Does service of a bankruptcy petition need the personal touch? (Morby v Gate Gourmet Luxembourg IV Sarl and another)

Does service of a bankruptcy petition need the personal touch? (Morby v Gate Gourmet Luxembourg IV Sarl and another)

What are the requirements as to service of a bankruptcy petition? Does the petition have to physically touch the debtor to constitute personal service? Steven Thompson QC, a barrister at XXIV Old Buildings, who represented the respondent, reviews the decision in the Morby v Gate Gourmet appeal.

Original news

Morby v Gate Gourmet Luxembourg IV Sarl and another [2016] EWHC 74 (Ch), [2016] All ER (D) 157 (Jan)

The Chancery Division, in dismissing the claimant's appeal against the grant of a bankruptcy order, held, among other things, that the registrar had been entitled to find that the claimant had been personally served with the petition of bankruptcy, as required by rule 6.14 of the Insolvency Rules 1986, SI 1986/1925 (IR 1986) and as articulated in authority, notwithstanding that the process server had, in the presence of the claimant, handed it to a third party who had accompanied the claimant and who had thrown it in the bin. The claimant had been aware that the document was a petition seeking a bankruptcy order against him and the registrar had not made erroneous or unjustified findings of fact.

What was the background to the appeal briefly?

Mr Morby was adjudged bankrupt. He appealed on the basis that he had not been personally served with the petition—his evidence was that the process server passed the petition to a friend of Mr Morby, who read it, attempted to return it to the process server and then put it in the bin. At no point in time did the petition come into contact with Mr Morby. Mr Morby had invited his friend to an appointment specifically made with the process server for the purpose of being served with the petition and the two of them were together when the process server handed the petition to the friend.

The process server’s evidence was that he had personally handed the petition to Mr Morby.

For further reading on the first instance decision (which deals with issues in addition to those appealed), see our blog post: Bankruptcy petitions—are you being served?

What were the legal issues that the deputy judge had to decide in this appeal?

The deputy judge was faced with three issues:

  • whether the Registrar making the bankruptcy order had made a number of findings of fact in relation to what happened at the meeting without having resolved the conflict as to the evidence (the first issue)
  • whether Mr Morby had been personally served with the bankruptcy petition in the absence of him having physically touched it (the second issue)
  • whether, if personal service had not been effected, IR 1986, r 7.55 could be deployed to waive any defect or irregularity in that personal service (the third issue)

What did the deputy judge decide, and why?

The first issue

The deputy judge agreed that the Registrar’s findings were either based on Mr Morby’s evidence, or were common sense inferences. There was no need for the Registrar to (and he in fact did not) resolve the conflict as to the evidence.

The second issue

The deputy judge considered the case law applicable to service of writs and claim forms under the CPR which is to the effect that personal service requires that a document be handed to the person to be served or, if he will not accept it, that he be told what the document contains and the document be left with or near him (Kenneth Allison Ltd v AE Limehouse & Co [1992] 2 AC 105, [1991] 4 All ER 500).

In the instant case, on the assumed facts, the document was not handed to the person to be served. But the debtor knew that the document in question was a bankruptcy petition in his own name—had it been left with or near him? The deputy judge decided it had been. The fact that it was left in the hands of another person rather than on a table or the floor did not mean that the petition had not been left with the debtor. It could even be said that the petition was left with him given the obvious inference that the debtor could have had the document at any time just by asking his friend for it.

The third issue

Given the deputy judge’s decision on the second issue, it was unnecessary for him to decide the third issue. However, obiter, he added that he considered the question of service one of pure fact and not one which could be properly characterised as an 'irregularity' so as to be susceptible of cure by IR 1986, r 7.55. But if it was then it could be so cured as it had caused no injustice to the debtor.

The appeal was accordingly dismissed.

To what extent is the judgment helpful in clarifying the law in this area?

This case makes clear that the law on personal service is the same as for personal service of other originating processes, as set down in Kenneth Allison Ltd v AE Limehouse & Co, and not (as submitted by Mr Morby) somehow stricter. The question of actual service is one of fact so, if the court is not able to resolve the dispute on assumed facts, presumably it will have to receive live evidence. If service is contested, practitioners should consider whether to seek an order for the attendance of the debtor to be cross-examined on the final hearing of the petition.

What practical lessons can those advising take away from this case?

This is a pragmatic decision by the court focussing on what the purpose is of service of proceedings. While service of a bankruptcy petition will always be effective where the petition physically touches the debtor (and service by handing the petition to the debtor should always be attempted first), the requirement for personal service goes beyond mere touching and includes the debtor being told what the petition contains and the petition being left with or near him.

Where there is some doubt as to whether personal service has been effected, the petitioner may decide to attempt to re-serve the petition or, where necessary, apply to the court for an order for substituted service under IR 1986, r 6.14(2).

Interviewed by Stephen Leslie.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

Further Reading

If you are a LexisPSL subscriber, click the link below for further information:

How to effect service of the bankruptcy petition on the debtor and what happens if service cannot be effected

What you can do if you cannot effect service of insolvency proceedings on the respondent

Checklist: when is permission needed to serve out of the jurisdiction and how to obtain permission

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First published on LexisPSL Restructuring and Insolvency

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.