Judgment had been handed down by Mr Justice Foxton in Bank of America Europe DAC v Citta Metropolitana di Milano [2022] EWHC 1544 (Comm) on a series of related applications which give important guidance on the operation of the “automatic stay” provisions in CPR 15.11.

The proceedings arose from the entry by Merrill Lynch (now Bank of America) into interest rate swaps with the City of Milan in 2002. Following a complaint by Milan and a threat to issue proceedings in Italy, two Merrill Lynch entities (“ML”) issued proceedings (in mid-2015 and early 2016) in the English Courts seeking negative declaratory relief. Having been served, Milan did not file either an Acknowledgement of Service (as required by Part 58) or a Defence. In circumstances where Milan did not in fact issue proceedings in Italy, and continued to make payments under the relevant transactions, ML did not apply for either default or summary judgment, with the result that, after 6 months both sets of proceedings were subject to the ‘automatic’ stay under CPR 15.11. Several years later, in April 2021, Milan commenced proceedings against ML in the Milan Civil Court, which in turn led ML to apply to lift the automatic stays. In response, Milan further applied (in the event that the application to lift the stays were successful) in one of the proceedings for relief from sanctions in order to file an Acknowledgement of Service indicating an intention to dispute jurisdiction.

In his judgment, Mr Justice Foxton accepted Milan’s arguments that (relying on a series of older cases concerning transitional arrangements for the entry into of the CPR) an application to lift a stay was one for relief from sanctions. In doing so he departed from a number of recent first instance decisions where the matter had been (briefly) considered. Although the Judge accepted that no specific rule in the CPR required a party to apply for default judgment or summary judgment, he found that a failure to do so (or to apply for a case management or other stay, or other form of directions) could amount to a breach of a party’s obligation to assist the Court in furthering the Overriding Objective of dealing with cases expeditiously. However, despite the length of time in which the stays had been in operation (more than 5 years), he granted ML relief, noting the unusual context, which included the fact that the length of the stays had been a consequence of the time which had elapsed before Milan decided to “come off the fence” and commence proceedings in Italy. He also rejected Milan’s arguments that ML’s conduct had involved an abuse of process in the form of “warehousing” of claims.  Having decided to lift the stays, the Judge also granted Milan’s application to file a late Acknowledgement of Service in one of the proceedings, thereby opening the way for Milan’s proposed jurisdiction challenge to proceed.

Richard Handyside QCAdam Sher and Matthew Hoyle (of One Essex Court), instructed by Freshfields Bruckhaus Deringer LLP acted for ML. Craig Ulyatt, instructed by Osborne Clarke LLP, acted for Milan. 

The judgment is available here.