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The power of irrevocable process agent clauses

Serving proceedings on defendants outside the UK can be an expensive, complicated and time consuming process. It can involve instructing local lawyers to advise on and serve in accordance with local law; possibly require translation of documents into an official language of the country concerned; and, because of the relevant court rules, mean defendants have a longer time to respond to the proceedings.

It is therefore standard practice in most commercial contracts, particularly finance agreements, to include a process agent clause requiring overseas parties to nominate an address for service within the jurisdiction. The boilerplate clause should be uncontroversial, but the recent case of Aquila WSA Aviation Opportunities II Ltd v Onur Air Tasimacilik shows that, whilst issues can arise, the English Court is unlikely to be sympathetic to a defendant who unreasonably tries to evade service.

Facts

Aquila, an Irish finance company, entered into an aircraft lease agreement with Onur Air, a Turkish airline. The lease had a non-exclusive jurisdiction clause in favour of England and was governed by English law. It also contained a process agent clause whereby Onur Air was to irrevocably appoint Corporation Service Company (CSC) as its English based agent for service of proceedings. The clause also stipulated that, if the appointment of the agent was terminated, Onur Air had to appoint a replacement as soon as practicable.

Prior to completion, Onur Air provided a letter confirming the appointment of Corporation Service Company (UK) Limited (CSCUL) as its process agent. This letter stated that the appointment was effective for one year.

Some 15 months later, Aquila attempted to serve proceedings on the agent named in the lease (CSC) at the address given. In fact, CSC did not exist as an entity and the address was a building site. Aquila then sought to effect service on Corporation Services Company Limited (CSCL) at its registered address, relying on the fact that the individual who accepted delivery of the documents confirmed he was able to accept service on behalf of Onur Air.

Finally, it is worth noting that Aquila also sent copies of the proceedings to Onur Air's address in Turkey "for information only". Onur Air also accepted that the proceedings had come to their attention.

Onur Air brought an application disputing service on the basis that the appointment of the agent had lapsed and/or service was affected on the wrong entity and at an address not named in the documents.

Lapse of appointment

The Court ruled that the irrevocable nature of the appointment could not be altered by the appointing party unilaterally. Service could therefore be affected on an appointed agent even if they no longer had any contractual arrangement with the appointee. 

The intention of the irrevocable appointment was underscored by provision for a replacement agent, indicating the parties' intention for there to be a mechanism to affect service within the jurisdiction even if the original agent was no longer able to act. An arrangement (that the appointment was only for a year) between Onur Air and CSCUL, to which Aquila was not a party, could not affect matters as between Onur Air and Aquila.

The Court stated that "it is a matter for [Onur Air] if the agent in fact ceases to act for them or moves offices or for some other reason is no longer squarely within the terms of the appointment letter", noting that its argument as to the expiry of the appointment relied on a breach of contract by Onur Air to appoint a replacement agent.

Incorrect process agent / address

Whilst the Court accepted that the proceedings had not been served with "all the perfection and form which is technically required", it ordered that the proceedings should be deemed as validly served (as opposed to requiring Aquila to have a second go or making an order for substituted service).

Aquila had demonstrated good reasons as to why it took the steps it did (this was a case of a genuine attempt to serve) and it was noted that CSCL and CSCUL shared a registered address and were part of the same corporate group. In particular, the Court gave weight to the fact that Onur Air had learnt of the proceedings through the first, technically failed, attempted service on CSCL (as well as the informal means of being sent a copy at its address in Turkey). It had filed an Acknowledgement of Service less than two weeks after service and so it could not be said that Onur Air had been prejudiced in any way. 

Practical Implications

This case serves to underline the power of irrevocable clauses in agreements. It is unsurprising that the Courts will not allow someone with no control over an agent's appointment to suffer at the hands of a defaulting party, with the emphasis firmly on the appointing party to ensure its arrangements are kept up to date. It also highlights the need to ensure the process agent clause is drafted to include all appropriate provisions, including a mechanism for replacement agents to be nominated.   

It also again demonstrates that the English Court will be prepared to take a pragmatic approach to technical deficiencies in procedure, preferring substance over form. If there is any uncertainty as to where service should be affected, the sensible approach is to send copies of documents to all known service addresses, if only for information purposes, to increase the chance of the Court being satisfied, in the event of a challenge to service, that proceedings have been brought to a defendant's attention.

TLT's Capabilities

TLT has extensive experience in negotiating, and subsequently enforcing, finance agreements involving international parties.  For more information, please contact Peter Carney in relation to negotiating finance agreements and Paul Gair or Nick Curling in relation to disputes and enforcement.  

Contributor: Shibani Kapur

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at July 2017. Specific advice should be sought for specific cases. For more information see our terms & conditions.

 

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