Agba v Luton Borough Council
| Jurisdiction | England & Wales |
| Judge | Mr Justice Choudhury |
| Judgment Date | 19 March 2020 |
| Neutral Citation | [2020] EWHC 1160 (Admin) |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 19 March 2020 |
| Docket Number | No. CO/2111/2019 |
[2020] EWHC 1160 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Mr Justice Choudhury
No. CO/2111/2019
THE APPLICANT did not attend and was not represented.
Ms E. Baden (instructed by Wilkin and Chapman LLP) appeared on behalf of the Respondent.
This is an appeal by way of case stated against a decision of District Judge Leigh-Smith in which the appellant, a bankrupt, was held to have no standing to challenge liability orders made against her in respect of unpaid Council Tax. The question identified by the District Judge for consideration by this court is this: can a party, being an undischarged bankrupt whose estate is now vested in the trustee in bankruptcy by virtue of s.306 of the Insolvency Act 1986, personally commence legal proceedings to challenge a liability order?
Factual Background
The appellant owns the freehold to a residential property 2 at Angus Close, Luton, LU4 0NX (“the property”). The relevant authority for the purposes of Council Tax in relation to the property is the respondent. Between 16 May 2008 and 28 June 2016, the respondent obtained seven liability orders against the appellant in respect of unpaid Council Tax. These orders were for periods commencing on 1 April 2008 and ending on 31 March 2017.
Further to a statutory demand, the respondent presented a bankruptcy petition against the appellant on 30 December 2016 in respect of the sums due under the liability orders. This petition was deemed served on 3 March 2017, and the bankruptcy order was made against the appellant on 29 March 2017. Trustees in bankruptcy were appointed on 11 May 2017. The appellant contended that she did not receive the summons relating to the liability orders and that she had had no notice of the hearings before the Magistrates' Court. The appellant states that she was out of the country during the relevant period and that she first found out about the bankruptcy order upon her return to the UK at some point in 2018.
On 8 June 2018, the appellant made an application to set aside the liability order. That was dated 29 March 2017. The grounds of that application were that the respondent had obtained liability orders pursuant to summonses that had not been served properly and that this amounted to a substantial procedural error, defect, or mishap such that the liability orders, or some of them, should be set aside. That application came before the District Judge on 7 November 2018. As at that stage, the District Judge considered that the exact nature of the appellant's case remained unclear in that she had not specified which liability order or orders should be set aside.
It was an agreed fact before the District Judge that, at the time of the application, the appellant remained an undischarged bankrupt, that the trustees in bankruptcy were two individuals of KPMG LLP, that the trustees were aware of the appellant's application, and that the trustees did not support the application and played no part in the proceedings. The appellant was represented by counsel before the District Judge, as was the respondent. The respondent's counsel made a preliminary submission that the appellant lacked standing to apply for the liability orders to be set aside. Reliance was placed on s.306 of the Insolvency Act 1986 (“the 1986 Act”) which provided that a bankrupt's estate vested in the trustee in bankruptcy immediately upon his appointment taking effect, and it was submitted that the authorities clearly stated that in those circumstances the bankrupt had no locus standi in an action to set aside the liability orders.
The appellant contended that she did have standing and submitted that the respondent's approach would mean that the appellant was effectively left without a remedy in respect of a matter, namely the bankruptcy, which directly impacted upon her personal reputation and credit worthiness. Having been referred to the relevant legislation and to the authorities, the District Judge found that, in circumstances where the appellant remained an undischarged bankrupt, the relevant cause of action was one that vested in the trustee and the appellant therefore lacked standing to pursue the application to set aside the liability orders in her own name.
The appellant appeals against that decision by way of case stated. As I have said above, the question identified for this court by the District Judge was whether an undischarged bankrupt, whose estate is now vested in the trustee in bankruptcy by virtue of s.306 of 1986 Act, can personally commence legal proceedings to challenge a liability order.
Legal Framework
By s.267 of the 1986 Act, a creditor's petition for bankruptcy must be in respect of one or more debts owed by the debtor, and the petitioning creditor or each of the petitioning creditors must be a person to whom the debt or, as the case may be, at least one of the debts, is owed.
The Council Tax (Administration and Enforcement) Regulations 1992 (“the 1992 Regulations”) deal with the enforcement of Council Tax debt and the making of liability orders. Regulation 49 of the 1992 Regulations provides that,
“Where a liability order has been made and the debtor against whom it was made is an individual, the amount due shall be deemed to be a debt for the purposes of section 267 of the Insolvency Act 1986”.
Accordingly, the respondent was entitled to petition for bankruptcy in respect of the liability orders arising from the unpaid Council Tax in respect of the property.
Section 306 of the 1986 Act, so far as is relevant, provides:
“(1) The bankrupt's estate shall vest in the trustee immediately on his appointment taking effect or, in the case of the official receiver, on his becoming trustee.
(2) Where any property which is, or is to be, comprised in the bankrupt's estate vests in the trustee (whether under this section or under any other provision of this Part), it shall so vest without any conveyance, assignment or transfer.”
By s.283(1) of the 1986 Act, a bankrupt's estate, for the purposes of this part of the 1986 Act, comprises:
“(a) all property belonging to or vested in the bankrupt at the commencement of the bankruptcy, and
(b) any property which by virtue of any of the following provisions of this Part is comprised in that estate or is treated as falling with the preceding paragraph…”
Section 436 of the 1986 Act defines “property”, for these purposes, as follows:
“‘Property’ includes money, goods, things in action, land and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent, arising out of, or incidental to, property.”
The question of standing to pursue a claim or appeal when an undischarged bankrupt is involved was considered by the Court of Appeal in the case of Heath v Tang [1993] 1 WLR 1421. At 1423 A to 1423 H, Hoffmann LJ, having considered the authorities, said as follows:
“The property which vests in the trustee includes ‘things in action:’ see section 436. Despite the breadth of this definition, there are certain causes of action personal to the bankrupt which do not vest in his trustee. These include cases in which ‘the damages are to be estimated by immediate reference to pain felt by the bankrupt in respect of his body, mind, or character, and without immediate reference to his rights of property:’ see Beckham v Dale (1849) 2 H.L.Cas. 579, 604, per Erle J and Wilson v. United Counties Bank Ltd. [1920] A.C. 102. Actions for defamation and assault are obvious examples. The bankruptcy does not affect his ability to litigate such claims. But all other causes of action which were vested in the bankrupt at the commencement of the bankruptcy, whether for liquidated sums or unliquidated damages, vest in his trustee. The bankrupt cannot commence any proceedings based upon such a cause of action and if the proceedings have already been commenced, he ceases to have sufficient interest to continue them. Under the old system of pleadings, the defendant was entitled to plead the plaintiff's supervening bankruptcy as a plea in abatement. Since the Supreme Court of Judicature Act 1875 (38 & 39 Vict. c. 77), the cause of action does not abate but the action will be stayed or dismissed unless the trustee is willing to be substituted as plaintiff: see Jackson v. North Eastern Railway Co. (1877) Ch.D. 844. An illustration of the incapacity of the bankrupt to bring proceedings is Boaler v. Power [1910] 2 K.B. 229 in which an action brought by the bankrupt had been dismissed with costs. The bankrupt then commenced another action to have the judgement set aside on the ground of fraud. The successful party presented a bankruptcy petition based on the unsatisfied order for costs and the bankrupt was adjudicated on the petition. The trustee declined to proceed with the...
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