A special relationship: attempted service of a US company in the UK

Published: 29/6/2022

Court confirms that service at the London office of another member of the same group as a California-based defendant did not constitute valid service for the purposes of CPR 6.9.

In a recent decision, Mr Justice Jay provided useful guidance as to the application of CPR 6.9 and one of the routes for valid service contained therein that a company or corporation "carried on its activities within the jurisdiction".

Background

The claimant ("C") is a specialist debt recovery law firm headquartered in Leeds. The defendant ("D") is the operator of a website that allows employees to leave anonymous reviews - good and bad - about their employer, ostensibly to allow potential jobseekers further insight into that potential employer. D’s registered office and headquarters are based in California.

Two critical reviews were left on the D’s website in October 2021 which outlined the reviewers’ thoughts on working at C (one being slightly more balanced in its criticism than the other: both are annexed in full to the judgment). C sought to bring proceedings against D to obtain an order obliging D to identify the authors of those two reviews. This was on the basis that, on C’s case, they were defamatory and potentially in breach of the reviewers’ employment contracts (assuming the reviewers were existing employees). It is worth noting at this stage that C had previously set up an employer account with D which allowed it access to certain reporting metrics and the ability to respond to comments. As a condition of setting up that account, C had had to agree to D’s terms, which included that "any and all claims" being governed by Californian law and litigated in the Californian courts ("the Terms”).

Permission initially granted

C issued proceedings in England and sought permission, pursuant to CPR 6.9, to serve the Claim Form at the London offices of another company ("G"), which is in the same group as D (but is not a subsidiary of D). The Claim Form listed G’s address. G provided "marketing support services" for the Defendant relating to advertising on its website, albeit G had no authority to enter into contracts on D’s behalf. A Master granted the Norwich Pharmacal order sought ("the Order") and gave permission to serve D at G’s London offices. That happened in November 2021.

The challenge

In December 2021, D filed an Acknowledgment of Service which stated that it intended to challenge jurisdiction. That was followed by an application that sought a declaration:

  1. that the English court had no jurisdiction because no valid service had been effected; or
  2. that, even if service was valid (a) the exclusive jurisdiction clause in the Terms meant that the claim should be stayed and resolved in California and/or (b) C had obtained the permission to serve unfairly and/or improperly.

As a result of (1) or (2) above, D argued that the Order should be discharged and the Claim Form, together with service of it, set aside. Alternatively, D argued that the requisite conditions for the Order had not been met and/or C had obtained it unfairly and/or improperly.

The decision

Following a hearing in April 2022, Mr Justice Jay noted that this dispute had not come out of the blue. The parties had had various interactions in the past, during which C had "frequently" used the Terms in its favour to have other unfavourable reviews from D’s website. The judge also noted that D had put a marker down in mid-2021 that should the issues between C and D become litigious, D would challenge any attempt by C to litigate in the English courts, given the provisions of the Terms.

Was there valid service pursuant to CPR 6.9?

C relied on having served D at "any place of business of the company within the jurisdiction" (i.e. at G’s offices). The judge stated that the "real question" was whether G’s business should properly be regarded as its own business, or as the business of D. To answer that, the judge needed to explore the activities of G, and its relationship with D. The fact that G did not have the ability to bind D to contracts was an important factor against G’s offices constituting a place of business of D.

Various other factors were also considered (and stated not to be exhaustive) but the one that the judge flagged as having particular force was the "single commercial unit" argument. In summary, the fact that a company might choose to arrange its affairs such that the business carried out in a foreign jurisdiction is the business of a subsidiary (and not that of the parent company) is a matter for that company. In this case, where G was not a subsidiary of D, that point assumed even greater weight.

Having indicated that he did not agree with C’s analysis as to why G’s offices were a place of business of D, the judge observed that C’s argument really distilled into one point – it was arguing that the commercial reality was that C and G were one sole commercial unit. Mr Justice Jay was not persuaded by this argument, and reiterated that if C wanted to arrange its affairs in a way that ensured, so far as possible, that it would not be sued in England, then it was perfectly entitled to do so.

Having found service to be invalid, Mr Justice Jay went further and:

  1. found the claim was caught by the exclusive jurisdiction clause in the Terms, such that the claim would need to be brought in California;
  2. found that C did not prove serious financial loss, given that one of the reviews was only online for 3 weeks, and was unlikely to have caused the losses claimed;
  3. expressed surprise that the Master had originally granted the Order on the terms sought in advance of an Acknowledgment of Service having been filed by D. The judge felt that once that fact had become clear, it was possible that C ought to have taken steps to notify the Master who had granted the Order on a without notice basis (despite C not requesting this). However, the judge also made clear that if he had been in agreement with C on the other issues (which he wasn’t) he was not sure that C taking no steps in this regard would, in isolation, have been sufficient to mean it was not entitled to Norwich Pharmacal relief.

Conclusion

The judgment provides a useful reminder of the need to establish that business of the putative defendant is being carried on in this jurisdiction, and the considerations that the court will bear in mind when making that assessment.

There is an obvious attraction to avoiding onerous service out requirements where possible (albeit this option was not open to C here given the relief sought). There was clearly some basis for assuming that G was, in effect, carrying out D’s business in the UK (G and D used the same logo on their letterhead, for example). However, the court will be reluctant to go behind corporate structures without good reason, and careful forensic analysis will be required by any claimant to ensure they are able to establish a sufficiently strong nexus between a defendant operating outside of the jurisdiction and a business operating within it.

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