Protec International Ltd v Stout

There are two applications before me: the first in time is the Second Defendant’s (“D2”) application dated 11/04/17 seeking a declaration that the Amended Claim Form dated 22/09/16 and the accompanying Particulars of Claim have not been validly served on him; the second is the Claimant’s (“C”) application dated 26/04/17 seeking an order pursuant to CPR 6.15(2) that the steps taken to effect service of the Amended Claim Form and Particulars of Claim on 23/02/17 constituted good service, alternatively an order extending time for service of the same pursuant to CPR 7.6(3).

The Claim Form was issued on 19/09/16. It was therefore valid for service out of the jurisdiction until 18/03/17. It was slightly amended on 22/09/16. It has been duly served within the jurisdiction on D1 and D3. On 20/12/16 C applied for service out on D2 at his home address in the US. On 05/01/17 Master Bowles made the order for service out. The order was sealed on 25/01/17. Thereafter the relevant papers were sent to the Michigan firm of Honigman Miller Schwartz and Cohn LLP (“Honigman”) who were instructed by C’s solicitors to effect service of the proceedings on D2. Honigman received the papers on 04/02/17. A partner in that firm, Mr Tracy, claimed to have effected personal service on D2 in accordance with the Michigan Court Rules (“MCR”) on 23/02/17.

At the outset of the hearing, Mr Richardson, who appears for the Claimant, sensibly accepted that the proceedings had not been validly served on D2 in accordance with Michigan State law, in particular Rule 2.105(A)(1) of the MCR which requires personal service of the proceedings. As Mr Rodbard, an attorney in good standing in the State of Michigan, explains in his witness statement dated 10/04/17, the MCR require that a process server must inform the defendant of the nature of the papers, offer them to the defendant and leave them within the defendant’s physical control. This clearly did not happen on 23/02/17 in relation to C’s attempts to personally serve D2 on that date and it has never been suggested that there was any other occasion on which it might be said that D2 had been personally served with the proceedings.

What in fact happened on 23/02/17 was this. On the morning of 23/02/17 Mr Tracy, a partner in the firm of Honigman, attended at the D2’s address in Michigan, namely 3442 Oakdale, Hickory Corners, Michigan (“the Property”), in an effort to effect service of the proceedings on D2. He gives an account of what happened at paragraph 20 of his witness statement dated 26/04/17 as follows:

“I went to Mr Overbeck’s property again on 23 February 2017. When I arrived at the property, I saw a man who appeared to be Mr Overbeck through the window at the front of the house. The man refused to answer the door. I indicated in a clear and loud voice that I had papers for him that related to the Protec case to serve on him. The man would not come to the door so I indicated still in a loud and clear voice that I was going to leave the Documents on the doorstep. […]. I left the Documents in an envelope outside Mr Overbeck’s front door and completed the enclosed Certificate of Service timed at 7.04 am (page 11 of CET 1).”

On that basis Mr Tracy completed the Certificate of Service at page 188 in the bundle which confirms personal service of the proceedings on D2 at 7.04am at the Property.

However, the evidence served with D2’s application indicates that D2 was not physically present at the Property on 23/02/17. He was in fact en route to Aspen for a pre-arranged holiday and had stayed overnight on 22/23 February at a hotel in Chicago: see paragraphs 11-14 of witness statement of Mr Bignell dated 11/04/17 and the exhibits referred to therein. Hence Mr Richardson’s concession that D2 had not in fact been validly served in accordance with the MCR. The matter therefore turns on C’s application. If I dismiss that application, it follows that D2 is entitled to the relief claimed. If I accede to the application, it will be on the basis that the steps taken to effect service on 23/02/17 constituted good service, alternatively on the basis that I am satisfied that it is appropriate to make an order extending time under CPR 7.6(3).

The crux of the underlying claim is that the Ds wrongfully diverted C’s principal assets, being various trademarks, from C to D3. The claim follows lengthy proceedings in Guernsey concerning the shareholdings in and directorships of C, to which D1 and D2 were parties. C has only been able to bring this claim as a result of and following the Guernsey proceedings which restored the proper board of C to control of it. At the trial before the Royal Court in 2015, the trial Judge, Lt Bailiff Marshall QC, found that D1, D2 and their associates had wrongfully assumed de facto control of C to the exclusion of its proper board at the time when they also caused the transfer of the relevant trademarks to D3. The Guernsey proceedings were conclusively resolved against D1 and D2 and C’s share register and board have been restored to the position they ought always to have been in, enabling C to bring the present proceedings to recover the trademarks from D3, an English company. D1 owns and is a director of D3 and it is accepted that the proceedings against all Ds have been appropriately brought in this jurisdiction. It should also be noted for the purpose of the applications now before the court that there is no suggestion that D2 has any limitation defence.

