SERVICE OF PROCEEDINGS WHEN THEY ARE PUT IN THE BIN: A HIGH COURT DECISION

February 1, 2016 · by · in Applications, Civil evidence, Service of the claim form, Serving documents, Uncategorized

In Morby -v- Gate Gourmet Luxembourg IV SARL [2016] EWHC  74 (Ch) Edward Murray (sitting as a Deputy Judge of the Chancery Division) considered an issue relating to personal service.

“If facts are in dispute, absent special situations, it would be unsafe to reach a conclusion on witness statements of fact alone”

“There is an obvious conflict of evidence. Although the parties did not seek an order for cross-examination, I say straight away that it is regrettable that an order for cross-examination was not made by the Deputy Registrar who gave directions for the hearing and final disposal of the Petition. I am able to say this as I was the Deputy Registrar”

KEY POINTS

  • The respondent to a bankruptcy petition had arranged to meet to receive the petition. He asked for the petition to be handed to a friend so it could be checked. (There was a dispute of fact as to whether it was ever handed to the respondent).
  • Objection was taken to the contents of the petition and attempts were made to hand it back to the process server.
  • When the process server refused to take it back the petition was placed in the bin.
  • The respondent later sought to argue that the petition had not been properly served.
  • This argument was rejected by the Registrar, who held that service had taken place even if the petition had not been handed to to respondent personally.
  • The Registrar’s decision was upheld on appeal.

PRACTICE POINTS

  • In addition to consideration of the rules relating to service the primary practical point here is the failure to make an order that the witnesses in relation to service attended the hearing to be cross-examined. The court could not make findings on disputed issues of fact on the basis of witness statements alone.

THE CASE

The appellant (Mr Morby) was seeking to set aside a bankruptcy petition. One of the grounds for the application was that it had not been served on him.

THE DECISION BY THE REGISTRAR AT FIRST INSTANCE

The judgment at first instance found that there had been personal service.
  1. It is accepted that if the Petition were handed to Mr. Morby in Terminal 3 at Heathrow airport on 21 July 2014, personal service would have been effected. It is accepted, if the Petition would have been placed on his lap (if he were sitting) that would be sufficient. The evidence of GG is that the Petition was handed to Mr. Morby. Mr. Morby contends that the process server gave the Petition to Mr Malik, a friend, who attended Terminal 3 for the purpose of receiving the Petition on his behalf. There is an obvious conflict of evidence. Although the parties did not seek an order for cross-examination, I say straight away that it is regrettable that an order for cross-examination was not made by the Deputy Registrar who gave directions for the hearing and final disposal of the Petition. I am able to say this as I was the Deputy Registrar.
  2. I have been invited by counsel to reach a decision based on the witness statements. Regardless of the merits of preferring the sworn evidence of the process server who has no interest in the outcome, who had previously seen Mr. Morby and was unlikely to confuse him with another, I do not accept the invitation. If facts are in dispute, absent special situations, it would be unsafe to reach a conclusion on witness statements of fact alone:Wilkinson v Commissioners of Inland Revenue [1998] BPIR 418. As it happened the process server attended court and was prepared to be cross- examined on the evidence he had provided, however the invitation to cross-examine was declined. Even if the process server had been cross-examined I would not have had the benefit of hearing Mr. Morby.
  3. No doubt prepared for the situation, GG argue that the circumstances are unusual and as a result I may find that the Petition was served personally. If not the court could order retrospective substituted service based on Mr. Morby’s evidence. There would be no prejudice to Mr. Morby as he accepts that he has received the Petition by e- mail, and has come to court through solicitors and counsel to argue the case. Further there no dispute that he owes the sums said to be due on the face of the Petition. Failing that GG rely on the powers provided under rule 7.55 IR 1986 to waive any defect or irregularity by serving a friend at the request of Mr. Morby. I shall deal with these arguments in turn.
  4. Dealing with personal service, I find that the following matters material (1) Mr. Morby flew into Heathrow for the purpose of receiving the petition (2) he knew that he would be met at Terminal 3 by a process server (3) he knew that the process server would serve the Petition (4) he directed, on his own evidence that the Petition be handed to his friend (5) Mr Morby was present when the Petition was handed to his friend (6) his friend received and read the petition and spoke to Mr. Morby about its contents which were seemingly read out to him or partly read out to him enabling him to comment on it and (7) the process server engaged Mr. Morby about its content.
  5. The issue between the parties is, if I may term it this way, one of touch. If Mr. Morby had been touched by the Petition he would have been personally served. These are unusual circumstances. Mr. Morby had knowledge: knowledge that what was contained in the sealed envelope was the Petition. He could hear from the process server and from Mr. Malik that it was the Petition. He could see that it was the Petition. His mind engaged with the process of service and the detail of the Petition. He had notice of the Petition. He was given the opportunity to deal with the subject of the Petition. The distinction, in my view, of the Petition touching his lap or arm followed by a refusal to grasp the Petition, or followed by the debtor throwing it in the bin himself, and the circumstances of this case is a thin one, in reality. I find in these unusual circumstances where a Petition is handed to a specified agent at the request of the debtor, in the presence of the debtor in the manner described, personal service was effected. I recognise that there may be more than one view regarding my finding and therefore go on to consider substituted service and the cure provision contained within the IR 1986.

