Although an insolvency case, the judgment of His Honour Judge Paul Matthews, sitting as a High Court Judge, in Broom v Aguilar [2024] EWHC 1764 (Ch) deals with a service issue of more general importance.
Mrs Aguilar, a Spanish national, moved to the UK in 1972 and married Michael Chambers. They lived together in England for more than 40 years until 2014 when they emigrated to Spain, where they continued to live. The couple bought a house in Arlingham, Gloucestershire. In 1978 Mr Chambers became a self-employed builder. To raise finance for his development work the Arlingham house was charged to a bank. In 1988, to raise further finance, the Arlingham property was sold and a smaller house purchased in Dursley, Gloucestershire, to which the charge was transferred. The borrower in each case was Mr Chambers and his wife jointly. This borrowing was refinanced in 1993 with a mortgage loan, and the house charged to Birmingham Midshires. There were subsequent borrowings. The sums raised were all put into Mr Chambers’s business, and he paid the instalments on all of them.
In 1996 Mr Chambers was made bankrupt on a petition of HM Customs & Excise. Mrs Aguilar bought her husband’s beneficial interest in the house from the Official Receiver in 1998. Thereafter she was and remained the sole beneficial owner of the property. However, although she asked Birmingham Midshires to remove Mr Chambers from the mortgage, they refused, so the legal title remained registered in joint names. Mrs Aguilar paid the instalments on the mortgage loan.
In 2015 Mr Chambers’s then trustee in bankruptcy applied for relief under ss 339-342 Insolvency Act 1986 in respect of transactions at an undervalue and preferences arising out of transactions from which it was said Mrs Aguilar had benefitted. He attempted unsuccessfully to serve his application in England, so applied to, and obtained, an order for service under CPR rule 6.15 by text message, voicemail, Facebook messenger, and by leaving the application and the evidence in support with the trustee’s solicitors at their office in Bristol for collection during business hours.
The substantive application was heard in Mrs Aguilar’s absence, and the court ordered her to pay the trustee £151,396.67 plus interest and costs summarily assessed in the sum of £35,799.80.
Attempts to enforce the order in Spain, where Mrs Aguilar had been living at the material times, prompted her to apply for a review under s 375 Insolvency Act, but her application was largely unsuccessful.
Mrs Aguilar appealed. The appeal relied in a number of grounds, but it is the service issue that is of particular interest.
The judgment in Broom v Aguilar reviews the history of the procedure governing service and service out of the jurisdiction and the substantial body of case law to which it has given rise. In the end, however, following Chellaram v Chellaram, the judge held that service had not been effective:
“At the time that the court made the alternative service order in relation to the appellant in February 2015, it had no jurisdiction over her. Accordingly, compliance with that order could not amount to service of the proceedings upon her under English law. Hence the court on 18 March 2015 had no jurisdiction to make the substantive order which it purported to make. That in turn meant that there was indeed a proper basis for the appellant’s application under section 375 to set aside the substantive order. But the error of the judge below, in not recognising that the court in March 2015 had no jurisdiction over the appellant, meant that the judge addressed the application on a false basis, and (unsurprisingly) reached the wrong conclusion. The appeal must therefore be allowed on this ground alone.”
The current trustee pointed out that his predecessor had not known, when he applied for and obtained the service order, that Mrs Aguilar was no longer in the jurisdiction. He argued that he should be allowed to proceed. The judge did not agree:
“Jurisdiction is fundamental, and the English rules are clear. The court has jurisdiction over a person within its territorial jurisdiction. It also has jurisdiction over persons outside that territory, but only when the statutory conditions are satisfied. Here, no permission having been obtained to serve out, they were not. The English court does not have jurisdiction over persons outside the territory just because the claimant honestly but mistakenly, and even reasonably, believes (if that be the case) that the intended defendant is actually within it.”
In support of that he relied on the decision of Lavender J in Osbourne v Persons Unknown:
“In circumstances where the Claimant does not know either the identity or the location of the person or persons who possess or control the Two [Non-Fungible Tokens] … the jurisdiction of the court can only be established by service of the claim form out of the jurisdiction.”
HHJ Matthews held that “the correct approach was that taken by the claimants in M v N, Interbunker Holdings and BBG, who sought and obtained permission to serve out. Here the respondent did not know where the appellant was living at the material time. By applying for an alternative service order, but not permission to serve out, he took the risk that [Mrs Aguilar] was no longer within the jurisdiction. Unhappily for him, that risk matured.”
The decision makes two points clear:
1. An order for service by alternative means cannot of itself be effective where the party to be served is, at the time, living outside the jurisdiction.
2. Such an order cannot be relied on to circumvent the need to apply for service out of the jurisdiction.
At the time the order for service by an alternative means was made in this case (2015) the Insolvency Rules 1986 and the Insolvency Practice Direction of 2014 applied. Service is now dealt with in paragraph 5 of the current Practice Direction, paragraph 5.2 of which states that:
“Subject to the Court approving or directing otherwise, CPR Part 6 applies to the service of Court documents both within and out of the jurisdiction.”