On 27 February I heard an application by the Second Defendant (“Credit Suisse”) to set aside the Order dated 17 October 2012 of Christopher Clarke J extending time for service on Credit Suisse in Switzerland of the Claim Form issued by the Claimant. I granted the application, but, since there was a case immediately to follow on in the list, I adjourned the giving of my reasons, which are contained in this judgment.

The setting for the application is that CPR Rule 7.5 provides that a claim form must be served within four months of issue if served within the jurisdiction and within six months of issue if served outside England and Wales. Although the language of Rule 7.5 is mandatory, extension of time for such service is provided for under Rule 7.6. Such application must be supported by evidence and may be made without notice. By Rule 7.6(2) “the general rule is that an application to extend the time for compliance with Rule 7.5 must be made …. within the period specified by Rule 7.5”. There is however provision for an application for an order to extend time for compliance with Rule 7.5 after the expiry of the four-month or six-month period, but only if:

The claim was made ex parte to Christopher Clarke J, and decided by him, in accordance with the usual Commercial Court practice, on paper. Such application was issued by the Claimant’s solicitors on 1 October, and on that same date, before presentation of the papers, the Claimant’s solicitors had sent a letter to Holman Fenwick & Willan, London solicitors, with whom the Claimant’s solicitors had previously corresponded, and who had, in circumstances which I shall describe, previously on three occasions, on 14 June and 26 and 28 September, informed the Claimant’s solicitors that they had no instructions to accept service on behalf of Credit Suisse. That letter notified Holman Fenwick that the Claimant would be making a paper application in respect of the Claim Form, a copy of which had already been supplied, and that they were not required to apply on notice, but would draw the correspondence to the attention of the Court; and by separate copy letter (by which they enclosed a copy of their application) they suggested that if Holman Fenwick wished to comment on the application they should do so by close of business on 2 October. Holman Fenwick did, by letter dated 2 October, to the Court, copied to the Claimant’s solicitors, so comment and object, pointing out the passage of time since the Claim Form was issued on 5 April and some of the chronology to which I shall refer below; and by letter dated 3 October to the Court, copied to Holman Fenwick, the Claimant’s solicitors commented on that letter.

Before me, Mr Sudhanshu Swaroop of Counsel on behalf of the Claimant, took what he submitted to be a preliminary objection to Credit Suisse’s application to set aside. He submitted that the Claimant’s application to Christopher Clarke J had been, or was agreed or deemed to be, on notice and/or that the Defendant was estopped from denying that it was on notice, and consequently that the Defendant was not entitled to seek to set it aside, but its only remedy was to appeal the order, which appeal would now (subject to any application for extension) be out of time.

I concluded that this argument, however put, was without any foundation. Holman Fenwick had three times declined to accept service and were not on the record on behalf of Credit Suisse. Notice was consequently not given to them as solicitors for Credit Suisse on the record or at all, and in any event (i) there was insufficient notice (ii) the application was dealt with as a paper application and certainly (iii) was not inter partes. At the highest it could be described as having been ex parte on notice. The practice is well established and fair that if in fact there is an ex parte hearing in open court before a judge and short notice is given to a defendant – very often a sensible course because it may lead to compromise or on the other hand to the disclosure of a knock-out blow on the part of the defendant – and the defendant attends and says something (not of course the case here), that step is not treated as ruling out the opportunity of a subsequent application to set aside, the claimant’s application not having been on due notice, unless a defendant so appearing is treated as having waived, or in front of the Court agrees to dispense with, the requirement of notice. To follow the course suggested by Mr Swaroop would not only be unjust – it is plain that Credit Suisse did not have a proper opportunity to marshal the arguments which have been marshalled before me and certainly took no step which could be seen as waiver – but would set a precedent which would create a grave handicap to those seeking to take part in future hearings ex parte on notice, which perform a valuable function. I reject both the Claimant’s argument that Credit Suisse has lost its opportunity to apply to set aside and also its alternative argument that in some way Christopher Clarke J’s ex parte decision has to be shown to be in error. The issue must be treated before me as de novo.

I turn then to consider the application to set aside. Although Mr James Willan of Counsel in his skeleton argument raises a number of points about the substance of the claim and the contents of the Claim Form (and of the subsequent Particulars of Claim served on 15 October 2012), asserting on behalf of Credit Suisse that no or no arguable case is disclosed against them, in the event at the hearing it became common ground that such arguments were not such as to impinge upon the issues before me; and I did not consider, nor was invited to consider, the merits of the claim against Credit Suisse, which were thus assumed for the purposes of this hearing.

