Credit Agricole Indosuez v UNICOF Ltd. & Ors [2003] EWHC 77 (Comm)

Case No 2000 Folio 1193[2003] EWHC 77 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 4 th February 2003
Before
THE HONOURABLE MR JUSTICE LANGLEY
Between
CREDIT AGRICOLE INDOSUEZClaimants(1) UNICOF LIMITEDDefendants(2) UNEXIMP LIMITEDDefendant(3) UNEXIMP (T) LIMITEDDefendant(4) JOSRA COFFEE COMPANY LIMITEDDefendant(5) HANIF MOLEDINADefendant(6) EBRAHIM MOLEDINADefendant(7) KARIM MOLEDINADefendant(8) UNEXIMP INTERNATIONAL LLCDefendant(9) SDV TRANSAMI (KENYA) LIMITEDDefendant
Mr D. Foxton (instructed by Messrs Clyde & Co.) for ClaimantsMr M. Sullivan (instructed by Messrs Slaughter & May) for 9 th DefendantsHearing Hearing date : 27 th January 2003
Approved JudgmentI direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic..............................The Hon. Mr Justice Langley

THE APPLICATION

[1]The Ninth Defendant (“SDV”) applies to set aside a judgment entered by the Claimant (“CAI”) under Part 12 of the CPR in default of acknowledgement of service. The judgment was entered on 15 July 2002 in the sum of $US 1,579,705.90 plus interest of $400,942.34.[2]SDV contends that: i) It is entitled under CPR Part 13.2 to have the judgment set aside because the proceedings had not been served upon it; or ii) Judgment should in any event be set aside under CPR part 13.3 as it has reasonable prospects of successfully defending the claim; or because iii) There is good reason to set the judgment aside because the ground or at least the principal ground on which CAI obtained permission to serve SDV out of the jurisdiction was not justified and judgment was entered on the basis of untrue evidence.

THE CLAIM

[3]CAI’s claim was originally brought in November 2000 against the first 7 (and later the 8th) Defendants. They are coffee traders. CAI claimed that it had financed the purchase by the first defendant of Kenyan coffee and was owed in excess of $6m under the terms of a facility agreement. The claim against the other Defendants was for damages for deceit and conspiracy. Essentially it was alleged that the Defendants had disposed of coffee held in warehouses which had been pledged as security for payment to CAI. SDV (a Kenyan warehouse company) gave undertakings direct to CAI that some of the quantities of coffee were under SDV’s control and pledged to CAI and that when shipped bills of lading would be made out to CAI’s order and sent to CAI in London.[4]The undertakings by SDV are alleged to have been given in the period between October 1998 and May 1999. The undertakings are said in draft particulars of claim to have given rise to a duty of care to “ensure the accuracy of the information provided (to CAI) and the safety and security of the goods held and to advise CAI of any information which was at variance with the undertakings”. It is further alleged that in September 1999 SDV sent a fax to CAI representing that coffee was still held by SDV pursuant to the undertakings when SDV in fact knew that was not the case alternatively was negligent in representing otherwise. The brief details of claim on the Claim Form itself claimed “damages for breach of undertaking” and for deceit.

