The Commissioners for HM Revenue and Custsoms v David Gerald Vivian Fitzwilliam De Freitas
| Jurisdiction | England & Wales |
| Judge | Passfield |
| Judgment Date | 04 August 2022 |
| Neutral Citation | [2022] EWHC 1946 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BR-2019-000436 |
[2022] EWHC 1946 (Ch)
DEPUTY ICC JUDGE Passfield
Case No: BR-2019-000436
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN BANKRUPTCY
IN THE MATTER OF DAVID GERALD VIVIAN FITZWILLIAM DE FREITAS
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Raj Arumugam (instructed by the General Counsel and Solicitor to HM Revenue and Customs) for the Petitioners
Anthony Pavlovich (acting pro bono, instructed by Advocate) for the Debtor
Hearing date: 20 May 2022
APPROVED JUDGMENT
On 20 May 2022, I heard a bankruptcy petition (“ the Petition”) presented by HM Revenue and Customs (“ HMRC”) against David de Freitas (“ the Debtor”). That hearing took place in private in accordance with paragraph 5 of the Order of Deputy ICC Judge Lambert dated 23 February 2021. This is because, as a result of tragic and regrettable personal circumstances for which I express a great deal of sympathy, the Debtor suffers from mental health issues which he wishes to remain confidential. For the purposes of these proceedings, it is common ground that by reason of those mental health issues (the details of which were set out in the evidence before me), the Debtor has a disability within the meaning of s.6(1) of the Equality Act 2010 (“ EA 2010”). I will need to address the consequences of that so far as the Petition is concerned in due course.
As the parties' submissions occupied the court for the entirety of the day set aside for the hearing, and given that the case raises complex and potentially novel issues, I indicated that I would hand down a written judgment in public but take care so far as possible to avoid the disclosure of the relevant confidential information. This is that written judgment.
At the hearing, HMRC was represented by Raj Arumugam and the Debtor by Anthony Pavlovich. I am grateful to both counsel for the careful and helpful way in which they set out the relevant arguments in their written and oral submissions, which was of great assistance. I also record my particular thanks to Mr Pavlovich, who has represented the Debtor through Advocate and, as recorded in the Debtor's costs schedule, has dedicated approximately 62 hours of advice and representation to the Debtor on a pro bono basis since November 2019.
Overview
By the Petition, HMRC claims that the Debtor is indebted to it in the total sum of £130,812.26 in respect of unpaid self-assessment tax, penalties and interest for 15 tax years from 1998/99 to 2000/2001 and 2005/06 to 2015/16 and seeks a bankruptcy order against him.
The Debtor seeks the dismissal of the Petition on four grounds, which are set out in his Amended Grounds for Opposing Bankruptcy Petition dated 11 March 2021 (“ the Amended Grounds of Opposition”) and summarised in paragraph 2 of Mr Pavlovich's skeleton argument as follows:
i) there is an ongoing ADR process relating to the petition debt. A previous, similar petition was dismissed to allow ADR to continue;
ii) the Debtor is able to pay or to compound for any debt that may be due;
iii) the Petition is defective in that it contains incorrect information;
iv) the Court is invited to dismiss the Petition as a matter of discretion because of the effect of HMRC's conduct on the Debtor's mental health.
Alternatively, if I am not satisfied that it is appropriate to dismiss the Petition, the Debtor seeks an adjournment of the Petition for a period of 42 days to enable him to raise the funds to pay the petition debt in full. Whilst HMRC opposes an adjournment in principle, in the event that I conclude that an adjournment would be appropriate, it does not oppose the period of 42 days sought by the Debtor.
Background
Since at least the 1998/99 tax year, the Debtor has carried on business as a financial adviser on a self-employed basis.
