HH Aluminium & Building Products Ltd & Anor v Bell & Anor (Rev 1)

The Court of Appeal considered three principal procedural points arising from insolvency proceedings under the Insolvency Act 1986 and the Insolvency (England and Wales) Rules 2016: (1) whether a County Court may transfer a single application within insolvency proceedings to the High Court; (2) the meaning of rule 12.9(3) (time for service of an application endorsed with the venue) and whether the date for service is the date originally fixed for the hearing or a subsequently re-fixed date; and (3) whether limitation considerations relevant to extension of time for service of a claim form under the Civil Procedure Rules apply equally to service of an insolvency application.

The Court held (i) that rule 12.30(2) permits the County Court to transfer a particular application in insolvency proceedings to the High Court rather than only the entirety of the insolvency proceedings; (ii) that rule 12.9(3) requires service at least 14 days before the date originally fixed and endorsed on the sealed application (not a subsequently re-fixed date); and (iii) that where granting an adjournment or implied extension of time for service would have the effect of depriving a respondent of a limitation defence, the court must take that limitation issue into account and apply the same principles as under the CPR (subject to modification for the insolvency context). Consequently the without-notice order vacating and re‑fixing the hearing was set aside as against the appellants and the substantive claims against them were struck out.

Background and nature of the proceedings.

The appeals arose from an insolvency application made by the trustees in bankruptcy of Mrs Nicola Jane Ide seeking recovery of payments alleged to be transactions at an undervalue, preferences or transactions defrauding creditors after the sale of Ortus House in 2012. The trustees issued an application notice under the Insolvency Act 1986 and the 2016 Rules. The County Court at Southampton transferred the file to Bristol where a hearing date (9 July 2019) was endorsed. Prior to service of the substantive application the trustees obtained a without‑notice order vacating that date and re‑listing the first hearing for after 1 October 2019. The substantive application was in fact served on HH Aluminium and Mr House on or about 6 September 2019.

Procedural posture and issues on appeal.

• (i) Whether the County Court had power under rule 12.30(2) to transfer only the October application (a single interlocutory/strike-out/summary judgment application by HH and Mr House) to the High Court rather than the whole bankruptcy proceedings;
• (ii) The construction of rule 12.9(3): whether the 14‑day service requirement runs from the date originally fixed and endorsed on the sealed application or from a subsequently re‑fixed date;
• (iii) Whether established CPR principles on refusal of extensions of time for service where limitation has expired (see Cecil v Bayat and related authority, and the decision in Kelcrown) apply equally to insolvency applications and hence whether the vacating/re‑fixing order should have been set aside because the judge who made it did not consider the limitation issue.

Court’s reasoning and subsidiary findings.

The court interpreted rule 12.30(2) purposively and practically, endorsing the wider meaning that permits transfer of a particular application rather than only the entire insolvency proceedings, noting consistency with the Insolvency Practice Direction para 3.6 and the decision of Coulson J in Hall & Shivers v Van der Heiden. On rule 12.9(3) the court read the chapter sequentially (file, venue fixed under rule 12.8, then service under rule 12.9) and accepted the approach earlier taken by Deputy ICCJ Prentis in Re HS Works Ltd: the 14 days runs from the date originally fixed and endorsed on the sealed application. On limitation the Court held that there is no principled distinction between an unserved claim form under the CPR and an unserved application notice under the 2016 Rules where the application asserts substantive claims; the court must treat the expiry of limitation as a primary consideration when deciding whether to allow an extension or give effect to a vacatur/re‑fixing that has the practical effect of extending time for service. The Court therefore set aside the without‑notice vacatur/re‑fixing order as regards HH and Mr House and struck out the trustees’ claims against them for failure to serve within time; it left intact the High Court’s strike‑out of the specific preference claim against HH under s.340(3)(a) (no appeal against that point) and did not determine the summary judgment point against Mr House because it became unnecessary.

Wider context. The court emphasised the practical importance of early notice of insolvency applications to respondents, the need to protect limitation defences and the application of CPR principles to insolvency applications when the substance of the application is akin to a substantive claim.

Appeal allowed in part. The Court dismissed the challenge to the County Court’s power to transfer a particular insolvency application to the High Court (transfer upheld) but allowed the appeal against the order vacating and re‑fixing the hearing as against HH Aluminium and Mr House because the judge who made that without‑notice order had not considered the critical limitation issue; the consequence was that the substantive application as against HH and Mr House was struck out for failure to serve in accordance with rule 12.9. The reasoning rested on (i) a purposive construction of rule 12.30(2) permitting transfer of particular applications; (ii) a construction of rule 12.9(3) that service must be at least 14 days before the date originally fixed and endorsed; and (iii) application of the same limitation‑sensitive principles to extensions of time for service in insolvency applications as under the CPR.

The trustees issued an Insolvency Act 1986 application in the County Court (Southampton, later transferred to Bristol). HHJ Paul Matthews (County Court at Bristol) ordered transfer of the appellants' October application to the High Court on 4 February 2020 (Bell v Ide [2020] EW Misc 3 (CC)). HHJ Matthews then heard the October application sitting as a High Court judge and delivered substantive judgment on 12 February 2020 (Bell v Ide [2020] EWHC 230 (Ch)). Permission to appeal was given and the matters were determined by the Court of Appeal on 9 November 2020 ([2020] EWCA Civ 1469).