What Mr Willan did submit, and I shall return to this below when relevant, is that, given that the allegations as against the First Defendant (an English company) and the Third Defendant (a Romanian resident who is said to control it), are based on allegations of fraud underlying the transactions, in which it is not alleged that Credit Suisse was involved, and that the only case against Credit Suisse relates to the Letters of Indemnity issued in respect of such transactions, so even if there be merit in the Claimant’s claim against Credit Suisse, Credit Suisse should not, and does not desire to be, involved in the resolution of the issues as between the Claimant and the First and Third Defendants.

The procedural history of the Claim Form is as follows. It was issued on 5 April, as Mr Edward Davis of the Claimant’s solicitors explains in his first witness statement, in order to establish jurisdiction and seisin of the court in England and Wales, and to pre-empt the possibility of proceedings first being issued by the Third Defendant in Romania. The Claimant hoped or perhaps expected that, once the Claim Form was issued, disputes could be resolved without need to proceed to court, and a detailed letter dated 5 April 2012 was sent. So far as Credit Suisse is concerned, a substantive reply was made on 14 May, to which the Claimant’s solicitors responded on 29 May. No resolution of the dispute occurred between the Claimant and any of the Defendants, and by letter dated 13 June 2012 the Claimant’s solicitors enquired of Holman Fenwick and of Hill Dickinson, who had been representing the First and Third Defendants, whether they would accept service, and both of them replied by return in the negative. A further detailed response was sent by Holman Fenwick rebutting the claim against Credit Suisse, dated 22 June 2012.

The next step was that the Claimant’s solicitors lodged documents with the Foreign Process Section (“FPS”) of the High Court, for service on the Third Defendant in Romania on 13 July 2012. I have no information so far as service on the First Defendant is concerned as to what occurred. So far as Credit Suisse is concerned, the Claimant’s solicitors wrote a letter to Holman Fenwick dated 3 August 2012, replying to their letter of 22 June, stating that it was plain from the correspondence that the Claimant would have to pursue its claim in the courts, and concluded as follows:

It seems that at some stage in August a decision was taken by the Claimant to add to and/or amend the Claim Form, and thus to allow it to lapse, with a view to issuing a fresh claim form. No very clear explanation is given as to this thought process or its precise timing by Mr Davis, who simply says at paragraph 7 of his first witness statement as follows:

This is a particularly elusive explanation, given that the only Defendant about whom any account as to service has been given is the Third Defendant. In any event, the result is that on 30 August 2012, the Claimant’s solicitors requested the FPS to instruct the Romanian authorities not to take any steps to serve the Third Defendant and to return the claim documents. It seems that at that stage the documents had not yet been served on the Third Defendant. The Claimant’s solicitors chased up the FPS on 7 September, when they were told that the individual at the FPS who was looking after the matter had left on holiday and had not yet passed on the request to the Romanian authorities. By the time the request was passed on to the Romanian authorities, on 11 September, it turned out that the Third Defendant had already been served. An acknowledgment of service was filed on behalf of both the First Defendant and the Third Defendant on 18 September 2012 by Hill Dickinson. Mr Davis said as follows, in paragraph 9 of his first witness statement:

The Claimant’s solicitors again asked Holman Fenwick on 26 and 27 September whether they would accept service on behalf of Credit Suisse, and to both letters a negative reply was given. Against the background that the six-month period for service out of England and Wales was to expire in 5 October, the Claimant made its application for an extension while CPR 7.6(2) still applied, and Christopher Clarke J made the order which I am now asked to set aside.

Some jurisprudence has been built up in respect of the exercise of the Court’s discretion pursuant to CPR 7.6(2), as to which I was given helpful assistance by both Counsel. It is clear that an explanation must be given as to why the claim form has not been served, both in accordance with the Practice Direction, which I have set out above, and by reference to the authorities to which I have referred.

The first such authority, Hashtroodi v Hancock[2004] 1 WLR 3206 CA states per Dyson LJ, who gave the judgment of the court, at paragraph 18:

It is clear from the authorities that good reason is not required as a threshold: see Dyson LJ in Hashtroodi at paragraph 17:

Per Dyson LJ in Hashtroodi at paragraph 19:

In Collier Dyson LJ said at paragraph 131:

In the exercise of this calibration it is plain that some reasons will not qualify as a good reason or even as a (neutral) reason. In Hashtroodi at paragraph 35 Dyson LJ stated that “this is a case where there is no reason for the failure to serve other than the incompetence of the claimant's legal representatives. Although this is not an absolute bar, it is a powerful reason for refusing to grant an extension of time.” In Cecil v Bayat Rix LJ characterises this as a “bad reason”. He said as follows:

