Factual background
Procedural background
Service pursuant to Companies Act
Conflicts of law
Judgment
Usual or last known residence
Alternative service
Comment
In what is believed to be the first decision on the issue, the High Court has decided(1) that a claimant may serve an individual defendant who is a director of a UK company at any address being shown as a current address for that person in the part of the Companies House register available for public inspection, despite the director claiming to be resident outside the jurisdiction. The court held that this service method operates as a parallel code to the Civil Procedure Rules (CPR).
The claimants were special purpose vehicles set up to attract investment for building projects. Until he resigned on April 5 2013, the defendant was the sole director of each of the claimants. The investment scheme he developed involved attracting a large number of investors, who each invested with a view to receiving rental income after the deduction of management expenses. The amounts invested exceeded £53 million.
On April 5 2013 Melior Development Management Limited and the defendant entered into a share purchase agreement, pursuant to which Melior acquired the entire issued share capital of each of the claimants and the defendant agreed to resign his directorships.
After entering into the share purchase agreement, Melior discovered that the defendant had diverted a substantial proportion of the investment funds, amounting to at least £20 million. The claimants sought an account from the defendant of the investment moneys, delivery up of books and records and ancillary relief. There was urgency in pursuing the claim, owing to the parlous financial position of the claimants.
On August 16 2013 the claimants issued proceedings against the defendant. The English solicitors acting for the claimants did not have instructions to accept service of proceedings. Accordingly, the claimants served the defendant on September 13 2013 by delivering the proceedings to two addresses:
- 869 Romford Road, London E12 5JY (a residential address); and
- 12 Town Quay Wharf, Abbey Road, Barking IB11 7BZ (a business address).
The defendant disputed that effective service on him had taken place and applied for a declaration that the addresses were not his usual or last known residence (CPR Part 6.9).
Further, the defendant sought to argue that Section 1140 of the Companies Act 2006 could not be used to circumvent the CPR, which the defendant contended required the claimants to serve him outside the jurisdiction.
Service pursuant to Companies Act
The salient provisions of Section 1140 of the act state as follows:
"(1) A document may be served on a person to whom this section applies by leaving it at, or sending it by post to, the person's registered address…
(2) This section applies to —
(a) a director or secretary of a company…
(3) This section applies whatever the purpose of the document in question.
It is not restricted to service for purposes arising out of or in connection with the appointment or position mentioned in subsection (2) or in connection with the company concerned.
(4) For the purposes of this section a person's 'registered address' means 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…
(5) If notice of a change of that address is given to the registrar, a person may validly serve a document at the address previously registered until the end of the period of 14 days beginning with the date on which notice of the change is registered…
(6) Service may not be effected by virtue of this section at an address —
(a) if notice has been registered of the termination of the appointment in relation to which the address was registered and the address is not a registered address of the person concerned in relation to any other appointment…
(8) Nothing in this section shall be read as affecting any enactment or rule of law under which permission is required for service out of the jurisdiction."
The defendant argued that Section 1140, as a whole, had to be interpreted in light of Section 1140(8) and the general rule of conflicts law – that is, that a person may not be served at a time when he or she is not resident within the jurisdiction, unless that absence is temporary. It should be noted that Section 1140(8) of the act clearly limits the scope of Section 1140 overall.
However, the claimants successfully argued that they were entitled to rely on Section 1140 of the act, and that by virtue of that section alone – disregarding the CPR provisions – service had been effected. The claimants pointed to the fact that at the time when service was effected, the defendant held several directorships in connection with which he used the London and Barking addresses.
In the judgment, the court considered whether there was an underlying conflict of law rule that a party may not be served while out of the jurisdiction unless that absence is temporary.
The defendant argued that the effect of Section 1140 is that it does not abrogate what was described as the general rule of conflicts law – that is, that a person may not be served at a time when he or she is not resident within the jurisdiction unless that absence is temporary.
The Court of Appeal has considered this issue in two cases which appear to express irreconcilable views. In City & Country Properties Limited v Kamali(2) the claim form was served on the defendant at his place of business while he was abroad. All three members of the Court of Appeal held that the rule had no application to service of proceedings under CPR 6.2 to 6.5.
In SSL International Plc v TTK LIG Limited(3) a differently constituted Court of Appeal reached the opposite conclusion and Kamali was distinguished. The facts in SSL International were markedly different from those in Kamali. SSL International concerned service on a company, rather than an individual, and the issue before the court concerned the proper construction of CPR 6.5(3)(b).
In the present case, the court found that SSL International related only to CPR 6.5(3)(b), concerning service of a claim form on a company. The present case, and Kamali, related to service on an individual. The master hearing the case therefore considered himself bound by the decision of the Court of Appeal in Kamali. He found that nothing in Section 1140 suggested that its provisions are limited such as to prevent service on a director who is not resident within the jurisdiction.
