Okon v London Borough of Lewisham
| Jurisdiction | England & Wales |
| Judge | Mr. Robin Hollington |
| Judgment Date | 18 April 2016 |
| Neutral Citation | [2016] EWHC 864 (Ch) |
| Docket Number | Appeal Ref. CH/2015/0302 |
| Court | Chancery Division |
| Date | 18 April 2016 |
[2016] EWHC 864 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM THE COUNTY COURT AT CROYDON
No. 0775 of 2014
Mr. Robin Hollington QC sitting as a Deputy Judge of the Chancery Division
Appeal Ref. CH/2015/0302
In Bankruptcy
Re: Nkoyo Okon
Representation: Ms. Rosana Bailey of Counsel for the Applicant
Mr. Kavan Gunaratna of Counsel for the Respondent
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Hearing date: 9–10 February 2016
On 2 June 2015 at 11.34am a bankruptcy order was made against the Applicant, Ms. Okon, upon a petition presented by the Respondent, the London Borough of Lewisham, on 14 October 2014 in the absence of Ms. Okon or anyone representing her. In fact, Ms. Okon had instructed Miss Bailey of Counsel to appear for her on that occasion by direct access but due to a breakdown in communication at court Miss Bailey's message, that she had been delayed due to problems with the trains, did not reach the Court before it made the order. The court quite rightly relisted the matter for a further hearing and it was entered into the general list on 9 June 2015. At that hearing, District Judge Bishop ("the Judge") declined to set aside the bankruptcy order, on the ground that, having heard Miss Bailey's submissions and those advanced by the Respondent's agent, there was no arguable basis upon which the making of a bankruptcy order could be opposed. I have been provided with transcripts of that hearing, of both the argument and the judgment delivered by the Judge ("the Judgment").
Ms. Okon has applied for permission to appeal against that decision, on the grounds (in summary) that, very little time being available for the hearing on 9 June 2015, the District Judge should at the very least have adjourned the matter for more extensive argument than time allowed at that hearing, and that a bankruptcy order should not have been made.
By order dated 7 July 2015, Mrs. Justice Rose stayed the bankruptcy order pending the determination of this application for permission to appeal.
It is common ground between the parties that, if minded to grant permission to appeal, I should treat the hearing before me as that of the appeal itself.
I have had the considerable advantage, not enjoyed by the Judge, of having had over a day's oral argument in this matter from Counsel for both sides, extensive supplemental written submissions (in addition to earlier skeleton arguments which, for the reasons set out below, could have been more helpful), and time to consider my judgment.
The bare bones of this dispute are as follows. The Applicant owned two properties, 18 Hillbrow Road, Bromley, and 298 Southend Lane, Catford. The first property was subsequently divided so that a separately rateable property, 18A Hillbrow Road, came into existence. The Respondent's case is that the Applicant owes £14,097.59 in respect of unpaid domestic council tax on these three properties. The Applicant's case is that she owes nothing, because the properties were tenanted, so that the tenants were liable for the council tax, and that in any event 18A Hillbrow Road had ceased to be a separately rateable property.
The sum claimed by the Respondent is the total of a number of Liability Orders made by the Bromley and Greenwich Magistrates respectively in respect of the three properties. These Orders are set out in the "Particulars of Debt" section of the statutory demand dated 21 July 2014, which was served at the beginning of August 2014. The four Liability Orders in respect of 298 Southend Lane totalled £2,448 67, were made between March 2009 and January 2014, and relate to the years 2008/09, 2009/10, 2010/11 and 2013/14. The five Liability Orders in respect of 18 Hillbrow Road totalled £8,158.47, were made between February 2012 and May 2014, and relate to the years 2009/10, 2011/12, 2012/13, 2013/14 and 2014/15. The four Liability Orders in respect of 18A Hillbrow Road totalled £3,490.45, were made between October 2010 and May 2014, and relate to the years 2011/12, 2012/13, 2013/14 and 2014/15.
