Service out: tick the boxes or lose the order
An order permitting service out of the jurisdiction is only as secure as the application on which it rests. In Degroma Trading v Dreter 2, the Commercial Court set aside such an order and issued guidance that every practitioner in this field, in London and offshore, should heed.
The decision
Bright J set aside an order permitting the claimants to serve the second defendant, a Panamanian company, out of the jurisdiction and to join it to the proceedings. He did so on two independent grounds.
First ground: no serious issue to be tried
An applicant for permission must satisfy the three-stage test in Seaconsar and Altimo: a serious issue to be tried on the merits; a good arguable case that the claim falls within a jurisdictional gateway; and that England is clearly the appropriate forum.
The claim against the second defendant depended on its having exercised de facto control over, and being the ultimate beneficial owner of, the companies alleged to have committed the deceit. The judge held that the claimants had not raised a serious issue to be tried on that point. Their case rested entirely on inference, and the documentary evidence identified a different person as the ultimate beneficial owner.
Second ground: the application was not fairly presented
The claimants’ evidence and skeleton did not properly address either the test for permission or the duty of full and frank disclosure. The witness statement dealt with permission in a single short paragraph, and the skeleton treated it as a formality. The three failures the judge identified each carry a lesson.
First, the most direct evidence of beneficial ownership (formal filings signed by the registered owner) had been disclosed well before the hearing, but its significance was overlooked and it was never shown to the judge. When he asked about beneficial ownership, he was told that it was purposefully undocumented, which was untrue. Disclosure received from the other side must be reviewed for material adverse to the application, and a judge’s question must be answered accurately.
Second, a statement by US counsel to OFAC, which contradicted the claimants’ case, was exhibited but presented as though it supported that case. Placing an adverse document before the court does not discharge the duty if its significance is inverted. Material against the application must be identified as such.
Third, the judge was given a misleading impression of the relationship between the second defendant and its affiliated entities: an informal association of companies was described as though the second defendant sat at the head of a corporate group. This led the judge to assume a holding company that did not exist. Corporate relationships must be described accurately, including what they are not.
The guidance
Bright J emphasised that practitioners must give serious thought to the duty of full and frank disclosure, so that without-notice applications are fairly presented.
Appendix 9 to the Commercial Court Guide sets out practice guidance on service out, together with a checklist covering each step of the application. The judge held that it should never be ignored, even where, as here, the application for permission is an adjunct to a contested application. Adopting its structure is good mental discipline, encouraging those involved to address every relevant step.
The applicant should set out its case, in the witness statement or skeleton, under headings corresponding to each of the three Seaconsar stages, with a further heading on full and frank disclosure. That may help satisfy the judge that proper care has been taken. Otherwise, the judge is likely to be concerned that these matters have received insufficient attention.
Bright J frequently refuses permission on paper where the checklist has not been completed or its structure adopted, and now considers that approach highly desirable for applications made at a hearing as well. He intends to draw his observations to the attention of his Commercial Court colleagues.
The position in the BVI
The BVI has taken a different route. Under the Eastern Caribbean Supreme Court Civil Procedure Rules (Revised Edition 2023), in force since 31 July 2023, court process falling within a gateway in rule 7.3 may be served out without permission. Instead, the claimant or its legal practitioner files and serves a certificate under rule 7.6. The certificate identifies the gateway relied upon and states the signatory’s belief that the claimant has a good cause of action, that the BVI court is the appropriate forum for the trial, and that the method of service is lawful.
If service is challenged under rule 7.8, the claimant must satisfy the court on each of those matters. The elements mirror the three stages of the Seaconsar test. Permission also remains available under rule 7.4, on a without-notice application supported by affidavit; where that route is taken, the duty of full and frank disclosure applies in the usual way.
Degroma is not binding in the BVI, but English Commercial Court authority carries considerable weight there. Its lesson translates readily: a certificate is a practitioner’s statement of belief on each limb of the test, and should be signed only after the disciplined analysis Bright J required. The BVI rules contain no equivalent of the Appendix 9 checklist, so adopting its structure when preparing the certificate is a prudent safeguard.
Would following the checklist have changed the outcome here? The judge could not be certain, but, in his words, “it should have, in theory, and it might have, in practice”.
