WOULD YOU BELIEVE IT? ANOTHER CASE WHEN CLAIM FORM WRONGLY SERVED : CLAIMANT “SERVED” ON SOLICITORS WHO DID NOT HAVE INSTRUCTIONS TO ACCEPT SERVICE

In the judgment  in Gallagher v Hallows Associates [2020] EW Misc 7 (CC) HHJ Jarman QC found that a defendant had been wrongly served when it was sent to solicitors who did not state they had instructions to accept service.  This is the second reported case in two days where proceedings have failed because they were served on solicitors who had not been nominated, or stated that they would accept service.  Ironically this was a professional negligence action (and this is not the first time that a professional negligence action has failed on these grounds).

THE CASE

The claimant was pursuing a professional negligence action against the defendant.  The defendant had gone bankrupt.

THE SERVICE ISSUE

The claimant served on solicitors who had not confirmed they had instructions to accept service.

There was correspondence with the firm’s solicitors and with its professional indemnity insurers, Endurance Worldwide Insurance Ltd (Endurance).  In August 2018, these solicitors were asked by Mr Gallagher’s solicitors whether the latter had instructions to accept service of proceedings. Without having had a reply, a claim form (the claim form) was issued on his behalf on 4 June 2019. The limitation period under the 1980 Act for bringing that claim expired the following month. The claim was then sent to the firm’s solicitors on 19 September 2019, about two weeks prior to the date when the four-month period for service of the claim form expired. On 7 October 2019, after the expiry of that period, the firm’s solicitors wrote to Mr Gallagher’s solicitors saying they had no such instructions, and on the same day the latter found out that Mr Hallows had been made bankrupt on 30 June 2018, on a petition bought by HMRC (the bankruptcy proceedings).

THE DIFFERING ARGUMENTS

The claimant’s solicitors argued that this was an issue under the Insolvency Act.  The defendant that this was an issue of non-service.

   Mr Phelps, however, focuses on the CPR. As no indication had been given that service of the claim could be effected upon the firm’s solicitors under rule 6.7(1), the claim should have been served at the usual or last known residence of Mr Hallows or his principal or last known place of business, pursuant to rule 6.9(2). This was not done within the four-month period, or at all, and no extension for service has been applied for or obtained. Accordingly, the claim may not now be served, and the court cannot entertain the same. It would be otiose therefore to give permission under section 285 of the 1986 Act.

THE DEFENDANT’S BANKRUPTCY WAS A RED HERRING IN RELATION TO POINTS ON SERVICE

17.              Where no notice has been given in writing by either the defendant or the solicitor acting for the defendant, service under rule 6.7 is not engaged. Instead service must be affected in accordance with rule 6.9(2), which provides that the claim form must be served on the defendant at the place shown in the table therein set out, which on the facts of the present case means the usual or last known residence of Mr Hallows, or the principal or last known place of business.

18.              It is clear, and the contrary was not argued by Mr Sterling, that the claim form as issued in the present case (leaving aside for one moment the fact that Mr Hallows was at that time an undischarged bankrupt) was not served in accordance with the above rules. Moreover, no application for an extension under rule 7.6 has been made. In my judgment given that there was no attempt to serve within time by any method permitted by the rules, it is, to use Lord Sumption’s phrase, difficult to see how it could be said that the requirements of rule 7.6(3) could be made out.

19.              Had it not been for Mr Hallows’ bankruptcy therefore, it seems likely that once the time limit for serving the claim form expired on 4 October 2019 without valid service, that would have been the end of the claim. The question at the heart of these applications is what difference if any does the fact of his bankruptcy make, or ought to make.

GRANTING PERMISSION TO PROCEED AGAINST THE BANKRUPT WOULD NOT REMEDY THE DEFECT IN SERVICE

The judge held that giving the claimant permission to proceed against the bankrupt defendant would relate back to matters relating to the issue of proceedings, however it could not solve the problem of defective service.

28.              In my judgement it is clear that as applied to the facts of this case, any permission under section 285 could only relate to the commencement of proceedings. Although the court can impose conditions under that section, in my judgment having regard to the purpose of it as explained by David Richards J in Bank of Ireland and to the principles summarised in Bristol & West, it would be inappropriate to do so in a way that retrospectively validates invalid service. Given the insurance position, such a term does not promote the collection or distribution of Mr Hallows’ bankruptcy or the orderly administration of it.
29.              I do not accept Mr Sterling’s submission that in the present case the claim form could not have been served without permission. That is not the reason why there was no valid service. The reason was that Mr Gallagher’s solicitors, unaware of the bankruptcy, attempted service by a method which was not permitted by the rules, namely service on the firm’s solicitors, without having had confirmation that the latter had instructions to accept such service. Although the issue of service is not expressly dealt with in the authorities such as Saunders, it is implicit from some of the above examples that re-service was not required. The claim form could and should have been served in a manner permitted by the rules, in which event service would be validated by retrospective permission to commence the claim.

THE RESULT

The judge granted permission to commence the claim against the bankrupt. However because the claim had not been properly served the court made an under order CPR 11 that it would not exercise its jurisdiction. The claimant’s action, therefore, failed.

“Accordingly in my judgement the proper disposal of the applications is that retrospective permission should be given in the bankruptcy proceedings to commence the claim, but that an order should be made in that claim that the court should not exercise jurisdiction in respect of it. The application to join parties and to amend therefore falls away.”