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"No one to blame but yourself" – Service of proceedings on company directors

In Key Homes Bradford Ltd and Others v Patel [2014] EWHC B1(Ch) the Court provided new guidance about where proceedings can be served on company directors and company secretaries. The judgment has important implications for prospective claimants in litigation and for company officers, particularly those who are resident outside England and Wales.

 

Rules governing the service of a claim form

Under the Civil Procedure Rules ("CPR"), where the defendant is an individual who has not given the claimant an address at which he may be served, the claim form must be served at the defendant's "usual or last known residence" (CPR 6.9). There has been a string of cases about the meaning of these terms and it is often hard for a claimant to be sure about where to serve proceedings, particularly if the defendant owns several properties or if he spends some of his time abroad. Claimants therefore face the risk that a defendant will argue that service was not valid because the claimant picked the wrong address. This can be especially problematic for a claimant if there is a limitation deadline looming.

If the defendant is resident outside England and Wales a claimant is sometimes also required to make an application to the Court for permission to serve the claim form outside the jurisdiction. This can be a relatively straightforward process but even in straightforward cases it is inevitably more costly and time-consuming than simply serving the claim form on an address in England and Wales.

The Companies Act 2006 ("the Act") sets out an alternative set of service rules. It provides that a document may be served on a director or company secretary by leaving it at or sending it by post to the director or secretary's "registered address" (s.1140(1)). This is defined as any address shown as a current address in relation to that person in the publicly available register of directors. Importantly, the Act provides that these rules apply "whatever the purpose of the document in question". They therefore apply to proceedings brought against a director in his personal capacity, not just to proceedings linked to the company of which he is a director.

If claimants in civil proceedings can rely on this provision in the Act it will be possible to avoid some of the uncertainty surrounding the service rules in the CPR. However, until the Key Homes judgment a claimant's ability to do so had not been tested.

 

Key Homes - Background

The Claimants served the claim form on the Defendant by delivering it by hand to two addresses in England which he had listed as addresses for service on the register of directors. The Defendant claimed that effective service had not taken place because he was no longer resident in England and Wales and neither of the addresses to which the claim form had been delivered was his usual or last known residence. 

The Claimants raised what was agreed to be a novel point. They argued that they were entitled to rely on s.1140 of the Act by serving the claim form at the address listed for the defendant on the register of directors and that valid service had been effected by virtue of that section alone, regardless of the provisions of the CPR.

 

Judgment

Master Marsh held that the claim form had been validly served under s.1140 of the 2006 Act. He noted that s.1140 of the Act provides a valid basis for serving documents on a director which is entirely separate and runs parallel to the provisions for service in the CPR.

The Master found that nothing in s.1140 of the Act requires a director to be present or resident in England at the time of service for that service to be valid.  If a director provides an address for service that is within the jurisdiction then he may be served at that address whether or not he is normally resident outside the jurisdiction.

The Master considered whether it was "unfair" to allow service to be effected at an address in England and Wales on a director of an English company who resides abroad. However, he noted that a director who is resident abroad is free to provide Companies House with an address outside the jurisdiction. In those circumstances a claimant would have to comply with the usual rules governing service of a claim form out of the jurisdiction. Part of Parliament's rationale for introducing s.1140 was to encourage directors to ensure that they keep their address for service on the register up to date. If a director moves abroad and fails to change his address for service the Master said that "he has no one to blame but himself" if proceedings are served at that address.

 

Comment

Key Homes appears to have been the first time the Court has considered the interaction between the alternative service regimes set out in the CPR and the Act. It confirms that a claimant is entitled to serve proceedings on a director or company secretary at an address for service in England and Wales which they have registered with Companies House, even if they have moved outside the jurisdiction. This rule applies even when the claim form being served relates to a claim against the director or company secretary in their personal capacity which has nothing to do with the company of which they are an officer.

This decision is clearly helpful for claimants who may be able to avoid the uncertainty of trying to establish a defendant's usual or last known residence and the need to apply for permission to serve out of the jurisdiction.

The case is also a useful reminder for directors and company secretaries of the importance of keeping their details registered at Companies House up to date. If they move abroad but fail to update their address for service they leave themselves open to being served with proceedings in England. They will have no one to blame but themselves.

The full judgment is available here: http://www.bailii.org/ew/cases/EWHC/Ch/2014/B1.pdf

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