The Claim Form having been issued on 19/09/16, it remained valid for service upon D2 until 18/03/17. It is now common ground that it was not validly served within the 6 month period of its validity – hence C’s application dated 26/04/17 which invites me to make an order under CPR 6.15(2) that the steps taken to effect service of the Amended Claim Form and Particulars of Claim on 23/02/17 constituted good service, alternatively to make an order extending time for service of the same pursuant to CPR 7.6(3). In order to resolve these applications, it is necessary to consider the extent of C’s attempts to serve the proceedings on D2 and why those attempts failed.

The evidence as to C’s attempts to effect personal service of the proceedings on D2 is contained principally in the evidence of Mr Tracy, to which I have already made brief reference above. He explains that following his firm’s instruction by Trowers & Hamlins on 03/02/17, he instructed Karen Hencken, a certified Court Officer and Process Server, to effect personal service on D2. The extent of her efforts to effect service are apparent from her invoice dated 02/03/17 (p.257). The initial attempt at service appears to have involved a visit to D2’s in-laws on 10/02/17 by William Goodrich III which was unsuccessful. Thereafter it is apparent from the invoice and Mr Tracy confirms that process servers attended at D2’s office at 616 West Centre Avenue, Portage, Michigan on three occasions without success. Mr Tracy says this at paragraph 14 of his statement:

“I can confirm that on one occasion her agents had waited nearly all day at Mr Overbeck’s office to personally serve him. She also informed me that they had spoken to his employees to try to understand when he would be available and that the responses they had received were evasive. I expect that one of his employees would have told him that process servers had attended his office on a few occasions looking for him, if indeed his in-laws or his neighbours (as indicated below) had not already told him”.

It would also appear that Ms Hencken herself attended at the Property on 23/02/17 at 5.02pm but found no one at home (p.262). It would appear to be common ground (see para 4 of D2’s witness statement dated 10/04/17) that Ms Hencken left her business card (p.259), which clearly identifies her as a process server, at the Property but it is not clear to me from the evidence whether this was on 23/02/17, or some earlier occasion. It is also accepted that Ms Hencken phoned D2 on numerous occasions, leaving a message asking him to return her call which he never did. The invoice identifies “2 calls per day, at both office and cell, for a total of 26 calls. Left messages. Will not come forward”. As to this, D2 says this in his statement at paragraph 4:

“… I now understand that she telephoned me and left messages requesting that I return her call. I have, since the beginning of this year, been avoiding anything which would distract me, from my preparation for the Bar Exam, including unsolicited telephone calls. I have since checked my voicemail and have now listened to the messages left by the process server. […]. None of the messages made any reference to the fact that the process server was intending to effect service of the legal documents on me. The messages simply asked me to return the process server’s call”.

Due to the difficulties being encountered in effecting personal service, Mr Tracy became personally involved. He describes in his witness statement at paragraph 17 that D2 is “personally known to me” and the extent of his knowledge. Mr Tracy attended at the Property on 21/02/17 and nobody was at home. He spoke to some neighbours who told him that D2 and his wife had been at home the previous weekend. Mr Tracy then called D2 on his mobile phone on 22/02/17 and left him a message asking him to return his call. He did not explain the purpose of his call. D2 did not call back.

Mr Tracy went to the Property again on the morning of 23/02/17 and I have already set out at paragraph 4 above what happened. Mr Tracy thought he had done enough to effect personal service, having regard to what happened, his belief that the man inside was D2 and having regard to the law as set out in the MCR but also as explained in paragraph 9 of Mr Tracy’s witness statement.

Finally, the proceedings were additionally sent by post by Honigman to D2’s office and home addresses. D2 accepts receiving the proceedings on his return to the Property from holiday at around midnight on 01/03/17, albeit he says they were contained in a brown envelope hand marked to “Ed Overbeck” leaning against the post of the mail box on the street in front of his house. Ms Hencken also deposes to the fact that she saw just such an envelope in that position when she attended at the Property on 23/02/17 (p.262). D2 also accepts that the proceedings had been sent to him by post at his office address as set out above and that he received them there on 02/03/17.

Thus there is no doubt that the proceedings came to the attention of D2 within the period when the Claim Form was valid for service. However, it now being accepted by C that they were not validly served as required by the MCR, C seeks an order under CPR 6.15(2) to validate as good service the steps taken on 23/02/17 to effect service, alternatively an order under CPR 7.6(3) extending the time for service.