On 29 April 2015, HMRC presented a bankruptcy petition against the Debtor for unpaid self-assessment tax, interest and penalties in the tax years from 1998/99 to 2000/01 and 2005/06 to 2012/13 in the total sum of £89,731.06 (“ the Prior Petition”). On 24 August 2015, Registrar Briggs (as he then was) dismissed the Prior Petition and, on 6 May 2016, Asplin J (as she then was) dismissed HMRC's appeal against that decision ( HMRC v de Freitas [2016] EWHC 1433 (Ch); [2016] BPIR 1179). Although I have not been provided with a transcript of the hearing before Registrar Briggs, the relevant extracts are set out in paragraph 10 of Asplin J's judgment. In summary, the Debtor contends that when he filed his self-assessment tax returns for the tax periods in question he was unaware (because HMRC had not updated the relevant manuals) that he was entitled to set off certain expenses (including council tax and mortgage interest payments) against his tax liability. Accordingly, he issued a complaint to HMRC. As I explain in more detail below, this involved a potential four stage process: two-tiers of complaint to HMRC and further complaints to respectively The Adjudicator's Office (“ the Adjudicator”) and the Parliamentary and Health Service Ombudsman (“ the Ombudsman”). At the time of the hearing before Registrar Briggs, the Debtor's complaints to HMRC had been rejected, but he had not yet submitted (but intended to submit) a further complaint to the Adjudicator. In essence, Registrar Briggs concluded that it would be wrong to allow HMRC to pursue a bankruptcy petition against the Debtor before the determination of that complaint by the Adjudicator. Asplin J was satisfied that this was a proper exercise of the Registrar's discretion on the facts of the case.
On 4 January 2016, the Debtor submitted his complaint to the Adjudicator, which was rejected on 27 January 2017. The Debtor has not produced any of the documentation relating to that complaint in his evidence in these proceedings.
On 28 July 2017, HMRC served on the Debtor a statutory demand dated 17 July 2017 (“ the Demand”) in the total sum of £130,812.26, comprising: (i) the debts claimed in the Prior Petition; (ii) unpaid self-assessment tax, interest and penalties for the tax years 2013/14 to 2015/16; and (iii) self-assessed payments on account and interest for the tax year 2016/17.
On 14 August 2017, the Debtor applied to set aside the Demand pursuant to r.10.5(5)(d) of the Insolvency (England and Wales) Rules 2016 (“ IR 2016”) on the grounds that it would be an abuse of process for HMRC to present a bankruptcy petition against him because there had been no substantial change since the hearing before Registrar Briggs on 24 August 2015 at which the Prior Petition was dismissed. At this stage, the Debtor did not indicate that he had any mental health issues which should preclude HMRC from presenting a bankruptcy petition against him.
In January 2018, the Debtor submitted a complaint against the Adjudicator's decision to the Ombudsman (via his MP). Again, the Debtor has not produced any of the documentation relating to that complaint in his evidence in these proceedings. It is common ground that the complaint was ultimately rejected by the Ombudsman (although I do not have any evidence as to the date on which this occurred). The Debtor subsequently issued judicial review proceedings against the Ombudsman, but these were settled by a consent order signed by the Debtor on 24 June 2019 and sealed on 15 July 2019 (“ the Consent Order”) which provided as follows:
UPON [the Ombudsman] agreeing that, in the event a request is made by [the Debtor], he will consider whether to undertake a review of the challenged decision
BUT without giving any assurance or indication of the outcome of that consideration
AND upon the understanding that any such consideration and/or subsequent review is, in [the Ombudsman's] view, unlikely to give rise to a decision which is amenable to further Judicial Review proceedings:
BY CONSENT it is ORDERED as follows:
1. The claim is withdrawn
2. There is no order as to costs.
To date, the Debtor has not made a request to the Ombudsman to review his decision. In paragraph 6 of his fifth witness statement in these proceedings, the Debtor gives the following explanation for this:
“I am awaiting further details of what was communicated between HMRC and [the Ombudsman] in 2018. I do not have all the information I need. I have also not had an explanation of why Asplin J's judgment was not provided to [the Adjudicator] and [the Ombudsman] and I await this. This has a direct impact on my ADR as this judgment shows that ADR could have proceeded, which is relevant to [the Adjudicator's] and [the Ombudsman's] decisions. I need all of this information before applying for the review allowed via the Consent Order with [the Ombudsman].”
On 24 September 2018, Deputy ICC Judge Middleton dismissed the Debtor's application to set aside the Demand and authorised HMRC to present a bankruptcy petition against him after 15 October 2018.
On 15 October 2018, the Debtor filed an appeal against the dismissal of his application to set aside the Demand.
On 11 February 2019, Snowden J (as he then was) ordered the Debtor to file a witness statement by 22 February 2019 setting out the steps which he had taken to pursue a complaint to the Ombudsman. The Debtor duly complied with that order, but did not serve a copy of his witness statement on HMRC (not having been ordered to do so).
On 5 April 2019, HMRC presented the Petition. By r.10.7(2) IR 2016, as more than 4 months had elapsed between the service of the Demand and the presentation of the Petition, the Petition was required to explain the reasons for the delay. This was addressed in paragraph 6 of the Petition,...
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