Unlawful service by unregulated person

In Ndole Assets Ltd v Designer M&E Services UK Ltd [2018] EWCA Civ 2865 the Court of Appeal was faced with the issue:

“Is service of a claim form a reserved legal activity for the purposes of the Legal Services Act 2007 (the 2007 Act)? And if it is, does service of a claim form where carried out by a person who is not an authorised or exempt person for the purposes of the 2007 Act have the consequence that service is invalid and that the claim should be struck out?”

On the facts of the case, CSD, referred to as “claims consultants”, purported to serve a claim form on behalf of a litigant in person.  It was not in dispute that CSD were not solicitors and were not authorised for the purposes of the 2007 Act to conduct litigation.

Schedule 2 of the 2007 Act defines “conduct of litigation” as:

“(a) the issuing of proceedings before any court in England and Wales,

(b) the commencement, prosecution and defence of such proceedings, and

(c) the performance of any ancillary functions in relation to such proceedings (such as entering appearances to actions).”

The Court concluded that:

“that service of the claim form was within the ambit of ‘conduct of litigation’. … I consider that service of the claim form is indeed an aspect of ‘prosecution… of such proceedings’ and at all events that service of the claim form is ‘an ancillary function in relation to such proceedings’.  As stated by the Court of Appeal in paragraph 56 of Agassi, it must have been intended that ‘ancillary functions’ would be formal steps required in the conduct of litigation. Service of the claim form is unquestionably, in my opinion, of such a kind. There are rules of court relating to it. A legal action cannot be progressed, cannot be prosecuted, unless and until the claim form is properly served, as the judge had noted. Service is the essential means by which a defendant is notified of the content of the court process which has been initiated against him and in respect of which he is ordinarily required to acknowledge service. Thus service of the claim form falls within the ambit of the statutory language, naturally read.”

The Court therefore decided that service of the claim form had been unlawfully effected by CSD.

Nevertheless, the Court rejected the argument that service was therefore invalid.  The 2007 Act contains no such consequence and such a draconian outcome would not be justified.

“It follows that service in this present case is to be taken as valid unless the court were to decide to set it aside. I can see no reason whatsoever for so ordering.”

This decision has important implications for much costs litigation.

It remains common practice for firms of costs draftsmen and costs lawyers to purport to serve Notices of Commencement, Replies, etc.

Costs draftsmen are clearly not authorised for the purposes of the 2007 Act.

Practising costs lawyers are authorised, but only as individuals.  The Costs Lawyer Standards Board does not regulate entities.  There is no such thing as an authorised firm of costs lawyers.  Any step taken in relation to costs litigation by a costs firm (other than a firm that is an actual firm of solicitors) must be taken by, and in the name of, the individual costs lawyer.  A costs firm cannot go on record as acting for a party to litigation; it must be an individual costs lawyer and any further steps taken must be by the same costs lawyer (unless and until a Notice of Change is filed)

In this case, the Court concluded that:

“even if CSD had … simply sent a letter to the defendant saying they acted for the claimant and enclosing the claim form by way of service under the rules … that would , in my view, have been prohibited.”

It therefore seems inevitable that a court would conclude that service of a Notice of Commencement, etc by a costs draftsman or a costs firm would be an unlawful act.

If it does not invalidate service, does it matter?  Rather.

As the Court observed, the fact that service was not invalid did not mean that no sanction was available:

“On the contrary there are sanctions available in the form, in an appropriate case, of criminal process and sentence and a contempt application. And those sanctions are directed at the right target – that is to say, the person who has actually engaged in the unlawful conduct of litigation.”

The relevant section of the 2007 Act reads:

“Any person who contravenes the provisions of subsection (1) –

(a) shall be guilty of an offence and liable on conviction on indictment to imprisonment for not more than two years or to a fine or to both; and

(b) shall be guilty of contempt of the court in which the action, suit, cause, matter or proceeding in relation to which he so acts is brought or taken and may be punished accordingly; and

(c) in addition to any other penalty or forfeiture and any disability to which he may be subject, shall be liable to a penalty of £50 to be recovered, with the full costs of the action, by an action brought by the Society with consent of the Attorney General in the High Court or in any county court, and to be applied to the use of Her Majesty.”

Something to think about.