Olafsson v Gissurarson

This is an appeal from an order of Master Turner, the Senior Master, dated 23 May 2006. After a one and a half day hearing he dismissed the appellant/defendant’s application under CPR 13.2 to set aside a judgment in default, and exercised his discretion under CPR 3.10 and/or 6.9 “to correct any error in respect of service”

The appellant defendant appeals this order with the permission of the Master. This appeal therefore is a return to the vexed issue of service of English proceedings out of the jurisdiction of the English Court.

The appellant is a professor of political science at the University of Iceland, a resident of Iceland and an English speaker. The respondent is an Icelandic businessman. The basis of the claim is the alleged publication by the appellant on his website of defamatory material relating to the respondent. That material is said to amount to an allegation that the respondent was a former drug dealer, had employed sharp business practices, maintained corrupt relationships with Icelandic politicians and was guilty of tax evasion.

Solicitors for the respondent made contact with the appellant following which the appellant disconnected the home page on his website. After a letter before action proceedings were issued in this court on 4 August 2004. On the 2 September 2004 on the instructions of the international legal matters unit of the FCO Simon Minshull, Deputy Head of Mission at the British Embassy in Iceland and Her Majesty’s Consul, set about the service of these proceedings on the appellant at an address in Reykjavik. He identified the appellant, who was already known to him, and gave him a copy of the claim form and all other court documents including the response pack. Beyond receiving the envelope containing all the documents, opening and reading them the appellant took no other steps. He did not sign any written receipt.

The appellant took advice from a lawyer at the University of Iceland on the question of the jurisdiction of the English Court. There is no evidence that he took advice specifically on the issue of whether he had been properly served with the proceedings. Jurisdiction as such is not in issue in this appeal.

There having been no acknowledgement of service, and the court being satisfied that the documents had been served, on 23 December 2004 Master Whittaker ordered judgment in default in favour of the respondent for damages for libel together with aggravated damages and costs.

Thereafter the respondent’s solicitors kept the appellant fully informed of the progress of proceedings by fax and telephone and the appellant chose to take no part in the events which followed. These proceedings culminated in an assessment of damages on the 13 July 2005 by HH Judge Previte QC who assessed damages at £55,000 with £10,000 by way of aggravated damages and he granted a permanent injunction.

On the 12 January 2006 the defendant applied to set aside that judgment. At the hearing of that application the respondent in turn applied for relief under CPR 3.10 and/or 6.9. The result was as stated above.

I should set out the rules relevant to the issues raised by this appeal.

CPR 1.1(1): “These rules are a new procedural code with the overriding objective of enabling the court to deal with cases justly”…

On the 14 June 2006 the Master produced written reasons for the order he had made. Having set out the Icelandic law as to service, which constituted a complete and exclusive code, he identified the problem in the case as being the fact that the consul had failed to obtain from the defendant a signed receipt on an appropriate Court form for the papers which he had in fact delivered, and which the appellant was accepting he had received.

As in the appeal before me the Master had a large number of authorities cited to him. Many were decisions on RSC O.2 r.1, broadly the predecessor of CPR 3.10. I find for my part that the most reliable assistance is to be derived from post-CPR authorities. At all events, the Master reminded himself of the overriding objective, and the general reasons for service pervading all jurisdictions, namely the need to ensure that the defendant had received the process, that the Court should be aware that he had done so, and that the defendant should appreciate that what he received concerned Court proceedings which required some response from him. He relied on the authority of Golden Ocean Assurance Ltd v World Mariner Shipping SA (the Goldean Mariner) [1990] 2 Lloyd’s Rep 215, a case on RSC O.2 r.1.

