Bell & Anor v Ide & Ors

For an insolvency application, the period in which service must occur under rule 12.9(3) of the Insolvency Rules 2016 is calculated by reference to the hearing that actually proceeds, rather than an earlier date endorsed on the application. The service requirement is procedural. Late service does not render the application a nullity.

An insolvency application issued within an applicable limitation period remains in time. The considerations applicable to extending service of a CPR claim form, including possible loss of a limitation defence, do not generally apply. A preference claim requires the recipient to have been a creditor. Summary judgment is inappropriate where resolution depends on conflicting evidence requiring disclosure and cross-examination.

The applicants, joint trustees in bankruptcy, brought insolvency proceedings concerning payments allegedly amounting to transactions at an undervalue, preferences or transactions defrauding creditors. The application was issued within the potentially applicable limitation period but was not served at least 14 days before the first hearing date originally fixed by the court. It was later served more than 14 days before the relisted hearing.

The fourth and fifth respondents sought to set aside the adjournment and strike out or obtain summary judgment on parts of the claim. The central issues were the construction of rule 12.9(3) of the Insolvency Rules 2016, the effect of late service and adjournment on limitation, whether the preference claim disclosed reasonable grounds, and whether the claim against the fifth respondent could be determined summarily.

1. Service and the hearing date. Rule 12.9(3) requires service at least 14 days before the hearing that actually proceeds. The words do not refer necessarily to the date originally endorsed on the application. The application was therefore served in time and complied with the rule.
2. Procedural effect of service. The service requirement is procedural. Non-compliance does not make an insolvency application a nullity. Rule 12.64 of the Insolvency Rules 2016 prevents invalidation for a formal defect or irregularity unless substantial injustice has been caused which cannot be remedied by court order. The ordinary consequence of late service may be an adjournment to allow proper preparation.
3. Limitation. An insolvency application issued within an applicable limitation period is in time. Unlike a CPR claim form, it has no fixed period of validity during which it must be served. Because the application does not become a nullity through late service, an adjournment does not deprive the respondent of a limitation defence. The principles in Cecil v Bayat concerning extension of time for serving a CPR claim form therefore do not apply.
4. Adjournment. The deputy district judge had to act judicially when deciding whether to adjourn. The decision to adjourn for service out of the jurisdiction and amendment of the draft points of claim was within the reasonable range of available decisions and was not set aside.
5. Preference claim. The applicants’ pleaded case positively alleged that the first respondent owed the fourth respondent nothing. Since a preference requires the recipient to be a creditor, the preference claim against the fourth respondent disclosed no reasonable grounds and was struck out.
6. Summary judgment. The documents relied upon by the fifth respondent pointed strongly against receipt of the alleged payment, but the applicants relied on conflicting affidavit evidence from a person involved in the transactions. Resolving that conflict would require disclosure and cross-examination. Summary judgment was therefore refused.
7. The respondents’ applications were dismissed except for the application to strike out the preference claim against the fourth respondent, which succeeded.

First-instance decision on applications arising in insolvency proceedings. No prior appellate decision is stated in the judgment.