Ndole Assets Ltd v Designer M&E Services UK Ltd

The Court of Appeal considered whether service of a claim form is a "reserved legal activity" under the Legal Services Act 2007 and whether service carried out by an unauthorised person is invalid. The court concluded that formal service of a claim form falls within the statutory definition of "conduct of litigation" (Schedule 2, paragraph 4) and so is a reserved legal activity unless performed by an authorised or exempt person (see Part 3 and Schedule 3 of the 2007 Act). The court rejected the judge's narrower agency-based reasoning but adopted a pragmatic distinction between purely clerical/mechanical acts (which do not engage the prohibition) and those acts that assume legal responsibility under the rules (which do). Although CSD Legal Limited carried out service without statutory authorisation and thus engaged in conduct of litigation, the appropriate consequence was not automatic nullity. The court exercised its discretion not to set the service aside because the claimant and CSD acted in good faith, the defendant had notice, and striking out would produce an unjust result in the circumstances.

Background and parties.

The dispute arose from a subcontract for mechanical and electrical works. The original contractor terminated the subcontract and there followed adjudication and a series of assignments that resulted in Ndole Assets Limited (a British Virgin Islands company) issuing proceedings against Designer M&E Services UK Limited for sums claimed to be due following repudiatory breach and/or damages. Proceedings were issued in the Technology and Construction Court on 17 October 2016 and particulars of claim were later served. The claimant is a company; the defendant is a subcontractor. The claimant did not have solicitors on the record. CSD Legal Limited, a claims consultant company, delivered the sealed claim form and particulars to the defendant's registered office and completed a certificate of service.

Procedural posture.

• At first instance Coulson J refused the defendant's application to strike out the proceedings on the ground that service was unlawful.
• The defendant obtained permission to appeal to the Court of Appeal.

Issues.

1. Whether service of a claim form is a "conduct of litigation" and therefore a reserved legal activity under the Legal Services Act 2007 (notably Schedule 2 para 4 and Schedule 3 para 2(4)).
2. If it is reserved, whether service effected by a person who is neither an authorised nor an exempt person is invalid and requires the court to strike out the claim or otherwise set service aside.

Court’s reasoning.

The court rejected the appellant's submission that service did not fall within the statutory definition. Applying the wording of Schedule 2(1) and the framing in the 2007 Act, the court held that service of a claim form is an aspect of "prosecution" of proceedings and, in any event, an "ancillary function" in relation to proceedings. The court considered earlier authorities (including Gregory v Turner and Agassi v S. Robinson) and concluded that Gregory supported the proposition that the right to conduct litigation is personal and cannot be delegated to an unqualified agent; Agassi was not decisive on the precise point. To avoid absurdity (e.g. exposure of process-servers or postal employees to criminal liability) the court adopted a practical test distinguishing purely clerical or mechanical acts (permitted) from acts that assume legal responsibility for service under the rules. On the facts, CSD had gone beyond mere mechanical delivery and had taken responsibility for service (letters, enquiries to court, and a signed certificate of service). The conduct therefore engaged the statutory prohibition because CSD were neither authorised nor exempt.

Remedy and result.

The court held that the statutory scheme and practical considerations did not require that such service be treated as automatically void. Instead, the appropriate remedies include criminal or contempt sanctions directed at the wrongdoer or exercise of the court's discretion to set aside service. Given that CSD and the claimant acted in good faith, that the defendant and its solicitors received the documents and had adequate notice, and that striking out would be oppressive and give an adventitious benefit to the defendant (including potential limitation consequences), the Court of Appeal declined to set aside service. The appeal was dismissed.

Appeal dismissed. The Court of Appeal held that formal service of a claim form is within the statutory definition of "conduct of litigation" in Schedule 2(1) to the Legal Services Act 2007 and thus is a reserved legal activity if carried out by a person who is neither authorised nor exempt. The court rejected the judge's agency-based reasoning but adopted a practical distinction between purely clerical/mechanical acts (permitted) and acts that assume legal responsibility under the rules. CSD Legal Limited had assumed legal responsibility and therefore acted without statutory authorisation, but automatic nullity was not required; the court exercised its discretion and refused to set the service aside because the claimant and CSD acted in good faith and the defendant had actual notice, so striking out would have been unjust.

Appeal from the High Court of Justice, Queen's Bench Division, Technology and Construction Court (Coulson J), where an application by the defendant to strike out the claim for unlawful service was refused. Leave to appeal was granted on the papers by Rupert Jackson LJ. The Court of Appeal delivered judgment on 21 December 2018 ([2018] EWCA Civ 2865).