Before the Master, as in this appeal, the appellant placed heavy reliance on two decisions of Colman J in the case of Shiblaq v Sadikoglu, the second of which was reported at [2004] EWHC 1889 (Comm); [2004] 2 All ER(Comm) to which I will have to return. The Master preferred the Court of Appeal’s reasoning in the Goldean Mariner, and noted that in any event Colman J’s judgment had not been tested on appeal and was not binding on him. He considered other authorities and concluded that as the error on the part of the consul was “not to ask the defendant to sign a copy of the claim to acknowledge receipt as required by article 83 (3) (a)”, while carrying out or purporting to carry out a recognised form of service, that it was an irregularity that ought properly to be cured by the application of CPR 3.10. He gave reasons for exercising his discretion so as to reach that decision.

The appellant’s case is that simple personal service, no matter by whom it is effected, is not a permitted method of service in Iceland. Therefore the respondent did not use any of the permitted methods of service and the Master should have so found. The Master was not entitled to treat the failed attempt at service in the way that he did. There was a fundamental flaw in the purported service which was of no effect and which cannot be rendered valid by the retrospective application of CPR 3.10. The appellant stresses the importance of strict observance of service rules imposed by the state in which the person served is found.

The appellant’s argument is that either there is service or there is no service and this is a case where there is none. That being so the judgment entered under CPR 12 was wrongly entered because there cannot have been a default in the provision of an acknowledgement of service. The terms of CPR 13.2 are such that it is mandatory in those circumstances that the court must set aside the default judgment.

In Shiblaq No 2 between paragraph 36 – 41 Colman J addressed the question of whether CPR 3.10 could assist a claimant by correcting an error in a step in proceedings on the basis of the validity of which further steps had then been taken, which involved “impleading a foreign defendant in a manner impermissible by the law of his country and under any international convention”.

Mr Dhillon for the appellant sought to argue that article IV of the Lugano convention of 1988 was of relevance in this context. I will not lengthen this judgment by setting out its terms. In my judgment this argument adds nothing to the strength of the appellants’ case, as Mr Mercer correctly argues for the respondent. The issue of Icelandic service simply depends on the Icelandic law that I have set out above and as the Master found it to be.

To return to Shiblaq, Colman J considered Elmes v Hygrade Food Products PLC [2001] EWCA Civ 121 in which the Court of Appeal held, regardless of the facts of a particular case, that CPR 3.10 could not be used in a domestic case in order to have the effect of a retrospective application for alternative service under CPR 6.8, an application which should have been made prospectively. Colman J plainly regarded the case he was considering as a stronger case than Elmes; considering the limits on the manner on which CPR 3.10 can be deployed he concluded

“Specifically it cannot be used to avoid the consequences of failing to utilise rule 6.8 prospectively in order retrospectively to validate defective service. It certainly cannot be used retrospectively to create a deemed breach of the duty to acknowledge service and thereby to justify signing judgment in default. I would hold that this is not merely a matter of the exercise of the Courts discretion to remedy errors under rule 3.10(b) but goes to the scope of rule 3.10(a). Accordingly the approach of the Court of Appeal in the Goldean Mariner does not apply to the scope of rule 3.10”.

As I have already observed the Master took a different view and he was in terms of stare decisis entitled so to do. However on the 19 May 2006, the last working day before the Master heard this application, the Court of Appeal had handed down judgment in the case of Phillips and another v Nussberger and another [2006] EWCA Civ 654. Unfortunately, if understandably, that case was not drawn to the attention of the Master. It is a very important decision in the context of this appeal. The Court of Appeal was considering a situation where English court documents had been served on a Swiss resident in Switzerland, but where the claim form itself, the key document in the issue of proceedings in English litigation, was missing. The issue before the Court was whether the English Court or the Swiss Court, in which proceedings had also been issued by the opposing party, had first become “seised of the matter” under Article 21 of the Lugano Convention. The Claimant sought to apply CPR 6.9 to obtain an order dispensing with service of the English proceedings and thus making the English Court the Court first seised, winning what could be called the jurisdiction race. The decision of the Court of Appeal was that this was not an order that the English Court could make.

