Cowley v LW Carlisle & Company Ltd

The Court of Appeal dismissed the appellant's appeal against the strike out of his claim against a dissolved defendant, L.W. Carlisle & Company Limited (LWC). The court held that where a defendant company was dissolved at the time of the proceedings and no sensible steps had been taken by the claimant to procure restoration, a judge did not err in principle in striking out the claim under CPR 3.4 as part of case management. The court considered but did not need to decide points about the retrospective effect of a restoration order under section 1032(1) of the Companies Act 2006 or the proper use of CPR 11 where a defendant is dissolved. The court therefore affirmed that proportionality and the overriding objective permit a robust approach to the continued presence in proceedings of a non-existent party.

Background and parties:

• The appellant, Mr Kevin Cowley, sued for damages for noise-induced hearing loss sustained in the course of employment with four different employers, one of which was L.W. Carlisle & Company Limited (LWC). The total claim was approximately 5,000.
• LWC had been struck off and dissolved before issue of proceedings; the appellants solicitors nevertheless issued proceedings and purported to serve the claim on LWC at its last known place of business.

Procedural history and relief sought:

• The insurers of the former company notified that the company was dissolved and that proceedings could not be served. An acknowledgment of service and an application to strike out the claim were later filed on behalf of LWC (by insurers' solicitors), contending the proceedings were a nullity in the absence of restoration. The District Judge struck out the claim against LWC on 31 May 2018 under CPR 3.4 and ordered costs; permission to appeal to him was initially refused. HHJ Rawlings granted limited permission to appeal and dismissed that appeal on 14 November 2018. Permission to appeal to the Court of Appeal was later granted; the present appeal challenged the strike out order and the judge's reasons.

Issues framed:

1. Whether the strike out should have been decided under CPR 11 (jurisdictional challenge to service on a dissolved company) and, if so, whether the procedural requirements of CPR 11 had been observed;
2. Whether, alternatively, the strike out under CPR 3.4 was an impermissible backdoor around CPR 11;
3. What effect a subsequent restoration order (and section 1032(1) Companies Act 2006) has on proceedings begun during dissolution, and whether that would validate prior steps retrospectively; and
4. Whether the courts below had erred in principle in striking out the claim where the claimant had not taken steps to restore the company.

Reasoning:

• The court observed that at the time the orders below were made LWC had been dissolved and did not exist; the judges had to decide the applications on that factual basis. The retrospective effect of any later restoration order could not be assumed by the judges below when deciding the strike out application.
• The court distinguished earlier authority relied upon by the appellant (notably Hoddinott) because the factual matrix was different, and considered Peaktone v Joddrell ([2012] EWCA Civ 1035). Peaktone demonstrates that a subsequent restoration can validate steps taken during dissolution, but the court emphasised that the judges below were obliged to decide the matter on the facts before them when LWC did not exist.
• Accordingly, the District Judge was entitled, in the exercise of case management and taking proportionality and the overriding objective into account, to conclude that striking out the claim against a non-existent defendant was appropriate where the claimant had not taken steps to procure restoration or to seek a stay.
• The Court of Appeal therefore upheld the exercise of discretion to strike out under CPR 3.4 and dismissed the appeal. The court also observed concerns about the disproportionate costs incurred in satellite litigation occasioned by commencing proceedings against a known-dissolved company and commented on prudent steps insurers might take in such circumstances.

The appeal was dismissed. The Court of Appeal held that when a defendant company was dissolved at the time of the proceedings and no sensible steps had been taken to restore it, the court was entitled to strike out the claim under CPR 3.4 as a case management exercise. The retrospective effect of any later restoration order under section 1032(1) Companies Act 2006 did not mean the judges below were required to assume the company existed when they decided the applications.

The claim was begun in the County Court at Stoke-on-Trent. District Judge Etherington struck out the claim against L.W. Carlisle & Company Limited on 31 May 2018. HHJ Rawlings (Stoke-on-Trent County Court) refused the appellant's limited challenge and dismissed the appeal from the District Judge's order on 14 November 2018. Permission to appeal to the Court of Appeal was granted by Irwin LJ on 5 November 2019; the present appeal was heard in the Court of Appeal, which delivered judgment on 25 February 2020 ([2020] EWCA Civ 227).