13 July 2017
Contracting parties will often choose the governing law and jurisdiction that will apply to claims that may arise under the contract. As we foreshadowed in our recent alert on service of proceedings on a general sales agent, they should also consider at the outset how service of any proceedings can best be effected. Where one of the parties is a foreign entity, provision for service upon an agent within the jurisdiction appointed for that very purpose should save time and costs.
The recent decision in Aquila WSA Aviation Opportunities II Ltd v Onur Air Tasimacilik AS confirms that the courts will uphold such provisions and will not be receptive to technical arguments on service where the proceedings have clearly come to the defendant's attention.
The claimant, Aquila WSA Aviation Opportunities II Ltd ("Aquila"), is an Irish asset finance company which leases aircraft and aircraft engines. Aquila had entered into a lease agreement (the "Lease") with Onur Air Tasimacilik AS ("Onur"), a Turkish airline, in relation to an aircraft engine. The Lease contained a non-exclusive jurisdiction clause in favour of England. As Onur was based outside the jurisdiction, it also included a mechanism (the "Service Agent Clause") for service of proceedings on an appointed agent (the "Service Agent") located within England.
Onur sought to terminate the Lease for repudiatory breach following engine problems which had caused one of its planes to make an emergency landing. In response, Aquila brought a claim for $9 million in respect of various sums due under the Lease.
Appointment of the Service Agent
The Service Agent Clause provided that Onur would irrevocably appoint Corporation Service Company ("CSC") as its Service Agent in relation to any legal proceedings in connection with the Lease. It also specified that Onur would provide a letter to Aquila confirming the appointment of CSC and that if the appointment of CSC ceased to be effective, Onur would, as soon as reasonably practicable, appoint another agent in England to accept service on its behalf (in England). It would provide written confirmation and contact details of the new agent to Aquila.
Onur sent Aquila a copy of a letter on CSC headed notepaper dated 18 September 2015 confirming the appointment of Corporation Services Company (UK) Limited ("CSCUKL") as the Service Agent (the Letter of Appointment). This was in fact a different company to CSC, albeit apparently related to it, and CSCUKL was based at the same London address as CSC. The Letter of Appointment also confirmed that CSCUKL was appointed for a period of one year only, expiring 18 September 2016. Onur did not subsequently appoint any other agent.
Service of the proceedings
On 16 December 2016, Aquila attempted to serve the proceedings on CSC under the Service Agent Clause, but was unable to complete service as the address provided for CSC turned out to be a building site.
Instead, on 19 December 2016, Aquila served the papers on a company called Corporation Services Company Limited ("CSCL") at a different address, by giving it to an individual named Mr Ogunbase.
CSCL had only been incorporated after the copy Letter of Appointment was sent to Aquila on 18 September 2015. Since its incorporation, it had changed its registered office to the same address as CSCUKL. It was not clear what connection Mr Ogunbase had to CSCL, and there was no evidence that he had any connection to CSCUKL. There was also no evidence as to the relationship between CSCL and CSCUKL.
The issues for the court was whether Aquila's attempt at service under the relevant clause constituted good service and, if not, should an order for alternative service via the steps it had already taken under the Civil Procedure Rules, Rule 6.15 (CPR 6.15) be granted?
Aquila argued that:
- the intention behind the Service Agent Clause was to ensure that if any dispute arose, it would be possible to effect service within the jurisdiction;
- the appointment of CSC under the Service Agent Clause was irrevocable; and
- the Service Agent Clause foresaw the possibility where the appointment of CSC might cease to be effective, in which case Onur would be under an obligation to appoint a replacement service agent within the jurisdiction.
Seeking, perhaps somewhat opportunistically, and perhaps more in hope than expectation to avoid service (given the factual circumstances), Onur argued that:
- service had not been effective because Aquila had served the incorrect company;
- at the time of purported service, the Service Agent's contract had expired and no Service Agent existed that could be served; and
- the Service Agent Clause envisaged that there could be a period between agents by stating that where the appointment ceased to be effective, Onur "shall as reasonably practicable appoint another person". The clause did not provide that until that appointment the original agent was still appointed.
The High Court's view
Did service on CSCL constitute good service?
The court held that on its proper construction, the Service Agent Clause should be read as appointing a 'CSC entity' to be agreed or designated. The Letter of Appointment subsequently defined this entity as CSCUKL. The parties had agreed that CSCUKL was the Service Agent and so service on CSCL was not service on the designated Service Agent and was invalid.
Did Onur's appointment of CSCUKL as Service Agent for the period of one year only affect the contractual position between Aquila and Onur?
The court held it did not. Aquila's and Onur's contractual relationship remained governed by the Service Agent Clause - i.e. Aquila's right to serve could not be adversely affected by the fact that by the Letter of Appointment Onur had only appointed CSCUKL for one year and had then failed to renew its appointment. That was an agreement between Onur and a third party. The Service Agent Clause intended that an agent was to be appointed irrevocably. To interpret the clause in any other way would allow Onur to benefit from its own wrong doing. Aquila's right to serve could not be revoked by a letter to which it was not a party. Unless the agent itself ceased to exist (or was properly replaced), the appointment was valid as between Aquila and Onur. It followed that Aquila could have served on CSCUKL at its original address.
Should alternative service be permitted?
The court then considered Aquila's application under CPR 6.15. CPR 6.15 allows the court to order that steps already taken to bring a claim to a defendant's attention can constitute good service, provided that there was good reason for doing so. When making such an order, the critical factor is that the defendant must have learned of the claim's existence. In considering the factual background, the court found that:
- Onur had plainly learned of the existence and content of the claim form very shortly after attempted service - evidenced by the fact that it had filed an acknowledgement of service less than two weeks after the claim form was issued;
- the appointment of the service agent was irrevocable and Onur had consented to service in the jurisdiction;
- Onur's point on the expiry of CSCUKL's appointment essentially relied on its own breach of the obligation to appoint a new agent; and
- there had been no delay on Aquila's part - it had attempted service promptly, with the initial attempt taking place on the day of issue and the service upon which it now relied taking place within a few days of this.
In exercising its discretion under CPR 6.15(2), the court held that there was good reason why the claim form had not been served and confirmed that the steps already taken - handing the claim form to CSCL on 19 September 2016, constituted good service. To require the parties to take further steps and incur additional costs would not be in line with the overriding objective of dealing with cases justly and at proportionate cost.
This is an unsurprising result reached by the court. To allow Onur to benefit from its own breach (by failing to appoint a new agent) to undermine Aquila's attempted service would be inequitable. Parties will often agree that service within the jurisdiction should take place and the courts are unimpressed with defendants' attempts to wriggle out of that agreement by taking technical arguments on service. This is particularly so where the proceedings have clearly come to their attention. The time and money spent in pursuing such technical arguments is precisely what was intended to be avoided in the first place.
Aquila was not a party to the Letter of Appointment between Onur and CSCUKL. Therefore, the fact that the appointment was for a limited amount of time could not impact upon Aquila's right to serve (irrevocably) under the Service Agent Clause. What a party agrees with its service agent is between it and its agent and will not affect the serving party.
Interestingly, the Judge also held that had it been necessary, she would have held that the error (misidentification of a service agent - CSCL instead of CSCUKL) was a procedural error, and therefore subject to correction, under CPR Rule 3.10 - again preventing the defendant from taking a technical point.
Claimants should check the service provisions in contracts before attempting to serve. The ability to serve within the jurisdiction will save time and money, but only if any contractually correct notices of change of service agent received are followed through to ensure that the correct, currently appointed service agent is indeed served. This is especially relevant where a contract has been in existence for some time.
NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.