YA II PN Ltd v Frontera Resources Corporation

Permission to serve a claim form out of the jurisdiction is confined by the terms of the permission order. Where the order specifies an address and does not permit service elsewhere in the country, service at another address is irregular, even if the method is permitted by local law.

In an application to set aside a default judgment, valid service must be proved on the balance of probabilities. The court may retrospectively validate defective service under CPR 6.15 where there is good reason, including actual knowledge, reasonable steps to effect service, absence of prejudice and compliance with the relevant international convention. Validation does not retrospectively validate a default judgment entered before the defendant had time to acknowledge service.

YA II PN Ltd claimed US$2,785,200 from Frontera Resources Corporation under a settlement deed. The court permitted service out of the jurisdiction at specified addresses in Texas and the Cayman Islands.

Attempts at service at those addresses failed. The claim form was instead personally delivered in Texas to Gerard Bono, a former Frontera officer. Frontera later became aware of the claim, but a default judgment was entered before it acknowledged service.

Frontera applied to set aside the judgment, arguing that service was invalid. YA II sought retrospective validation under CPR 6.15, alternatively other procedural relief. The issues were whether service complied with the permission order and applicable United States law, whether defective service should be validated, and what consequence validation had for the default judgment.

1. Initial service was invalid. The order permitting service out of the jurisdiction authorised service at specified addresses only. It did not contain the standard words permitting service elsewhere in the country. CPR 6.40(3)(c) was subject to that restriction and could not authorise service at a different address. The omission of the standard wording was legally significant, not merely technical.
2. YA II had to establish valid service on the balance of probabilities. A default judgment depends on a valid obligation to acknowledge service. A merely good arguable case was insufficient.
3. Service was also not shown to be valid under United States law. Under Texas law, the citation failed to contain the required warning that default judgment might follow from failure to answer, and service departed materially from the court’s order. The same defect was materially prejudicial under the applicable federal service rules.
4. There was nevertheless good reason retrospectively to validate the service under CPR 6.15. Frontera had received the claim form and its contents through an attempted formal service and had promptly informed its chief executive. The claimant had taken reasonable steps to serve Frontera, the method used was permitted by the Hague Service Convention, the United States had made no relevant Article 10 objection, and no prejudice would result. The circumstances also amounted to special or exceptional circumstances if that higher threshold applied.
5. The default judgment was set aside under CPR 13.2. Following Dubai Financial Group LLC v National Private Air Transport Co (National Air Services) Ltd [2016] EWCA Civ 71, retrospective validation did not validate a judgment entered before the defendant had a period to acknowledge service. Frontera was given seven days from hand-down to file an acknowledgment of service.

First-instance decision. The judgment records and applies principles from prior decisions of the Court of Appeal and Supreme Court but does not describe an appeal in this litigation.