Key takeaways
Start service steps without delay
Early action avoids costly time extensions later.
Document every effort to serve in time
Clear records strengthen applications for extensions.
Court demands good reason for delay
Weak explanations risk refusal and loss of claim.
Nefelia Shipping SA & another -v- Mosaic Fertilizantes Do Brazil Ltda & another (Kona Trader) [2025] EWHC 2941 (Comm)
In a general average claim, the Court has upheld the grant of a second time extension to allow the vessel interests, as claimants, to effect service of proceedings on cargo interests, as defendants, in Brazil.
The case highlights the importance of taking reasonable steps to effect service within the initial period of validity of the claim form, to document all efforts made to do so and to avoid unnecessary delays. In the event that any time extension is subsequently needed, a claimant will be required to justify this and to provide good reason for not effecting service in time.
The background facts
The underlying claim in this case was for general average (GA) arising out of the grounding of the Kona Trader at Paranagua, Brazil, following a main engine failure in March 2018.
The claimants were the shipowners and their P & I Club as assignees. The defendants were the Brazilian cargo owners and their insurers.
The claimants claimed against the defendants in respect of claimed contributions to GA pursuant to (i) a GA bond dated 19 March 2018, as against the first defendant cargo owners, and (ii) a GA guarantee dated 20 March 2018, as against the second defendant insurers. Both the GA bond and guarantee were governed by English law and subject to the exclusive jurisdiction of the English High Court.
The GA adjustment was published on 5 April 2019, pursuant to which the GA adjusters determined that the defendants’ contribution to GA was a total sum of US$892,381.46. That was the principal sum claimed in these proceedings, together with interest.
The proceedings
The claim form was issued on 11 September 2023. In order to effect service of the claim form on the defendants in Brazil, and in light of advice from the Foreign Process Section (FPS) in June 2023 that service would take up to 12 months, the claimants applied for an extension of time for service of the claim form for 15 months (i.e. up to 15 November 2024).
The application was made on the basis that it allowed a reasonable margin for effecting service, while still respecting the reasons for the default validity period of six months and the importance of speedy service.
The order (first extension order) was granted on 22 September 2023. The relevant documents for service in Brazil were lodged with the FPS on 4 October 2023.
On 7 November 2024, the claimants applied without notice under CPR7.6(2) for a further extension of time for service of the claim form to 15 November 2025. This order (second extension order) was granted on paper on 14 November 2024, subject to a liberty to apply to set aside the order.
On 14 April 2025, the claimants obtained an alternative service order, permitting them to effect service by alternative means. On 22 April 2025, the claim form was served on the defendants by the permitted alternative means.
The defendants sought to set aside the second extension order and thereby the extension of time granted in that order. The defendants submitted that if that order was set aside, then the claim form should be set aside, and the Court should decline jurisdiction in respect of the matter.
The defendants’ arguments
A claimant that applies without notice for an extension of time for service of a claim form must, in the supporting evidence, state all the circumstances relied upon and a full explanation as to why the claim has not been served within the default period of validity. That claimant also has a duty of full and frank disclosure of all matters relevant to the application.
The defendants’ key arguments were that: (i) the claimants had not provided the Court with evidence that sufficiently justified the granting of the second extension and no such justification existed; and (ii) the claimants had failed to give proper disclosure when making their without notice application to the Court.
The relevant legal principles
As part of the overriding objective of dealing with cases justly, the Court should identify why the claim form was not served within the validity period i.e. the cause of the delay. As the defendant has the right to expect that any proceedings against it are issued within the statutory period of limitation and are served within the initial period of validity, any departure from the starting point has to be justified.
The reason for the inability to serve within time is a highly material factor. The better the reason, the more likely it is that an extension will be granted. Carelessness or oversight by a claimant (or its solicitors) or waiting for some other development (such as funding) may not amount to good reason. The Court has to apply a calibrated approach in assessing the strength of a claimant’s reasons for why a claim form was not served within the period of its initial validity. The weaker the reason, the more likely the Court will be to refuse the extension of time.
Where there is no good reason for the need for an extension, the Court still retains a discretion to grant an extension of time but is not likely to do so. Additionally, if a limitation defence will or may be prejudiced by the granting of an extension of time, a claimant must show at the very least that they have taken reasonable steps to serve within time.
Finally, the fact that a defendant has had informal notice of the claim is a relevant factor to be considered.
Relevant guidance
Service of proceedings in Brazil is governed by Article 5 of the Hague Convention. At the time the claimants’ solicitors were taking steps to serve the defendants under Article 5, they had limited guidance available to them on the relevant procedure.
Principally, they had specific guidance relating to Brazil provided by the FPS on 23 June 2023. It was noted by the Court that the FPS now publishes on its website a checklist for service pursuant to Article 5 of the Hague Convention, which sets out the steps to be taken to ensure that any request for service complies with the Convention and can be processed and forwarded on a timely basis. The FPS also now publishes a spreadsheet with a specific list of requirements for individual countries with entries as to the specific requirements for Brazil.
It was, however, common ground that neither the checklist nor the spreadsheet had been published prior to early 2025.
The Commercial Court decision
The Court considered the five material periods of delay to decide whether there was good reason for the delay and, if not, whether that delay was causative of the need to extend the period of validity of the claim form beyond November 2024.
The Court acknowledged that some criticism might be made of the claimants or their solicitors in respect of some of the delay. However, looking at the position overall, the Court was satisfied that the evidence established sufficiently good reason to justify the extension of the period of validity of the claim form in the second extension order.
The granting of that order was in accordance with the overriding objective. Among other considerations:
While the amended claim form may not have been served on the defendants within the statutory period of limitation, it was served within the period of initial validity of a claim form issued immediately prior to the expiry of the statutory period of limitation.
The defendants each agreed under the GA guarantee and under the GA bond to irrevocably submit to the exclusive jurisdiction of the High Court of England & Wales.
The claim did not come as a surprise to the defendants. Among other things, there had been “wp” discussions, the GA adjustment had been issued to both the claimants and the defendants and the claimants’ solicitors had sent to the defendants a detailed letter before action. The defendants had also been asked to appoint English solicitors to accept service.
The amended claim form was issued well in advance of the expiry of the limitation period.
It would not have been consistent with the overriding objective to force the claimants to issue a fresh claim form and recommence the process of service.
Even if the defendants had a limitation defence (which the claimants disputed) that would be lost if the second extension order was upheld, the greater prejudice would be to the claimants in losing a prima facie valuable claim.
The Court also found on the evidence that there was no breach of the claimants’ obligation to make full and frank disclosure or any failure to explain the reasons for needing the second extension order.
The defendants’ applications were, therefore, dismissed.
Comment
Service of proceedings out of the jurisdiction can be a lengthy and time-consuming process. That is why a claimant should start taking all the necessary procedural steps as soon as the claim form is issued and leave to serve out (where this is required) has been granted.
Where negotiations between the parties are underway, or a settlement offer has been made and is awaiting a response, it may seem sensible to avoid the expense of progressing the steps necessary to effect service. However, a claimant should be careful not to prejudice its position and may consider asking the defendant to appoint English solicitors to accept service and/or asking the Court to make an order for service by alternative means. A standstill agreement between the parties may also be appropriate.
