Council tax – Liability orders – Enforcement by winding-up order – Respondent council presenting winding-up petitions against appellant companies in respect of liability orders including some made more than six years previously – Whether petitions constituting actions to recover sums recoverable by virtue of enactment so as to be time-barred under section 9(1) of Limitation Act 1980 – Respondents obtaining declaration that petitions not so barred – Appeal dismissed
The appellant companies owned houses in the area for which the respondent councils were the local authorities. The respondents obtained liability orders in the magistrates’ court against the appellants in respect of unpaid council tax on those properties, but the tax remained unpaid. The respondents therefore sought to enforce the liability orders by presenting winding-up petitions against the appellants.
The appellants applied to strike out the petitions on various grounds, one of which was that some of the liability orders had been made more than six years before the date of the petitions and that any enforcement action was therefore statute-barred under section 9(1) of the Limitation Act 1980, which applied a six-year time limit to an action to recover “any sums recoverable by virtue of any enactment”. The appellants contended that unpaid council tax was recoverable by virtue of an enactment within the meaning of section 9 and that a winding-up petition constituted an “action” within that section.
The judge held that the petitions were unobjectionable in respect of the council tax that had fallen due within the six-year period; the appellants paid those sums. Since the only amounts then outstanding were those for which a limitation defence was asserted, the judge dismissed the petitions, holding that winding-up proceedings were not the correct forum for resolving the limitation issue. The respondents brought proceedings for declaratory relief on that issue; they obtained a declaration that the passage of six years after the making of the liability orders did not prevent them from proceeding by way of a winding-up petition. The appellants appealed.
Held: The appeal was dismissed.
On a proper application of the relevant legislation, an application for a winding-up petition to enforce a liability order in respect of unpaid council tax was not subject to a six-year limitation period. The regime of the Local Government Finance Act 1992 and Council Tax (Administration and Enforcement) Regulations 1992 was comprehensive with regard to enforcement of the obligation to pay council tax. Section 9(1) of the 1980 Act did not apply in respect of that obligation. It was not possible to bring a civil claim in the county or High Court to recover unpaid council tax and, instead, regulation 34(3) of the 1992 Regulations imposed an equivalent six-year restriction on obtaining a liability order in respect of such sums. Although unpaid council tax could count as a debt for the purposes of the insolvency legislation even where no liability order had been made, it would not be a valid debt for that purpose, by analogy with the 1992 Regulations, if it were no longer possible to apply for such an order because six years had elapsed since the tax had fallen due. Accordingly, the regulation 34(3) restriction either replaced section 9(1) of the 1980 Act or rendered it superfluous in respect of council tax. The six-year time bar therefore applied at the outset, at the point of the application for a liability order, and there was no further time bar on proceedings to enforce such an order. The sums to which such proceedings related were not recoverable by virtue of an “enactment”: the liability arose not by virtue of the obligation to pay council tax under the 1992 Act and Regulations but by virtue of the liability orders, which were analogous to a court order in an ordinary civil judgment: Central Electricity Generating Board v Halifax Corporation [1963] AC 785 distinguished; Dennis Rye Ltd v Bolsover District Council [2009] EWCA Civ 372; [2009] 4 All ER 1140 and Yorkshire Bank Finance Ltd v Mulhall [2008] EWCA Civ 1156; [2008] 3 EGLR 7; [2008] 50 EG 74 applied.
That conclusion prevented the creation of an anomalous situation by comparison with non-domestic rates, in respect of which court proceedings could be brought to recover unpaid sums, and, if such proceedings were brought within six years of the sums falling due, no further limitation period would apply to the enforcement of any judgment so obtained by means of a charging order or winding-up petition: Lowsley v Forbes (t/a LE Design Sevices) [1999] 1 AC 329 and Ridgeway Motors (Isleworth) Ltd v ALTS Ltd [2005] EWCA Civ 92; [2005] 1 WLR 2871 applied.
Accordingly, the presentation of a winding-up petition in respect of sums due under liability orders for unpaid council tax was not within the scope of section 9(1) of the 1980 Act and the respondents had been entitled to the declaration in their favour.
David Lock (instructed by Brooks Solicitors, of Chesterfield) appeared for the appellants; James Morgan (instructed by Summers Nigh Law LLP, of Little Brington) appeared for the respondents.
Sally Dobson, barrister
