Bankruptcy petition – Application to dismiss – Miscarriage of justice – Petition presented by respondent council against appellant based on statutory demand for amounts due under two liability orders in respect of business rates – Appellant claiming sums not due because not in rateable occupation of premises during relevant period – Whether miscarriage of justice such that court entitled to go behind liability orders – Permission to appeal refused
In April 2007, the appellant took a five-year lease of premises that comprised two commercial units and 125-parking spaces. Three months later, he granted a written licence of the units to a company, of which he was the sole director and shareholder, for a term ending one day before the expiry of the lease.
Between 2007 and 2008, the respondent council sent the appellant two demands for business rates on the premises for the rating years 2007-08 and 2008-09. These went unpaid and the respondents obtained two liability orders for £154,817 and £173,430; the appellant attended the hearing for the second order but, on the advice of the respondents, did not dispute liability. Meanwhile, the appellant’s landlord forfeited the lease for non-payment of rent. The respondents obtained a statutory demand for the sums in the liability orders, less a deduction representing rates for the period after the forfeiture of the lease; the appellant’s application to have this set aside was unsuccessful.
The respondents then presented a bankruptcy petition against the appellant based on his failure to comply with the statutory demand. The appellant applied to dismiss the petition, arguing that the sums it represented were not due because his company, not him, that had been in rateable occupation of the premises during the relevant period. Dismissing that application, the district judge found that the appellant had shared occupation of the premises with the company, such that he was jointly and severally liable with it for the rates.
The appellant applied for permission to appeal. He contended that a miscarriage of justice had occurred such that the court was entitled to go behind the liability orders and consider whether the sums in question were due. He argued that: (i) he had effectively been told not to dispute liability in respect of the second order; and (ii) the liability order process was not a full judicial process and, once such an order had been made, the methods of challenging it were limited.
Held: Permission to appeal was refused.
It was not appropriate for a bankruptcy court to go behind the court order on which the petition was founded save in limited circumstances, including fraud, collusion or a miscarriage of justice. To do so, the court would have to be shown evidence that had there been a properly conducted judicial process, it would have been found, or would likely have been found, that nothing was in fact due to the claimant: McCourt v Baron Meats Ltd [1997] BPIR 114 applied.
There had been no miscarriage of justice in the instant case such as to justify going behind the liability orders. Such orders could be made only after an elaborate procedure had been followed and after the defendant had been given an opportunity to explain why he had not paid. The court could then make the order if it were satisfied that the sum had become payable and had not been paid. If a defendant thought that the order had been wrongly made, it was, in principle, entitled to challenge that order in the High Court either by way of judicial review or by an appeal by way of case stated. Although the liability order procedure was of a relatively summary nature, it had the basic hallmarks of a judicial process and could not be stigmatised as being inherently unfair. The appellant had taken no active steps to present his case to the magistrates’ court in the course of the liability order applications, nor had he challenged either of the orders. The appropriate procedure for obtaining liability orders had been followed and he had had the opportunity to present his case at both hearings. His complaint seemed to be that the liability orders were wrong in substance, but, in the absence of any effective opposition from him, it was unsurprising that the magistrates’ court had not investigated the matter. The appellant was an experienced businessman, who had had the assistance of a professional adviser. He could have opposed the second order; there was nothing to suggest that he had felt pressured by the respondents to do so. Moreover, any impropriety in that respect could not affect the first liability order. Accordingly, there were no grounds for granting permission to appeal because an appeal had no real prospect of success.
Jonathan Titmuss (instructed by BTMK Solicitors LLP, of Southend-on-Sea) appeared for the appellant; Thomas Evans (instructed by Sharpe Pritchard) appeared for the respondents.
Sally Dobson, barrister
