Key Homes Bradford Ltd and Others v Rafik Patel

JurisdictionEngland & Wales
JudgeMaster Marsh
Judgment Date10 January 2014
Judgment citation (vLex)[2014] EWHC J0110-1
Docket NumberCLAIM No: HC13F03721
CourtQueen's Bench Division (Administrative Court)
Date10 January 2014

[2014] EWHC J0110-1

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Rolls Building

7 Rolls Building

London EC4A 1NL

Before:

Master Marsh

CLAIM No: HC13F03721

Between:
Key Homes Bradford Ltd & Ors
Claimants
and
Rafik Patel
Defendant

Edward Cumming instructed by Reynolds Porter Chamberlain LLP appeared for the Claimants

Tim Penny instructed by Shulmans LLP appeared for the Defendant

Master Marsh
1

On 16 th August 2013 the Claimants issued proceedings against the Defendant. The Claimants say that the claim was served on the Defendant on 13 th September 2013. On that date, Christopher Whitehouse, a Solicitor employed by Reynolds Porter Chamberlain, attended two addresses at each of which he delivered the claim form, the particulars of claim and a response pack. The two addresses he attended were:

(a) 869 Romford Road, London E12 5JY ("Romford") and

(b) 12 Town Quay Wharf, Abbey Road, Barking IG11 7BZ ("Barking").

Romford is a residential address. Barking comprises business premises.

2

The Defendant disputes that effective service has taken place and on 9 th October 2013 issued an application seeking, amongst other things, an order setting aside purported service of the claim form, a declaration that the Romford and Barking addresses are not his usual or last known residence and declaring that the claim form has not been served on him. On 12 th November 2013 the Claimants issued an application seeking permission to serve the Defendant out of the jurisdiction at an address in United Arab Emirates (UAE) and also seeking an order that they be permitted to serve the Defendant by alternative methods pursuant to CPR 6.15(1).

3

On 20 th November 2013 the Claimants attended before me and, having read the witness statement of Timothy Charles Brown dated 12 th November 2013, I granted permission to serve the claim form out of the jurisdiction in the UAE. I directed that the remainder of the Claimants' application should be heard at the same time as the Defendant's application. Both applications came before me on 17 th December 2013 when I reserved judgment.

The Claim

4

It is only necessary to provide a brief summary of the claim. The Claimants are each special purpose vehicles (SPV's) set up for the purpose of attracting investment for particular building projects. The projects involve building student accommodation and/or hotels. Until he resigned on 5 th April 2013, the Defendant was the sole director of each of the Claimants and, clearly, he was the driving force behind the setting up of the Claimant companies and the proposed building projects. The investment scheme he developed involved attracting a large number of small (or relatively small) investors who each entered into an agreement for lease of a particular room in a specified building (student accommodation or a hotel) with a view to receiving rental income after deduction of management expenses. The total amount of investment attracted by the Claimants is slightly in excess of £53 million.

5

The investments were underwritten by a Deposit Protection Bond with Northern and Western Insurance Company Limited ("NWIC"). The Claimants' case is that by early 2013 NWIC had become concerned about whether the Claimants would be able to complete the developments successfully and on 5 th April 2013 a Sale and Purchase Agreement ("the SPA") was entered into between Melior Development Management Limited ("Melior"), a company related to NWIC, and the Defendant under which Melior acquired the entire issued share capital of each of the Claimants and the Defendant agreed to resign his directorships. Thus, NWIC was able to obtain control of the developments at that stage. The Claimants say they discovered after the SPA that the Defendant has diverted a substantial proportion of the investment funds, amounting to at least £20 million, for his own benefit and that those funds were transferred to an account under his control and believed to be in the name of Key Homes FZE in Dubai. The proceedings seek an account from the Defendant of the investment monies that were received, delivery up of books and records and ancillary relief. Since the proceedings were commenced, one of the Claimants has gone into administration. The Claimants say there is some real urgency in pursuing the claim.

