Hornan v Baillie & Ors

Where Council Regulation (EC) 1393/2007 applies, its prescribed method of service is mandatory. Insolvency proceedings are not excluded from the regulation merely because they arise in a liquidation. A claim under s.423 of the Insolvency Act 1986 is not necessarily an insolvency proceeding for these purposes, since it may be brought by any victim and need not arise directly from, or be closely connected with, the winding-up.

A defect in service should not be waived under r.7.55 of the Insolvency Rules 1986 where doing so would cause substantial injustice, including the potential loss of a limitation defence. The six-month validity period applicable to service out of the jurisdiction under the CPR should be applied by analogy to an ordinary insolvency application.

The claimant, the liquidator of Baillies Limited, brought proceedings against James Stuart Baillie and others, including claims under s.423 of the Insolvency Act 1986. Mr Baillie, resident in France, challenged service of the ordinary application.

The court had authorised service by personal service, by means permitted by the CPR, or otherwise as permitted by French law. Mr Baillie was personally served in France by an English process server rather than through a French huissier. The issues were whether the European service regulation applied, whether the order authorising alternative service was valid, and whether the defect could be waived or the application’s validity extended.

1. Service regulation. Article 4 of Council Regulation (EC) 1393/2007 was mandatory where the regulation applied. It required judicial documents to be transmitted through the designated agencies, resulting in personal service in France through a French huissier. The court’s earlier order authorising alternative methods of service should therefore not have been made in that form.

2. The expression “civil and commercial matters” in the service regulation had no fixed meaning in English law. The regulation contained no insolvency exception, unlike the judgments regulation. Insolvency proceedings were therefore within the service regulation. The court also treated the silence of Council Regulation (EC) 1346/2000 on service as supporting that conclusion.

3. The s.423 claims could not be treated as insolvency proceedings for the purpose of the service regulation. They could have been brought by any victim, including the company before liquidation, and were not sufficiently connected with the winding-up. The claims were therefore required to be served under article 4.

4. The defect was not waived under r.7.55 of the Insolvency Rules 1986. Even assuming that rule could apply to a breach of the service regulation, waiving the defect would potentially deprive Mr Baillie of a limitation defence. The six-month period for service out under the CPR was applied by analogy to an ordinary insolvency application. The liquidator had identified no sufficient reason to extend that period, and good faith could not override Mr Baillie’s rights and legitimate expectations.

5. The order for service out against Mr Baillie, and all orders made on the basis that the court had jurisdiction over him, were set aside. Delay in challenging service was a factor capable of consideration, but had caused no significant prejudice because nothing substantial had occurred. The injunction was continued for 14 days to permit an appeal.