Time limits to serve Insolvency Act 1986 proceedings (Bell & Anor v Ide & Ors)

Time limits to serve Insolvency Act 1986 proceedings (Bell & Anor v Ide & Ors)

This case deals with the interaction between the CPR and the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024, when dealing with service of proceedings. In short, it decides that as long as proceedings are issued within the limitation period and served more than 14 days before the first hearing (whenever that takes place), they are validly served, even if service occurs more than four months after issue. The court held that the judgments in Re Kelcrown Homes Limited and Re HS Works Limited were wrongly decided and did not follow them. Permission has been given for an appeal to the Court of Appeal. Written by Steven Fennell, barrister, Exchange Chambers, and Karen Unsworth, director, Hewlett Swanson.

Bell & Anor v Ide & Ors [2020] EWHC 230 (Ch) (12 February 2020)

What are the practical implications of this case?

HHJ Paul Matthews’ decision confirms that where proceedings are issued within the limitation period and served at least 14 days before the first effective hearing, the court will not create a limitation defence where none would otherwise exist.

The court still has a discretion to refuse to vary the date of the first hearing and is unlikely to allow unreasonably long delays, or any delay at all where there is no good reason for it.

If the decision is upheld on appeal, it will mean that an applicant who issues within the limitation period will not face the risk of a limitation defence where the first hearing is adjourned for reasonable and proper case management reasons.

What was the background?

The applicants issued proceedings under the Insolvency Act 1986 (IA 1986) in January 2019, shortly before the sixth anniversary of the facts giving rise to the claim. For the purposes of the hearing, it was accepted that there was an arguable case that the primary limitation period was six years.

The procedure for claims issued under IA 1986 is governed by IR 2016, SI 2016/1024, which incorporates part of the CPR but not all of it. In particular:

  • IA 1986 claims are started by an application notice, not a claim form  
  • there will be an initial directions hearing at which the court will determine the next steps, usually a choice between pleading or service of witness evidence   
  • IR 2016, SI 2016/1024, r 12.9 requires the application and evidence to be served at least 14 days before the hearing SI 2016/1024, r 12.9IR 2016,   
  • CPR 7.5 (which requires service of a claim form within four or six months) does not apply

The court listed the first hearing for a date in July 2019. All but one of the respondents was in England. The applicants did not serve the application notice on all the respondents immediately. They applied successfully for permission to serve the proceedings on the respondent who was outside the jurisdiction, and to adjourn the first hearing to a date after service on him.

The first hearing was relisted for a date in October 2019 and all the respondents were duly served more than 14 days in advance.

Two respondents applied to strike out the application on the basis that:

  • IR 2016, SI 2016/1024, r 12.9 requires the applicant to serve the respondents with notice of the date initially fixed by the court, even if that hearing is vacated and relisted, in accordance with the decision in Re HS Works Limited [2018] EWHC 1045 (Ch)

  • the first hearing should not have been adjourned, because the court should approach an application to extend time for service of IA 1986 proceedings in the same way as it approaches an application to extend time under the CPR, following Re Kelcrown Homes Limited [2017] EWHC 537 (Ch)

What did the court decide?

HHJ Paul Matthews (sitting as a judge of the High Court) decided that IR 2016, SI 2016/1024, r 12.9 requires a respondent to be served at least 14 days before the effective hearing. If the court changes the date of the first hearing, the proceedings have to be served at least 14 days before the hearing that actually goes ahead. IR 2016, SI 2016/1024, r 12.9 is a procedural rule whose purpose is to ensure that the respondent has at least 14 days to prepare for the first hearing.

Deputy Insolvency and Companies Court Judge Prentis (as he then was) reached the opposite conclusion in Re HS Works Limited [2018] EWHC 1045 (Ch), deciding that IR 2016, SI 2016/1024, r 12.9 requires an applicant to serve the application notice at least 14 days before the date initially fixed by the court, even if that date is varied and the hearing takes place on a different date. HHJ Paul Matthews decided that this analysis was wrong and that the proceedings had been served on time.

The judge went on to consider what the position would have been if Re HS Works Limited was correct. The point in question was whether the district judge should have adjourned the first hearing and extended time for service to the later hearing.

In Re Kelcrown Homes Limited, the High Court decided that time for service should not be extended in that situation unless the case is one where time for service of a claim form would have been extended under CPR 7.6. To do otherwise would be to deprive the respondent of a potential limitation defence.

HHJ Paul Matthews decided that Kelcrown was wrongly decided. If a CPR Part 7 claim form is not served within the relevant service period, it becomes a nullity. Extending the time for service creates the potential loss of a limitation defence. An IA 1986 application which is not served in time does not become a nullity. There is no potential loss of a limitation defence if time for service is extended.

The respondents were given permission to appeal to the Court of Appeal to allow it to decide between the competing views in the High Court.

Case details

  • Court: High Court, Business and Property Courts  
  • Judge: HHJ Paul Matthews  
  • Date of judgment: 12 February 2020

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About the author:

Zahra started working as a paralegal at Lexis Nexis in Banking and Insolvency teams in April 2019. Zahra graduated with a 2.1 honours in a BA French and Spanish, completed the GDL at BPP University and is seeking some experience before commencing the LPC. She has undertaken voluntary work for law firms in London, Argentina and Colombia.