd, defendants probably cannot contest valid service on the basis that another business operates from the same premises. The court may disregard this argument, especially if the shared occupancy occurs as a result of the business structure of the defendant itself. 

Author: Ilona Bateson

Service out of the jurisdiction - Extension Granted - Alternative Service Refused

TWO DECISIONS, RELATING TO SERVICE IN UZBEKISTAN AND CHINA, SHOW THE STRUGGLES YOU MAY FACE WHEN SERVING ENGLISH CLAIMS OVERSEAS

SERIOUS FRAUD OFFICE V KARIMOVA [2020] 6 WLUK 383


EXTRA TIME ALLOWED BECAUSE OF PANDEMIC

An extension of time for service of a claim was granted to the Serious Fraud Office (SFO), as the ability to serve out of the jurisdiction upon two defendants in custody in Uzbekistan had been impacted by the COVID-19 pandemic.

Factual Background

The SFO alleges that Gulnara Karimova (K), the daughter of Uzbekistan's former president, and her former partner, Rustam Madumarov (M), received corrupt payments between 2004 and 2012 which were the source of her funds for purchasing a number of UK assets. These assets were subject to a property freezing order (PFO) in 2017, which provided that the SFO had to commence its claim for a civil recovery order within 12 months. 

Although proceedings had been issued within 12 months, there were difficulties in effecting service because of the COVID-19 pandemic. An additional, identical, claim was brought against three other defendants, companies based in the British Virgin Islands (BVI).

The SFO made several applications including for an extension of time for the service of the claim upon K and M.

KEY LEGAL POINTS

The Court held that the SFO had a good reason for not having effected service upon K and M. Both were incarcerated in Uzbekistan and service upon them had been hindered due to the outbreak of the COVID-19 pandemic and the accompanying travel restrictions. In coming to this decision the Court considered the importance of ensuring all efforts had been made to serve upon all those who had a beneficial interest in the property.

COMMENTARY

This judgment may assist those seeking to serve an English claim overseas in the ongoing pandemic. It shows the type of evidence that may be adduced to show good reason for service not having been effected. The Court will consider all factors and base its decision on the interests of justice in the particular case.


NO PERMISSION TO SERVE ON D IN CHINA BY ALTERNATIVE MEANS

The High Court granted permission for the claim to be served out of the jurisdiction in China, but refused permission to serve by alternative means.

CELGARD, LLC V SHENZHEN SENIOR TECHNOLOGY MATERIAL CO LTD [2020] EWHC 2072 (CH)


FACTUAL BACKGROUND

Celgard, LCC (Celgard), an American company, alleged that the Chinese company, Shenzhen Senior Technology Material Co Limited (Shenzhen), was using Celgard's confidential information to produce battery separators. Trade secrets had been obtained by Shenzhen by hiring Celgard's former scientist, Dr Zhang, who had worked for Shenzhen under a different name to avoid attention being drawn to the work. Celgard was concerned that the product being produced by Shenzhen was being sold at a much lower price point and may steal their manufacturing customers. 

One Shenzhen customer was a UK based manufacturer with whom Celgard had a contract. So that Celgard's UK interests were protected, Celgard applied for an injunction in the High Court to prevent the Shenzhen battery separators from entering the UK market. At the same time, they applied to serve the proceedings out of the jurisdiction under CPR 6.36 and to serve the claim form by alternative means under CPR 6.15(1).

KEY LEGAL POINTS

Service out

The Court gave permission for service of the claim out of the jurisdiction. This was on the basis that the claim asked for an order that Shenzhen do or refrain from doing an act within the jurisdiction; the claim was for breach of confidence / misuse of private information where a detriment will be suffered which results from an act committed or likely to be committed within the jurisdiction.

Alternative means

Celgard made an application under CPR 6.15 to serve by alternative means. This application arose out of the successful application for permission to serve out of the jurisdiction. 

Given that China is a Hague Convention country, the test to be considered was whether there were "exceptional circumstances" which would justify an order for alternative service. Additional expense or delay are not considered sufficient to merit such an order. The Court found it difficult on the evidence provided to reach a clear view on how long service would take in China, when taking into account the normal process of service (4-6 months) and the additional delay as a result of COVID-19.

The Court decided that although the COVID-19 pandemic was having an impact on the length of time it takes to serve documents in China, the delay would not be so great so as to be incompatible with the due administration of justice.

