Retrospectively Extending Time for Service of a Claim Form

APRIL 2018

Retrospectively Extending Time for UPDATE Service of a Claim Form

Update prepared by Shane Donovan (Counsel, British Virgin Islands) and Eleanor Morgan (Partner, British Virgin Islands)

The Eastern Caribbean Court of Appeal has confirmed that the court has the power to retrospectively extend the life of an expired claim form notwithstanding the express requirement in the Civil Procedure Rules that any application for an extension be made during the life of the claim form. Although the court cannot rely upon its general power to extend the time for compliance with any rule, it may nevertheless dispense with the requirement that the application be made during the life of the claim form in 'special circumstances'.

Introduction

Under Part 8 of the Eastern Caribbean Civil Procedure Rules (the CPR), a claim form to be served outside the jurisdiction of the British Virgin Islands must be served within 12 months of its date of issue. A claimant may apply for an extension of time of up to 6 months of the period within which the claim form may be served. However, the CPR expressly requires that any such application be made within the period for serving the claim form, or that period as extended.

In JSC VTB Bank v Katunin1, the Eastern Caribbean Court of Appeal considered whether it was possible to retrospectively extend the life of a claim form that had expired without any application having been made for an extension of time within which to serve it.

Background

On 23 May 2014, the claimant, JSC VTB Bank (VTB), a major Russian bank, commenced a claim before the BVI court (the 2014 Claim) against the defendant, Mr Katunin, seeking recognition and enforcement of a judgment obtained against him in Russia in the sum of about US$30 million, and obtained a worldwide freezing order (WFO) against him in support of those proceedings.

On 26 May 2014, VTB obtained an ex parte order for permission to serve the claim form on Mr Katunin out of the jurisdiction. This meant that Mr Katunin would need to be served in Russia in accordance with the requirements of the Hague Service Convention.

VTB did not, however, attempt to effect service on Mr Katunin in accordance with the Hague Service Convention. Instead, on 8 July 2014, it obtained a further ex parte order permitting service on him by an alternative method, namely by delivering the claim form to some BVI registered companies alleged to be owned or controlled by him (the Alternative Service Order), on the basis that service in accordance with the Hague Service Convention was impracticable.

1 Appeal Nos BVIHCMAP2016/0047 and BVIHCMAP2017/0006, 18 April 2018.

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On 3 November 2014, Mr Katunin applied to set aside the Alternative Service Order. On 28 January 2015, that application was dismissed on the basis that Mr Katunin was found to have submitted to the jurisdiction and that there was, in any event, valid grounds for the Alternative Service Order.

Mr Katunin appealed the dismissal of his application, and on 20 June 2016, the Alternative Service Order was set aside by the Court of Appeal which held that there had not been a submission to jurisdiction, and the court had erred in granting the Alternative Service Order. VTB had not made any protective application for an extension of time within which to serve the claim form pending the determination of the appeal, and the claim form had expired on 22 May 2015.

On 4 July 2016, Mr Katunin applied for an order discharging the WFO (the Discharge Application) on the ground that the claim in which it was made had expired without service having been validly effected. Further or alternatively, he contended that there was no real or continuing risk of dissipation and/or the WFO had been obtained as a result of material non-disclosures.

On 14 July 2016, VTB applied to extend the period for service of the claim form. In so doing, VTB relied upon the power of the court under CPR 26.1(2)(k) to extend time for compliance with the rules and/or the power under r. 26.1(6) to dispense with compliance with the rules. VTB also made a rare application under r. 7.8B for an order dispensing with the need to serve the claim form altogether (together, the Claim Form Relief Application).

In dismissing the Claim Form Relief Application, the BVI court held that: (a) the requirement under r 8.13(3)(a) that any application for an extension be made within the period for service of a claim form, or that period as previously extended, was one of strict application, and r. 26.1(2)(k) could not be used to extend the time for making the application; (b) CPR 26.1(6) did confer upon the court 'in special circumstances' a power to disapply time limits otherwise imposed by the rules. Although this rule could in principle be used to retrospectively extend time for service of a claim form where no timely application had been made, the circumstances in which the court would do so must 'surely, truly be exceptional, and then only if to do otherwise would wreak an injustice'. On the facts of this case, the court was far from satisfied that special circumstances sufficient to justify the use of the power existed; and (c) the alternative of dispensing with service of the claim form altogether under r. 7.8B was not available.

As the claim form had not been served within the period of its validity, the Discharge Application was granted.

However, on 3 November 2016, VTB commenced a second claim (the 2016 Claim) against Mr Katunin seeking the recognition and enforcement of the first Russian judgment and a second Russian judgment (also in a sum of about US$30 million), such claim being brought without prejudice to the 2014 Claim. VTB made an ex parte application for and obtained a WFO against Mr Katunin in the 2016 Claim which took effect at the same time that the WFO in the 2014 Claim was discharged. In so ordering, the court accepted that there was a real and continuing risk of dissipation, and that there had not been material non- disclosures when the original WFO was granted.

VTB appealed the court's decision dismissing the Claim Form Relief Application and Granting the Discharge Application.

The Relevant Provisions of the CPR

The relevant provisions of the CPR are as follows: 7.8B (1) The court may dispense with service of a claim form in exceptional circumstances. (2) An application for an order to dispense with service may be made at any time and – (a) must be supported by evidence on affidavit; and (b) may be made without notice. … 8.13 (1) The claimant may apply for an order extending the period within which a claim form may be served. (2) The period by which the time for serving a claim form is extended may not be longer than 6 months on any one application.