To complete the chronology, I should also deal briefly with the course of correspondence which followed D2’s receipt of the proceedings at the beginning of March. The next thing that happened was that on 21/03/17, i.e. 3 days after the Claim Form had ceased to be valid for service, Messrs Howard Kennedy LLP wrote to Trowers & Hamlins contending that the proceedings had not been validly served on their client in accordance with the requirements of the local jurisdiction and in particular the MCR which required personal service. They did not explain the basis of that contention. Trowers & Hamlins replied on 24 March contending that D2 had been properly served. The material part of the letter provided as follows:

“Service was ultimately effected on him by an attorney who is personally known to him. We would add that your client had been actively seeking to evade service and our client has therefore been put to considerable expense in trying to serve him. We understand that no less than 26 telephone messages were left for him by process servers. We enclose a copy of the certificate of service which was lodged with the court on 14 March 2017 for your record”.

On 29 March 2017 Howard Kennedy replied maintaining that personal service had not been effected on their client and on 11 April 2017 they served an application on behalf of D2 seeking to set aside service of the proceedings. That application included with it the evidence to which I have referred in paragraph 6 above. Thus C was able to see for the first time the precise basis upon which D2 disputed service and following receipt of that application and evidence on 26/04/17 C’s solicitors issued an application seeking relief under CPR 6.15(2), alternatively 7.6(3).

CPR 6.15 provides as follows:

CPR 7.6 provides as follows:

The proper approach to Rule 6.15(2), at least in a case not involving the Hague Service Convention, or any other bilateral treaty, is now well established. As Lord Clarke said in Abela v. Baadarani [2014] 1 WLR 2043 at [33]-[38]:

However, the USA is a party to the Hague Convention (CPR 6.40.9) and for that reason Mr Davies QC submitted that the correct test was that articulated by Stanley Burnton LJ in Cecil v. Bayat [2011] 1 WLR 3086 at [65] where he said:

Mr Richardson’s response was two-fold. Firstly, he submitted that, having regard to the preceding paragraphs in Stanley Burnton LJ’s judgment at [62]-[64], the learned Lord Justice’s conclusion at [65] was predicated on the principle, enshrined in a line of cases going back to Cookney v. Anderson (1863) 1 De G J & S 365, that (to quote Lord Westbury LC in that case at 380-381):

“The right of administering justice is the attribute of sovereignty, and all persons within the dominions of a sovereign are within his allegiance and under his protection. If, therefore, one sovereign causes process to be served in the territory of another, and summons a foreign subject to his court of justice, it is in fact an invasion of sovereignty, and would be unjustifiable, unless done with consent …”

Mr Richardson submitted that the invasion of sovereignty principle had been disapproved by the Supreme Court in Abela as outdated and impractical in a world where “litigation between residents of different states is a routine incident of modern commercial life” (per Lord Sumption in Abela at [53]) and invited me to proceed on the basis that Cecil v. Bayat had been impliedly over-ruled by Abela.

Secondly, Mr Richardson submitted that even if the test was as per Cecil v. Bayat, i.e. special circumstances, there were here special circumstances, namely the fact that D2 had been seeking to avoid personal service, an inference that Mr Richardson invited me to draw from the evidence as to C’s attempts to serve. In that regard he referred me to [68] in Cecil v. Bayat where Stanley Burnton LJ said this:

“Service by alternative means may be justified by facts specific to the defendant, as where there are grounds for believing that he has or will seek to avoid personal service where that is the only method permitted by the foreign law…”

In my judgment the position is as follows. Lord Clarke, who gave the leading judgment in Abela with whom the other members of the Court agreed, expressly stated at [34] that: “I say nothing about the position where there is a relevant convention or treaty”. I therefore conclude that Abela is not authority for the principles to be applied where there is a relevant convention, as there is here, namely the Hague Convention. Lord Clarke clearly had the authority of Cecil v. Bayat very much in mind (see [34]) but said nothing to suggest that he considered that that case, and the test set out in [65] should no longer be followed where there was a relevant convention.

I note too that the test of special circumstances as articulated by Cecil v. Bayat was that applied by Teare J in a recent decision of his under CPR 81.10(5) involving a state that was party to the Hague Convention: see Deutsche Bank AG v Sebastian Holdings Inc  [2017] EWHC 459 (Comm) at [28].