SERVICE

[5]On 22 May 2002 CAI applied to add SDV as a Defendant to the claim and to serve the amended Claim Form upon SDV out of the jurisdiction. The application was supported by the third Witness Statement of Mr Parson, a partner in Clyde & Co. the solicitors of CAI. The Statement referred to the possibility that SDV were likely to argue that jurisdiction should be reserved to the Kenyan courts but contended that these courts would be the most convenient forum. The basis for seeking permission was that SDV was “a necessary or proper party” to the claims against the other Defendants.[6]By Order sealed on 29 May the court gave permission both to amend and serve out of the jurisdiction. SDV was given 22 days to acknowledge service.[7]The Court’s Order gave permission for service by post at a PO Box No in Mombasa. That admittedly was not done in sufficient time to permit the Claimants to enter judgment in default on 15 July 2002. For the purposes of obtaining the judgment the subject of this application CAI produced a Certificate of Service dated 15 July 2002 which stated that the Claim Form had been served “by handing it or leaving it with Miss Caroline Kioni”. Miss Kioni is and was the Company Secretary of SDV. CAI also relied upon an Affidavit of Service of Mr Michael Wakahu (a process server) sworn in Nairobi on 24 June 2002. Mr Wakahu deposed that he had on 18 June 2002 at about 2.50 in the afternoon at SDV’s registered office tendered the Claim Form (and response pack) for service to Miss Kioni who had agreed to accept the documents but refused to sign to acknowledge their receipt.[8]Mr Foxton, who appeared for CAI, accepted that CAI could not in the light of the evidence now before the court establish that personal service was effected in the manner stated in these documents. Miss Kioni denies ever meeting Mr Wakahu. It is accepted that he came to SDV’s registered offices in the morning of 18 June but denied that he came at all in the afternoon. Suffice it to say, that whilst I think it would be wrong to conclude that Mr Wakahu deliberately misled the court I am satisfied that as a matter of probability, as indeed Mr Foxton accepts, the default judgment was entered on a false basis as to service of the proceedings.[9]By CPR Part 6 rule 6.24(1)(a) a Claim Form may be served out of the jurisdiction by any method permitted by the law of the country in which it is to be served. Section 391(1) of the Companies Act of Kenya (Rev 1978) provides that a document may be served on a company by personally serving it on an officer of the company, by sending it by registered post to the registered postal address, or by “leaving it at the registered office of the company”.[10]Mr Foxton submitted that whilst CAI could not establish the personal service on Miss Kioni on which it had relied it could establish on the evidence service by leaving the Claim Form at SDV’s registered office, both in the morning and in the afternoon of 18 June, and also service on SDV’s lawyers in Kenya. Mr Foxton did not pursue a submission that sufficient service had also been effected by post as the evidence was that the relevant correspondence, even if otherwise effective, had in the event only arrived at SDV’s registered postal address on a date which made the default judgment premature.[11]These submissions were made in support of Mr Foxton’s further submissions that service had in fact been effected within CPR Part 13.2 and that the failure of personal service was a matter which the court could remedy under its general powers in CPR Part 3, and in particular rule 3.10, because service by other means could have been relied upon and on the evidence there could be no doubt that the proceedings had come to the attention of SDV which was the objective of service. I can deal with them shortly. On the morning visit there is no evidence which could lead to the conclusion that the Claim Form was ‘left’ at SDV’s offices. Mr Wakahu says in his Affidavit of Service no more than that in the morning he was “informed none of the directors was available”. In his Second Affidavit he says he was told by Miss Kioni to take the documents to SDV’s lawyers which he did. Miss Kioni denies she met him but agrees she told her secretary to tell Mr Wakahu to go and see SDV’s lawyers.[12]Mr Foxton’s submission that the burden of the morning conversation was that the documents could properly be served on SDV’s lawyers is, I think, equally flawed. The lawyers were not instructed to accept service and said so. Mr Wakahu returned from their offices and was instructed by his principals to return again to SDV’s offices to serve the Claim Form personally. That gives rise to the conflict of evidence about the service in fact relied upon on which I have already commented. CAI have not proved that any form of service took place in the afternoon let alone that relied upon.[13]There can in my judgment be no doubt that Mr Wakahu and his principals had determined to serve personally on an officer of SDV. The instructions to return in the afternoon are in any event not consistent with a belief that service had already been effected either in the morning or on SDV’s lawyers. It follows that the proceedings were not served at all.

THE RULES

[14]CPR 13.2 provides:
“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 acknowledgement of service any of the conditions in rule 12.3(1) … was not satisfied.” (a) in the case of a judgment in default of an acknowledgement of service any of the conditions in rule 12.3(1) … was not satisfied.”
[15]CPR 13.3 provides “(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 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.”[16]CPR 12.3(1) provides:
“The claimant may obtain judgment in default of an acknowledgement of service only if- (a) the defendant has not filed an acknowledgement of service or a defence to the claim …; and (b) the relevant time for doing so has expired.” (a) the defendant has not filed an acknowledgement of service or a defence to the claim …; and (b) the relevant time for doing so has expired.”
[17]CPR 10.3 establishes that the period for filing an acknowledgement of service is, in this case, the period of 22 days specified by the court after service of the claim form.

