David Norman Kaye v South Oxfordshire District Council and Another
| Jurisdiction | England & Wales |
| Judge | Judge Hodge QC |
| Judgment Date | 06 December 2013 |
| Neutral Citation | [2013] EWHC 4165 (Ch) |
| Date | 06 December 2013 |
| Court | Chancery Division |
| Docket Number | Claim No. 4115 of 2013 |
[2013] EWHC 4165 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MANCHESTER DISTRICT REGISTRY
Manchester Civil Justice Centre
1 Bridge Street West
Manchester
M60 9DJ
His Honour Judge Hodge QC
Sitting as a Judge of the High Court
Claim No. 4115 of 2013
Counsel for the Applicant: Mr David Mohyuddin
Counsel for the First Respondent: Mr Jonathan French
No appearance by the Second Respondent
APPROVED JUDGMENT
This is my extemporary judgment in the matter of Certain Exhibitions Limited, number 4115 of 2013. I have to decide a short but important point of law concerning the incidence of business rates in a company voluntary arrangement. Although the instant case relates to a company voluntary arrangement, it seems to me that similar considerations would apply in any form of corporate insolvency, including liquidation. This decision is, therefore, of potential interest to all insolvency practitioners and billing authorities for business rates. It is also of potentially wider interest because, on the evidence, it would appear that billing authorities have been in receipt of advice that the arrears of business rates outstanding for the purposes of insolvency are to be treated in the same way as arrears of council tax, and that, in both cases, the debt provable in the insolvency is that due up to the date of the insolvency event, unless the debtor has previously defaulted, in which case it is the debt for the whole of the relevant financial year, that is considered to be due, and to become payable and provable in the insolvency. It is the correctness of that view which falls for decision by this court.
The present application was issued by Mr David Norman Kaye, in his capacity as the supervisor of a company voluntary arrangement, on 18 th October 2013. The respondents to the application are: first, the South Oxfordshire District Council as the relevant billing authority; and, secondly, the company itself, Certain Exhibitions Limited. The application is supported by a short witness statement from Mr Joseph Oliver Byrne, dated 18 th October 2013, together with exhibit JOB1, which exhibits all the relevant documentation, including the applicable company voluntary arrangement. The applicant is represented by Mr David Mohyuddin (of counsel), instructed by Freeth Cartwright, the firm in which Mr Byrne is a solicitor and partner. The first respondent, South Oxfordshire District Council, is represented by Mr Jonathan French (also of counsel), who is instructed by the district council itself. The second respondent has played no part in the hearing of this application.
The application first came on for hearing in the applications list in Manchester before me on 1 st November 2013. It was adjourned, at the request of the first respondent, to the applications list on the following Friday, 8 th November, again before me, due to the shortness of service of the papers on the first respondent. Before the matter could come on for hearing in the following week's applications list, the active parties to the application had sensibly agreed the terms of a further order adjourning the effective hearing to come on as an application by order because it was anticipated that the arguments required might take longer than the time available in the ordinary applications list.
In fact, due to the comprehensive nature of both counsel's written skeleton arguments, which I have had the opportunity of pre-reading, the hearing before me has taken less than an hour. Mr Mohyuddin has opened the application, identifying the issue before the court in a neutral fashion, as befits the role of the supervisor of a company voluntary arrangement; and Mr French, for the respondent billing authority, has addressed me even more briefly, again maintaining a neutral and non-partisan stance. Both counsel have sought to ensure that the relevant legislation and case law authority have been put before the court in an entirely neutral manner. I am satisfied that I have had full and appropriate argument on the point.
The background to the present application can be quite shortly stated. The application notice itself seeks directions as to the level that the district council, as the relevant billing authority, should be allowed to prove for within the company voluntary arrangement and, consequently, whether the full amount of the outstanding non-domestic rates due for the year 1 st April 2013 to 31 st March 2014 is caught within the terms of the voluntary arrangement, so as to preclude the billing authority from taking any enforcement action in respect of the same against the company. In summary, the supervisor seeks a direction as to the amount for which the claim of the first respondent district council in respect of non-domestic rates is bound by the CVA.
