Ardawa v Uppal & Anor

For a bankruptcy petition, personal service is mandatory unless the court prospectively orders substituted service under rule 6.14 of the Insolvency Rules 1986. The court has no power to validate retrospectively a purported substituted service by relying on general case-management powers or inherent jurisdiction. A fundamental failure to serve a petition is not a formal defect or irregularity curable under rule 7.55. The power to annul under section 282(1)(a) of the Insolvency Act 1986 is engaged where the grounds undermining the bankruptcy order existed when it was made, even if an invalid service order remained formally in place. Annulment remains discretionary, and may be refused where the debtor knew of the proceedings, deliberately evaded service and owed an undisputed debt.

The appellant challenged a bankruptcy order founded on costs debts owed to his former wife. He sought to set aside an order authorising substituted service of the bankruptcy petition, annul the bankruptcy order and dismiss the petition.

The District Judge found that the appellant resided at the address where the statutory demand and petition were posted, knew of the proceedings and had evaded service. She also held that the substituted service order was valid and, alternatively, declined to annul the bankruptcy order under section 282(1)(a) of the Insolvency Act 1986.

On appeal, the central issues were whether the statutory demand and petition had been validly served, whether the court had jurisdiction retrospectively to authorise substituted service, whether any defects were curable under rule 7.55 of the Insolvency Rules 1986, and whether the bankruptcy order should be annulled.

1. Appeal allowed in part. The order of 17 February 2016 authorising substituted service of the bankruptcy petition was set aside. The bankruptcy order was not annulled.
2. The District Judge’s finding that the appellant resided at 26 Saltwood Avenue was a finding of primary fact supported by abundant evidence. The inference that he knew of the statutory demand and petition was also properly available. The appellate court therefore had insufficient basis to interfere with those findings.
3. The obligation under rule 6.3(2) of the Insolvency Rules 1986 is to do all that is reasonable to bring a statutory demand to the debtor’s attention. The test is high but fact-sensitive. On the findings, service of the statutory demand at the appellant’s residence satisfied that obligation. The omission of previous addresses from the petition breached rule 6.7(1)(e), but caused no possible injustice and was curable under rule 7.55.
4. By contrast, a bankruptcy petition must be personally served under rule 6.14(1). Substituted service under rule 6.14(2) requires a court order. The wording of the rule and paragraph 13.2.4 of the Practice Direction: Insolvency Proceedings contemplated a prospective order. The court therefore had no jurisdiction retrospectively to authorise substituted service that had already taken place.
5. Neither CPR rule 3.1(2)(m), assuming it applied, nor the inherent jurisdiction could be used to circumvent the specific service requirements in rule 6.14. The order was also obtained on materially misleading information concerning available contact details and another address used for service.
6. The resulting failure was fundamental, not a formal defect or irregularity within rule 7.55. Section 282(1)(a) was engaged because the grounds impugning the service existed when the bankruptcy order was made, notwithstanding that the invalid service order had not yet been set aside.
7. On the discretionary question, the court weighed the invalid order and misleading evidence against the appellant’s knowledge of the proceedings, deliberate evasion of service, undisputed debt and ability to pay. Exercising the discretion afresh, it reached the same conclusion as the District Judge and refused annulment.

High Court (Chancery Division): The appeal from the decision of District Judge Thorpe was allowed only insofar as the order authorising substituted service was set aside. The refusal to annul the bankruptcy order was upheld.