6

The Defendant has not engaged with the merits of the claim and if he is correct the claim has not been served he has been under no obligation to do so. In any event, the merits, or otherwise, of the claim have nothing to do with whether the Defendant has, in fact, been served with the claim. They are relevant, however, to the grant of permission for service out of the jurisdiction (no challenge is made to the order dated 20 th November 2013) and to the Claimants' application under CPR 6.15 (2). It is not disputed that, subject to the question of service, the English court has jurisdiction to try the issues that are raised in the claim.

Defendant's Application

7

The Defendant's case is that by 13 th September 2013 he was no longer resident in the United Kingdom, and that neither Romford nor Barking were his "usual or last known residence". This gives rise to a number of fact sensitive issues which cannot be finally determined on the basis of the witness statements that have been provided. The approach I must adopt is to consider whether the Claimants or the Defendant have, on an analysis of the evidence, the better or much the better of the argument. The onus is on the Claimants to establish that proper service in compliance with the CPR has taken place and to establish that one of the two addresses was the usual or last known residence.

8

The Claimants have raised what is agreed to be a novel point concerning service. They say they are entitled to rely upon section 1140 of the Companies Act 2006 ("the 2006 Act") and that by virtue of that section alone, disregarding the provisions of the CPR, service has been effected. It is therefore convenient to deal with that issue first and in the course of doing so it is necessary to consider whether there is an underlying conflict of law rule that a party may not be served while out of the jurisdiction unless that absence is a temporary one.

Section 1140 Companies Act 2006

9

Before setting out the provisions of section 1140, and putting it into its relevant statutory context, it is appropriate to remark that despite the very helpful submissions provided by both counsel, their researches were unable to locate any case in which section 1140 has been considered. There is also no commentary about its effect either in the White Book save that the existence of section 1140 is referred to in the notes at paragraph 6.3.9.1 and the wording of the section is summarised in a manner which suggests that the editors of the White Book consider section 1140 may provide a means of service of a claim form that operates in parallel to the CPR. But the notes do not say that in terms.

10

Section 1139 of the 2006 Act deals with service of documents on a company. Section 1140 is headed "Service of documents on directors, secretaries and others". The material parts of the section are as follows:

"(1) A document may be served on a person to whom this section applies by leaving it at, or sending it by post to, the person's registered address.

(2) This section applies to-

(a) A director or secretary of a company;

……….

(3) This section applies whatever the purpose of the document in question.

It is not restricted to service for purposes arising out of or in connection with the appointment or position mentioned in subsection (2) or in connection with the company concerned.

(4) For the purposes of this section a person's "registered address" means any address for the time being shown as a current address in relation to that person in the part of the register available for public inspection.

(8) Nothing in this section shall be read as affecting any enactment or rule of law under which permission is required for service out of the jurisdiction."

11

Section 1141 is headed: "Service address". It provides a definition of "service address" for the Companies Act and states that it means in relation to a person:

"… an address at which documents may be effectively served on that person."

The Secretary of State is given power to make regulations to specify conditions with which a service address must comply. Part 3 of the Companies Act 2006 (Annual Return and Service Addresses) Regulations 2008 contain relevant conditions which permit service of documents by physical delivery or by postal delivery.

12

Sections 1140 and 1141 are linked to the information that is required to be recorded in the register of directors pursuant to section 163 of the 2006 Act. Under section 163(1) the register must contain for each director "a service address" and it is also required for the register to specify the country or state in which the director is usually resident. Under section 163(5) a person's service address may be stated to be the company's registered office.

13

Section 1140 came into force on 1st October 2009. Some assistance about its intended meaning can be derived from the commentary relating to the Bill. Clause 747 of the Bill corresponded to section 1140. The commentary is as follows:

"This clause is a new provision. It ensures that the address on the public record for any director or secretary is effective for the service of documents on that person. Sub-section (3) provides that the address is effective even if the document has no bearing on the person's responsibilities as director or secretary. The provision also applies to the address on the public record of various other persons for whom the 1985 Act requires an address on the public record."

Some, perhaps limited, assistance can be obtained from the DTI's consultation paper on Company Law Reform dated...

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