Knauf UK GmbH v British Gypsum Ltd

Alternative service under Civil Procedure Rules r 6.8 requires a good reason connected with service. A claimant cannot obtain such an order merely to accelerate service on a foreign defendant and thereby secure priority as the court first seised under the Brussels Convention. That use bypasses agreed cross-border service arrangements and subverts the Convention’s fixed rules on jurisdiction and lis pendens.

An applicant seeking without-notice discretionary relief that will affect jurisdiction must disclose a potentially applicable exclusive jurisdiction clause. The clause remains material even where its validity is disputed. A deliberate failure to disclose it may require the order to be discharged as the proportionate sanction for breach of the duty of candour.

Knauf UK GmbH, a German company operating in England, claimed that defective lining paper supplied by the German partnership Wellkisten und Papierfabriken Fritz Peters & Co KG had contributed to losses arising from defective plasterboard. Facing threatened English proceedings by British Gypsum Ltd, Knauf obtained without notice an order permitting service of its English claim on Peters’ English solicitors. The purpose was to make the English court first seised before Peters could commence proceedings in Germany.

David Steel J upheld the alternative-service order and rejected the challenge based on an alleged German exclusive-jurisdiction clause. Peters appealed. The central issues were whether speed and procedural consolidation supplied a good reason under r 6.8, and whether Knauf’s non-disclosure of the clause independently required the order to be set aside.

Disposition

1. The Court of Appeal, in a judgment of the court prepared by Rix LJ, allowed Peters’ appeal and set aside Aikens J’s order for alternative service.

2. Rule 6.8 confers a discretion only where there is a good reason for alternative service. Its exceptional function is concerned with effecting service where the normal method presents a relevant difficulty. It could not properly be used to obtain faster service on a German defendant merely so that the English court became first seised.

3. The proposed service on English solicitors would bypass the service arrangements agreed between the United Kingdom and Germany. More fundamentally, it would manipulate the Brussels Convention’s jurisdictional scheme. Article 2 establishes domicile as the general rule. Articles 21 and 22 use fixed chronological priority rules to resolve parallel or related proceedings. English procedural law could not use a discretionary device to advance the ordinary date of seisin for the purpose of displacing a competing Convention court.

4. The court therefore held that there can be no good reason for alternative service on a foreign defendant where the order is designed to subvert the agreed principles governing cross-border service and jurisdiction, rather than to overcome a genuine service difficulty.

5. The court also held, as an independent basis for discharge, that Knauf had breached the duty of full and frank disclosure. The possible exclusive jurisdiction clause was material because the application was designed to affect the jurisdictional position between England and Germany. Its disputed validity did not make its existence irrelevant. Knauf had deliberately withheld it, and the court could not say that disclosure would have made no difference to Aikens J’s decision. The order would therefore have been set aside for non-disclosure even if good reason for alternative service had otherwise existed.

6. The court did not determine the substantive Article 17 issues concerning the clause. Those questions, including the applicable standard of proof and the role of the contract’s proper law, were left open.

• Court of Appeal (Civil Division) — allowed Peters’ appeal in [2001] EWCA Civ 1570 and set aside the without-notice alternative-service order.
• Commercial Court — David Steel J had upheld the alternative-service order and rejected Peters’ jurisdictional challenge.
• High Court — Aikens J had made the initial without-notice order permitting service on Peters’ English solicitors.