Majid Saadati v Seyed Ehsan Dastghaib & Anor

This is an application by Majid Saadati (“the Claimant”) for permission to appeal against the order of Deputy Master Sabic KC (“the Deputy Master”) dated 20 June 2024 (“the Order”) made in favour of Seyed Ehsan Dastghaib (“the First Defendant”) and Andreas Rudolf Bihrer (“the Second Defendant”). By the Order, the Deputy Master set aside the order of Master Thornett dated 30 September 2020 (“the Thornett Order”) pursuant to which he had granted judgment in default in the action in favour of the Claimant (“the Default Judgment”). By the action, the Claimant claims from the Defendants repayment of a loan of $15 million, together with interest. On 23 September 2024 Mr Justice Saini directed that, if permission to appeal is granted, the hearing of the appeal should follow immediately thereafter. I have heard full argument on all grounds.

The Claimant is an Iranian national. He was previously employed as a branch manager at a state-owned Iranian bank with which the family of the First Defendant (headed by his father, Seyed Abdollah Dastghaib) conducted business. The Claimant claims to be a property developer and has experience in the use of corporate structures, both offshore and onshore. In the period from September 2018 up to, at least, the Default Judgment, the Claimant was represented by a sole practitioner direct access counsel, John McLanachan. The Claimant is now represented by a firm of solicitors, Mansouri & Son (“Mansouri”) and by Mr Andrew Butler KC and Ceri Edmonds.

The First Defendant is a UK national from an Iranian family. The Second Defendant is a Swiss attorney who has acted, among others, for members of the Dastghaib family and the Claimant. The Defendants were represented by Imran Ahmad at Bloomsbury Law in 2020. Mr Ahmad states that he did not inform the Defendants about the Thornett Order and hence the Default Judgment. Upon learning of the Claimant’s intention to enforce the Default Judgment three years later in late 2023, the Defendants sought different legal representation. The First Defendant is now represented by Cooke, Young & Keidan LLP (“CYK”) and by Ms Zoë Barton KC and the Second Defendant by Edwin Coe LLP and Mr Edward Francis of counsel.

The claim concerns a loan of US $15 million alleged by the Claimant to have been made in November and December 2013 by the Claimant to, or for the benefit of, the First Defendant and the Second Defendant. The purpose of the loan was by way of investment in a property development, in which the First Defendant was involved, relating to certain property in London. It appears that the sums were transferred by a company called Minion Holding Limited to one or both of two companies associated with the First Defendant’s family: Embasslan SA (a Belize company) and Elham Limited (a BVI company). The Defendants both contend that the Claimant cannot establish any basis upon which either of them was party to any agreement and/or is personally liable for the sums loaned.

On 16 December 2019 the claim form was issued through the services of Mr McLanachan. The original claim form set out the brief details of claim completed in manuscript, as follows:

“On 16^th December 2013 the Claimant paid US$15 million to the 2^nd Defendant at the request and direction of the 1^st Defendant so that the Claimant and both Defendants might buy and manage properties in London. The money was to be returned strictly within 12 months from the date of payment. No monies have been returned to date.”

It was stated that particulars of claim were to follow. An address for service in London was given in respect of the First Defendant and at the professional address in Zürich for the Second Defendant. The original claim form was marked not for service out of the jurisdiction.

Subsequently on an unknown date, a second version of the claim form came into being (“the amended claim form”). This appears to be exactly the same document as the original claim form but with added wording. The amended claim form now stated “Particulars of Claim (attached)” and then referred to, and attached, three emails, a letter and a bank transfer confirmation, and asserted that the Defendants were jointly and severally liable to the Claimant in the sum of US$ 15 million plus interest and costs. This document does not appear to have been formally filed or issued.

As regards service of the claim form and/or the amended claim form, Mr McLanachan sent a letter dated 16 April 2020 addressed to the Second Defendant at two addresses, enclosing the amended claim form. The letter was received by the Second Defendant at his professional address in Switzerland on 21 April 2020. Mr McLanachan also sent a further letter dated 17 April 2020 to the Second Defendant enclosing the standard response pack to accompany the claim form. This was received by the Second Defendant on 4 May 2020. At no point was any documentation relating to service out of jurisdiction provided. It appears that service by post on the Second Defendant was defective for two reasons: first there was no compliance with CPR 6.34, given that the Second Defendant was domiciled in a Lugano Convention country, and, secondly, and in any event, service in Switzerland required compliance with the Hague Service Convention, which did not happen. The Claimant has produced no evidence that the claim form (in original or amended form) was ever directly served on the First Defendant. Rather, it appears that it was the Second Defendant who forwarded what had been sent to him on to the First Defendant.

On 4 May 2020 Mr Ahmad acting for each Defendant filed acknowledgments of service, ticking the box that each intended to contest jurisdiction. On 20 May 2020 Mr Ahmad on behalf of the Defendants made a formal application challenging service and jurisdiction (“the May 2020 Application”). By that application the Defendants sought an order setting aside the claim form and particulars of claim for non-service of the claim form. Alternatively, they sought orders striking out under CPR 3.4 and/or for summary judgment under CPR 24 on the grounds, essentially, that the claim has no merit. There was ambiguity in the application notice: it stated that the Defendants sought a determination without a hearing, but then gave a time estimate of 30 minutes for a hearing. The applications were supported by a witness statement from Mr Ahmad.

