'Warehousing', cross-undertakings and the court's discretion to permit alternative service or dispense with service of the claim form

A recent decision in the case of Société Générale v Goldas Kuyumculuk Sanayi provides guidance on when an English court will allow service by a method other than that set out in the Hague Service Convention, or dispense with the need to effect service.

The case concerned an application for alternative service of claim forms on defendants where service had not been validly effected in Turkey under the Hague Service Convention, or the UAE under the bilateral treaty with UAE.

The judgment reiterates that the decision in Abela and others v Baadarani and another has not lowered the threshold for granting an order permitting alternative service in a claim concerning the Hague Service Convention. It remains relevant whether the court is being asked to sanction a method of service which is not permitted by the Hague Service Convention or the relevant bilateral treaty. In such cases, an order permitting service by an alternative method, or dispensing with the need to effect service, should only be granted in exceptional circumstances.

The case also considers the issue of ‘warehousing’ a claim and the approach to complying with undertakings applicants give to the courts when applying for world freezing injunctions.

What was the dispute about?

Société Générale obtained worldwide freezing orders in March and April 2008 and issued two sets of proceedings against Turkish and Dubai companies that formed part of the Goldas group, a multinational jewellery manufacturer.

The claim forms were not, however, effectively served on the defendants. Service in Turkey was wrongly believed to have been effected, when in fact Turkey’s registered objection to the service routes of Article 10 of the Hague Service Convention had been overlooked. In Dubai, after the first attempt at service was unsuccessful, matters were not rectified.

Soon after issuing both claims and obtaining freezing order relief in London, Société Générale decided to focus its attentions instead on bankruptcy proceedings in Turkey.

As a result, the English claims were ‘warehoused’: the claims were not proceeded with, but instead were to be kept under review and the matters revisited once the outcome of the Turkish bankruptcy proceedings was known.

The Turkish litigation became protracted and, as a result, the primary limitation period for the English claims passed. Two years later, Goldas issued applications for the English freezing orders to be discharged and the underlying claims struck out. In response, Société Générale made various cross-applications to the English courts for: (i) orders dispensing with service; (ii) orders extending time for service of the claim forms; (iii) orders for retrospective permission for service by an alternative service; and (iv) for summary judgment prior to acknowledgment of service.

The judgment

Popplewell J dismissed all of Société Générale’s applications and granted Goldas’ core applications. He also ordered an inquiry into damages on the cross-undertaking for the freezing injunctions, which could prove significant given that the effect of the world freezing injunction is alleged to have been to shut down Goldas’ business.

The judge made the following findings:

• At paragraph 49 of the judgment, Popplewell J provided a detailed analysis of the principles applicable to applications to allow service by an alternative method, or to dispense with the need for service (under CPR 6.15 and 6.16 respectively).
• There was no good reason for granting relief under CPR 6.15, still less were there exceptional circumstances justifying dispensing with service under CPR 6.16. The judge held that Société Générale’s failure to effect valid service during the limitation period was culpable.  It knew that service was disputed in Turkey and had no good reason to believe that it had been effected in Dubai, but failed to address the issues of service at the time due to a deliberate decision to ‘warehouse’ the English claims.
• The court takes a pragmatic approach when procedural defaults occur due to incorrect advice as to foreign law or procedure. If Société Générale received incorrect advice on service in Turkey, this was not considered good reason for the court to grant relief, but rather a reason for it not to do so.
• The parties should not take “a casual attitude to the undertakings given to the Court”. Since the focus shifted to the Turkish proceedings, the only sound basis for the freezing order relief would have been under section 25 of the Civil Jurisdiction and Judgments Act 1982. That was not the basis on which the freezing order applications had been made: they had been presented as applications in support of English claims, not Turkish proceedings. Société Générale had given undertakings to serve the claim forms “as soon as practicable”. In relation to service in Turkey “this placed a heavy onus on [Société Générale] to investigate and resolve the known dispute about service.”
• For a claimant unilaterally to ‘warehouse’ proceedings is an abuse of process, and may be a sufficiently serious abuse to warrant striking out the claim in appropriate cases.

Practice points

• The judge in this case emphasised that freezing orders are a draconian remedy. When a party obtains a freezing order “it is incumbent upon it to progress the proceedings expeditiously, unless the Court sanctions delay.  A failure to do so is an abuse of process.”  The judge was critical even of a day’s delay in issuing the claim after the freezing order had been granted.  To avoid the risk of being criticised, an undertaking to the court to take an action “as soon as practicable” should be taken literally.
• Proceedings often take unexpected turns, and can involve new actions being progressed in different jurisdictions, but parties should not be tempted to simply ‘warehouse’ one strand of proceedings. Where it is desirable to put one set of proceedings on holding in favour of another, the court should be asked to sanction a stay of proceedings, and courts should then be kept informed about the case’s development, to avoid criticism that their claims are not being progressed adequately.