Ruling benefits companies serving legal proceedings to debtors living outside UK

Ruling benefits companies serving legal proceedings to debtors living outside UK

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Author: Lauren Lee

Lauren Lee, finance litigation solicitor at Shoosmiths LLP, highlights the outcome of a court case which could benefit companies looking to serve legal proceedings on debtors living outside the UK

Most companies will be familiar with the peculiarities and pitfalls in serving legal proceedings on debtors out of their jurisdiction and time and costs involved can be long-winded and disproportionate.

This issue is prevalent at the moment and Shoosmiths are witnessing an increase in the number of individuals who, following a failed business venture in the UK, move abroad and are often never heard from again. Even where the individual's out-of-jurisdiction address is known, it can take months or even years to serve the proceedings, by which point professional fees have soared and key assets have been dissipated.

Court rules state; where the debtor does not give an address at which he may be served, the address for service will be the debtor's usual or last known residence. Where the debtor is known to reside outside the UK, the proceedings must be served in accordance with the law of the country involved. Depending on where the defendant is located, permission is often required from the court to serve on the individual.

Unfortunately, whether permission is required or not, from this point on the hard work begins. There are numerous treaties, conventions, regulations and agreements between different countries setting out the rules that must be followed to effect valid service, whether it is through personal service, registered post, the judicial system of the country involved or any other specified manner - it is seldom a straightforward process.

The recent decision of Key Homes Bradford Ltd and Others v Patel [2014] EWHC B1(Ch) gives some hope that, in the future, service on directors who reside outside the UK, but have a UK address registered on Companies House under their directorships, can be served much more efficiently.

By way of background to the case, the claimants served the claim form on the defendant - a former director of the claimants - by serving it on two addresses in the UK which were listed on the register of directors. The defendant claimed he was no longer resident in the UK and neither address was his usual or last known residence. He claimed he was currently living in the United Arab Emirates and applied for an order to set aside service of the claim form and declarations that neither of the two addresses were his usual or last known residence. The claimants sought an order for alternative service in accordance with Civil Procedure Rule 6.15(1) and also argued service was valid under section 1140 of the Companies Act 2006 (CA 2006).

Section 1140 permits service of a document, whatever the purpose, on a director at any address for the time being shown as a current address in relation to that person in the part of the register available for public inspection, and it is the first time that the High Court has considered the application of section 1140 of the CA 2006 as an alternative procedure to the Civil Procedure Rules for valid service on a director.

It was held that the defendant had been validly served with the claim form at the address listed on the register of directors pursuant to section 1140 of the CA 2006, and the key points noted by the master were as follows:
Section 1140 is entirely separate from the provisions for service in the Civil Procedure Rules and operates as a parallel code.

It was not deemed prima facie unfair that a director of an English company who resides abroad, but gives an address for service in England, should be served at that address because a choice, or a deemed choice, has been made. If a director who resides outside the jurisdiction does not want to be served in England, then he should have provided an address for service abroad.

This case should provide practitioners and clients alike with the comfort that, where a director resides outside the jurisdiction, but his address for service on the register is in the UK, service of proceedings will now be considerably easier and claimants will be entitled to serve on the English address listed on the register, thereby completely avoiding the provisions for service out of the jurisdiction as set out in the Civil Procedure Rules.

About the Author

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Lauren Lee

Associate

03700 86 5689

Lauren is a banking litigation solicitor who specialises in invoice discounting and factoring disputes, receivables finance litigation and recoveries, and asset finance disputes. Lauren acts on behalf of major clearing banks, asset based lenders and insolvency practitioners in both the County Courts and High Courts.

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