It appears that on 3 June 2020 the Court sent an email to the Mr Ahmad pointing out inconsistencies in the Defendants’ application about the need for a hearing. This email is referred to in the recitals to the Thornett Order, but has not been produced in evidence.

Despite the existence of the Defendants’ May 2020 Application, on 15 June 2020, Mr McLanachan applied, on behalf of the Claimant, for judgment in default of defence. He filed a standard form “N227 Request for judgment by default (amount to be decided by the court)”, which stated:

“The defendants have not filed (an acknowledgment of service) a defence to my claim and the time for doing so has expired, nor have they filed an application to contest the jurisdiction and the time for doing so has expired. I request judgment to be entered against the defendant for an amount to be decided by the court and costs” (emphasis added).

At the same time, Mr McLanachan filed form N225 “request for judgment and reply to admission (specified amount)”. On that form, it was stated that “the defendant has not filed an admission or defence to my claim or application to contest jurisdiction” and “I confirm that particulars of claim have been served on the defendant in accordance with the rules”. The form stated “the amount payable by defendant” to be £25,327,465.82.

It further appears that on 1 September 2020 the Court sent a chasing communication to the parties, requesting the Defendants to confirm their position in respect of the May 2020 application or that it was withdrawn; and that by letter dated 8 September 2020 to the Court, the Claimant confirmed that the Defendants had not communicated to the Claimant their position in relation to the May 2020 Application. These communications have not been produced in evidence but again are referred to in the recitals to the Thornett Order. Thus, whilst there is no evidence that at the time he made the application for default judgment, Mr McLanachan was aware of the May 2020 Application, it does appear that he and/or the Claimant was aware of it by 8 September 2020 at the very latest.

Mr Ahmad in his evidence claims that correspondence from the Court between 3 June and 30 September must have gone into his email junk box and that he did not see it.

On 30 September 2020 Master Thornett made the Thornett Order. In the recitals, the Master referred to the two applications and the fact that the Defendant had not responded to emails from the Court on 3 June and 1 September 2020 nor responded to the Claimant. The Thornett Order then provided as follows:

“AND UPON the court making the following order of its own motion, it being satisfied that the Defendants have evidenced no real intention of pursuing their 20 May 2020 Application despite reasonable invitation and notice from the court to clarify and progress with the same, such that the Application stands and constituted an abuse of process.

IT IS ORDERED that:

1.

The Defendants’ Application dated 20 May 2020 stands as dismissed.

2.

Judgment for the Claimant.

3.

Defendants to pay the Claimant’s costs, to be subject to detailed assessment in default of agreement.

4.

A party affected by this Order may apply to suspend, vary or revoke the same providing that their Application is issued and served within 7 days of service of this Order.”

On 1 October 2020 the Thornett Order was served by the Court by email to Mr Ahmad. On 8 October 2020 Mr Ahmad responded on behalf of the Defendants, asking for the Default Judgment to be revoked. He pointed out that the Defendants had not been able to file a defence, since the May 2020 Application had not yet been listed after nearly three months of waiting. By email dated 12 October 2020 to Mr Ahmad, the Court passed on Master Thornett’s response as follows:

“Paragraph 4 of the 1 October 2020 Order is quite clear as to what is required and when. Merely e-mailing the court with generalised observations and comment, as amounts in effect to a bare request to revert to an earlier procedural position, does not constitute compliance with the Order. The judgment stands. I further note and comment that the Defendant's e-mail correspondence dated 8 October 2020 should have been copied in to the Claimant, pursuant to CPR 39.8.”

The email concluded by stating “Please take note and act accordingly”. Nothing further happened until November 2023.

On 24 November 2023, the Claimant’s new solicitors, Mansouri, wrote to the Second Defendant informing him of the Default Judgment and indicated the Claimant’s intention to enforce the Judgment without further notice. A similar letter bearing the same date was received by the First Defendant on 6 December 2023.

The Defendants applied to set aside the Default Judgment. In fact, there were 11 applications listed to be heard by the Deputy Master. Each application has been given a number, which I also adopt.

On 20 and 22 December 2023 respectively, the First and Second Defendants each filed an application to set aside the Default Judgment (referred to as “Applications 1 and 2”) pursuant to CPR 13.2 and, in the alternative, pursuant to CPR 13.3. The grounds for the application were essentially that the claim form had never been validly served. In the alternative, setting aside was sought pursuant to CPR 13.3 on the merits. Each application was supported by a witness statement from the Defendant personally.

On 9 February 2024 the Claimant made an application in relation to service of the claim form (referred to as “Application 4”). First he sought an order that the claim form had in fact been validly served and/or that the Defendants were estopped by their conduct from challenging the validity of service of the proceedings; and secondly, he sought an order seeking to regularise service (retrospectively) i.e. for an order pursuant to CPR 6.15 for alternative service or pursuant to CPR 6.16 dispensing with service or directing that any defects in service do not invalidate service, pursuant to CPR 3.10. The orders were sought on the basis that the Defendants had “left the matter in abeyance”, (rather than having “abandoned” or “withdrawn” the May 2020 Application).

