Broadside Colours And Chemicals Ltd, Re (No 2)

In insolvency proceedings, the power to review, rescind or vary an order is governed by Insolvency Rule 7.47(1), rather than exclusively by the conditions in CPR 39.3(5). Promptness remains relevant, but delay is not an absolute bar. The court must exercise its broad discretion by considering all material circumstances, including whether the applicant lacked knowledge of the proceedings and whether the proposed defence has realistic prospects of success.

For service at an individual’s usual or last known residence, “knowledge” may include constructive knowledge acquired through reasonable diligence. Information obtained from Companies House may constitute such knowledge, even where the individual no longer lives at the address and did not receive the proceedings.

The joint liquidators of Broadside Colours and Chemicals Ltd applied to set aside the judgment dated 4 May 2011 insofar as it affected James Button. The judgment concerned claims against him arising from alleged unlawful loans to a director and related misfeasance proceedings under the Insolvency Act 1986.

Mr Button contended that he had not been served and had known nothing of the proceedings until September 2011. He also argued that he had realistic defences, including that he had ceased to be a director earlier than recorded at Companies House and that he might obtain relief under section 727 of the Companies Act 1985. The central issues were the applicable power to review the judgment, the relevance of delay, the merits of the proposed defences and whether service at the address found through Companies House was valid.

1. Application granted. The judgment dated 4 May 2011 was set aside insofar as it affected James Button. The two charging orders were also set aside.
2. The applicable jurisdiction was Insolvency Rule 7.47(1), which gives the court power to review, rescind or vary an order made in the exercise of its insolvency jurisdiction. CPR 39.3(5) did not govern the application as a complete code. The principles identified in Papanicola v Humphreys [2005] 2 AER 418 were relevant by analogy: the discretion is wide, the applicant must show circumstances justifying relief, and there must be a material difference from what was before the original court.
3. Promptness was relevant because the philosophy underlying CPR 39.3 applies where an order was made in a party’s absence. It was not, however, an absolute bar under Rule 7.47(1). The important considerations were Mr Button’s lack of knowledge of the proceedings and the realistic prospects of success of his proposed defences.
4. There was a realistic defence to claims relating to payments made after the date on which Mr Button might prove that he ceased to be a director. The Companies House entry was not conclusive. There was also a realistic possibility that relief under section 727 of the Companies Act 1985 could succeed, at least in part.
5. Service was valid. Under CPR 6.9, the question was whether The Tudors was Mr Button’s last known residence. Applying Collie v Williams [2006] 1 WLR 78, knowledge included actual or constructive knowledge acquired through reasonable diligence. The Companies House information, based on statutory notifications and a director’s signed consent, was sufficient to constitute knowledge rather than mere belief. The liquidators therefore had no obligation to make further enquiries.