The principle which underlies this approach is ascribed to the Woolf reforms, and the Overriding Objective. This is most fully set out in Hashtroodi, where the Overriding Objective is first referred to in paragraph 18, and then Dyson LJ continues:

He repeats this in paragraph 24. In paragraph 54 of Hoddinott, he expands on this:

So much for the enunciation of general principles, but inevitably, by the time there has been some build up of jurisprudence as here, examples can be given of what falls either side of the line, apart from the existence of the bad reason constituted by solicitors’ incompetence or negligence. It is quite clear that if the claim for which the extension is sought, if such extension be not given, would be (Collier, and Sodastream Ltd v Coates[2009] EWHC 1936 (Ch)) or might be (Cecil v Bayat) statute-barred, that would be a circumstance which would require a very good reason indeed (and no example has been identified or suggested, save obviously where the failure is that of the court) to justify an extension. But it is clear that even if the claim would not be statute-barred that is not an open sesame to the grant of an extension. Dyson LJ in Hoddinott at 54, in the passage which I have cited, addressed the question as to what the point would be in refusing to extend time if the Claimant can issue fresh proceedings. Indeed he met the point head on:

Rix LJ said as follows in Cecil v Bayat at para 90:

Although in fact both Collier and Sodastream wereexamples of cases in which the claim was statute-barred, examples were given of what might be said to amount to a bad reason, or certainly at best to ‘no reason’. At para 129 of Collier, Dyson LJ said that in their judgment “the failure of the First Defendant to respond to the letter of claim was no reason at all for not serving the claim form … In not serving the document, the claimant’s solicitor made a serious error of judgment.” In Sodastream, at paragraph 50, Blackburne J set out a number of propositions derived from the cases which include:

In Hoddinott, which was a case in which the claim was not statute-barred, an extension was granted on appeal to the Court of Appeal, although Dyson LJ stated (at paragraph 58) that “there was no good reason for the failure to serve”, and he reiterated, at paragraph 59, that such a course would be “exceptional”. He identified in that case what he called an “unusual combination of facts” which justified the exercise of this exceptional discretion. By reference to his having set out in paragraph 54 (cited above) the three purposes for the service of the claim form, he concluded that it could be said in that case that the first, namely notifying the defendant that the claimant had embarked on the formal process of litigation and informing him of the nature of the claim, had been satisfied. The unusual combination which he referred to was (para 58) that “(i) the claim is clearly not even now time-barred and (ii) a copy of the claim form was sent to the defendant within the 4 months’ period”. Blackburne J in Sodastream referred to this in his list of propositions at para 50(8) by stating “the fact that the person to be served has been supplied with a copy of the claim form or is otherwise aware of the claimant’s wish to take proceedings against him is a factor to be considered”.

Mr Swaroop relies upon the way that the result in Hoddinott is summarised by Rix LJ at para 88 of Cecil v Bayat:

It is not therefore a surprise that Mr Swaroop should, in the light of the use of the word “will” by Rix LJ, state the proposition as follows in paragraph 17(3) of his skeleton namely:

He adds that, in this case, there is the further factor that if the service on Credit Suisse is set aside, and the Claimant is thus driven to issue fresh proceedings at some expense and delay, it will not be put back in the same position as it would have been if the period is simply extended, because there will then be two sets of proceedings, given that by now the First and Third Defendants have acknowledged service in the existing proceedings; and the Claimant will therefore need to start fresh and separate proceedings against the Second Defendant. Either that will, as he submits, lead to the possibility of inconsistent judgments, or he will need to apply to consolidate, which will require the permission of the Court, which may well (in the light of the position adumbrated by Credit Suisse as set out in paragraph 7 above), be opposed, whether successfully or otherwise would remain to be seen.

The Claimant submits as follows:

The words of Rix LJ correctly summarise the effect of Hoddinott. The facts here fall (at least) within the same factual matrix as Hoddinott and so the Court will grant the extension.

The Overriding Objective, to which reference is significantly made in Hashtroodi,as set out in paragraph 17 above, militates in favour of avoiding technical points and the incurring of unnecessary cost and expense, additional proceedings and applications, and delay.

The reason for the delay appears from the chronology which I have set out above. In particular the reason is as set out by Mr Edward Davies in his second witness statement at paragraph 24:

Credit Suisse is not prejudiced, not only because fresh proceedings could be issued, but because it can make in the existing proceedings the same case as it would wish to make in opposition to consolidation of fresh proceedings, by issuing applications for severance/preliminary issues or even for reverse summary judgment.