Strictly CPR 3.10 was not in issue in that appeal since it was not relied on by the appellant, but the Court of Appeal went on to consider whether, if it had been, it could have saved the appellant’s position. The Court noted that in domestic cases it was not possible to invoke CPR 3.10 on its own to extend time for service of the claim form, or to override the failure to serve the claim form, not least because there were other specific rules dealing with extension of time and dispensing with service. The Court cited Elmes and Vinos v Marks and Spencer plc [2001] 3 All ER784. At paragraph 95 Neuberger LJ said:-

“I do not consider that CPR rule 3.10 can possibly help the claimants case in relation to the service of the copy claim form.…CPR 3.10 does not have the effect of treating the document as fictionally having been served”.

He therefore approved Colman J’s decision in Shiblaq No.2. Mr Dhillon for the appellant claims this dictum as binding Court of Appeal authority on the issue before me in this appeal. In my judgment he puts his case too high. Paragraph 95 was not strictly speaking the ratio decidendi of the appeal, nor was it a finding which had to be made to reach that ratio. It is however highly persuasive and powerful support for the views of Colman J, and might, if drawn to his attention, have caused the Master to take a different view from that which he took. I should therefore turn to see how the respondent meets these authorities.

On his behalf Mr Mercer seeks to distinguish from the facts of the present case, in which there was an imperfect or incomplete attempt to use a permitted method of service, those cases where there was either been no service at all (for example Shiblaq and Nussberger) or cases where the method of service adopted was expressly unlawful by virtue of the laws of the state in which service was effected (e.g. Ferrarini S.P.A. and others v Magnol Shipping Co Inc(the “Sky One”) 1988 1 Lloyds Rep 238). The case I am considering, he argues, is merely an example of the incomplete execution of the permitted method of service, which succeeded in placing the process into the hands of the defendant, but which fails the test for complete service by want of the formality of a signature. He cites Klomps v Michel [1981] ECR 1593 as authority for the proposition that the question of whether due service has been effected or not is decided by reference to the law of the state in which judgment was given, taking into consideration any conventions or bilateral agreement binding upon the two states in question. The issue here, therefore, depends on English law and any international agreements made between the UK and Iceland.

CPR 6.24 is therefore the relevant law for me to consider, and of that rule I should focus on 6.24 (1), which is appropriate for a case where the Claimant has used a permitted method of service, albeit one which is defective in one respect. This, he argues, is to be distinguished from 6.24 (2) which deals with methods of service contrary to the law of the foreign country. Shiblaq was an example of service which was entirely ineffective in notifying the proposed defendant of the proceedings (he did not hear about them at all for many months) and in a context where Turkey had specifically objected to the incorporation of any notion of private service of international litigation in Turkey. There is no agreement between the United Kingdom and Iceland, which is not a signature to the Hague convention, and therefore the Icelandic domestic code is that which prevails.

He relies on the decision of Field J in Habib Bank Ltd v Central Bank of Sudan [2006] EWHC1767. In that case the English Court had made an order under CPR 6.8 for alternative service, something that was neither expressly permitted or expressly prohibited by the laws of Sudan. The defendant not having appeared, Field J was putting the claimant to proof of every aspect of his case including service. At paragraph 30 he challenged the assertion in a White Book note to the effect that CPR 6.24 had the effect of preventing service by a method which the law of the place of service did not permit in the relevant circumstances.

At paragraph 30 he said as follows

“In my view this notice is somewhat misleading. CPR 6.24 does not require service abroad ‘by any method…permitted by the law of the country in which it is to be served’. On the contrary, it is implicit in 6.24(2) that the Court may permit any alternative method of service abroad under CPR 6.8 so long as it does not contravene the laws of the country where service is be effected. In Shiblaq Colman J found that the method of service adopted in Turkey was simply not permitted by Turkish law for the service of foreign proceedings but “was a method expressly excluded by reason of the Turkish objection registered under the Hague Convention and could not therefore be within the scope of CPR 6.24(a)” (para 27). The decision is therefore not authority for the proposition that service abroad must be expressly permitted by the foreign jurisdiction in order for it to good service within CPR 6.24”.

