Merrygold (Liquidator) v Bates & Anor

Insolvency proceedings may be served outside the jurisdiction under the wide discretion conferred by rule 12.12(3) of the Insolvency Rules 1986. Even if the chosen method is technically defective, rule 7.55 permits the court to validate service where the defect causes no substantial injustice and any difficulty can be remedied. The court should consider whether the defendant received proper notice and a fair opportunity to respond, together with the practical consequences of re-service.

A defendant may waive an objection to service. The question is objective: whether a disinterested observer with knowledge of the case would regard the defendant’s conduct as inconsistent with making and maintaining the challenge. Procedural participation, including seeking extensions and agreeing directions for trial, may establish waiver.

Anderson Owen Ltd was wound up and David Merrygold, its liquidator, brought proceedings against Nicole Bates under section 212 of the Insolvency Act 1986, alleging misfeasance, breaches of duty and receipt of company money. Mrs Bates lived in Germany.

The Chief Registrar authorised service of the application by post under rule 12.12(3) of the Insolvency Rules 1986. Mrs Bates later sought to set aside both the order and service, arguing that the Service Regulation governed service and had not been complied with. She also challenged the order for alleged material non-disclosure and relied on her subsequent inability to attend the hearing.

The central issues were whether the order should be set aside, whether defective service could be validated under rule 7.55, and whether Mrs Bates had waived her objection by participating in the proceedings.

1. The application was heard on its merits despite Mrs Bates’s non-attendance. The court declined to adjourn because the application was already late, had previously been adjourned, concerned an old order, and further delay would prejudice the liquidator, creditors and the administration of justice. A limited opportunity to seek review or variation was provided instead.

2. The Chief Registrar’s order was not vitiated by material non-disclosure. The correct question was whether there was a real and properly arguable issue which a court could reasonably be asked to try, as explained in Re Howard Holdings Inc. [1998] BCC 549. The present section 212 claim differed materially from the earlier freezing-injunction proceedings, so observations concerning the earlier case did not require disclosure.

3. The court proceeded on the assumption, accepted tactically by counsel, that the Service Regulation applied and that the original method of service was technically non-compliant. The interaction between the Service Regulation, the Insolvency Regulation and the Insolvency Rules 1986 was left open for any review application.

4. Rule 7.55 applied to defective service. Its purpose was to prevent invalidation for a formal defect or irregularity unless substantial injustice had been caused and could not be remedied. Mrs Bates had actual notice, had instructed English solicitors, and had been served both personally and through Vogel. Re-service would have secured no practical advantage and would have caused cost and delay. The court therefore declared the service effective.

5. There was also waiver. Applying the objective approach in Global Multi Media International Ltd v Ara Media Services [2006] EWHC 3107, Mrs Bates’s failure to exercise the permitted challenge, followed by seeking an extension for the Defence, agreeing consequential directions and arranging the case for trial, was conduct consistent only with an intention to proceed to trial rather than maintain the service objection.

6. The application was dismissed. The time for service of the Defence was extended to 4:00 pm on 14 December 2009, with consequential directions for Reply and disclosure. Mrs Bates was given permission to apply under rule 7.47 for review, rescission or variation by 4:00 pm on 27 November 2009.