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(3) An application under paragraph (1) – (a) must be made within the period – (i) for serving a claim form specified by rule 8.12; or (ii) of any subsequent extension permitted by the court; and (b) may be made without notice but must be supported by evidence on affidavit. (4) The court may make an order under paragraph (1) only if it is satisfied that - (a) the claimant has taken all reasonable steps to – (i) trace the defendant; and (ii) serve the claim form; but has been unable to do so; or (b) there is some other special reason for extending the period. … 26.1 (1) The list of powers in this rule is in addition to any powers given to the court by any other rule, practice directions or any enactment. (2) Except where these rules provide otherwise, the court may – … (k) extend or shorten the time for compliance with any rule, practice direction, order or direction of the court even if the application for an extension is made after the time for compliance has passed; … (6) In special circumstances on the application of a party the court may dispense with compliance with any of these rules.

The Court of Appeal's Decision

The Power to Extend Time under Rule 26.1(2)(k)

VTB argued that the BVI court had erred in finding that it had no power under r. 26.1(2)(k) to extend time to apply for an extension under r. 8.13. In dismissing this ground of appeal, the Court of Appeal approved a first instance decision of the High Court of St Kitts and Nevis2 in which it had been held that: (a) the requirements of r. 8.13 must be strictly complied with since, unlike the position in England and Wales, the Eastern Caribbean CPR does not empower the court to grant an extension of time where permission is sought after the expiry of the period for service of the claim form; (b) the policy behind r. 8.13 would be defeated if the conditions for obtaining an extension of time could be sidestepped by appealing to the court's discretionary powers under r. 26.1(2)(k); and (c) general discretionary powers cannot be used to achieve something that is prohibited under another rule. In that respect, r. 8.13 constituted an exhaustive arrangement for dealing with extensions of time to serve a claim form and displaced the general discretion to extend time under r. 26.1(2)(k).

The Court of Appeal accordingly held that r. 26.1(2)(k) has no application to the regime under r. 8.13.

The Power to Disapply the Rules under Rule 26.1(6)

Mr Katunin accepted at the appeal hearing that r. 26.1(6) could be used to disapply the time period prescribed by r. 8.13 for applying for an extension of time for service of a claim form. However, according to its terms, that power can only be exercised in 'special circumstances'. Mr Katunin contended that the court below had been correct to interpret that expression as requiring 'exceptional' circumstances. However, the Court of Appeal disagreed, finding that the court below had imposed a higher burden than that imposed by r. 26.1(6) and thereby improperly elevated the evidential hurdle that VTB was required to meet. It said that seeking to further define the term 'special circumstances' was likely to be unhelpful.

2 Williams v Chang & Anor (Claim No. NEVHCV2010/0153, 10 October 2012).

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Special Circumstances

Having found that the court below had placed an inappropriate gloss on the requirement for special circumstances, it then fell to the Court of Appeal to consider the matter afresh. Having done so, it found that the circumstances presented by VTB, when taken together, did constitute special circumstances for the following reasons: (a) The fact that the Alternative Service Order had been made, service had been effected in accordance with its terms, and it had been upheld on an inter partes hearing was an 'important factor'; (b) Although it was 'undeniable' that a protective application for an extension of time could have been made to safeguard VTB's position in the event that Mr Katunin's appeal in relation to the Alternative Service Order were to succeed (which in the event it did), the court was unwilling to attribute to VTB's solicitors the requisite amount of fault that would be sufficient to automatically disentitle VTB from successfully arguing the existence of special circumstances, particularly in light of positive action that had been taken to obtain the then still valid Alternative Service Order; (c) The need for and cost of a second WFO, the potentially large costs consequences of the failure of the 2014 Claim, and the possibility of an enquiry as to damages (as a consequence of the discharge of the first WFO), not of their own but in conjunction with the above factors set out above, went towards establishing special circumstances justifying an extension of time being granted for service of the 2014 claim form; and (d) The fact that the 2016 Claim was not barred by limitation was, although not determinative, a factor that supported the existence of special circumstances, in that any extension could not have deprived Mr Katunin of any limitation defence.

Having found the existence of special circumstances, it was unnecessary for the Court of Appeal to consider the appeal in relation to r. 7.8B. The Court of Appeal accordingly allowed VTB's appeal, set aside the order dismissing the Claim Form Relief Application, and extended time for service of the claim form for a period of 6 months.

Conclusion

Although the Court of Appeal's decision in Katunin introduces an element of uncertainty in relation to the question of when the validity of a claim form can be considered to have finally expired, any applicant for a retrospective extension of time to serve a claim form after the validity of the claim form has expired will still need to be able to show the existence of 'special circumstances'. This is likely to be a highly fact sensitive exercise and applications will be dealt with by the court on a case by case basis.

Contacts

Eleanor Morgan Justine Lau Shane Donovan Partner, Mourant Ozannes Partner, Mourant Ozannes Counsel BVI Hong Kong BVI +1 284 852 1712 +852 3995 5749 +1 284 852 1731 [email protected] [email protected] [email protected]

This update is only intended to give a summary and general overview of the subject matter. It is not intended to be comprehen sive and does not constitute, and should not be taken to be, legal advice. If you would like legal advice or further information on any issue raised by thi s update, please get in touch with 2021934/73119857/1 one of your usual contacts. © 2018 MOURANT OZANNES ALL RIGHTS RESERVED