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Samson Spanier wins in High Court on estoppel by convention

The High Court (Chancery Division) has given judgment in Edray Ltd v Anthony Canning (Lawtel LTL 4/6/2015; Westlaw 4/6/2015). This is the first recorded case in which a party has succeeded in overcoming defective service under the CPR by relying on estoppel by convention.

Edray Ltd (‘Edray’) served a statutory demand on Mr Canning, who applied to set it aside. Mr Canning’s application failed, and he was ordered to pay Edray’s costs to be assessed if not agreed. Edray then served a bankruptcy petition on Mr Canning, who in respect of the bankruptcy petition was unrepresented. Mr Canning paid the petition debt, and at the first hearing, the petition was dismissed with Mr Canning to pay the costs to be assessed if not agreed.

A firm of solicitors, T, then wrote to Edray’s solicitors, stating that it was instructed in respect of the statutory demand application costs, but making no mention of the bankruptcy costs. Edray’s solicitors in response sent to T a notice of commencement and a bill of costs in respect of the bankruptcy matter. T then applied for an extension of time to file and serve points of dispute; T wrote in the application notice that Mr Canning had been served but more time was needed. T did nothing further.

Some time passed, and then Mr Canning instructed new solicitors, W, in respect of the statutory demand costs. Edray’s solicitors, having not received points of dispute in respect of the bankruptcy matter notice of commencement, applied for a default costs certificate (‘DCC’). Mr Canning applied (through W) to set it aside, on the basis that he knew nothing about the notice of commencement in respect of the bankruptcy matter, and that service of it was defective, because it should have been done on him, not T.

The judge at first instance held that service was defective because T had not, before the date of service, stated that it was instructed in that matter. She set aside the DCC on the mandatory ground that Edray was not entitled to it because service was defective. Edray contended that Mr Canning was estopped from asserting defects in service or otherwise had waived defects in service. The judge rejected that contention. Edray appealed on estoppel and waiver.

On appeal, Mr Stephen Jourdan QC, sitting as a Deputy High Court Judge, allowed the appeal and held:

  • The first instance judge had made an error of law in holding that estoppel could not affect the question of whether service was effective.
  • There was an estoppel by convention which prevented Mr Canning from asserting defects in service. The application notice statement that Mr Canning had been served demonstrated that both Edray’s solicitors and T participated in a ‘convention’ that service was effective.
  • But for T’s actions, Edray’s solicitors would have organized effective service in which case the DCC would have been unassailable (subject only to discretionary reasons to set aside). The DCC was a valuable right, and depriving Edray of it would amount to serious prejudice and would be unconscionable.

Edray therefore won the appeal, and Mr Canning failed in his application to set aside the DCC.

Samson Spanier represented Edray, the successful appellant.