Accordingly, I propose to proceed on the basis that the correct test in this case, a Hague Convention case, is that service by an alternative method under CPR 6.15 should only be permitted in special circumstances.

As to CPR 7.6(3), the principles to be applied are not in doubt. The court can only make the order if the three requirements of r.7.6(3) are met. There is thus a striking contrast between r.7.6(2) and r.7.6(3): see FG Hawkes Ltd v. Beli Shipping Co Ltd [2009] EWHC 1740 (Comm) at [23].

If, but only if, those three requirements are met, the court then has a discretion to be exercised in accordance with the overriding objective. Most of the cases have turned on the interpretation of “all reasonable steps” by the claimant (to effect service) in r.7.6 (3)(b).

Against that background, I can state my conclusions quite briefly. Not without some hesitation, I have concluded that I should make the order sought under CPR 6.15(2). My reasons for so concluding are as follows.

First, despite the attack made by Mr Davies QC on Mr Tracy’s credibility, I am satisfied that I should accept his evidence. I therefore accept that he genuinely believed that the man at the Property on 23/02/17 who was refusing to come to the door was D2; I also accept that he completed the Certificate of Service in the genuine belief that good personal service had been effected on 23/02/17 in accordance with the MCR and the general law as explained in paragraph 9 of his witness statement and promptly informed C’s solicitors of his belief that good personal service on D2 had been effected.

Secondly, notwithstanding that the purported personal service on 23/02/17 was not effective, the Amended Claim Form did come to the attention of D2 within the relevant 6-month period such that D2 was aware of its existence and the nature of the proceedings being brought against him.

Thirdly, although C did not, in my view, take “all reasonable steps” to serve the claim form in time, overall C made significant efforts over a reasonable period to bring the claim and the claim form to the attention of D2 and succeeded in doing so.

Fourthly, it has not been alleged on behalf of D2 at this hearing that the claim is time barred, England is the appropriate jurisdiction and there might be further difficulties and delays if C were required to serve a new claim out of the jurisdiction.

Lastly, and critically, I am entirely satisfied that D2 was at the material time actively seeking to avoid personal service, knowing that that was the only method permitted under local law. Clearly, he was under no obligation to assist C in effecting personal service on him, as Mr Davies QC rightly emphasised. However, it seems to me remarkable that he was never at the places that one would ordinarily have expected to find him and that he should have been so difficult to track down if he was not evading service. There is scant evidence as to why this should be so, if D2 was not evading service, other than what Mr Bignell says in paragraph 9 of his witness statement where he explains that “From 2 January 2017 Mr Overbeck was busy preparing for the Michigan State Bar Exam due to take place on 21 and 22 February 2017”. Mr Bignell explains in some detail what D2 was doing from 20 February until 1 March 2017 but there is no explanation of where he was or what he was doing between 10 February 2017, when the efforts to find and serve D2 began, and 20 February 2017 when he travelled to Lansing to sit the Bar Exam on 21 and 22 February. D2 does not explain in his witness statement where he was or what he was doing between 10 and 20 February 2017 beyond confirming what Mr Bignell said on his behalf in paragraphs 9-15 of his witness statement. No further evidence has been served in response to C’s evidence, in particular the evidence contained in paragraph 14 of Mr Tracy’s witness statement to the effect that Ms Hencken’s agents had “spoken to his employees to try to understand when he would be available and that the responses they had received were evasive”.

In all the circumstances I consider that I should infer that D2 was actively evading service at this time and that two particular pieces of evidence point strongly to such a conclusion: (i) his failure to respond to any of the 26 messages left for him by Ms Hencken and (ii) the uncontroverted evidence (see paragraph 14 of Mr Tracy’s witness statement) that D2’s office staff were spoken to in an effort to find out when D2 would be available but his staff were evasive in the responses they gave. I am totally unpersuaded that his failure to respond to any of the 26 messages left for him by Ms Hencken and his absence from the office can be satisfactorily explained away by the fact that he was busy preparing for the Bar Exam.

There is, in my view, clearly good reason to make an order under CPR 6.15(2) but it is my finding that D2 was actively seeking to avoid personal service that provides the necessary special circumstances required to justify an order under CPR 6.15(2) in a case involving the Hague Service Convention.

Given that I have acceded to the application under CPR 6.15(2), I do not need to consider the alternative application under CPR 7.6(3). However, if I had needed to rule on it, I would have found that, although the application had been made promptly, C had not taken all reasonable steps to comply with r.7.5 and would have dismissed the application on that basis.

I will hear Counsel as to the form of Order I should make and on any other consequential issues, including costs.