THE DECISION ON APPEAL

On appeal the judge conducted a detailed review of the law relating to service.

The law applicable to personal service of a bankruptcy petition
  1. Chapter 2 of Part 6 of the Insolvency Rules 1986 sets out rules applicable to a creditor’s bankruptcy petition. Within that chapter, Rule 6.14 governs service of the petition. For present purposes, we need only consider the first clause of that rule. Rule 6.14(1) of the Insolvency Rules 1986 provides as follows:
“6.14.- Service of petition
(1) Subject as follows, the petition shall be served personally on the debtor by an officer of the court, or by the petitioning creditor or his solicitor, or by a person instructed by the creditor or his solicitor for that purpose; and service shall be effected by delivering to him a sealed copy of the petition.”
  1. The Insolvency Rules 1986 do not, however, provide further guidance on what constitutes personal service. My attention was drawn to a recent decision of Mr Justice Phillips in the Commercial Court, Tseitline v Mikhelson [2015] EWHC 3065 (Comm), in which Phillips I considers personal service of a claim form under CPR 6.5(3). That case was decided after the Registrar had handed down his decision in this case, but it usefully summarises the law relating to personal service of court documents.
  2. CPR 6.5(3) provides that “a claim form is served personally on … an individual by leaving it with that individual”. The Civil Procedure Rules provide no further guidance on what that means. Phillips J noted in para 14 of the Tseitline case that the House of Lords in Kenneth Allison Ltd vAE Limehouse & Co [1992] 2 AC 105 considered what was meant by “leaving a document with the person to be served”. Their Lordships were called upon to consider personal service under a provision of the former Rules of the Supreme Court that was substantially the same as CPR 6.5(3). Lord Bridge of Harwich set out the following two-limbed test (at p 113E):
“There is abundant authority for the proposition that personal service requires that the document be handed to the person to be served or, if he will not accept it, that he be told what the document contains and the document be left with or near him.”
  1. Similarly, Lord Goff of Chieveley said the following (at p 124C):
“Prima facie, the process server must hand the relevant document to the person upon whom it has to be served. The only concession to practicality is that, if that person will not accept the document, the process server may tell him what the document contains and leave it with him or near him.”
  1. There is no reason to doubt that this two-limbed test also applies to CPR 6.5(3), as was accepted by the parties and held by Phillips J in the Tseitlinecase. It is a sensible, common sense test that resolves an important practical difficulty of effecting personal service arising in many cases, namely, the refusal of an astute potential recipient of personal service to accept the proffered document, in the hope of avoiding the personal jurisdiction of the court. It is clearly not in the interest of the effective administration of civil justice that a person should simply be able to refuse to accept personal service of a claim form and thus defeat the jurisdiction of the court, absent the availability of another lawful form of service.
  2. An important part of the Kenneth Allison test is that the person being served should be told what the document contains. In paras 18 and 19 of his judgment in the Tseitline case, Phillips J referred to and quoted from the case of Re a Debtor [1939] Ch 251, in which the Court of Appeal held that delivery of a bankruptcy petition in an envelope to the debtor without any indication of its contents was not valid service. In that case Sir Wilfred Green MR at p 256 emphasised the importance of compliance with the “strict requirements which are to be found in the case of the service of writs and other documents under the Rules of the Supreme Court”. In the passages quoted by Phillips J, Sir Wilfred Green MR was concerned with importance of the requirement that the nature of the documents being served be “brought to [the] mind” of the person be served. Otherwise, the “gravest injustice” could occur.
  3. Phillips J concluded (in paras 22 to 24 of his judgment) that this remains good law, and that the Kenneth Allison test must be read in that light. Regarding the second limb of the Kenneth Allison test, where the person being served must be told what the document contains, Phillips J referred (in para 24 of his judgment) to the judgment of Lord Justice Hoffmann in the unreported case of Walters v Whitelock (19 August 1994), relating to the service of papers in connection with a committal application, to explain the purpose of that requirement:
