The Court of Appeal upheld a strike-out of a claim against a non-existent company and gave guidance on how an insurer of a dissolved company should proceed if faced with a claim without a concurrent application to restore.
Full judgment, dated 25 February 2020
A had pursued R for damages for noise-induced hearing loss but had failed to restore R to the register. R’s insurers applied for strike-out of the claim, which was granted. A appealed on the basis that the strike-out was wrong for a number of reasons. The court ruled that there could not have been valid service given that the company was non-existent at the time of service and of the hearing of the application and that, notwithstanding some difficulties surrounding R’s insurers having applied to the court at a time when R did not exist, the judge was entitled to consider and indeed order strike-out as part of his general case-management powers.
Simon Hughes, of this parish, appeared for the Respondent company.
The Appellant appealed the decision of a circuit judge to dismiss his appeal against the decision of DJ Etherington to strike out his claim against the Respondent for damages for noise-induced hearing loss.
The court began the judgment by raising a procedural issue, which was that although R had been struck off the register and dissolved on dates unknown to the court, and was so during the initial proceedings below, an application had since (and before the appeal before the circuit judge) been made to restore R to the register. The circuit judge was not informed of the same at the hearing before him. R was restored to the register on 5 February 2019.
The court then, from paragraph 7 onwards, gave the procedural background underlying the appeal. A purported to claim against R among other companies in 2017. They served the claim on R’s last known place of business. A letter was also written to the insurers for R averring that service could be retrospectively validated if R was restored to the register and giving notice of intention to apply to restore R. It specifically recorded that any application for strike-out by R would be met with evidence of an imminent application for restoration. A stay pending restoration was sought.
R’s insurers wrote back stating that as R was dissolved proceedings could not be served on them. However, they also purported to lodge an acknowledgment of service evincing an intention to contest jurisdiction on the basis that in the absence of a restoration of R the proceedings were a nullity. The correspondence accompanying the same purported to be based on instructions from R. Shortly afterwards, R’s insurers issued an application for strike out of A’s claim as an abuse of process and/or an order that there was no jurisdiction.
The application came before DJ Etherington, who took the position that the court would only allow a claim against a company that exists and that, given that there was no evidence of an imminent restoration to the register, a stay was inappropriate. Accordingly, he struck out the claim.
Before HHJ Rawlings it was argued that (i) the procedural requirements of CPR 11 had not been observed, so that any decision using those powers was wrong, and (ii) any strike-out on an application by a non-existent company must be wrong and that the decision was wrong in any event.
HHJ Rawlings found that the DJ had not decided the matter under CPR 11. He found that it was open to the court to exercise its case-management powers in that way regardless of any jurisdictional challenge where the purported Defendant didn’t exist, and no sensible steps had been taken to bring it into existence. His reasons are quoted in detail at para 19 of the court’s judgment, but are essentially that there was no evidence before the DJ that there were any steps being taken, or that there was any intention to take steps, to restore R to the register. In those circumstances strike-out was appropriate.
Before the Court of Appeal, A argued that the use of CPR 3.4 was essentially a backdoor means of challenging jurisdiction in a case where the procedural requirements of CPR 11 hadn’t been complied with. A relied on Hoddinott v Persimmon Homes (Wessex) Ltd.  EWCA Civ 1203 to that effect.
A also relied on Joddrell v Peaktone Ltd.  EWCA Civ 1035. In that case, the court of appeal had ruled that, as a restoration order has the effect that the company is deemed to have continued in existence as if it had never been dissolved, the restoration of the company retrospectively validated the issuing of a claim against it and the serving of documents on it notwithstanding that at the relevant time the company did not exist. Further, Munby LJ had opined, obiter, that the company’s challenge to the bringing of proceedings was a jurisdictional challenge that was required to be brought under CPR 11.
A further argued, again in line with submissions made in Peaktone but not decided by the court, that R had effectively submitted to the court’s jurisdiction by making its application under CPR 3.4.
The court, in responding to these arguments, pointed out that whatever the retrospective effect of restoring R to the register might be, the question for it was whether the orders below were made properly. At the time of those orders, R did not exist because it had not been restored .
Accordingly, at paragraph 31, the court found that there could not have been valid service on R because it did not exist at the time of service and had not been restored at the time the judges reached their decisions (so service could not have been retrospectively validated). Accordingly, both the arguments drawn from Peaktone were incapable of succeeding.
The only question for the court was therefore whether or not the DJ was entitled to strike out the claim under CPR 3.4 and whether he was correct to do so. The court pointed out that because R didn’t exist at the time of the application, there was no company to give its insurers authority to make said application and any authority under the contract of insurance may have lapsed at the time of dissolution. R submitted that its authority revived upon restoration, but the court considered that it was not necessary to decide the point for the purposes of the appeal.
The reason it so decided was that the DJ, regardless of any application, was entitled to consider how best to progress the claim before him in the exercise of his case management powers . He was therefore entitled to consider all the things he did consider, including whether or not to strike out A’s claim. Further, the reasons given by HHJ Rawlings for the strike-out were good ones that could not be faulted.
Accordingly, the appeal was dismissed.
The court then addressed two further matters. First, at para 36, the court gave guidance to insurance companies faced by the circumstances faced by R’s insurers here. The appropriate course, the court felt, would be to notify the claimant of the company’s dissolution and invite him/her to restore the company and apply to stay the main claim in the interim. If nothing was forthcoming, the insurers should write to the court asking for a stay of the court’s own motion and, if still nothing was forthcoming, eventually to apply for an order to strike out the proceedings.
Second, the court indicated that none of the costs of the proceedings should be pursued against A in person, given that they were occasioned entirely by his solicitors misguidedly pursuing a non-existent company without taking any steps to restore the same.