Home Information Cases (1) Cunico Resources NV (2) Cunico Marketing FZE (3) Feni Industries AD v (1) Konstantinos Daskalakis (2) Arvind Mundhra : Cunico Marketing FZE v (1) Konstantinos Daskalakis (2) Arvind Mundhra (2018)

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(1) Cunico Resources NV (2) Cunico Marketing FZE (3) Feni Industries AD v (1) Konstantinos Daskalakis (2) Arvind Mundhra : Cunico Marketing FZE v (1) Konstantinos Daskalakis (2) Arvind Mundhra (2018)

Summary

The court commented on the proper construction of CPR r.12.3(1), which provided for the claimant to obtain judgment in default of acknowledgment of service if certain conditions were met. The meaning of r.12.3(1) had been the subject of conflicting first-instance decisions, and it was to be hoped that the Court of Appeal would rule definitively on its construction.


Facts

The claimant sought judgment in default against the first defendant under CPR r.12.3(1), while the first defendant applied for a retrospective extension of time for filing an acknowledgment of service.

The claimant, a Dubai-based company, had brought a claim against the defendants, who had occupied senior positions within the group to which the claimant belonged. The defendants were domiciled in Switzerland when proceedings were brought. The claimant relied on a jurisdiction clause in contracts signed by the defendants which provided that disagreements would be resolved in the UK courts. The defendants had challenged jurisdiction. In the first defendant's case, the time for filing an acknowledgment of service expired on 6 June 2018. He filed an acknowledgment of service on 4 July 2018, an hour before the claimant filed its application for judgment in default. Rule 12.3(1) provided that the claimant could obtain judgment in default of acknowledgment of service only if "(a) the defendant has not filed an acknowledgment of service or a defence...; and (b) the relevant time for doing so has expired". The meaning of r.12.3(1) had been the subject of conflicting first-instance decisions. Three suggested constructions emerged: r.12.3(1) only allowed the court to grant default judgment where, at the time of judgment, there was no acknowledgment of service and the time for acknowledging service had expired (the first meaning); r.12.3(1) allowed the court to grant default judgment so long as, at the time of filing the request for default judgment, there was no acknowledgment of service and the time for acknowledging service had expired (the second meaning); r.12.3(1) allowed the court to grant default judgment where a timely acknowledgment of service had not been filed, irrespective of any acknowledgment of service filed later (the third meaning).

Held

Application for default judgment and construction of CPR r.12.3(1) - The language of r.12.3(1) naturally conveyed the first meaning, which also accorded with the purpose of r.12.3. Even bearing in mind that dealing with cases justly included enforcing compliance with the rules, ultimately the courts existed to resolve disputed claims by reference to their merits. The default-judgment regime of r.12.3 was a specific feature of the initial process of getting a claim going. It existed to give the claimant the option of obtaining a final judgment he could seek to enforce, without the merits of his claim ever being considered, in cases where the defendant was not participating in the proceedings to contest the claim. That the first meaning was correct was also supported by the practice where, under the rules, it was necessary to make an application rather than merely a request on a practice form and the claimant's solicitors would check with the court for any late filing of an acknowledgment of service before they signed off on the application. However, it was appropriate to follow Unilever Plc v PAK Supermarket [2016] EWHC 3846 (IPEC), in which the judge refused to grant judgment in default where an acknowledgment of service had been filed, late but before the application for default judgment was issued, thereby giving support to the second meaning. It was the only decision which set any precedent for the correctness or incorrectness of the third meaning, which the claimant needed to be correct; Unilever decided that it was not correct. The conditions for judgment in default under r.12.3(1) were not met because the first defendant had filed an acknowledgment of service, late but (just) before the default-judgment application, and there was no application to set aside that acknowledgment of service. It was to be hoped that the Court of Appeal would rule definitively on the construction of r.12.3(1), Unilever followed, McDonald v D&F Contracts Ltd [2018] EWHC 1600 (TCC) not followed and Coll v Tattum [2001] 11 WLUK 526, Boeing Capital Corp v Wells Fargo Bank Northwest [2003] EWHC 1364 (Comm), ESR Insurance Services Ltd v Clemons [2008] EWHC 2023 (Comm), Talos Capital Ltd v JCS Investment Holding XIV Ltd [2014] EWHC 3977 (Comm), Taylor v Giovani Developers Ltd [2015] EWHC 328 (Comm), Almond v Medgolf Properties Ltd [2015] EWHC 3280 (Comm) and Billington v Davies [2016] EWHC 1919 (Ch) considered (see paras 23, 43, 47, 51, 89-90, 92-93 of judgment).

Application for retrospective extension of time - It was appropriate to waive the requirement in r.11(2) to file an acknowledgment of service in time so as to entitle the first defendant to challenge jurisdiction under r.11(1). The claimant had made it clear that it did not wish to prevent him from challenging jurisdiction. Accordingly, the question of an extension of time did not arise. Had it been possible for judgment in default to be entered regularly, an extension of time would not have been granted. Among other things, the first defendant's procedural default was substantial: he was in default by 28 days in respect of the key, basic procedural step he was required to take. Further, it was entirely his fault that he did not file a timely acknowledgment of service, Denton v TH White Ltd [2014] EWCA Civ 906 applied. However, it was important to state that, without an extension of time, a default judgment regularly entered would not have been the end of the claim at first instance for the first defendant. He would have had the right to apply under r.13.3 for that judgment to be set aside by showing that he had a real prospect of success on the merits or that there was some other good reason for allowing the claim to proceed to trial (paras 96, 101-104, 116).

Judgment accordingly

Queen's Bench Division
Andrew Baker J
Judgment date
7 December 2018
References
LTL 7/12/2018 : [2018] 12 WLUK 87