Complaint is made as to the lack of instruction given by Credit Suisse to Holman Fenwick. This is repeated no less than three times in the course of Mr Edward Davis’s second witness statement, most clearly at paragraph 24.2:

Mr Willan’s answer to these points is as follows:

He does not accept that Rix LJ was characterising, or intended to characterise or (if necessary) was entitled to characterise, the circumstances in Hoddinott as anything other than an exemplar of a case in which the discretion may be exercised exceptionally to extend time, just as Blackburne J interpreted it in Sodastream at para 50(8). The words of CPR 7.5(1) (quoted in paragraph 2 above) are mandatory, and the procedure for extension is, as Rix LJ himself said in Cecil v Bayat in para 90, cited above, “strict”. What Rix LJ must have meant is that the facts of Hoddinott, where there was no good reason (the solicitor having made a serious error of judgment (para 41) in waiting for a further expert’s report to enable proper particularisation of the claim before serving the Claim Form), was an example of a case where the two identified factors could justify exceptional circumstances: but that he laid down no binding principle that wherever those two factors were present the discretion would always be exercised in the same way.

It is clear what Dyson LJ meant by the Overriding Objective, because he emphasised in those passages the purpose of the Woolf Reforms, namely (para 20 of Hashtroodi) to “introduce more discipline into the conduct of civil litigation”. In that same paragraph he referred to what Lord Woolf MR had said in the Biguzzi case [1999] 1 WLR 1926 at 1933 namely “if the court were to ignore delays which occur, then undoubtedly there would be a return to the previous culture of regarding time limits as being unimportant”.

Mr Willan submitted that it was a total mischaracterisation of the Claimant’s case to say that a reason, let alone a good reason, or other than a bad reason, had been given, and I shall expand on this below.

He does not accept that there is no prejudice to Credit Suisse if time is extended and the proceedings against all three Defendants simply permitted to proceed, but he submits that, in any event, any additional problems have in fact been caused by the Claimant, by virtue of the way in which it has mishandled the question of service of all three Defendants, again as I shall expand below.

The attempted complaint about Credit Suisse declining to instruct Holman Fenwick he submits to be entirely misconceived in the light of Blackburne J’s proposition at paragraph 50(9), set out above, derived from the authorities.

By way of expansion upon the propositions I have summarised at (iii) and (iv) above, Mr Willan relies upon, and is heavily critical of, the Claimant’s handling of the proceedings as appear from the chronology I have set out in paragraphs 8 to 12 above. He is critical of the Claimant for starting the proceedings in an attempt to pre-empt seisin by the Romanian courts, but then taking no steps to serve. As is clear from Collier and Sodastream, but in any event from all the authorities to which reference has been made, that waiting, certainly waiting for so long as to take up all or the majority of the generous periods of time for service of the writ, in seeking to persuade the proposed Defendants to instruct solicitors or to put forward a substantive defence or to make an offer in settlement, is not to be regarded as a good reason, but it is indeed rather to be treated as a bad reason or as negligence or incompetence; and the obtaining of further information or the thinking up of fresh or different causes of action before finalising Particulars of Claim and/or service of the Claim Form would be regarded as a serious error of judgment.

But the real error upon which Mr Willan relies, and the real cause of the problem, is that which is entirely obfuscated by the expressed reason (set out in paragraph 26(iii) above) which Mr Edward Davis chooses to light upon as to why “in short” it is that the need for the extension is said to have arisen. The real problem in fact, even allowing for the Claimant taking its time, and even (though probably impermissibly) (as per paragraph 24.2 of Mr Edward Davis’s second witness statement set out above) “taking some time in which to consider what to do following Holman Fenwick’s declining to accept service” is that which did, or rather did not, occur on 13 July. When the Claimant lodged papers for service with the FPS on 13 July, it did so only in respect of the Third Defendant in Romania. Had it done so in respect of Credit Suisse in Switzerland at the same time (or at all), then the two sets of service would have gone forward in tandem, and Credit Suisse would have been served well in time before 5 October, as was the Third Defendant (indeed in the event, after the extension in October, service on Credit Suisse only took 28 days).

The evidence from Mr Edward Davis is strangely lacking. In his first witness statement, produced for the ex parte application, he said at paragraph 6:

The “Accordingly” may make some sense so far as the Third Defendant is concerned. But it does not make any sense at all so far as why no similar steps were taken as against the Second Defendant, and no explanation is given in that regard. This point is made by Credit Suisse in support of this application in the witness statement of Mr Jeremy Davies at paragraph 22, and again more forcefully at paragraph 36(2), in which he points out that, while the Claimant’s solicitors took steps with the FPS to arrange for service of the Third Defendant on 13 July 2012, they “did not take any similar steps in relation to Credit Suisse. There was no good reason at all for failing to serve Credit Suisse at that time when (i) [the Claimant] had decided that it was necessary to pursue proceedings and was arranging for service of at least one of the parties and (ii) it had not yet decided to allow the Claim Form to lapse. There is no explanation whatsoever for its failure to take steps to serve Credit Suisse at this time”.