The second respondent company is an exhibition stand and design company which operated from premises within the area of the South Oxfordshire District Council. On 21 st April 2013 a fire started in neighbouring warehouse premises to the company's storage facility which completely destroyed all of the company's property, together with some clients' material. The company has a substantial claim in respect of the damage caused by that fire. However, the disruption to the company's business activities caused by the fire led it to enter into a company voluntary arrangement. Non-domestic rates (or business rates) were payable in respect of the company's premises.
On 12 th March 2013, the first respondent district council issued a notice in respect of non-domestic rates (or business rates) for the company's workshop and premises. It set out a calculation in respect of business rates for the year from 1 st April 2013 to 31 st March 2014 in the total sum of £25,905. Accompanying that rates bill was a notice and direct debit confirmation which stated that, in accordance with the Local Government Finance Act 1988, it was the company's statutory right to pay by instalments. Details were set out of the payments that would be made under the company's direct debit arrangement with the council. That arrangement provided for a single payment of £2,586 to be made on 15 th April 2013, and for nine further payments, each of £2,591, to be made at monthly intervals on the 15 th day of each month, starting on 15 th May 2013 and ending on 15 th January 2014.
The company entered into a voluntary arrangement at a meeting of creditors held on 10 th July 2013. The proposal was accepted by creditors at a meeting on that day, and ratified by the members of the company in general meeting on the same day. A report on the meeting of creditors was signed by Mr Kaye, the chairman of the meeting and supervisor of the voluntary arrangement, on 11 th July 2013.
It would appear that on 11 th July 2013 a reminder notice was addressed to the company alerting it to the fact that the monthly instalments due on 15 th June and 15 th July had not been paid and that unless the outstanding amount was paid by 21 st July 2013, the full balance for the 2013 to 2014 charging year would become due. After a further seven days, legal proceedings were threatened. That notification was not apparently received by the applicant until after the issue of the present application.
The council submitted a claim in the voluntary arrangement for the sum of £1,918.26 for the period 1 st April to 10 th July 2013. Mr Kaye, the supervisor and applicant, wrote to the district council on 25 th July questioning how that sum had been calculated and observing that the district council's claim should be for the full year's business rates. The reason for that was said to be that the full year's rates had fallen due on 1 st April 2013, and the full year liability should, therefore, rank as an unsecured creditor in the company voluntary arrangement.
The district council's response to that, on 29 th July 2013, was to enclose the council's proof of debt for the balance of £1,918.26, covering a period of outstanding business rates from 1 st April to 9 th July, when the company entered into the CVA. Details of the calculation were given. The supervisor was advised that the district council's claim for the period was correct as although the annual bill was issued in April, full payment was not then required, and the ratepayer was given ten statutory instalments to clear the balance. As those instalments were still in place at the date of the company's CVA, the amount due was said to be only up until that date.
The supervisor responded on 13 th August, stating that whilst he understood the arithmetic of the district council's calculation, he did not agree with its basis. He asked, rhetorically, whether it was not the case that business rates for the 2013 to 2014 year fell due for payment on 1 st April 2013. He understood that, by concession, the rates payable might be split over ten instalments throughout the year; but that was said not to detract from the fact that the rates had fallen due on 1 st April 2013. The situation was said to be, in principle, no different from that of any other creditor. If, for example, goods had been supplied prior to the CVA then, absent any retention of title claim, the full debt was said to rank as an unsecured creditor within the CVA, and the company would be entitled to retain the goods. It was said that the same would be true of the supply of services, or even in the treatment of taxation relating to a period ending prior to the CVA. It might well be that the district council's pro rata...
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Prezzo Investco Ltd
...it is subject from the beginning of that year (1 April) in respect of the entire year (see Kaye v South Oxfordshire District Council [2013] EWHC 4165 (Ch) at [55] and, in a CVA context, Lazari Properties 2 Ltd v New Look Retailers Ltd [2021] Bus LR 915. I accept that the same approach woul......
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High Court Decision On Business Rates And Provable Debts In CVAs
...Arrangement are provable debts. In the case of Kaye v (1) South Oxfordshire District Council and (2) Certain Exhibitions Limited [2013] EWHC 4165 (Ch), it fell to be decided whether the full amount of non-domestic rates should be a provable debt within the company voluntary arrangement (CVA......