William Shirley considers the decision in Orexim Trading Ltd v Mahavir Port and Terminal Private Ltd [2018] EWCA Civ 1660 confirming that an Insolvency Act 1986 section 423 claim may be served outside the jurisdiction on a foreign defendant.
In July this year the Court of Appeal held that paragraph 3.1(20)(a) of Practice Direction 6B of the Civil Procedure Rules (“CPR”) provides the ‘jurisdictional gateway’ for service out of the jurisdiction of a claim under section 423 of the Insolvency Act 1986 (“IA 1986”).
Section 423 IA 1986 deals with transactions at an undervalue that were intended to defraud creditors. If the Court is satisfied that such a transaction was entered into for the purpose of putting assets beyond the reach of a person who is claiming against him or otherwise prejudicing the interests of such a person in relation to the claim which he is making or may make, then the Court has wide powers under section 425 IA 1986 to undo the transaction.
The Court confirmed the extra-territorial effect of section 423 and held that it conferred on the Court the power to make orders against persons or property outside England and Wales, subject to the Court being satisfied that there is a close enough connection with England and Wales. The Court held that the degree of connection between the claim and England and Wales should be considered at the stage of considering whether to permit service out of the jurisdiction.
In addition, there were 2 further requirements to be proven being that the claimant must satisfy the Court that the claim has a reasonable prospect of success (CPR Part 6.37 (1)) and the Court must be satisfied that England and Wales is "the proper place" to bring the claim (CPR Part 6.37 (3)).
On the facts of this case, the Court considered that the degree of connection between the claim and England and Wales was too tenuous and concluded that permission should not have been given under the ‘jurisdictional gateway’. The factors taken into account by the Court included, inter alia, that none of parties were incorporated or carried on business in England and Wales and the impugned transactions all took place outside the jurisdiction.
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