In addition, each Defendant made applications for a stay of execution of the Default Judgment (Applications 3 and 6); for security for costs (Applications 7 and 11); and to admit evidence of Swiss Law in relation to service (Applications 9 and 10). The First Defendant also applied for an order requiring the Claimant to respond to a part 18 request for information relating to service of the claim form (Application 8). The Claimant applied for the Defendants to attend for cross-examination (Application 5).

There were a number of witness statements before the Deputy Master: from Mr Ahmad, from each of the Defendants, from the Claimant, from Mr Felce of CYK and from Mr Rahman of Edwin Coe.

By letter dated 8 March 2024 to the parties’ solicitors, the Court informed them of the listing of the applications, including a direction from Master Thornett that “the Master conducting the hearing shall hear such Application(s) in such order as they thinks fit and may or may not conclude such Application(s) as they thinks fit”.

The various applications came before the Deputy Master on 21 May 2024. At the outset, and in particular in the context of the limited time available, there was an issue as to which applications the Deputy Master should consider. Mr Butler for the Claimant contended that the Court should deal with the smaller, peripheral applications first, because the Claimant considered it important “to establish precisely what had happened” before the Court could be in a position to decide what he considered to be “the main applications” – namely Applications 1 and 2 and Application 4. However, the Deputy Master acceded to the Defendants’ contention that she should determine the Defendants’ applications to set aside judgment pursuant to CPR 13.2 and, insofar as it was necessary, the Claimant’s application in relation to service i.e. the first part of Application 4. The Deputy Master then heard submissions on those points for the rest of that day. The Claimant now seeks permission to appeal against that initial decision of the Deputy Master: see Ground 1 below.

The Deputy Master gave oral judgment on 20 June 2024. She set aside the Default Judgment on the mandatory ground under CPR 13.2 as an irregular judgment in light of the requirements of CPR 12.3 not being met, having found that (1) there had been no service of the claim on either Defendant in accordance with the CPR and (2) there had been no opportunity provided upon dismissal of the May 2020 Application for the Defendants to serve a second acknowledgment of service, as provided for in CPR 11. At the same time, she dismissed the first part of the Claimant’s Application 4. Thus, by the Order, the Deputy Master declared that the claim form was not served on the First Defendant or the Second Defendant in accordance with the CPR and that the period for service of the claim form and particulars of claim under CPR 7.5 had expired. The Order ordered that Application 4 as to part was dismissed, that Applications 1 and 2 were allowed pursuant to CPR 13.2 and that the judgment and order for costs in the Thornett Order were set aside.

The Deputy Master then proceeded to give directions for the determination of the remaining applications. (Applications 3, 5 to 11 are now listed to be heard on 17 January 2025 and the balance of Application 4 is listed to be heard in February 2025.) The Deputy Master ordered the Claimant to pay the Defendants’ costs of the applications and of the hearing to be assessed, if not agreed. She further made orders for interim payment on account of those costs in favour of the First and Second Defendants in the sums of £134,474.75 and £57,573.50 respectively, to be paid by 18 July 2024. The Order reflected these further decisions.

On 11 July 2024 the Claimant filed and served its notice of appeal against the Order and at the same time applied for a stay of execution of the order for payment on account of costs. On 16 July 2024 Sheldon J made an order, on the papers, staying payment of the costs order until determination of the Claimant’s application for permission to appeal, with liberty to apply. On 23 July 2024 the Defendants applied to set aside the order of Sheldon J. The matter came before Saini J on 23 September 2024, who made an order covering a number of matters. Sheldon J’s order for a stay was set aside, but the Defendants’ solicitors each gave an undertaking that they would retain the interim costs moneys in client accounts until judgment in relation to the Claimant’s appeal.

In her judgment (“the Judgment”), the Deputy Master started by summarising the eleven applications that had been listed before her. At paragraph 3, she referred to the fact that there had been insufficient time for her to deal with all the applications. She continued:

“At the beginning of the hearing, I decided firstly to deal with the set aside application on the mandatory ground. I was mindful of the fact that the determination of that part of the application would have a significant bearing on the necessity to hear the other applications. This is my judgment on that application alone, and anything I say here by way of factual matrix should be approached with an appropriate degree of caution and mindful of the fact that I am not determining, as a matter of fact, anything which may impact on the other applications that remain outstanding…”

At paragraphs 4 to 6 of the Judgment, she set out a summary of the facts. She described the period between the Thornett Order and November 2023 as “a curious and inexplicable period of inaction or ineffectiveness of the most serious kind by the defendants’ legal representative”. She added that such inaction or ineffectiveness was a common feature which “plagues all parties in this claim”.

At paragraphs 7 and 8 she summarised the parties’ positions. The Defendants’ application for mandatory setting aside under CPR 13.2 was based on two reasons. First, the procedural requirements as to service were not met at the time of the default judgment. Secondly, CPR 11(7) affords a defendant the right to file and serve a further acknowledgment of service. She went on (at paragraph 7):

“The code for default judgment is a complete code, and here the court is concerned with considering mandatory grounds which focus on the procedural requirements imposed on the claimant. CPR 13.2 imposes a duty on the court to set aside if those have not been complied with”.

The Claimant’s case was that it was not open to a defendant who has acted unconscionably to invoke the court’s duty in the self-contained code for default judgments. That applied in the present case.

