Claims for breach of contract must be made within 6 years of the breach.  A claim form must be served within four months of issue.  Any reasonably competent solicitor ought to make sure these deadlines are met, but there are pitfalls.  They can lead to disputes over the conduct of the litigation, a fiendish outcome for the client. 

A recent example

The contract and alleged breach

A contract was entered into on 20 June 2011 between a chemist and a drugs supplier, Phoenix, to buy some Atorvastatin for £448,707.  However, because the drug was still under patent to Pfizer but was sold by Phoenix as a generic drug in breach of that patent, Phoenix was alleged to have been in breach of contract in selling the drug when it was not entitled to.  Alternatively Phoenix misrepresented that the generic drug was no longer under patent.

The claim issued

By a Claim Form issued on 19th June 2017, the claimants, brought proceedings against Phoenix for breach of contract and misrepresentation, claiming over £5m.  

The claim was brought within six years of the breach, the breach being the date the contract was entered into on this occasion.  (Often the relevant breach will be after the date of the contract.)

The claim served

Issuing is not enough though.  The claim still needs to be served on the defendants in accordance with court rules; that was the heart of the problem in this case.

The rules say that the Claim Form should be served by no later than 12.00 midnight on the calendar day four months after issue, in this case 19 June 2017.  Service can be made by delivering the Claim Form personally, or by posting it first class or by using DX if available.  There are numerous options depending on what the situation is.

There is also the question of where to serve.  In the case of a person you need to know where they live or work.  For a company do you use the company’s current address or its head office? Partnerships are different again; which partners should be served and where? Those who are current, or partners when the breach occurred? 

In all cases you can serve the Claim Form on the solicitor who acts for the defendant, but only if the defendant has agreed in writing to accept service by that method. 

So what happened in this case?  It was easy enough to serve Phoenix at its registered address since that information was on Companies House and that could have been done comfortably within four months.  However, it was not until 17 October 2017 that the claimant’s solicitors sent to Phoenix’s solicitors, by first class post, the Claim Form with the Particulars of Claim by way of purported service.  This was, just, within the four month period allowed for service of the Claim Form.  If that service were defective then it was highly likely that the Claim Form would expire at midnight on 19th October 2017. It was also highly likely that any claim in respect of the matters raised against Phoenix in this Claim Form would have been time barred.

In addition to sending the Claim Form to the solicitors by post the same documents were emailed to a partner at that law firm at 10.37 a.m. on 17th October 2017.  At 10.43 a.m. the same day, a Read Receipt was received by the claimant’s solicitors, acknowledging the receipt of the relevant email and that the email had been read.

Or was it served?

On 20th October 2017 Phoenix’s solicitors replied to the claimant’s solicitors to say that service of the Claim Form on them constituted defective service. Phoenix needed to be served, not them.  Their solicitors had never been instructed to accept service and neither their solicitors nor Phoenix had ever confirmed in writing that the solicitors had been authorised by Phoenix to accept service.

On that basis they said the Claim Form had expired, unserved, and the court had no jurisdiction to hear the Claim. The claim was effectively lost if that was right.

Despite the claimant arguing (i) that the lengthy pre-action correspondence between the parties, from September 2015 onward, amounted to an implied written confirmation that the solicitors had been authorised to accept service and (ii) the court had power to dispense with service, or to validate, retrospectively, the multiple steps taken by the claimant to ensure that the defendant was fully aware of the claim, the court decided that service was not effective. 

Allegations of sharp practice were raised against the defendant’s solicitor and reference made to their professional duty not to take unfair advantage of third parties.  However the claimant had solicitors acting and the defendant’s solicitor was only acting in the best interest of their clients.

A costly debate

This outcome took two hearings to achieve and it may yet now be subject to further appeal. 

At the first hearing on whether service was effective in March 2018, Master Bowles found that service was effective because the overall purpose of bringing the substance of the claim to the defendant’s attention was achieved. He thought there had been “technical game playing” by the defendant’s solicitor. 

At the second hearing, in July 2018 Judge Hodge disagreed and decided that the rules on service needed to be complied with.

Outcome

The claimant currently has no claim because it is time barred.  They thought they had issued safely enough, albeit at the last minute, in June 2017.  Their solicitors then failed to do the necessary in time.  They are now faced with launching a different claim, for professional negligence against their solicitors for the lost chance of securing damages from Phoenix.  They have been delayed in recovering any damages by at least 13 months (and counting) and have been put to considerable additional litigation expense. 

It could be said that the outcome here is unjust in that a valid claim has been lost due to technicalities, but the court rules are there in black and white and the court will uphold them.  Why the issue and service were left so late, by which time the claim was vulnerable to technical defences, is the real question.  That is likely now to be the topic of lengthy discussion between the claimant and their (former) solicitors. 

For further reading see Phoenix Healthcare Distribution Ltd v Woodward and another [2018].

About the author

Susan Hopcraft Partner

Susan advises on all aspects dispute resolution particularly in the financial services sector. She has extensive insurance, professional negligence and restrictive covenants experience. She deals with claims against solicitors, valuers, surveyors, brokers and accountants, fraud issues, recoveries for lenders and bank mis-selling.