“The purpose of the requirement that he be told is that he should not be able to say that he ignored the document on the grounds that it was simply junk mail or something which did not necessarily require his attention at all.”
  1. Phillips J set out, in para 31 of his judgment, Hoffmann LJ’s further explanation in the Walters case of what this requirement entails:
“With what degree of particularity does the rule require that the person served be told what the documents contain? In my judgment, one must look at this in a practical way. I think it is sufficient if it is brought to his attention that it is a legal document which requires his attention in connection with proceedings. The purpose of the requirement that he be told is that he should not be able to say that he ignored the document on the grounds that it was simply junk mail or something which did not necessarily require his attention at all.”
  1. The Kenneth Allison case concerned the personal service of a claim form. Is the test articulated in that case applicable to the personal service of a bankruptcy petition under Rule 6.14(1) of the Insolvency Rules 1986? Ms Deb on behalf of the Appellant several times made the point, although principally in the context of the application of Rule 7.55, that the test for personal service of a bankruptcy petition must be particularly strictly applied given the very serious consequences of an adjudication of personal bankruptcy for an individual. She suggested, therefore, that a stricter standard should apply than, for example, would be the case in relation to the service of a statutory demand or the service of a winding up petition on a company. Nonetheless, she quite rightly did not suggest that the Kenneth Allison test does not apply in the case of the personal service of a bankruptcy petition. I can see no basis in authority or general principle to support such a suggestion. Accordingly, the question I must answer is whether the Registrar was correct to conclude that personal service of the bankruptcy petition had been effected upon Mr Morby in accordance with the Kenneth Allison test as clarified by the decision of the Court of Appeal in the Walters case.
  2. On the basis of the assumed facts, the Appellant did not touch the bankruptcy petition. Instead, Mr Beecham handed it to Mr Malik. So, the first limb of the Kenneth Allison test does not apply. The Appellant clearly indicated, by his actions and through Mr Malik, that he did not accept the document. I say “through Mr Malik” because it is clear from Mr Morby’s evidence that Mr Malik attending this meeting to assist Mr Morby and not to protect or advance some personal interest. Absent other evidence, it is must be assumed that Mr Malik acted as he did (for example, insisting that Mr Beecham take back the petition and then subsequently throwing the petition into a waste paper bin) with Mr Morby’s express or tacit approval. This is the most natural inference from Mr Morby’s own account of the meeting.
  3. Accordingly, is the second limb of the Kenneth Allison test satisfied in this case? The second limb requires that (i) the person being served “be told what the document contains” and (ii) the document be left with or near him.
  4. By his own account, Mr Morby arranged the meeting with Mr Beecham “at Terminal 3 of Heathrow Airport on 7 August 2014 so that the Petition could be personally served upon me.” He described the meeting and the interaction of Mr Malik and Mr Beecham, ending with Mr Malik putting the petition in a bin. There can be no doubt based on his evidence that he was aware that the document was a petition seeking a bankruptcy order against him. This is comfortably above the standard articulated by Hoffmann LJ in the Walters case that the person being served have “brought to his attention that it is a legal document which requires his attention in connection with proceedings”. Mr Morby was in no doubt about the nature of the document that Mr Beecham brought to the meeting at Heathrow.
  5. Phillips J helpfully further clarifies this requirement in para 34 of his judgment:
“In my judgment it is plain from these authorities [in particular, the Kenneth Allison case, the Wallers case and an Australian case referred to in para 32 of his judgment] (and from the special nature and role of personal service discussed above) that the process of leaving a document with the intended recipient must result in them acquiring knowledge that it is a legal document which requires their attention in connection with proceedings. Whilst this is expressed as requiring that the intended recipient be ‘told’ the nature of the document, the focus is on the knowledge of the recipient, not the process by which it is required. While in most cases knowledge of the nature of the document will be found to have been imparted by a simple explanation, it is clear that it can be also readily be [sic] inferred from pre-existing knowledge, prior dealings or from conduct at the time of or after service, including conduct in evading service: sec Barclays Bank of Swaziland Ltd v Hahn [1989] 1 WLR 506 at 512A.”
