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11-11-2020

HH Aluminium & Building Products Ltd & Anor v Bell & Anor (Joint Trustees In Bankruptcy of Ide) [2020] EWCA Civ 1469

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“These conjoined appeals raise two points of general importance as to procedural aspects of applications in insolvency proceedings, and one point of no general significance [so is not dealt with in this alert.]. They arise out of the bankruptcy of Mrs Nicola Jane Ide who was made bankrupt on her own petition on 6 December 2012. The respondents in this Court, Ms Sarah Bell and Mr Paul Williams, are the current joint trustees in bankruptcy of Mrs Ide…and brought an application in the County Court against a number of respondents, including the present appellants, HH Aluminium & Building Products Ltd…and Mr Peter House, who were 4th and 5th respondents to that application. Mr House is a director of HH.”

The appeal was against a judgment of HHJ Matthews, Bell and Anor. v Ide and Ors. [2020] EWHC 230 (Ch), reported in our alert of 17 April 2020 (When are 14 days 14 days?).

The first issue before the court was whether it was possible for the County Court to transfer part of (as opposed to the whole of) insolvency proceedings to the High Court. HHJ Matthews decided that the answer was yes and transferred an application made by HH and Mr House to strike out or grant summary judgment on the trustees’ application against them. The Court of Appeal upheld Judge Matthews’s decision. Noting that the language of the relevant rule itself (r. 12.30(2) Insolvency (England and Wales) Rules 2016) did not provide a clear answer, the Court of Appeal held that it was to be interpreted widely and so as to make practical sense. That meant interpreting it so as to enable the county court to transfer a particular application in bankruptcy without having to transfer the whole proceedings. That was consistent with the view reached in Hall v Van Der Heiden [2010] EWHC 537 (TCC) and with The Practice Direction - Insolvency Proceedings 2018  which envisaged that a transfer might be made either of an “application within existing proceedings” or of “the entirety of those insolvency proceedings”.

The second issue was whether the principles applicable to an extension of time for service of an insolvency application were the same as those applicable to the extension of time for service of a claim form under the CPR. In the case of a claim form that has been issued, but not served within the limitation period an extension of time for service will not be given unless there are exceptional circumstances, since the effect of doing so is to deprive the defendant of a limitation defence. That was the approach taken in relation to an application in insolvency proceedings in Re Kelcrown Homes Ltd [2017] EWHC 537 (Ch); but HHJ Matthews declined to follow Kelcrown, holding instead that vacating and re-fixing the first hearing of the application had the practical effect of extending time for service so that there was no need to have regard to limitation in the same way as there would have been under the CPR. It was on this issue that the Court of Appeal disagreed with the judge below.

The court noted that there were two possible meanings of the phrase  “the date fixed for the hearing” in r.12.9(3) Insolvency (England and Wales) Rules 2016: it could be the date originally fixed for the hearing and endorsed by the court on the application notice; or it could be the date ultimately fixed for the hearing. Nugee LJ took the view that the difference between them had to be determined by reference to the structure of the Rules and the practical consequences. Part 12 of the Rules dealt with Court Procedure and Practice. It was divided into chapters which, read chronologically, began with an applicant filing an  application under r.12.7, the court fixing a venue under r.12.8, and the applicant then serving the application,     Having regard to that structure, the importance which the law attaches to service of originating process and the need to ensure the proper operation of limitation periods, Nugee LJ concluded,

“These…seem to me to point to an interpretation of the 2016 rules under which, once the applicant has issued an application, the applicant should notify the respondent of that sooner rather than later. That to my mind supports the interpretation of rule 12.9(3) under which the date fixed for the hearing is the date endorsed on the sealed copy of the application notice as part of the venue originally fixed by the Court under rule 12.8, rather than the date that might ultimately be the first hearing date.”

He accepted there could be difficulty if the hearing date initially fixed was altered but also concluded that, “So far as practical considerations are concerned, I think we should, if other things are equal, favour an interpretation that leads to earlier service of applications rather than later. In the usual course that too would point to rule 12.9(3) referring to the date originally fixed for the hearing […]”

Dealing with the limitation implications, he expressed the view that the principles applicable under the CPR to an application to extend the time for service of a claim form where the limitation period had expired also applied to an extension of time for service of an insolvency application. If the proceedings were brought within the limitation period but the limitation period had expired by the time the claimant or applicant applied for an extension, the effect of granting one would be to deprive the defendant or respondent of a limitation defence. The same principles ought to be applicable in both general claim form and insolvency proceedings. He concluded:

“For these reasons I respectfully disagree with the conclusion reached by HHJ Matthews. In my judgment rule 12.9(3) requires the applicant to serve the application 14 days before the date initially fixed for its hearing and endorsed on the application notice. In the present case that was 9 July 2019, and the application notice should have been served by 24 June 2019, which it was not.”

The case marks an increasing tendency to align insolvency processes with those governed by the CPR. The message is obvious: avoid issuing at the last minute and serve promptly.

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