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19.11.21

Service on directors of UK companies: a practical alternative to the Civil Procedure Rules

In Key Homes Bradford Ltd and others v Patel [2014] EWHC B1 (Ch), the High Court considered the validity of service of a claim form on the director of a UK company, pointing to a practical alternative for service found in the Companies Act 2006 ('the Act').

In the decision, Master Marsh concluded that section 1140 of the Act provides a method parallel to the Civil Procedure Rules ('CPR') for service on an individual who is a UK company director. Critically, under that provision service can be effected in respect of any document, regardless of whether it relates to the company or the individual’s directorship of the company.

Though it has been some time since the January 2014 decision, it has had favourable judicial treatment – notably in the High Court’s decisions in Brouwer v Anstey and another [2019] EWHC 144 (Ch) and Idemia France SAS v Decatur Europe Ltd and others [2019] EWHC 946 (Comm) – and remains an essential consideration, both for a claimant wishing to serve documents on an individual who is a director of a UK company, and for an individual who is a director of a UK company facing the threat of service, especially where that director resides abroad.

Traditional service route

The CPR provisions relating to the service of documents can be difficult to navigate and, in some cases, very difficult to execute.

The circumstances of any given case will dictate how complex or onerous it is to effect valid service. Serving a person outside the jurisdiction, for example, will likely at the very least require considerable time and expense.  But even service within the jurisdiction can be problematic.

To serve a claim on an individual within the jurisdiction (where the individual has not confirmed an address for service), CPR 6.9 requires service at the individual’s “usual or last known residence”. It is not, however, always clear what that address is. The onus is on the claimant to make reasonable efforts to get it right.  Mistakes often lead to considerable delays and additional expense, and in some cases, adverse costs consequences.

Under the CPR, serving a claim on an individual outside the jurisdiction is even more burdensome. Additionally, there are other laws that govern the procedure for service depending on the jurisdiction where the individual to be served resides. The court’s permission to serve outside the jurisdiction will very often be required, which can be challenging, time-consuming and expensive to obtain.  If granted, effecting service can take months or longer and can be a procedural nightmare (often requiring the cooperation of a foreign state).  There may also be significant delays in moving the proceedings forward due to stretched timelines in respect of both the deemed date of service and the deadline for a defendant to respond.

Whilst the court does have discretion, where there is good reason, to permit alternative service – for example at an alternative place or using a different method (such as email) under CPR 6.15 – an application to the court is required. Moreover, such orders are the exception not the rule – especially where the individual in question resides outside the jurisdiction.

A welcome alternative if the individual is a director of a UK company

Running parallel to the CPR requirements are the service provisions prescribed by the Act, including section 1140 which permits documents to be served on any director of a registered UK company by leaving them at or sending them by post to the address recorded at Companies House.

First, due to registration requirements there is rarely (if any) ambiguity as to the correct address for service. The Act requires every director to provide to the Registrar of Companies and to keep up to date his or her residential address, although this one is not necessarily open to inspection by the public. However, each director must also provide an “address for correspondence” which is open to inspection and recorded on the searchable Companies House website. This address may be the same as the residential address; it may be the company’s registered address; or it may be some other address. The key is that this is the director’s address for service.

Armed with more certainty as to the correct address for service, there are further benefits (or risks depending on your point of view):

Firstly, the purpose of the document to be served is irrelevant. The claim form, for example, does not have to relate in any way whatsoever to the company, or to the individual’s role or responsibilities within that company. Indeed, section 1140(3) expressly states that the service rule applies “whatever the purpose of the document in question”.  The potential utility of the Act's provisions is wide.  It is not limited to claims against individuals who run businesses.  Many people unwittingly become directors of a company for non-business purposes (e.g. where they purchase a leasehold property and have what is colloquially referred to as a 'share of a freehold').  Where service under the CPR is likely to be problematic, it is always worth running a search on Companies House to see whether the individual holds any directorships.

Secondly, even in cases where the claimant knows that the individual being served lives abroad and will not be in the UK at the time of service, the claimant is still permitted to effect service in the method described above at the “address for correspondence” in the UK.

Needless to say, these factors have the potential to make service on an individual, within or outside the jurisdiction, substantially easier, less expensive and quicker.

Both a sword and a shield

The parallel operation of the Act can clearly assist a claimant to effect efficient and prompt service of documents on any individual who is a director of a UK company, and to do so with greater certainty that the service is valid. Section 1140 effectively circumvents the more onerous CPR requirements, perhaps most remarkably in cases where the director in question lives abroad but has maintained a UK “address for correspondence”.

Conversely though, being aware of the parallel provisions and acting proactively can afford considerable protection to an individual residing abroad who is a director of a UK company. Indeed, with a view to ensuring s/he has actual notice of the documents being served and/or with a view to “buying time” to respond, the individual can use a simple tool: update his or her “address for correspondence” at Companies House to reflect that s/he lives abroad. In that case, the claimant would have to comply with the onerous CPR and other legislative requirements applicable to service outside the jurisdiction which, as above, will usually require an application to the court for permission.

Ultimately, this simple act of updating one’s address for service at Companies House could prove essential in protecting one’s position in English proceedings. Indeed, as a practical matter, the individual may not receive actual notice of the claim or other documents in a timely manner if s/he resides abroad. It is not difficult to imagine in such circumstances that the individual might run afoul of crucial deadlines, the consequences of which can be dire.

 

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Legal Disclaimer

Articles are intended as an introduction to the topic and do not constitute legal advice.


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