  1. The only remaining question, therefore, is whether the document was left “with or near” the Appellant at the meeting at Heathrow on 7 August 2014.
  2. In Nottingham Building Society v Peter Bennett & Co (a firm) (The Times, 26 February 1997), a process server attended at the office of a former partner of the defendant firm to serve a writ in a professional negligence action. The former partner examined the writ but purported not to accept it, and the process server took the writ with him when he left. Lord Justice Waite for the Court of Appeal nonetheless held that personal service had been effected. Waite LJ said:
“Once the intended recipient, assuming him to have knowledge of its nature, had been given a sufficient opportunity of possession of the document to enable him to exercise dominion over it for any period of time, however brief, the document had been left with him within the sense intended by the rule.”
  1. Similarly, in the Tseitline case, Phillips J found (in paras 44-45 of his judgment) that personal service had been effected on Mr Mikhelson in the circumstances of that case even though Mr Mikhelson did not accept the document, the document had been placed on Mr Mikhelson’s upper body and had then fallen or was thrown by him to the ground by his feet, so that “there is no doubt that it was left near him”. It did not matter that the document was later retrieved by the process server and taken away, given the holding in the Nottingham Building Society case to which I have already alluded.
  2. In this case, Mr Morby attended with his friend, Mr Malik. When the document was in the hands of Mr Malik, Mr Morby clearly had “a sufficient opportunity of possession of the document to enable him to exercise dominion over it for any period of time, however brief’. Mr Morby could, in fact, have had the document at any time by simply asking Mr Malik to hand it to him. There is no reason to suppose otherwise. Mr Morby, knowing that the document was a bankruptcy petition naming him (albeit with an allegedly inaccurate residential address shown on the face of it), could have retrieved the petition from the bin or stopped Mr Malik from putting the document there in the first place.
  3. It is a reasonable conclusion, and the most natural one, based on Mr Morby’s evidence, that the petition was left “near” Mr Morby. It could even be said to have been left “with” him, for the reason I have given in para 43 above.
  4. It is uncontroversial that personal service cannot be effected by serving an agent, in the absence of the principal. Does the fact that the petition was left by Mr Beecham in the hands of a person, Mr Malik, rather than, say, on a table next to Mr Morby mean that the petition was not left “with or near” Mr Morby? In the particular circumstances of this case, the answer is clearly no.
  5. Ms Deb has suggested that a decision against the Appellant on this appeal will potentially “open the floodgates” to a relaxation of the hitherto strict rules on personal service of a bankruptcy petition. In my view, however, this case resolves simply to determination, on the basis of the assumed facts, whether in the peculiar circumstances of this case the current test for personal service, as articulated in the Kenneth Allison case, in light of other relevant authority to which I have referred, has been satisfied so that it can be said that personal service of the bankruptcy petition has been validly effected on Mr Morby by Mr Beecham at Heathrow on 7 August 2014. In my view, the Registrar clearly reached the correct decision on this point, and accordingly the appeal must be dismissed.

RULE 7.55

The Registrar found, as an alternative, that he would have exercised a discretion under Rule 7.55 he would make an under 7.55 of the Insolvency Rules

“No insolvency proceedings shall be invalidated by any formal defect or any irregularity, unless the court before which objection is made considers that substantial injustice has been caused by the defect or irregularity, and that the injustice cannot be remedied by any order of the court”.

On appeal the judge had some reservations whether such an order was necessary. However he stated that it would not have been possible to interfere with the exercise of the Registrar’s discretion on this issue.

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