COMMENTARY

The judgment shows that there is a fine balance to be considered when the Court is making a decision on orders for service by alternative means under CPR 6.15, especially where there is a Civil Procedure Convention in place, like the Hague Convention. The Court must ensure that the level of delay in service of documents would have such an exceptional effect so as to impact on the due administration of justice. 

Author: Rosalind Davies

Can you Afford to Ignore a Withdrawn Part 36 Offer?

A claimant may still be faced with an adverse costs order for failure to accept a Part 36 offer from a defendant, even where that offer has been withdrawn.

BLACKPOOL BOROUGH COUNCIL V VOLKERFITZPATRICK LTD [2020] EWHC 2128 (TCC)


FACTUAL BACKGROUND

Blackpool Borough Council ("C") contracted with Volkerfitzpatrick Ltd ("D") to construct a new tram depot on the Blackpool seafront. Following construction, C brought proceedings against D claiming £6.7 million in damages on the basis that significant parts of the depot were defective and not suitable for the coastal location.

Defendant made a Part 36 offer of £750,000 in August 2019 in respect of certain parts of C's claim (the "August 2019 Offer"). This offer was withdrawn in January 2020. 

At the trial in February 2020 C was awarded £1.1 million in damages, substantially less than the amount claimed. Crucially, the amount awarded in respect of the part of C's claim that was covered by the August 2019 Offer was £631,510, less than the (withdrawn) August 2019 Part 36 Offer.

KEY LEGAL PRINCIPLES
  • CPR 36.17 states that where a claimant fails to obtain a judgment that is more advantageous than a defendant's Part 36 offer, the court must, unless it considers it unjust to do so, award the defendants its costs from the date on which the relevant part of the offer period expired.
  • Under CPR 36.17(7)(a) the automatic Part 36 cost consequences do not apply where the offer has been withdrawn.
  • CPR 44.2 provides that the court will still have regard to withdrawn offers in deciding on the appropriate costs order.
  • Thakkar v Patel [2017] EWCA 117 confirmed that one key factor when considering a withdrawn Part 36 offer is whether the offeree acted reasonably in failing to accept the offer while it was on the table. 
DECISION

The judge found that C had acted unreasonably in failing to accept the August 2019 Offer during the period that it was available for acceptance. 

During that period, the judge concluded that C knew (or was in a position to know) that its case had been substantially weakened as a result of test results at the time. From that point there existed a real risk that C would not recover more than the August 2019 Offer at trial.  Yet, and as the judge put it, C "was taking a commercial risk in the knowledge that it could end up recovering less than the amount of the offer.

Accordingly, D was awarded 80% of its costs in relation to the element of the claim that was the subject of the August 2019 Offer, for the period beginning 21 days after service of the offer.

COMMENTARY

This decision reinforces the guidance in Thakkar: a court will consider whether the offeree acted reasonably when looking at withdrawn Part 36 offers, when awarding costs.  Offerees should watch out for this. A claimant may still be faced with an adverse costs order for failure to accept a Part 36 offer from a defendant, even where that offer has been withdrawn. This is probably counter intuitive for most litigants. In similar circumstances once a reasonable Part 36 offer (in the light of what is known at the time) is withdrawn, it may be sensible for an offeree to consider making its own offer on the same or similar terms.

Author: James Byrne

Part 36 - Offer to Accept Tiny Reduction on Claim

The High Court has held that a Part 36 offer to accept a discount of 0.3% constituted a "genuine offer to settle", where there was no viable defence.

RAWBANK SA V TRAVELEX BANKNOTES LTD [2020] 1619 (CH)


FACTUAL BACKGROUND

In proceedings brought by the Claimant (C) against the Defendant (D) for fraud and misrepresentation regarding banknotes paid for but not delivered, C (on the same date as the claim was issued) made a Part 36 offer of £48,290,000 (a discount of 0.3% of the total claim). D rejected C's Part 36 offer because of its inability to pay as a result of circumstances beyond its control leading to its insolvency.

D, whilst initially seeking a stay of proceedings, later consented to judgment being entered against it and accepted that it should pay C's costs of the action. One question for the High Court was whether C's Part 36 offer constituted a "genuine attempt to settle" and whether the consequences set out in CPR 36.17(4) should apply in respect of interest and costs.

