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Claims under Section 423 of the Insolvency Act 1986 – Court of Appeal rules on service out of the jurisdiction

In the recent decision of Orexim Trading Limited v Mahavir Port and Terminal Private Limited1, the Court of Appeal has ruled that the Court does have power to permit service of a claim under section 423 of the Insolvency Act 1986 outside England and Wales. However, in the circumstances of this case, the Court of Appeal declined to exercise its discretion to grant permission to serve the claim form outside the jurisdiction. HFW acted for the successful First Respondent, Mahavir Port and Terminal Private Limited (MPT).


The case concerned proceedings brought by Orexim Trading Limited (Orexim), a Maltese company, against MPT and Zen Shipping and Ports India Private Limited (Zen), both of which are Indian companies, and Singmalloyd Marine (S) Pte Limited (Singmalloyd), a Singaporean company. Orexim issued a claim for alleged breach of a settlement agreement (the Damages Claim). Orexim also alleged that the sale of a vessel by MPT to Singmalloyd and an on-sale by Singmalloyd to Zen was intended to put the assets of MPT beyond the reach of enforcement and claimed relief setting aside the sale under section 423 (the Section 423 Claim) and/or declaring that the sale of the vessel was a sham (the Declaration Claim).

MPT and Zen issued applications challenging the jurisdiction of the Court to hear the Section 423 Claim and the Declaration Claim. No challenge was brought in respect of the Damages Claim, to which Zen was not party, as the relevant settlement agreement contained a choice of English law and jurisdiction.

At first instance HHJ Waksman QC, sitting as a High Court judge, held that section 423 did not fall within the jurisdictional gateway in PD6B paragraph 3.1(20)(a), which permits service of a claim with the permission of the Court where the claim is made "under an enactment which allows proceedings to be brought and those proceedings are not covered by any of the other grounds referred to in this paragraph". The judge held that, in order to fall within this paragraph, the relevant enactment must indicate on its face that it is expressly contemplating proceedings against persons who are not within the jurisdiction and section 423 did not do so. The judge also indicated that, had the questions arisen, he would have held that the Section 423 Claim and the Declaration Claim had a reasonable prospect of success and that England was the proper place to hear those claims.

The decision of the Court of Appeal

The Court of Appeal held that the Court does have power under PD6B paragraph 3.1(20)(a) to permit service of a section 423 claim outside England and Wales and that paragraph 3.1(20)(a) is not a partial successor to RSC order 11, rule 1(2)(b). The consequences of a claim coming within this gateway will not necessarily result in service outside England and Wales. A two-stage approach is to be used, as the Court must still consider whether to grant permission. This is a strong point against implying any restrictions into the ordinary meaning of the gateway, which is to be construed in a neutral manner.

The Court must consider whether the claim has a real prospect of success and whether England and Wales is "the proper place" to bring the claim. On the question of whether the claim had a real prospect of success, the Court of Appeal considered that it was appropriate to respect the conclusions of the judge at first instance. However, in the case of a claim under section 423 with a foreign element there must, in addition, be a sufficient connection between the defendant and England and Wales. The breadth of the potential scope of section 423 emphasises the importance of this question.

In the present case, there was insufficient connection with England and Wales for the Court to give permission to serve the claim out of the jurisdiction. Furthermore, the Court of Appeal held that England and Wales was not "the proper place" to bring the claim in accordance with CPR 6.37(3). Where a claimant seeks to persuade the Court to grant permission to serve proceedings outside of the jurisdiction, the burden of proof rests on the claimant rather than the defendant and that burden is only discharged if the claimant shows that England and Wales is not only the appropriate forum, but that this is clearly so. It is not enough that there is a serious issue to be tried. In the present case, in addition to all of the factors considered in determining whether there was a "sufficient connection", the evidence suggested that England and Wales was not "the proper place" to bring the Section 423 Claim. The Court of Appeal therefore declined to exercise its discretion and refused permission to serve out of the jurisdiction on the basis that the Section 423 Claim did not have a sufficient connection to England and Wales and the jurisdiction was not "the proper place" to bring the claim.


The Court of Appeal's decision provides clarity on the interpretation of PD6B paragraph 3.1(20)(a) and the circumstances in which a claim under section 423 can be brought against defendants located outside England and Wales, helping to rationalise the conflicting authorities and explain the purpose and origin of the relevant rules. A claim under section 423 will be a useful tool for a claimant pursuing a defendant who has hidden assets or tried to put them out of reach of its creditors.

However, the case also serves as a useful reminder that it is not enough that the claim merely falls within a jurisdictional gateway – where the Court's permission is required to serve the claim out of the jurisdiction, the exercise of the Court's discretion is subject to important safeguards and the claim may not be served out as of right. The claim must have a real prospect of success. In addition, where there is a foreign element, there must be a sufficient connection with England and Wales. Finally, the claimant must show that England and Wales is "the proper place" to bring the claim. In the present case, Orexim had failed to fulfil these requirements and the Court therefore refused to exercise its discretion.

For more information, please contact the authors of this briefing:

Stephen Drury
Partner, London
T +44 (0)20 7264

Andrew Williams
Partner, London
T +44 (0)20 7264 8364

Michael Buffham
Associate, London
T +44 (0) 20 7264 8429


  1. [2018] EWCA Civ 1660

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