How did it come about that so many Liability Orders were made against the Applicant without any direct challenge from her to them, either after the proceedings for them had been commenced or once they had been made, bearing in mind that notice of the proceedings and of the making of the orders would have been sent to the properties in question? In my view, this is a significant question in this appeal, which I will have to consider. As appears from the statutory framework for domestic council tax, which is contained in the Local Government Finance Act 1992 ("the 1992 Act") and The Council Tax (Liability for Owners) Regulations 1992 made under it ("the 1992 Regulations"), Liability Orders have very important consequences and are not to be taken lightly. This is because regulation 49(1) of the 1992 Regulations provides:
"49.—Insolvency
(1) 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 (grounds of creditor's petition)."
To return to the bare bones of this dispute, the Respondent presented its bankruptcy petition against the Applicant on 14 October 2014, returnable on 3 February 2015. The Respondent was represented by an agent and Miss Bailey appeared for the Applicant. It appears that the petition was adjourned until 2 June 2015. The Applicant says that it was adjourned for the purpose of enabling her to apply to the appropriate Magistrates Court to set aside the Liability Orders: see paragraph 2 of her 2 nd witness statement dated 2 June 2015. The order itself does not record this purpose. The Respondent says that the petition was adjourned: para. 16 of Mr. Saver's affidavit dated 26 January 2016. Mr. Sayer is an employee of the Respondent.
In any event, the Applicant's next step was to apply in person to the Bromley Magistrates' Court to set aside the Liability Orders. Her witness statement dated 25 February 2015 sets out at length her case why she was not liable for the council tax, which was the subject matter of the Liability Orders. And she received in response a letter dated 17 March 2015 from the Administration Centre for Bexley/Bromley/Greenwich, Bromley Magistrates Court. In that letter the court referred her to the case of R. (on the application of Brighton & Hove City Council) v. Hamdan [2004] EWHC 1800 (Admin) ("Hamdan") as authority for the following:
"[it] gave clear guidance that a decision to set aside a liability order should only be made in the most exceptional cases and that the following would be the grounds on which an application could be made.
(l) That there is a genuine and arguable dispute as to the defendant's liability for the rates in question
(2) The order was made as a result of a substantial procedural error, defect or mishap
AND
(3) The application to the justices for the order to be set aside is made promptly after the defendant learns that it has been made or has notice that an order may have been made."
This letter is a precis of paragraph 31 of the judgment of Stanley Burnton J (as he then was) in the Hamdan case but it missed the subtlety of the distinction between the ground for setting aside, i.e. procedural defect and promptness, and the condition precedent, namely arguability on the merits, and misdescribed the condition precedent as a ground for setting aside:
".. That there is a genuine and arguable dispute as to that liability is a necessary condition for a decision by justices to set aside a liability order, but it is not a sufficient condition. The power of a magistrates' court to set aside a liability order it has made is an exceptional one, to be exercised cautiously. In my judgment, in general a magistrates' court should not set aside a liability order unless it is satisfied, in addition to there being a genuine and arguable dispute as to the defendant's liability for the rates in question, that:
a. the order was made as a result of a substantial procedural error, defect or mishap; and
b. the application to the justices for the order to be set aside is made promptly after the defendant learns that it has been made or has notice that an order may have been made."
So, in Hamdan the court did not find that the magistrates court itself could and should, on an application to set aside a liability order, go into the substantive merits of the case: on the contrary, it seems to me more likely that it was there being assumed (without deciding the point) that the magistrates court could and should not do so, going no further than satisfying itself that there was an arguable case on the merits before setting aside the liability order on the above ground. What the letter did not say, as I find to be the law, is that the magistrates court had no jurisdiction to go into the merits of the liability order on an application to set it aside and that the aggrieved council tax payer had also to appeal to the Valuation Tribunal if he or she wished the merits to be investigated.
In its subsequent letter dated 29 May 2015, the court again failed to make the point to the Applicant that she had to appeal to the Valuation Tribunal if she challenged the underlying, i.e. substantive, merits of the Liability Order. That letter was received by the Applicant shortly before the hearing on 9 June 2015.
On 29 May 2015, that is to say the week before the adjourned hearing of the bankruptcy petition, the Applicant and Respondent were back in court against each other, this time at the Bromley Magistrates...
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