At paragraphs 9 to 19, the Deputy Master set out her decision. She did not accept the Claimant’s submissions for three principal reasons. First, “as a matter of principle, to accept the propositions as to unconscionable behaviour would amount to a prohibition on the court’s ability to comply with its duty, not the exercise of its discretion, under CPR 13.2 … CPR 12.3 applies irrespective of the defendant’s conduct and is focused instead on compliance by the claimant with the CPR. … As a matter of principle the defendant’s conduct cannot be relevant to the assessment of the test under CPR 13.2. Further, no sufficient basis was put forward to make out the proposition that the defendant was estopped from asserting facts as to compliance with CPR 12.2 and 12.3, which would invoke the court’s duty under 13.2”. The case of Olafsson v Gissurarson (No 2) [2006] EWHC 3214 (QB) supported her conclusion.

Secondly (at paragraph 11), the suggestion that rejecting the Claimant’s proposed approach would lead to chaos and injustice is answered by the remainder of the CPR, which amply accommodates for any injustice between the parties to be resolved. In the present case, the Claimant had an outstanding application in relation to service which was yet to be determined, as was done in the Olafsson case.

Thirdly (at paragraph 12), even if she was wrong as a matter of principle and it would be permissible in appropriate circumstances for the court to estop the defendant from exercising their right and the court could decline to comply with its duties, she did not consider that the present case was one where it would be appropriate to do so. She adopted a broad, merits-based approach not constrained by strict rules, citing the case of LA Micro Group (UK) Ltd v LA Micro Group Inc [2021] EWCA Civ 1429 at §26. In reaching that conclusion she had taken into account the entire factual matrix including three particular factors “which again I have determined on a preliminary basis only at this stage given that they may be subject to further argument between the parties and a close examination of the evidence”.

The first factor was the duty of candour in applying for default judgment: see paragraph 13. When applying for default judgment, the Claimant failed to bring to the Court’s attention the fact that by disputing jurisdiction, the Defendant had been relieved of the obligation to file the defences and thus the fact that matters on which the court had to be satisfied were at least arguably not satisfied. She considered that that was a fatal blow to the Claimant’s plea for the equitable doctrine of estoppel. She continued:

“there [is significant force] in the submission that the conduct of the claimant’s litigation is the source of the [misfortune] from which he now seeks relief.” (Footnote: ¹)

Secondly, (at paragraph 14) referring to abuse of process and Aktas v Adepta [2010] EWCA Civ 1170 at §26, she did not consider the Defendants’ conduct to be a case of wilful response but rather more as negligent or mistaken conduct. Thirdly, the abuse which Master Thornett found in dismissing the May 2020 Application focused on the manner in which the application was prosecuted and not the substance of the application.

At paragraph 16 the Deputy Master concluded as follows:

“In all these circumstances the touchstone of “the administration of justice being brought into disrepute” is not met on the present facts. This is instead a case which has suffered from extraordinary apparent failings on the part of all the parties’ legal representatives (which I should say are not the representatives who appear before me).”

At paragraph 18 she concluded that the mandatory conditions for setting aside the default judgment were plainly met. In relation to the Second Defendant, what should have been done by way of service out of the jurisdiction was not done (as the Claimant accepted). It followed “that there was no compliance with CPR 12.2.” (Footnote: ²) In relation to the First Defendant she rejected the contention that there had been service at the address stated in the claim form. There was no direct evidence of proper service. The evidence was limited to the two letters of 16 and 17 April 2020 sent to the Second Defendant and there was no certificate of service. The positive evidence all pointed the other way. The Deputy Master concluded at paragraph 19:

“I conclude that the default judgment entered against the first and second defendant was irregular on two bases: first, the want of service and second the lack of compliance with CPR 12.3. It follows that I am obliged to set it aside under CPR 13.2 and I do so”.

She refused permission to appeal. The contention that there had been procedural impropriety was rejected on the basis that the decision as to how the applications were dealt with was a case management decision. She commented that it was sensible and appropriate to deal with the applications in the way that she had dealt with them. In relation to the second ground of appeal relating to the 7-day period of challenging the order contained in the Thornett Order, she commented that that was not a prohibition on the Court complying with its duty under CPR 13.2.

CPR Part 13.2 provides as follows:

“Cases where the court must set aside judgment entered under Part 12

13.2

The court must set aside a judgment entered under Part 12 if judgment was wrongly entered because–

a)

in the case of a judgment in default of an acknowledgment of service, any of the conditions in rule 12.3(1) and 12.3(3) was not satisfied;

b)

in the case of a judgment in default of a defence, any of the conditions in rule 12.3(2) and 12.3(3) was not satisfied; or

c)

the whole of the claim was satisfied before judgment was entered.” (emphasis added)

By contrast, CPR 13.3 provides:

“Cases where the court may set aside or vary judgment entered under Part 12

13.3—(1) In any other case, the court may set aside or vary a judgment entered under Part 12 if—

a)

the defendant has a real prospect of successfully defending the claim; or

b)

it appears to the court that there is some other good reason why—

(i)

the judgment should be set aside or varied; or

(ii)the defendant should be allowed to defend the claim.

(2)

In considering whether to set aside or vary a judgment entered under Part 12, the matters to which the court must have regard include whether the person seeking to set aside the judgment made an application to do so promptly.” (emphasis added)

CPR Part 12.3 provides as follows:

“12.3

(1) The claimant may obtain judgment in default of an acknowledgment of service only if at the date on which judgment is entered-

a)

the defendant has not filed an acknowledgment of service or a defence to the claim (or any part of the claim); and

b)

the relevant time for doing so has expired.