Notwithstanding this invitation, Mr Edward Davis simply repeated what he had said previously, in paragraph 24.3 of his second witness statement, namely “by July 2012 it became apparent that it would not be possible to resolve this claim without the need to pursue proceedings. Accordingly[my underlining] … claim documents were lodged with the FPS to be served on the Third Defendant in Rumania on 13 July 2012”.

Really the position can be most clearly illustrated by pointing to paragraph 10 of Mr Edward Davis’s witness statement on the ex parte application, when he says “the validity of the Claim Form for service on the Second Defendant expires on 5 October 2012. For the reasons explained above, the Claimant has not yet taken any steps to serve the Claim Form on the Second Defendant and … it would not be possible to effect service in Switzerland prior to 5 October 2012.” There were no reasons explained above, or even now. It may be, and I speculate, that, as of 13 July, it was thought that there might be some way of serving Credit Suisse in England and Wales by reference to a branch here (a possibility that was trailed during the course of the hearing, though without any evidence to that effect), but, even if that were the case, the four months for doing so expired without making any attempt to do so on 5 August, two days after the sending of the letter of 3 August to Holman Fenwick, from which I have quoted at paragraph 9 above.

If there was any justification for a decision made in August to allow the Claim Form to lapse and start again, simply in order to put forward fresh or additional causes of action (a course which could clearly have been taken by subsequent amendment, if that was the case – and which shows that at least in August the Claimant was prepared to allow this very Claim Form, extension of which it has now sought, to lapse rather than be proceeded with), then if by that time service on Credit Suisse was also in play, then a decision not to proceed against both, if such were desired, could have been taken. In the event, the Claimant was too late to withdraw the proceedings against the Third Defendant and had not troubled to seek to serve Credit Suisse. Hence the need for two proceedings, which Mr Willan submits to be entirely the fault of the Claimant, and even the fact that the FPS were slow (if they were) to pass instructions to Romania must also be seen as an inevitable and foreseeable consequence of the course chosen by the Claimant.

I agree with the Defendant’s propositions which I have sought to summarise at (i) to (v) above.

As to (i), I must exercise my own discretion in accordance with CPR 7.5 and 7.6 and the authorities. This is not a limitation case and is a case in which the Defendant had notice, prior to service, of the proposed claim, and so in the absence of a good reason (none having been identified which accords with the authorities), I could in those circumstances exceptionally grant an extension, or leave in place the extension granted ex parte by Christopher Clarke J. But I agree that I am not bound to do so and must consider the facts of the case. I must also bear in mind as to (ii) the strictness of the regime and as to (iv) the need for the issue of fresh proceedings which would be required though, particularly given that the additional problems of the need for two sets of proceedings have been caused by the Claimant’s changes of mind, I would regard this issue as neutral at best. As to (iv) I agree with the Defendants that it is entirely inappropriate and misconceived to describe any delay or fault to the fact that Credit Suisse did not choose to instruct Holman Fenwick: indeed I would add that since the issue of joinder of a foreign defendant is an exercise of an exorbitant jurisdiction, there can be no doubt that a foreign defendant is perfectly entitled not to instruct English solicitors unless it chooses voluntarily to do so.

I am most persuaded however by the Claimant’s case that there is not only no good reason in this case, such as might be overridden by the matters referred to in Hoddinott, but that either the Claimant has not (in relation to the fundamental issue as to the non-service of Credit Suisse in July) given any explanation at all, contrary to the Practice Direction and to the authorities, or that the entirety of its explanation can be characterised as a bad reason. I conclude that the Claimant is responsible for the entirety of the delay. This was caused by a concatenation of deliberate decisions, some understandable (though nonetheless not according with the views of the Court of Appeal in the previous cases, including awaiting instruction of solicitors for the defence), but some for which there appears no justification. These include the failure to note that the correspondence from Holman Fenwick was making it quite clear that Credit Suisse was going to be defending the claims, such that any prospect of settlement short of proceedings was non-existent, consideration of amendments and particularisation of the claim rather than getting on with service, but above all the deliberate decision (in the absence of explanation) not to take steps to serve Credit Suisse in July when it did so in respect of the Third Defendant, or at any time thereafter until 1 October.

I have no doubt at all that this application to set aside should be granted.