Bolsover District Council v Dennis Rye Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Elias,Lord Justice Mummery |
| Judgment Date | 14 May 2009 |
| Neutral Citation | [2009] EWCA Civ 372 |
| Docket Number | Case No: A2/2009/0058 |
| Court | Court of Appeal (Civil Division) |
| Date | 14 May 2009 |
[2009] EWCA Civ 372
Before: Lord Justice Mummery and
Lord Justice Elias
HHJ Cooke
Case No: A2/2009/0058
No 6721 of 2008
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BIRMINGHAM DISTRICT REGISTRY
MR PAUL JOSEPH (instructed by King & Brook) for the Appellant
MR JAMES MORGAN (instructed by Summers Nigh LLP) for the Respondent
Hearing date: 27 th March 2009
Lord Justice Mummery:
The application
This judgment is on an application for permission to appeal. As directed on 5 February 2009, the application was adjourned to an inter partes hearing. The application was made out of time. In the light of the applicant's explanation for delay there was no opposition to the grant of an extension of time.
At the end of the oral hearing the parties were informed that permission to appeal would be refused for reasons to be put in writing. The application raised points on the use of insolvency proceedings by local authorities in the case of companies from which council tax is due. The use of insolvency proceedings is a topic on which there has been recent media coverage, highlighting the extreme nature of the remedy and the high level of legal costs incurred. (Cases of personal bankruptcy for unpaid council tax are now reaching this court.) The winding up petition in this case was only one of a number of petitions based on unsatisfied statutory demands for unpaid council tax and presented by the local authority against various companies.
Although the appeal in this case has no real prospect of succeeding, the points taken by the applicant could crop up in other cases. They are worth noting for future reference and therefore this judgment should be treated as falling within the exception in para 6.1. of Practice Direction (Citation of Authorities) [2001] 1 WLR 346.
Background
The proposed appeal is by Dennis Rye Limited (the Company) against which the Bolsover District Council (the Council) presented a winding up petition on 29 February 2008. The petition was based on a statutory demand dated 10 January 2008 for payment of arrears of council tax in respect of various properties, including some called “New Terrace”, and late payment penalty charges. The demand totalled £16,846.26.
A succession of liability orders for the unpaid council tax had been made by the magistrates' court. The Company did not comply with the orders, or appeal against them, or take any steps to have them set aside. Where a liability order has been made against a company the amount due is deemed to be a debt for the purposes of section 122(1)(f) of the Insolvency Act 1986 (winding up of companies by the court for being unable to pay debts): regulation 49 of The Council Tax (Administration and Enforcement) Regulations 1992. As Lindsay J noted in Re Bydand Ltd [1997] BCC 915 at 918 liability orders are orders of the court like ordinary civil judgments. If a winding up petition is based on such orders the court will seldom look into them, or go behind them, in the absence of fraud, or in the absence of jurisdiction in the court that made the orders, or “some other truly compelling circumstance.”
In these winding up proceedings the Company disputed the debt demanded and stated that it was in a position to pay its debts, including the amount claimed on the winding up petition. It asserted a cross-claim that would exceed the balance of the amount claimed by the Council. It submitted that the petition should be dismissed and that the Council should pay the Company's costs in resisting it.
In his judgment on 6 November 2008 the judge, HHJ Cooke, rejected the Company's contention that it had a genuine and serious cross-claim against the Council. As the evidence of the cross-claim was insufficient to establish that it was genuine and serious, the judge disregarded it and found that the sum £4,852.25 was due from the Company to the Council.
Immediately after the judge's ruling the Company paid that sum to the Council. On 10 November 2008 the judge made an order for the substitution of supporting creditors, gave permission to amend the petition and directed re-advertisement of the petition. He also made an order that the Company pay 80% of the Council's costs on the basis that, although the Council had succeeded in establishing a debt which exceeded the insolvency threshold, it had taken two points on which it had lost. He refused to grant permission to appeal.
Company's case
The Company's case is that, contrary to the conclusion of the judge, it has a genuine and serious cross-claim against the Council for repayment of the sum of £8,085.59. After the presentation of the petition the Company paid the Council £10,775.37 on 13 May 2008. Next day the Company's solicitors put it to the Council that there was no real point in it continuing with the winding up petition. The Council did not agree, continued with the petition and established that it was owed £4,852.25 by the Company.
The Company's case on the cross-claim was that, in the sum of £10,775.37, there was mistakenly included £8,085.59. As it was paid under a mistake and overtopped the sum which the judge found was due from the Company to the Council, it was contended that the Company had a genuine and serious cross-claim for restitution. The judge ought to have dismissed the petition with costs instead of putting the Company in the position in which it had to pay the sum of £4,852.25 in order to avoid a winding up order and making an order against the Company to pay 80% of the costs.
The Company submitted that its mistake related to the relevant category of exemption from council tax for properties in New Terrace. It alleged that the properties were kept unoccupied, because they were effectively blighted in consequence of impending compulsory purchase orders. They fell within an exemption from council tax, namely Class G of the Council Tax (Exempt...
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