A recent decision from the High Court has found that section 1140 of the Companies Act 2006 (“CA 2006”) operates as a ‘parallel code’ which provides a basis for serving a director of a company which is entirely outside the provisions for service in the Civil Procedure Rules (“CPR”).
In the case of Key Homes Bradford Ltd and others –v- Rafik Patel (Ch D (Master Marsh) 10/01/2014), the Claimants issued proceedings against the Defendant alleging that the Defendant had diverted investment funds in the region of £20million for his own benefit and had transferred the funds to an account in Dubai. The investment funds were intended for building projects including student accommodation and the Claimants in the action were special purpose vehicles established for this purpose.
The Claimants issued proceedings on 16 August 2013 and maintained that the proceedings were served on the Defendant on 13 September 2013. The Claimants had served the claim form and particulars of claim at two addresses, one a residential address in Romford and the other commercial premises in Barking, which were addresses for the Defendant recorded in the company registers of certain companies.
The Defendant disputed that this was effective service and issued an application seeking an order setting aside purported service of the claim. The Defendant argued that by 13 September 2013 he was no longer resident in the UK and that proper service in compliance with the CPR had not taken place as the Romford and Barking addresses were not his usual or last known residence.
The Claimants asserted that they were entitled to rely on section 1140 CA 2006 and that by virtue of that section alone, disregarding the provisions of the CPR, service had been effected. Neither counsel for the Claimants nor the Defendant had been able to locate any case in which section 1140 CA 2006 had previously been considered.
The material parts of section 1140 CA 2006 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.
Section 1141(1) CA 2006 goes on to state that “a “service address”, in relation to a person, means an address at which documents may be effectively served on that person.” Both section 1140 and 1141 CA 2006 are linked to the information recorded in the register of directors required by section 163 CA 2006 which state that the register must contain for each director a ‘service address’.
The Court held that section 1140 CA 2006 had been drafted in clear and unambiguous language and was explicit that it applied whatever the purpose of the document in question and that service was not restricted to purposes arising in connection with the relevant company. The Defendant was at liberty to specify in the register of these companies an address in the United Arab Emirates (where it was said he was now resident) but did not do so. If this had been done then the Claimants would then have had to comply with the provisions in the CPR for service out of the jurisdiction. The Court concluded that service had therefore been properly effected on 13 September 2013.
The important point to take from this decision is that it is vital that directors ensure that their details as recorded in company registers are up to date and to remember to make changes when required. A failure to do so leaves a director vulnerable to service being effected at a previous address without their knowledge and such service will be valid under section 1140 CA 2006 even if it does not meet the requirements of the CPR.