BANK OF AMERICA EUROPE DAC & Anor. v CITTA METROPOLITANA DI MILANO

An automatic stay under CPR 15.11 is properly treated as a sanction arising from a failure to keep proceedings under judicial management. An application to lift the stay engages the Denton test, applied flexibly to the particular features of CPR 15.11.

The seriousness of the breach is assessed in context. A deliberate decision to allow the stay may nevertheless have a good reason where the proceedings were defensive and the claimant was awaiting the defendant’s position. The court must weigh all the circumstances, including prejudice and the effect of refusing relief.

Bank of America Europe DAC and Merrill Lynch International commenced English proceedings against Città Metropolitana di Milano concerning interest-rate swaps and related transactions. The claims became automatically stayed under CPR 15.11 because Milano had not acknowledged service or served a defence and the claimants had not sought judgment.

After Milano commenced Italian proceedings, the claimants applied to lift the stays. Milano opposed those applications and, if the MLI proceedings were revived, sought an extension of time to acknowledge service so that it could challenge jurisdiction. The central issues were the applicable test for lifting the stays and whether Milano should receive relief from the sanction arising from its failure to acknowledge service.

1. Applications to lift stays. The applications by Bank of America Europe DAC and Merrill Lynch International were granted.
2. Applicable test. The automatic stay under CPR 15.11 is, in ordinary language, a sanction. It follows from the parties’ failure to bring the proceedings before the court for case management. The Denton test therefore applies, or should be applied by analogy if the stay is not technically a sanction imposed for breach of a rule.
3. The three stages are seriousness and significance, the reason for the default, and all the circumstances. The test is sufficiently flexible to recognise that CPR 15.11 involves the combined inactivity of claimant and defendant, and that protective proceedings may be commenced defensively while the claimant awaits the threatened claim.
4. The five-year delay was significant but did not, by itself, make the breach among the most serious. The claimants’ decision was deliberate but was based on legitimate litigation concerns and was not abusive warehouse litigation. Their procedural error was to allow the automatic stay rather than seek a case-management stay.
5. Refusing relief would effectively terminate the English claims and risk materially prejudicing the claimants’ position under the Brussels Regulation Recast. Milano would suffer no comparable prejudice beyond the ordinary consequence of having to engage with proceedings which it had previously chosen not to pursue.
6. Extension of time. Milano’s failure to acknowledge service was serious and significant and had no satisfactory reason. Nevertheless, the court granted relief under CPR 3.9 because refusal would deprive Milano of an arguable jurisdictional challenge, and determining the jurisdiction issues would be assisted by argument from both parties. The delay caused no material additional expense or interference with a trial timetable.