The appellant’s response to this passage is to say that Field J was considering a significantly different question, namely one where a prospective application for alternative service had been made prior to judgment being entered, an exercise which avoids the criticisms so fatal to the retrospective type of exercise condemned in such cases as Elmes and Vinos . In my judgment this is indeed a valid distinction and undermines, from the respondents’ point of view, the utility of Habib Bank as an authority in this appeal.

Returning to Mr Mercers’ response, therefore, to Neuberger LJ’s judgment in the Nussberger case it is really this. The Court of Appeal’s fundamental objection to the use of 3.10 in a “no service at all” case is that it would have the effect of creating a fiction, namely the fiction that the document had been placed in the hands of the defendant by way of service when no such thing had in truth happened. He argues that that is not an objectionable feature of the present case, in which all agree that the document was placed in the hands of the defendant. The only fiction required would be to assume that he wrote his signature on a copy of it when he did not do so.

That is not an exercise, he says, which should repel the Court in the way that it has been repelled in the cases cited above. He takes an extreme example. What if the local law required the process to have a red seal placed upon it and the evidence was that a seal was placed upon it but it was blue? Would the English Court be powerless to treat that act as if it was good service? The appellant’s answer to those rhetorical questions is that in the imaginary case, or indeed in this case given the other ways of serving in Iceland, the claimant’s remedy lay in using one of the other methods of Icelandic service, or as a last resort invoking other rules of Court, probably CPR 6.8, to regularise his position. The respondent’s argument, says Mr Dhillon, does not avoid the central problem identified in Shiblaq and Nussberger of the retrospective validation by the English Court of a step in the foreign jurisdiction which was simply ineffective to achieve its object, and therefore which requires an objectionable fiction to make it effective, overriding a limitation defence in the process.

I confess that on first reading into this case I felt sympathetic to the respondents’ position, and unattracted to the stricter approach urged by the appellant. In addition, I should remind myself that this is an appeal by way of a review and not a rehearing, and also that the senior Master can be assumed to have great experience of issues relating to service out of and into this jurisdiction, not to mention his personal key role in the very creation of the Civil Procedure Rules 1998. I should accord a wide margin of respect to his decision, as Mr Mercer rightly reminds me.

It is however my final view that the cases I have referred to above are those of most assistance in this issue, and that pre CPR decisions are of lesser value. Also, and in my view crucially, the Master did not have the benefit of the views of the Court of Appeal on this very provision. Had he done so I believe he would and should have regarded the balance as being swung in favour of the appellant’s arguments as to whether 3.10 can be used at all in these circumstances. In my judgment it cannot, and therefore this appeal must succeed.

I have not found it necessary to have recourse to the fresh evidence that the appellant sought to introduce in this appeal in the form of a third expert report by Mr Magnusson. Had I needed to resolve the application to introduce it I believe I would have rejected it. The argument that it would not have been possible by the exercise of reasonable diligence to place this evidence before the Master is technical and unconvincing. The proposed report itself is in large measure comment. I prefer the arguments advanced by Mr Mercer that it is for the English Court to take a view on the proper characterisation of the actions of the claimant in his attempt to serve these proceedings. But in the event it has been possible for me to decide this appeal without recourse to it.

It is also not necessary for me, in the light of my above finding, to decide whether the Master was appealably wrong in exercising his discretion if he had one to exercise. I anticipate that I will have to resolve issues between the parties as to what orders should be made as a consequence of this appeal being allowed. The appellant will urge me to dismiss the claim and the respondent will seek an extension of time within which to revive it. At this stage therefore the less I say about the respective contentions on what might be called the broader merits of the position the better.

The Master made an alternative finding that he would dispense with service under this provision, if he was wrong about 3.10. The Respondent has not sought to support this part of the Master’s ruling, merely reserving his rights in respect of it should the matter go further. Accordingly I do not need to address this provision of the Rules.