James Hawksworth & Ors v Paul Stanley & Ors

Claims combining insolvency proceedings with ordinary company or tort claims should generally be issued separately: the insolvency claims by application and the other claims by Part 7 claim form. An incorrectly issued hybrid application need not be struck out where the error can be rectified under CPR 3.10 and no substantial injustice has resulted.

Insolvency Rules 2016, rule 12.64 applies only to insolvency proceedings and cannot validate claims which are not properly insolvency proceedings. For service of an application requiring permission to proceed against discharged administrators, the relevant date is ordinarily the first hearing date endorsed on the application. A procedural application may nevertheless be permitted to proceed where the court’s relisting order impliedly extended time and the respondent suffered no substantive detriment.

The applicants, acting as liquidators of Park Regis Birmingham LLP, brought a Main Application against the former administrators and Staywell Hospitality Management Ltd. They alleged, among other matters, that the administrators’ appointment was invalid, and claimed damages or equitable compensation for trespass, breach of fiduciary duty and breach of contract.

The applications were issued under rule 1.35 of the Insolvency (England and Wales) Rules 2016. The applicants also sought permission under paragraph 75(6) of Schedule B1 to the Insolvency Act 1986 to proceed against discharged administrators. The respondents applied to strike out both applications.

The central issues were whether the mixed claims had been properly issued as insolvency applications and whether late service of the Permission Application prevented it from proceeding.

1. Disposition. The applications to strike out the Main Application and the Permission Application were refused. Further directions were to be given.
2. Defects Issue. Claims concerning the validity of the administrators’ appointment and breaches of duties as administrators were capable of being dealt with as insolvency applications. Claims for trespass, breach of fiduciary duty and breach of contract were ordinary claims which should have been commenced under Part 7 of the Civil Procedure Rules 1998. Their alleged factual connection with the insolvency claims did not make them insolvency proceedings.
3. The procedural error did not justify striking out the proceedings. Rule 12.64 of the Insolvency (England and Wales) Rules 2016 could not apply to claims which were not insolvency proceedings. However, CPR 3.10 was available. The court exercised that power to permit the non-insolvency claims to continue as if issued by Part 7 claim form.
4. No substantial injustice had been caused. The respondents might have received the proceedings earlier had Part 7 procedure been used, but the difference was only likely to have been a few weeks and did not establish irremediable prejudice. The alleged lack of practical benefit was premature and did not justify strike-out. Although the applicants had recognised that some claims might require a Part 7 claim, striking out was disproportionate.
5. Permission Issue. Under Bell v Ide [2020] EWCA Civ 1469, the service period was calculated by reference to the first hearing date endorsed on the application, not the later relisted date. The applicants had therefore served late. Nevertheless, the court distinguished Bell v Ide [2020] EWCA Civ 1469 because the present application was procedural and did not affect a limitation defence. The prompt request to vacate and relist the hearing constituted an implied extension of time. No substantive detriment had been shown, so strike-out was refused.