(2)

Judgment in default of defence (or any document intended to be a defence) may be obtained only—

(a)

where an acknowledgment of service has been filed but, at the date on which judgment is entered, a defence has not been filed;

(b)

in a counterclaim made under rule 20.4, where at the date on which judgment is entered a defence has not been filed,

and, in either case, the relevant time limit for doing so has expired.

(3)

The claimant may not obtain a default judgment if at the time the court is considering the issue –

(a)

the defendant has applied-

(i)

to have the claimant’s statement of case struck out under rule 3.4; or

(ii)

for summary judgment under Part 24

and in either case that application has not been dealt with;

….

…

(Rule 6.17 provides that, where the claim form is served by the claimant, the claimant may not obtain default judgment unless a certificate of service has been filed.)”

CPR 12.12 is headed “Supplementary provisions where applications for default judgment are made” and provides, inter alia, as follows:

“…

(6)

Both on a request and on an application for default judgment the court must be satisfied that—

a)

the particulars of claim have been served on the defendant (a certificate of service on the court file will be sufficient evidence);

b)

either the defendant has not filed an acknowledgment of service or has not filed a defence and that in either case the relevant period for doing so has expired;

c)

the defendant has not satisfied the claim; and

d)

the defendant has not admitted liability to pay all the money claimed and requested time to pay.”

The “relevant time limit” referred to in CPR 12.3(1)(b) and (2) is set out in CPR 15.4, which provides as follows:

“15.4(1) The general rule is that the period for filing a defence is—

a)

14 days after service of the particulars of claim; or

b)

if the defendant files an acknowledgment of service under Part 10, 28 days after service of the particulars of claim.

(2)

The general rule is subject to rules 3.4(7), 6.12(3), 6.35, 11 and 24.4(2).”

(emphasis added)

CPR 11 provides, inter alia, as follows:

“(1)

A defendant who wishes to –

a)

dispute the court’s jurisdiction to try the claim; or

b)

argue that the court should not exercise its jurisdiction

may apply to the court for an order declaring that it has no such jurisdiction or should not exercise any jurisdiction which it may have.

(2)

A defendant who wishes to make such an application must first file an acknowledgment of service in accordance with Part 10.

(3)

A defendant who files an acknowledgment of service does not, by doing so, lose any right that he may have to dispute the court’s jurisdiction.

(4)

An application under this rule must –

(a)

be made within 14 days after filing an acknowledgment of service; and

(b)

be supported by evidence.

(5)

If the defendant –

(a)

files an acknowledgment of service; and

(b)

does not make such an application within the period specified in paragraph (4),

he is to be treated as having accepted that the court has jurisdiction to try the claim.

(6)

An order containing a declaration that the court has no jurisdiction or will not exercise its jurisdiction may also make further provision including –

(a)

setting aside the claim form;

(b)

setting aside service of the claim form;

(c)

discharging any order made before the claim was commenced or before the claim form was served; and

(d)

staying the proceedings.

(7)

If on an application under this rule the court does not make a declaration

(a)

the acknowledgment of service shall cease to have effect;

(b)

the defendant may file a further acknowledgment of service within 14 days or such other period as the court may direct; and

(c)

the court shall give directions as to the filing and service of the defence in a claim under Part 7 or the filing of evidence in a claim under Part 8 in the event that a further acknowledgment of service is filed.

(8)

If the defendant files a further acknowledgment of service in accordance with paragraph (7)(b) he shall be treated as having accepted that the court has jurisdiction to try the claim.

(9)

If a defendant makes an application under this rule, he must file and serve his written evidence in support with the application notice, but he need not before the hearing of the application file –

(a)

in a Part 7 claim, a defence; or

(b)

in a Part 8 claim, any other written evidence.”

(emphasis added)

By CPR 24.4, if a party applies for summary judgment before the defendant has filed a defence, the defence need not be served before the hearing of the application and then, pursuant to CPR 24.6, following determination of the application, the court may give directions for the filing of a defence.

CPR 3.3 makes provision for the Court to make an order of its own initiative, and CPR 3.3(4) indicates that it may do so without hearing the parties or giving them an opportunity to make representations. However, where the Court does this, CPR 3.3(5) provides that “a party affected by the order may apply to have it set aside, varied or stayed, and the order must contain a statement of the right to make such an application.” (emphasis added). An application under CPR 3.3(5) must be made within the period specified by the court or not more than 7 days after service of the order: CPR 3.3(6).

CPR 6.15 makes provision for service of the claim by an alternative method or at an alternative place. CPR 6.15(2) provides that the court may order that steps already taken to bring the claim form to the attention of the defendant by an alternative method or alternative place is good service. This is retrospective validation. CPR 6.15(4) provides that an order must specify the date of deemed service and periods for filing acknowledgment of service and a defence. Under CPR 6.16 the Court may dispense with service of a claim form in exceptional circumstances. This may be directed to have retrospective effect.