The master stated that:
"section 1140 is, in my judgment, drafted in clear and unambiguous language. Subsection (3) is explicit that the section applies whatever the purpose of the document in question and the section is not restricted to service for purposes arising out of or in connection with the directorship or in connection with the company to which the register relates. On the face of the section, it provides a method by which a company director may be served with any document, including a claim form, at the registered address. There are however limiting words in subsection (8) that require further examination."
A director of an English company who is resident abroad is at liberty to specify an address (business or residential) that is outside the jurisdiction for the purposes of the public register held by Companies House. In this case, the defendant was at liberty to specify that his service address was in the United Arab Emirates, rather than the London and Barking addresses. He did not do so.
The court found that the effect of Section 1140(8) is only to prevent Section 1140 from permitting service of proceedings on a director who has provided a service address outside the United Kingdom. In such a case, it is necessary to comply with CPR Part 6 and to obtain permission to serve out of the jurisdiction.
This decision will assist claimants where a director has moved to reside outside the jurisdiction, but whose address for service on the register remains an English address. Claimants will be entitled to serve on the English address listed on the register and avoid the need to obtain permission to serve outside the jurisdiction and the delays that entails.
On the basis of the above, the court therefore concluded that service was properly effected on the defendant on September 13 2013 by service of the claim form, particulars of claim and response pack at both the London and Barking addresses.
Having reached this conclusion, it was strictly unnecessary for the court to consider the remaining matters relating to "usual or last known residences", but nevertheless the master's judgment did provide some useful additional guidance to litigators.
Obiter, the master dealt with the other arguments deployed on the claimants' behalf. Had service under Section 1140 of the act not taken place, the question arose as to whether service was effected under CPR 6.9(2) by serving the defendant at his usual or last known residence. The delivery of documents to the Barking address could not have amounted to service within that provision, as it was found not to be a residential address (although this was not known by the claimants at the time).
Usual residence
CPR 6.9(2) was considered by the Court of Appeal in Relfo Ltd v Varsani:(4)
"the test was whether the defendant resided there in the settled pattern of his life and it was not a matter of merely comparing the duration or period of occupation, taking little account of the nature or quality of his use of the premises and ignoring that the premises were occupied permanently by the defendant's family."
Last known residence
This test raises different issues and the onus was on the claimants to establish that London was the defendant's last known address to them as at the date of service.
The master considered that the claimants had the better argument as to their state of knowledge about the defendant's residence. The defendant did not tell the claimants that he had given up being usually resident at London and maintained his connection there. Even though it had, in fact, ceased to be his usual residence, it was, as far as the claimants were concerned, his last known address because such knowledge as they had acquired for believing or knowing otherwise was inadequate to displace the knowledge that the defendant had provided to them.
The master concluded that London was the defendant's last known residence (or at least one of his last known residences) for the purposes of CPR 6.9(2) at the date on which the claim form was delivered there, and service was thus effective (if he was not served under the Companies Act).
The claimants also applied under CPR 6.15(1) and (2) either to permit service by an alternative method (by email or at his solicitors' address) or for a declaration that the steps taken had been effective to serve him.
The claimants had been granted permission to serve the claim out of the jurisdiction, although no steps had been taken to do so. The evidence was that it was likely to take between six and 12 months to effect service in the United Arab Emirates. As there is a bilateral convention between the United Kingdom and the United Arab Emirates, the master considered Cecil v Bayat. He concluded that exceptional circumstances existed and therefore, the rationale for the decision in Cecil v Bayat (that to allow service under CPR 6.15 would be an interference with the sovereignty of the United Arab Emirates) had no application in this case.
The circumstances were that the defendant had chosen to lead the claimants to believe that he continued to reside in the United Kingdom and serious issues were raised in the claim (eg, missing money in excess of £20 million with no explanation offered by the defendant at the pre-action stage and one of the claimants going into administration). A delay of six to 12 months could have been highly and irremediably prejudicial to the claimants. The master also found good reason to believe that the defendant might not cooperate with the service procedure under the bilateral convention. Finally, any limited interference with the sovereignty of the United Arab Emirates caused by service by alternative means could be justified when weighed against the likely prejudice to the claimants.
It was held that service of the claim form was valid under Section 1140 of the act. The defendant's presence in England was not necessary under the act and it was not a requirement of English conflicts law that he had to be resident in England at the date of service. The existence of parallel routes of service under the act and the CPR will doubtless prove to be an extremely useful weapon in the litigator's arsenal.
For further information on this topic please contact Adam Forster or Tim Brown at RPC by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email ([email protected] or [email protected]). The RPC website can be accessed at www.rpc.co.uk.
Endnotes
(1) Key Homes Bradford Limited v Rafik Patel [2014] EWHC B1 (Ch).
(2) [2007] 1 WLR 1219.
(3) [2012] 1 WLR 1842.
(4) [2011] 1 WLR 1402.
