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Daniel Lewis, barrister and counsel for the respondent, at 3 Hare Court sums up the court’s approach to strike out an insolvency claim on the basis of period of validity.
Dumville and another (as joint liquidators of HS Works Ltd) v Irwin of Irwin & Co (trading as Financial Dynamics Consultants Ltd)  EWHC 1405 (Ch),  All ER (D) 169 (Jun)
A significant body of case law has developed around CPR 6 and CPR 7 and the technicalities as to service and validity of claim forms, which must be served within four months of issue. There is a dearth of similar authority relating to insolvency proceedings and, in particular, to what extent the CPR provisions relating to claim forms apply to the application notices by which they are initiated.
This case is significant in considering the time limits which might render insolvency proceedings invalid and how the CPR should be applied to insolvency proceedings more generally. The decision relating to how a jurisdictional challenge should be approached in insolvency proceedings is relevant not just to the question of the period of validity of the application notice, but also to the more common question of disputing territorial jurisdiction.
The claim was for breach of duty against the former administrator of the company (now in liquidation), although the judgment is of application to any claim commenced by issue of an insolvency application. The insolvency application was issued but was not served as the parties were still involved in pre-action correspondence. The first return date for the application was vacated at the applicant’s request, as was the second. The application notice was then served eight months after issue. No point was taken by the respondent until shortly before trial, when he applied to strike out the claim on the basis that the claim form was served out of time. By this time the respondent had participated in the proceedings and had complied with court directions for the filing of statements of case, provision of disclosure and the exchange of witness and expert evidence. In view of the imminent trial, the strike out application was expedited. In support of the application, the respondent relied upon Re Baillies Ltd (in liquidation)  EWHC 285 (Ch) where it was held that the period of validity for a claim form under the CPR applied to insolvency applications ‘by analogy’.
Declining to follow Re Baillies, the court found that there was a difference in commencement procedures between the CPR and the Insolvency (England and Wales) Rules 2016, SI 2016/1024 (IR 2016). The IR 2016 do not provide that an insolvency application lapses if it is not served. Where there has been delays in service of the application notice, the correct procedure for a respondent to follow is to apply to strike out the claim. The grounds for such an application are not whether the proceedings were served outside a four (or if foreign service, six) month period, but whether ‘there can be said to be an irremediable substantial injustice’ if the claim proceeds. The period of validity of four or six months for claim forms was only relevant to the extent that the insolvency court would be unlikely to find an abuse of process when those periods had not passed. The court found that the respondent had not been caused substantial injustice because such prejudice (he suffered from the loss of a limitation defence) was attributable to his own delay in bringing the strike out application. Perhaps, unsurprisingly, the court also decided that the substantial delay in bringing the application, during which time the proceedings were defended on the merits, amounted to a submission to the court’s jurisdiction.
Interviewed by Stephanie Boyer.
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
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