CPR 6.17 deals with notice and certificate of service relating to the claim form. CPR 6.17(2) provides:

“(2)

Where the claimant serves the claim form, the claimant –

a)

must file a certificate of service within 21 days of service of the particulars of claim, unless all the defendants to the proceedings have filed acknowledgments of service within that time; and

b)

may not obtain judgment in default under Part 12 unless a certificate of service has been filed.” (emphasis added)

CPR 7.5 provides time limits for the service of a claim form; where it is to be served within the jurisdiction, it must be served within 4 months of the date of issue; and where it is to be served out of the jurisdiction, it must be served within 6 months of issue.

I have been referred to Credit Agricole Indosuez v Unicof and others [2002] EWHC 77 (Comm) per Langley J at §18; Shiblaq v Sadikoglu [2003] EWHC 2128 (Comm) at §§19 to 24 and [2004] EWHC 1890 at §58 [2005] 2 CLC 380; Olafsson v Gissurarson [2006] EWHC 3162 (QB) at §§ 14 to 15, 28 to 29 and [2006] EWHC 3214 (QB) at §19; Dubai Financial Group LLC v National Private Air Transport Services Co Ltd [2016] EWCA Civ 71 [2016] 1 CLC 250 at §§28-32 and 37-42 and YA II PN Ltd v Frontera Resources Corporation [2021] EWHC 1380 (Comm) at §§14, 53-60. From these authorities, I derive the following propositions:

Further, common law waiver of a jurisdiction objection is doing an act inconsistent with maintaining a challenge to the jurisdiction. Such a waiver must clearly convey to the claimant and the court that the defendant is unequivocally renouncing his right to challenge the jurisdiction and the application of a “disinterested bystander test” is plainly apt. Deutsche Bank AG v Petromena [2015] 1 WLR 4225 at §32.

By his Notice of Appeal dated 11 July 2024, the Claimant seeks permission to appeal and, ultimately, an order setting aside the Order. He puts forward five distinct grounds of appeal. I deal with each ground in turn.

By Ground 1, the Claimant contends that the Deputy Master’s decision was rendered unjust by a serious procedural irregularity, namely that she proceeded to hear the Defendants’ applications to set aside the Default Judgment without hearing the other applications (and in particular the application to cross examine (Application 5), which would, if granted, have served to establish the underlying facts).

The Claimant submitsthat, if, as submitted on Ground 3, the duty in CPR 13.2 can be displaced by considerations of conduct by a defendant, then it would have made more sense for the Court to investigate exactly what happened before moving on to consider the mandatory ground.

The Deputy Master’s decision was unfair to the Claimant for two reasons. First it had the effect of emasculating most of Application 4. The setting aside of the Default Judgment has prejudged the Claimant’s application for an order for alternative service. Secondly it deprives the Claimant of the chance to establish who, on the Defendants’ side, knew what and when they knew it. That was sought by Application 5 in relation to cross-examination. It is possible that the Defendants knew of the dismissal of the May 2020 Application at the time but deliberately decided not to challenge it and leave matters until later, thereby improving their position in relation to limitation. The Claimant refers to the passage in the Judgment where the Deputy Master refers to determining factual matters on a preliminary basis only.

In so far as the decision on 21 May was a case management decision, the Claimant seeks an extension of time. Moreover, the high threshold for permission to appeal such a decision is met here, because this decision was based on a misapprehension as to the law, namely that the operation of CPR 13.2 could not be impacted upon by questions of conduct.

The First Defendant submitsthat there was no procedural irregularity in the Deputy Master’s case management decision to hear the mandatory limb of the Defendants’ applications to set aside at the hearing on 21 May. There was insufficient time to deal with all of the 11 applications before her. This was a perfectly proper course that was open to the Deputy Master.

There is a high threshold for an appeal court to interfere in a case management decision and that threshold is not met in this case. The decision here cut through the issues between the parties disposing of one of the most important issues between them. The case management decision was not based on the Deputy Master’s misapprehension as to the law. If the Deputy Master was correct to conclude that CPR 13.2 cannot be overcome by conduct, then factual evidence on the point is academic. In effect Ground 1 stands and falls with Grounds 3 and 4. Further, the Deputy Master was clear that her judgment was confined solely to the application she was dealing with and did not amount to a determination of any facts that might impact on other applications that remained outstanding.

The Second Defendant submits that, first, whilst the Claimant now submits that the Deputy Master should have first considered the application to cross examine the Defendants “in order to investigate exactly what had happened”, this is not the basis upon which Application 5 was brought. Rather, it was brought in order to establish dishonesty on the part of Defendants which would then weigh heavily in the exercise of discretion. Secondly, the Claimant has no proper basis for his speculative assertions that the Defendants acted deliberately and dishonestly in failing to take steps to challenge the Thornett Order. Cross-examination for the purpose of challenging the Defendants’ account of their knowledge of what had happened was only of potential relevance to their alternative set aside application under CPR 13.3 where the court was required to consider whether the application had been made promptly and the explanation for any delay.

Moreover, the Claimant made clear in advance of the hearing that he was going to invite the Deputy Master to deal with the first part of Application 4, in effect as a preliminary issue in advance of other matters, on the footing that if determined in his favour it would dispose of Defendants’ applications in limine. The Claimant can hardly therefore complain that, as a case management decision, the Deputy Master decided to deal with the mandatory parts of Applications 1 and 2 and the first part of Application 4, on the footing that this would short-circuit some of the other ancillary applications. The Claimant cannot get close to the high threshold required to challenge such a case management decision.