The High Court held that the offer of 0.3% less than the total claim was C's genuine attempt to settle and that it would not be unjust to require D to pay C's costs on an indemnity basis and interest on the principal sum owed at the Judgments Act rate (8%).

KEY LEGAL POINTS

Where a claimant obtains a judgment that is at least as advantageous as its Part 36 offer, the court will generally award it the costs consequences set out in CPR 36.17(4) unless it is unjust to do so. These are: 

  • an order for indemnity costs;
  • enhanced interest on the judgment and costs; and
  • an additional amount of up to £75,000 calculated as a percentage of the judgment sum. 

CPR 36.17(5) also sets out factors that the court must consider when deciding if it would be “unjust” to require payment, including whether an offer was a “genuine attempt to settle the proceedings”.

In making his decision, Zacaroli J said that in determining this question, the critical question was not "mathematical", but whether it could be inferred that there was no genuine attempt to settle. Here, the discount involved C giving up what it had a "near-certainty of obtaining". D's inability to pay was taken into account, but it was held that this on its own did not mean there was no genuine attempt to settle, especially if C believed that D could pay. 

D's inability to pay was taken into account in deciding whether it would be unjust to require payment of the amounts in CPR 36.17(4). The High Court held that it would be unjust to order "at least some" of the CPR 36.17(4) amounts, but not to require D to pay C's costs on an indemnity basis and interest on the principal sum owed at the Judgments Act rate (8%). This is because D could have agreed to judgment being entered against it earlier rather than seeking a stay.

COMMENTARY

This is a claim arising out of the Covid-19 pandemic. Although this is an extreme example, with the court holding that a Part 36 offer of 99.7% was valid, it is important to note that the court has a discretion under the Rules: each case will be determined on its facts. A high percentage offer by C, therefore, may not always be effective under Part 36. But the decision does suggest that where there is no viable defence, an offer may be valid if D is only looking to delay judgment against it.

Author: Clare Petrovic 

Norwich Pharmacal Relief, to Identify Wrongdoer

Norwich Pharmacal relief has been granted, for a potential libel claim by the applicants, to identify those who had access to and used an anonymous Twitter account.

COLLIER AND OTHERS V BENNETT [2020] EWHC 1884 (QB)


FACTUAL BACKGROUND

The Applicants were high-profile individuals who had taken active positions against the rise of anti-Semitism in the UK. They alleged that they were the subject of defamatory tweets posted by an anonymous Twitter account operating under the name of "Harry Tuttle", using the handle "@arrytuttle" (the "Account"), over a period of several years.

After another Twitter user publicly suggested that the Respondent was the owner of the Account, the Account was deleted from view and its tweeting history was removed. The Respondent admitted to being the account owner, but denied that he wrote or authorised the tweets.

In order to pursue their potential claim for libel and harassment, the Applicants sought a Norwich Pharmacal order (the "Order") to compel the Respondent to disclose deleted tweets, which were posted between March 2018 and July 2019 and which referred to them by name.

KEY LEGAL POINTS
  • Applicants 1 and 2 each had a good arguable case that they were subject to defamatory tweets and that these tweets could cause serious harm to their reputation. There was some evidence of the deleted tweets in Google searches in relation to Applicant 1. Applicant 2's solicitor had provided sworn evidence in relation to the content of the tweets. Applicant 3, however, failed to establish a good arguable case as there was less evidence to suggest that she had been the subject of defamatory tweets.
  • The Order was necessary in the interests of justice as the Applicants were entitled to identify all wrongdoers. The fact that the Respondent had accepted liability did not entitle him to obscure the identity of any additional person who could have had access to the Account.
  • By limiting the disclosure ordered to a specific period of time and subject matter, it would not be onerous for the Respondent to comply.
COMMENTARY

The decision shows that anonymous users of social media platforms can be forced to reveal their identity by way of a Norwich Pharmacal order. It is noteworthy that this application was brought against the account holder themselves, and not against Twitter. The Court noted that it "is likely to be a fruitless exercise" to obtain disclosure from Twitter directly.

But sufficient evidence was needed by the applicant to show that defamatory comments had been published. And, in future, it may assist victims of alleged defamation and harassment to be able to establish the identity of at least one of the users of the relevant account before making a similar application.

Author: Rachel Barnett

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