We have written before about the importance of correctly naming the parties to an arbitration notice (see previous article). Failure to do so may mean that the arbitration has not been properly commenced, with all the problems that can ensue from that. This can be a particular problem in insurance (and particularly reinsurance) when companies go into run-off or merge and claims may be transferred or take years to materialise.
These warnings have been reinforced recently by two English appellate decisions which also serve as a stark reminder that, even if the parties are correctly named, claims may still fail if proceedings are not served properly.
The case of Best Friends Group v Barclays Bank Plc arose out of interest rate swaps entered into by Mr Bennett with Barclays Bank, in 2006 and in 2008. Mr Bennett controlled a company known as Best Friends Veterinary Group (BFVG) but the swap transactions were entered into in his own name. In November 2014, proceedings were issued against the Bank for alleged consequential losses arising from the swaps. The Claimant in the proceedings was named as Best Friends Group. The limitation period for the 2006 swaps had already expired and the limitation period for the 2008 swaps was due to expire two weeks after the Claim Form had been issued.
In September 2016, Mr Bennett’s advisors realised that the proceedings had been issued in the wrong name and they applied to the Court to have the Claim Form corrected outside the limitation period. Before doing so, however, Mr Bennett had applied unsuccessfully to add himself as an additional Claimant in the proceedings in order to circumvent the problem and had made allegations of deliberate concealment against the Bank.
In order to succeed in an application to change the Claimant’s name in these circumstances, three tests must be satisfied:-
- There must be a genuine mistake;
- The mistake should not have caused any reasonable doubt as to the identity of the Claimant;
- And, if those two steps are satisfied, the Court must decide whether to use its discretion in favour of the Claimant.
At first instance, the Judge held that neither of the first two tests had been satisfied and that, in any event, he would not have exercised his discretion in Mr Bennett’s favour because of the delay in applying to correct the error and because of the unwarranted but serious allegation of deliberate concealment. He also took into account the delay which the confusion had caused to the case and the costs which it had generated.
The Court of Appeal upheld this decision and, in particular, expressed its surprise that Mr Bennett himself had provided no evidence about the reasons for the initial mistake. Whilst supporting Philips J’s exercise of his discretion, the Court of Appeal also made the point that it would not normally disturb such discretionary judgment.
This case illustrates that it is important not only for a Claimant to ensure that the Defendant is properly named but, also, to ensure it correctly identifies the entity with the cause of action.
Even if the parties are correctly identified, however, potential pitfalls remain. This was highlighted by the Supreme Court’s decision in Barton v Wright Hassall. In that case, the Claimant had sought to serve proceedings, just before the expiration of the limitation period, on the Defendant’s solicitors by email. Perhaps surprisingly, the English Civil Procedural Rules do not allow for service of proceedings by email unless the Defendant has agreed to accept service in that form.
The Court has the discretion to validate service in these circumstances but both the first instance court and Court of Appeal refused to do so.
When the matter came to the Supreme Court, it was held that the principal considerations in deciding whether to validate service are:-
- Whether the Claimant took reasonable steps to serve in accordance with the rules;
- Whether the Defendant or his solicitor knew of the contents of the Claim Form when it expired;
- What, if any, prejudice the Defendant would suffer from validation of the non-compliant service.
In considering these issues, the Court found that it was not enough that the Defendant’s solicitors were aware of the contents of the Claim Form and the Court also suggested that there were particular problems associated with electronic service: they suggested that a solicitor’s office must be properly set up to receive and monitor formal electronic communications “which can arrive unnoticed in the absence of the person primarily responsible for the matter”. They also pointed out that the Claimant had taken no steps to confirm that the Defendant’s solicitors would accept service by email and had not attempted service in accordance with the rules. Finally, they held that it would be inappropriate to deprive the Defendant of its accrued limitation defence. In reaching this conclusion, the Supreme Court rejected the suggestion that the Claimant’s rights to a fair trial under the European Convention of Human Rights had been denied.
In today’s world, communication by email is standard and very many vital and valuable messages, transactions and deals are finalised in that way. In the circumstances, it is perhaps surprising that English rules for service still prohibit service by email without consent. Perhaps even more surprising is Lord Sumption’s suggestion that modern solicitors’ firms are not set up to deal with service in that way, and in this regard service of the Claim Form differs from service of an arbitration notice. Although Lord Sumption and Lord Briggs (who gave the dissenting judgment) both agreed that the law in this area needs to be reviewed, we must all be cautious to ensure that the method of service of any proceedings is appropriate in all the circumstances otherwise, even if we have the right parties, we may find that a claim never even gets off the ground.