First, the decision in issue here was a case management decision and as such, an appeal court should only interfere where it is satisfied that the decision is so plainly wrong that it must be regarded as outside the general ambit of the judge’s discretion; Royal & Sun Alliance v T & N [2002] EWCA Civ 1964 at §38.

Secondly, the Deputy Master’s reasons are set out at paragraph 3 of the Judgment. It was common ground that there was insufficient time on 21 May 2024 to deal with all 11 applications; so that the Deputy Master had to exercise her discretion as to which applications should be dealt with.

Thirdly, the Claimant’s position as to which applications should have been dealt with has not been consistent. In advance of the hearing, he suggested that, effectively the first part of Application 4 should be dealt with at the outset. By his grounds of appeal, he submitted that the important matter to be dealt with first was Application 5; yet in his skeleton and oral argument, Mr Butler seemed to suggest that the second part of Application 4 should have been dealt with. This, of itself, indicates that there was no clear alternative to the course which the Deputy Master in fact adopted. Further as regards Application 5, it is far from clear what relevant facts the Claimant was seeking to establish by cross-examining the Defendants. Again, despite the First Defendant seeking clarification, the Claimant’s position on the purpose of that application has not been consistent. Moreover, Mr Butler accepts that there is no real need for such cross-examination, if the position is that Mr Ahmad’s knowledge of, and conduct in relation to, relevant matters is to be treated as knowledge and conduct on the Defendants’ part. I consider that, at least for the purposes of Applications 1 and 2, that is indeed the position as a matter of law. The action or inaction of a party’s legal representative falls to be treated under the CPR as the action or inaction of the party itself: see Training in Compliance Ltd v Dewse [2001] C.P Rep 46 at §66 CA; Mullock v Price [2009] EWCA Civ 1222.In any event, this Ground is linked to Grounds 3 and 4, and for the reasons set out in paragraphs 91 to 102 below, those latter grounds fail. As regards the second part of Application 4, contrary to Mr Butler’s submission, even if there had been an order regularising service of the claim form at the outset, then as a matter of law, such an order would not have cured any defect in the Default Judgment: see paragraph 45(2) above. As regards the first part of Application 4, this was in fact heard and dealt with by the Deputy Master.

As regards the extension of time, had there been any merit in the substantive ground, I would have granted an extension of time in which to appeal. Any appeal on this ground could only have been heard at the same time as the grounds challenging the substantive Judgment. However since there is no merit, I do not grant such an extension.

For these reasons, it is not arguable that there was any justification for hearing one or more of the other applications before hearing Applications 1 and 2 and the first part of Application 4. This ground therefore has no real prospect of success and accordingly I refuse permission to appeal.

By Ground 2, the Claimant contends that the Deputy Master was wrong to conclude that the mandatory basis for setting aside judgment in default under CPR 13.2 applied on the facts of this case.

The Claimant submitsthat this was not a case where the conditions for the exercise of CPR 13.2 were fulfilled. First, the judgment requested by the Claimant (and thus the judgment as granted) was for judgment in default of defence (not in default of acknowledgment of service). Master Thornett was not misled by the Claimant’s express statement that there had been no application to challenge the jurisdiction. Thus, the application to set aside had to be on the basis of CPR 13.2(b). The general rule for filing a defence in CPR 15.4 (14 or 28 days from service of the particulars of claim) was displaced by the provisions of CPR 11. Whilst recognising that Master Thornett did not comply with CPR 11(7), it may well have seemed to him that it would be unjust to let the Defendants have further time to file another acknowledgment of service. Master Thornett considered that, having made but not pursued their application to challenge jurisdiction (the May 2020 Application), the Defendants had abandoned that challenge and so waived their right to contest jurisdiction. In effect, they had submitted to the jurisdiction.

Secondly, it follows that either (a) there was no relevant time limit for filing a defence or (b) if there was a limit, it had expired. The time limit could fairly be treated as having expired 14 days from the acknowledgment of service. The position is analogous to that under CPR 11(5). There is no reason why a defendant who has made an application pursuant to CPR 11(1) but does not pursue it should be in a better position than a defendant who makes no application at all (under CPR 11(5)). They have bought themselves time they should not have been entitled to. Alternatively, the time limit should be treated as having expired 14 days from the date when a disinterested bystander would have treated the May 2020 Application as having been abandoned. Since the Defendants had stopped responding to communications from 3 June 2020 onwards, that time had long since passed by 30 September 2020 when the Thornett Order was made.

The First Defendant submitsthat the Deputy Master was correct to find that the conditions in CPR 12.3 were not met and that the duty of the court to set aside an irregular default judgment is mandatory under CPR 13.2. The Claimant does not challenge the findings that there is no evidence of service. Service being the foundation stone of the court’s jurisdiction over the parties, this is a case in which no service was effected and there was no certificate of service. Due to non-compliance with CPR 6.17(2)(b) (referred to in CPR 12.3 expressly), the Claimant was not entitled to default judgment. Secondly, the Defendants had not failed to serve a defence in time because, first, the relevant time limit did not start to run, due to want of service of any amended claim form or particulars of claim and, secondly, because no defence was required until disposal of the May 2020 Application to challenge jurisdiction or in the alternative strike out/for summary judgment: see CPR 11(9)(a).