RULE 13.2

[18]The Rule is mandatory. I have already decided that the Claim Form was not served upon SDV as claimed or at all. In my judgment the consequence is that SDV’s first contention is right and it is entitled to have the judgment set aside. It might be a nice question whether “service” by a method other than that relied upon to enter the default judgment would fall within the meaning of the Rule but that does not arise. Mr Foxton’s submission that the court retains a discretion to “deem” proper service had occurred is I think wrong. The Rule is clear. That does not mean that a court might not retain the power to decide that “service” had been effected despite some defect in the documents served or the like but I do not see that there is any room for an approach which permits a decision that there has been service when there has been no proper service at all. That is sufficient to dispose of this application, but as SDV’s other contentions were fully argued I will briefly express my views on them.

RULE 13.3(1)(a)

[19]Although Mr Foxton submitted compellingly that SDV did not have a real prospect of defending the claim for breach of the undertakings (as distinct from the claims in conspiracy and deceit) I was not persuaded. The claim is expressed in negligence or for a negligent breach of the undertaking. That appears to acknowledge that it lies in the duty of a bailee rather than in the specific obligations concerning bills of lading contained in the undertakings. CAI’s case is that the coffee vanished. SDV ceased to be lessees of the warehouse in (it seems) about June 1999. The evidence is that the coffee was found to have disappeared in about August 2000. When and in what circumstances, if at all, it disappeared is uncertain. There is evidence that in the interim CAI, the other Defendants and the new operators of the warehouse examined the coffee. On the other hand SDV confirmed to CAI on 22 September 1999 that it would “continue to monitor the movement of your consignments until the stock is exhausted”. Whilst I agree with Mr Foxton that SDV may have difficulty in formulating how the evidence I have shortly described could provide a defence and Mr Sullivan referred generally to want of negligence, the discharge of obligations and estoppel by convention, if I had to decide the question on the present state of the evidence and submissions I would, as stated, set aside the judgment in any event. Moreover Mr Foxton accepts that any judgment should have been for an amount to be decided by the court and not for a fixed amount and there are in any event potentially serious issues which may arise on the amount of CAI’s loss.

RULE 13.3(1)(b)

[20]In my judgment these proceedings also serve to illustrate circumstances in which “some other good reason” may appear for setting aside a default judgment even if there were real doubts about the sustainability of any defence. The judgment was obtained on a false basis as to service. The court was misled albeit that was not intended. Even if I had decided that service had been effected by other means and such service satisfied the mandatory wording of Part 13.2, as a matter of discretion under Part 13.3 I would have set aside the judgment. CAI knew (as Mr Parson stated on the application for permission to serve out of the jurisdiction) that SDV was likely to seek to challenge the jurisdiction. When informed of the default judgment SDV’s lawyers in Kenya at once expressed “surprise” and commented that CAI’s solicitors “were under notice that jurisdiction was contested”. If the judgment was not set aside or only set aside on conditions (as Mr Foxton suggested) SDV would lose the opportunity to contest the jurisdiction. In saying that I express no view on the chances of such an application succeeding. The false basis on which the judgment was obtained, therefore, which of itself I think would justify setting aside the judgment, also involves a real prejudice to SDV regardless of the merits of any defence it may have.[21]The other basis for Mr Sullivan’s submissions under this head was that the claims against the other defendants were not ones which CAI ever intended to pursue but were simply made for the purpose of establishing a ground to obtain permission to serve SDV out of the jurisdiction. CAI’s evidence is ( and was at the time it obtained permission) that, despite their at least apparent lack of any real assets, it did and does intend to pursue the first and fifth to seventh defendants as well as SDV. Mr Sullivan points out (rightly) that the claims against the other defendants have hardly been advanced at all. Particulars of the claim remain in draft and have not been served. CAI has also obtained a statement from one of the individual defendants. If this point had stood alone, however, I would not have thought it right to set aside the judgment on this basis as to do so would have been to reject the evidence of CAI’s solicitor which I see no sound basis for doing.

CONCLUSION

[22]The default judgment must be set aside and I will hear the parties on the appropriate form of order and any ancillary questions which arise when this judgment is handed down.