Preston Borough Council v Susan Marie Riley and and Another
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE HOBHOUSE,SIR ROGER PARKER,LORD JUSTICE RUSSELL |
| Judgment Date | 23 March 1995 |
| Judgment citation (vLex) | [1995] EWCA Civ J0323-3 |
| Docket Number | CCRTF94/0352/C |
| Court | Court of Appeal (Civil Division) |
| Date | 23 March 1995 |
[1995] EWCA Civ J0323-3
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM PRESTON COUNTY COURT
(Her Honour Judge Holt)
Before: Lord Justice Russell Lord Justice Hobhouse and Sir Roger Parker
CCRTF94/0352/C
MR W. BRAITHWAITE Q.C. and MR M. MULROONEY (Instructed by The Borough Solicitor, Preston Borough Council, Town Hall, Preston, Lancs. PR1 2RL) appeared on behalf of the Appellants.
MR A. RUMBELOW Q.C. and MR W. HUNTER (Instructed by Messrs Sutcliffe Reed, Preston, Lancs) appeared on behalf of the Respondents.
( )
Wednesday 23rd March 1995
The County Court Act 1984 consolidated various statutes dealing with the constitution, jurisdiction and procedure of the county courts. Part VI contains the provisions covering the making of administration Orders in the county court.
"112 (1) Where a debtor -
(a)is unable to pay forthwith the amount of a judgment obtained against him; and
(b)alleges that his whole indebtedness amounts to a sum not exceeding the county court limit, inclusive of the amount for which the judgment was obtained,
a county court may make an order providing for the administration of his estate."
Before it makes the order, the court has to give notice to each of the creditors whose name the debtor has given (ss.3). Creditors representing debts of over £1,500 may petition for the debtor's bankruptcy, provided he or they do so within 28 days (ss.4).
By subsection (6) -
"An administration order may provide for the payment of the debts of the debtor by instalments or otherwise, and either in full or to such extent as appears practicable to the court under the circumstances of the case and subject to any conditions as to his future earnings or income which the court may think just."
Section 113 provides for the marshalling of the debts and gives creditors the right to object to the order or its terms. It is implicit, with an immaterial exception, (d), that all creditors rank equally. (See also O. 18 r.18.) Section 114 provides that, subject to preserving a landlord's right to distrain for rent,
"When an administration order is made, no creditor shall have any remedy against the person or property of the debtor in respect of any debt
(a)of which the debtor notified the appropriate court before the administration order was made; or
(b)which has been scheduled to the order,
except with the leave of the appropriate court, and on such terms as that court may impose."
The court has the power to allow execution in certain circumstances (s.115). When a debtor has fully complied with the order he is discharged from his debts to the scheduled creditors (s.117).
Part VI therefore contains a simplified scheme for dealing with insolvent debtors in the county court. It has some of the features of the provisions of the Bankruptcy Act 1914, now superseded by the Insolvency Act 1986, and in a simplified way deals with the same problems as those Acts. In my judgment it is the bankruptcy legislation which provides the context in which the provisions of Part VI have to be construed.
The point raised by this appeal is whether a liability for unpaid community charge under the Local Government Finance Act 1988 is a "debt" for the purpose of Part VI of the 1984 Act. Is it part of the debtor's "whole indebtedness" for the purpose of section 112(1)(b)? Is it a "debt" for the purpose of section 114? We understand that different county courts have given differing answers to these questions and that an authoritative resolution of these differences is required. The community charge has now been replaced by the council tax and Part VI of the 1984 Act will shortly have been amended by the Courts and Legal Services Act 1990. But we are told that the decision of this Court upon the meaning of Part VI will still have value.
The rival arguments can be shortly stated. The judgment debtors, Mr and Mrs Riley, adopt the language of Somervell LJ in giving the judgment of the Court of Appeal in Re McGreavy [1950] Ch. 269, at 275, when considering whether a liability for rates came within the term "debt" as used in the Bankruptcy Act 1914:
"In the first place, we think that the word "debt", apart from any indication from the context to the contrary, would in its natural meaning cover a liability for rates. It is undoubtedly a sum due. If a man were asked to make a list of his debts he would clearly include it."
On this basis, they say the words in Part VI should be given their ordinary meaning. A man who is asked to list his whole indebtedness would certainly include the unpaid community charge which he owed to the local authority.
The Council refer to other dicta. In Seaman v Burley [1896] 2 QB 344 at 347 Lord Esher MR said:
"But I do not think it is true to say that the obligation to pay the rate is a debt. It is certainly not a debt in the ordinary sense of the term. No one can bring an action for it. It is a payment to be made in pursuance of a public duty which cannot be enforced by action or in any other way than by proceedings before magistrates."
In Liverpool Corporation v Hope [1938] 1 KB 751 at 754, Slesser LJ said, in relation to an attempt to bring a civil action to recover unpaid rates:
"As to the first ground, which appears on the face of it to be an ordinary common law claim for debt, it is clear to my mind that the only remedy which is afforded to a local authority entitled to rates is the remedy of distress. A rate is not a common law liability, it is the creature of statute."
Thus, the Council argue, debt does not as such include a liability for a tax. The community charge was a tax. It falls to be collected within the scheme laid down in Schedule 4 of the 1988 Act as elaborated by the Community Charge (Administration and Enforcement) Regulations 1989. In law it gives rise to a liability not a debt. The relevant judicial proceedings for the collection of the tax are in the magistrates court, not by action in the county court as would be the case if there were a debt.
Whereas the statement relied upon by Mr and Mrs Riley was made in the context of considering the Bankruptcy Act 1914, those relied upon by the Council were made in rather different contexts —whether the recovery proceedings were criminal or civil —whether a council was confined to proceedings in the magistrates court. But the Council submit that they should guide our decision and support the decision of Her Honour Judge Holt that unpaid community charge was not a "debt".
These quotations suffice to show that the word "debt" has been understood in different senses. It can be wide enough to include a liability such as that with which we are concerned; it can be more restricted and not include statutory liabilities for which remedies are provided in the magistrates' courts. The word is capable of being used to express wider and narrower meanings. In any given statute the sense in which it is used is to be derived from its context in the statute itself and the context of the statutory scheme into which the statute in question has to fit. It is necessary to make this choice in deciding in what sense the words "whole indebtedness" and "debts" have been used. In McGreavy the court did not treat as decisive their view of the ordinary meaning of the word; they went on to consider in detail the structure and provisions of the 1914 Act.
In 1991, judgments were given against Mr and Mrs Riley in the Preston County Court for sums which they owed to the Electricity Board. They asked the Court to make administration orders. They listed sums which they said they owed to other creditors. Mrs Riley listed four creditors and Mr Riley three. He included the rent which he owed to the Council. Each included as well a sum of £449 which he (she) said he (she) owed to the Council for unpaid community charge for an earlier year. The Council had taken proceedings against each of them in the magistrates court and on 22nd February 1991 had obtained "liability orders" against them under part 4 of...
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