Edray Ltd v Canning

A failure to serve costs proceedings in accordance with the Civil Procedure Rules may, in an appropriate case, be overcome by estoppel by convention. The essential questions are whether the parties communicated a shared assumption that service was valid, whether the receiving party relied on that assumption, and whether it would be unconscionable to permit the other party to depart from it. The doctrine is not excluded merely because the procedural rules require valid service. Waiver is conceptually distinct and ordinarily requires knowledge of both the relevant facts and the right to elect. On the facts, the debtor’s solicitors clearly treated service on them as valid, and the creditor probably would have served the debtor personally had that assumption not been created. The appeal was therefore allowed.

Edray Limited obtained a bankruptcy petition costs order against Mr Canning, with the costs to be determined by detailed assessment. Edray sent the notice of commencement and bill of costs to Teacher Stern, whom it mistakenly treated as authorised to accept service for Mr Canning. Teacher Stern then communicated on Mr Canning’s behalf as though valid service had occurred, including by seeking an extension of time for points of dispute.

A default costs certificate was later issued. District Judge Ashworth set it aside, holding that the communications could not give rise to waiver or estoppel because the procedural service requirements had not been complied with. The appeal concerned that conclusion. The court also considered whether the certificate should nevertheless be set aside because there was good reason for the detailed assessment proceedings to continue.

1. Appeal allowed. The District Judge erred in treating the service rules as making waiver and estoppel legally irrelevant. Estoppel, and specifically estoppel by convention, can in principle prevent a party from relying on a failure to comply with the rules governing service of costs proceedings.
2. Waiver is distinct from estoppel. Where waiver is based on an informed election, the person waiving must know the relevant facts and know that there is a right to elect. The court left open whether procedural service requirements can be waived by a clear and informed communication, because the evidence did not establish the necessary knowledge.
3. Estoppel by convention required a shared assumption communicated between the parties, reliance causing real prejudice, and circumstances making it unconscionable to resile from the assumption. The communications of Teacher Stern on 3 and 4 April 2014 clearly treated the notice of commencement sent to them as valid service on Mr Canning. Teacher Stern were authorised to act for him in relation to the costs.
4. The likely consequence of those communications was that Edray did not serve Mr Canning personally. Edray thereby lost the valuable ability, after 21 days and subject to CPR r.47.12(2), to obtain a default costs certificate. It was therefore unconscionable for Mr Canning to rely on the defective service.
5. The court rejected the argument that there was a good reason under CPR r.47.12(2) for detailed assessment to continue. The costs claimed were not manifestly excessive on their face, the delay gave Mr Canning ample time to serve points of dispute, and Edray was not obliged to raise the matter with solicitors instructed in separate proceedings.
6. Edray recovered half its costs below and its costs of the appeal.

High Court (Chancery Division): Allowed the appeal from the order of District Judge Ashworth dated 18 November 2014, which had set aside the default costs certificate. The High Court held that estoppel by convention applied and rejected the respondent’s alternative challenge under CPR r.47.12(2).