There is no evidence that Master Thornett considered that the May 2020 Application had been abandoned and that the Defendants had waived their right to contest jurisdiction. Instead Master Thornett wrongly proceeded to enter judgment in default despite the terms of CPR 11(7)(b) and (c). Given that the Defendants were not permitted to file a second acknowledgment of service and/or a defence, the relevant time limit could not have expired. At that time, and for CPR 12.3 (2) purposes, the relevant time limit for the defence had not even commenced.

Furthermore, the May 2020 Application was also an application for strike out and/or summary judgment, which precludes default judgment until determined. Master Thornett did not determine those applications on their merits. Even if he did, the time for serving a defence following their dismissal had not expired.

The Second Defendant submits that, despite the terms of CPR 11(7)(b), Master Thornett gave no directions for service of a defence. It is impossible to say that the time for a defence had expired; the condition in CPR 12.3(2) could not be satisfied. The Claimant’s suggestions of alternative time limits for service of the defence subverts the express provisions of CPR 11(7) or impermissibly seeks to read a time limit into the Thornett Order. In the absence of any time specified, under CPR 11(7)(c), for service of a defence, the relevant time limit for doing so, for the purposes of CPR 12.3(3) could not be said to have expired. The analysis in the Dubai Financial Group case (in relation to time for acknowledging service) necessarily applies with equal force to time for service of a defence.

First, it is accepted that there was no evidence of valid service of the claim form or the amended claim form or the particulars of claim. It follows that, absent valid service, there was no obligation upon the Defendants either to file acknowledgment of service, or to serve a defence. Time for service of a defence runs from the date of (valid) service of the particulars of claim. It further follows that the absence of such an obligation means that there is no time limit for filing acknowledgment of service or for filing a defence; and so, the conditions in CPR 12.3(1)(b) and/or in CPR 12.3(2) were not satisfied: see paragraph 45(1) above. Having found that there was no valid service on either Defendant, the Deputy Master’s conclusion that the Default Judgment had to be set aside under CPR 13.2 was correct, on this basis alone.

Secondly, and alternatively, even if there had been valid service of the claim form (or even if the Claimant could have established that the Defendants were estopped from denying valid service), then, subject possibly to the Claimant’s argument in paragraph 63 above, upon dismissal of the May 2020 Application challenging jurisdiction, the provisions of CPR 11(7)(a) and (b) applied. As a result there was automatically a further period of 14 days in which the Defendants could acknowledge service. Thus as at 30 September 2020, the date of dismissal of the May 2020 Application, time for acknowledgment of service had not expired. Moreover, having failed to set a time for filing and serving a defence under CPR 11(7)(c), there was no then existing time limit for service of a defence; and on that basis the condition in CPR 12.3(2) could not be met. In my judgment, Master Thornett, even if correct to dismiss the 20 May Application, erred in proceeding directly and at the same time to enter default judgment. As at that date, he had no basis to do so. Additionally, even assuming that the dismissal in paragraph 1 of the Thornett Order constituted the dismissal of the alternative strike out/summary judgment applications, there was no extant time limit for service of the defence: see CPR 24.4(2) and 24.6. Even if the Claimant is correct in relation to abandonment and CPR 11(5), CPR 15.4 remains subject to CPR 24.4(2) and the requirement for time for service of a defence upon dismissal of the summary judgment application under CPR 24.

Thirdly, the Claimant’s case on Ground 2 essentially turns on his contentions that (1) the May 2020 Application had been dropped, withdrawn or abandoned by the Defendants (as opposed to having been determined) and (2) the position in CPR 11(5) should apply by analogy. I do not accept these contentions. First, the terms of paragraph 1 of the Thornett Order are clear: the Application is dismissed – that assumes that, up to that point, it is maintained. Secondly, the recital to the Thornett Order does not support the Claimant’s contention. At its highest, it states that the Defendants have “evidenced no real intention of pursuing” the application. In my judgment, when read in the context of the terms of the paragraph 1 of the Order itself, this does not amount to a finding that the Defendants had withdrawn or abandoned the application. The language of the recital is not sufficiently strong to construe it as a finding of “abandonment” and to displace the meaning of the operative words of paragraph 1 of the Order. Secondly, CPR 11(5) applies in terms where no application under CPR 11(1) has been made. But in the present case, such an application was made. CPR 11(5) does not apply even where an application which has been made is subsequently abandoned or withdrawn. Further, in so far as the Claimant’s argument here is, more generally, that by their conduct the Defendants “are to be treated as having accepted that the court has jurisdiction”, I do not accept it, for two reasons. First, “common law waiver” of a jurisdiction objection requires an unequivocal act renouncing the right to challenge: see paragraph 46 above. There was no such act here. Secondly, submitting to the jurisdiction does not involve waiving the right to serve a defence or does not amount to submitting to judgment being entered and avoiding the need for due service of the claim form/particulars of claim. Submission to the jurisdiction and whether time for defence has expired such as to warrant judgment in default are two separate concepts. If there has been no due service, there is no time for service of a defence, failure of which could found a default judgment.

For these reasons, the Deputy Master was clearly correct to conclude that the mandatory basis for setting aside judgment in default under CPR 13.2 applied on the facts of this case. An appeal on Ground 2 has no real prospect of success and for that reason I refuse permission to appeal on Ground 2.