Council tax – Recovery – Bankruptcy – Appeal – Defendant local authority obtaining liability orders against claimant in respect of unpaid council tax – Claimant disputing liability for sums claimed – Defendants presenting bankruptcy petition against claimant – Court making bankruptcy order – Claimant appealing – Whether judge erring in law – Whether court wrongly failing to adjourn hearing of bankruptcy petition until conclusion of claimant’s appeal to Valuation Tribunal against liability orders – Whether appropriate case for setting side bankruptcy order – Appeal allowed
The claimant owned two properties in Bromley and Catford, one of which was subsequently divided and became two separately rateable properties. The defendant local authority issued a demand for £14,097.59 in respect of unpaid domestic council tax on the properties, pursuant to liability orders made by the magistrates’ court. When the claimant failed to pay, the defendants petitioned for her bankruptcy. The first hearing of the petition was adjourned because the claimant denied that she was liable for council tax as the properties were tenanted and the tenants were liable as the occupiers. After the adjournment, the claimant applied as a litigant in person to the magistrates’ court to set aside the liability orders.
The magistrates’ court responded to her application by letter but failed to inform the claimant that, if she wanted to challenge the substantive merits of the orders, she also had to appeal to the Valuation Tribunal under the section 16 of the Local Government Finance Act 1992. She only became aware of the necessity to appeal to the valuation tribunal a few days before the adjourned hearing of the bankruptcy petition at another hearing in Bromley Magistrates’ Court concerning further liability orders. To add to the claimant’s difficulties, a bankruptcy order was made at the adjourned hearing of the petition when the claimant’s legal representative missed the hearing due to a train delay. The court relisted the bankruptcy petition for another hearing but the district judge at that hearing declined to set aside the bankruptcy order. The claimant appealed against that decision.
The claimant contended that the judge should, at the very least, have adjourned the matter for more extensive argument than the time allowed at the further hearing and that a bankruptcy order should not have been made, in circumstances where the claimant’s appropriate remedy was by way of an appeal to the Valuation Tribunal.
Held: The appeal was allowed.
If a debtor had a bona fide appeal, or an application to set aside the judgment, in existence at the time when a petition came on to be heard, it was the invariable practice to adjourn the hearing of the petition until that application or appeal had been decided. The magistrates’ court had no jurisdiction to go into the merits of the liability order on an application to set it aside and that the aggrieved council tax payer had to appeal to the Valuation Tribunal if he or she wished the merits to be investigated. The issue before the judge at the hearing was whether the claimant’s intended appeal to the Valuation Tribunal was bona fide and substantial and whether, in the exercise of her discretion, she ought to have adjourn the bankruptcy petition in order to await the outcome of that appeal. The judge had not approached the matter on that basis. She had not realised that she should have been focussing on the appeal to the Valuation Tribunal rather than on the application to set aside to the magistrates court and she had never asked herself the question whether the intended appeal to the Valuation Tribunal was bona fide and why it had not yet been lodged. In those circumstances, the court’s discretion had to be exercised afresh in the light of all the circumstances. Provided that the claimant undertook to the court to prosecute with all reasonable expedition and diligence that appeal, together with any application to the Valuation Agency in respect of the registration of divided property as a rateable property; and not, without the prior written consent of the defendants or the leave of the court, to sell or otherwise dispose of any interest in any of the properties, otherwise than by way of arm’s length short term lettings which did not confer security of tenure, the court proposed to grant permission to appeal, allow the appeal, set aside the orders and adjourn the bankruptcy petition: Yang v Official Receiver [2013] EWHC 3577 (Ch) applied. Wiltshire Council v Piggin [2014] EWHC 4386 (Admin) followed. Muhammed v Robert [2014] EWHC 4800 (Ch) considered.
Per curiam: This case demonstrated the great uncertainty that existed around how the Magistrates’ Court and the County Court in bankruptcy should deal with the enforcement of domestic council tax liability orders. The area was a very important one for councils and council tax payers alike both of whom would benefit from greater certainty. The cases from which the court had derived considerable assistance (Wiltshire Council v Piggin and Yang v Official Receiver) should be more widely known than they appeared to be and the matter might benefit from the consideration of the Court of Appeal if possible. The court also questioned whether the Magistrates’ Court should not be referring litigants in person to bodies which offered free legal advice, so that the court itself could not be seen to be giving legal advice itself.
Rosana Baily (instructed by Direct Access) appeared for the claimant; Kavan Gunaratna (Lewisham London Borough Council) appeared for the defendants.
Eileen O’Grady, barrister
Click here to read transcript: Okon v Lewisham London Borough Council
