England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
IN BANKRUPTCY
(Mr Justice Peter Smith)

		Royal Courts of Justice Strand London, WC2
		30th January 2003

1. LORD JUSTICE CHADWICK: The appellant, Mr David Housiaux, carried on business as a retailer of electrical equipment under the trade name "Harpers of Weybridge". He was registered in respect of that business for the purposes of VAT. The registration address was 82, Church Street, Weybridge. That is the address of the shop from which the retail business was carried on. Following the disallowance of repayment claims in VAT returns which were made and the failure to make returns which should have been made and after a number of visits to the shop premises by Mrs Dempsey, an officer of Customs & Excise, assessments to VAT were raised. The particulars were set out in a letter dated 5th February 1999, sent to Mr Housiaux at 82 Church Street.

2. Payment was not made. In June 1999 a statutory demand was issued on behalf of the Commissioners for Customs & Excise. It claimed unpaid VAT and interest in the total amount of £19,422.88. The statutory demand was left at 82 Church Street on 18th June 1999 by a process server. He put it through the letterbox at about 5 pm. That followed an earlier letter seeking an appointment to serve the demand personally. The statutory demand was not complied with. On 22nd November 1999 Customs & Excise presented a bankruptcy petition in the High Court against Mr Housiaux. On 26th October 1999 the court made an order for substituted service of the petition. A bankruptcy order was made against Mr Housiaux on 15th December 1999 in his absence.

3. By application to the High Court made by notice dated 18th January 2000 Mr Housiaux applied for an order pursuant to section 375 of the Insolvency Act 1986 that the bankruptcy order of 15th December 1999 be rescinded on the ground that he was neither aware of the VAT debt nor of the bankruptcy proceedings. Alternatively, he sought an order under section 282(1)(b) of the Act, on the ground that he was in a position to pay or secure the bankruptcy debt and expenses. The application was supported by an affidavit which he swore on 18th January 2000.

4. Put shortly, his case on that application was that he accepted that the statutory demand and the bankruptcy petition had been left or served at 82 Church Street; that he accepted that they had been collected at those premises by his wife, Mrs Julia Housiaux; but that she had failed to tell him anything about them. He said he knew nothing about the debt, the statutory demand, the bankruptcy petition or the bankruptcy order until 13th January 2000 when he was telephoned by his solicitor, to whom his wife had taken the papers on that day. Her visit, it seems, was prompted by her knowledge that Mr Housiaux was about to issue a cheque for the purchase of a new van. As Mr Housiaux put it:

"I cannot say whether the statutory demand and bankruptcy petition were personally served upon her at the office address or whether she picked them up later. Whatever the situation, she had felt unable to tell me anything about it at all and only went to see Neville Watkins after it was all too late."

Mrs Housiaux's part in those events was acknowledged by her in a statement which she signed at about the same time. It is undated but it was sent by fax to her solicitors on 27th January 2000.

5. Following the order of 15th December 1999 in the High Court, the bankruptcy proceedings had been transferred to Croydon County Court. On 29th February 2000 that court made an order by consent that the bankruptcy order should be annulled pursuant to section 282(1)(a) of the Insolvency Act 1986 on the grounds that the order ought not to have been made. The bankruptcy petition was dismissed. The order provided that the Official Receiver's costs should be paid by Customs & Excise; but that Customs & Excise should have the right to recover those costs - in the sum of about £900 - as the court might direct. The costs of the bankruptcy petition and of the annulment application were reserved. The matter was to be relisted for determination of the question who should pay those costs. As I have said, the order was made by consent; but the recital that the parties had agreed terms was qualified by the words "without any admission of liability by the first respondent [Customs & Excise]." By a further consent order made in the Croydon County Court on 15th March 2000, it was ordered that Mrs Julia Housiaux be added as a respondent in relation to costs, pursuant to section 51 of the Supreme Court Act 1981 and CPR 48.2.

6. Eventually the question who should pay the costs of the bankruptcy petition and the annulment application came before District Judge Fink in Croydon on 31st July 2001. The District Judge made an order that the disputed costs should be paid by both Mr Housiaux and Mrs Housiaux. She assessed those costs at £4,817. In a judgment, of which we have her approved note, she set out her reasons. She explained that she had been persuaded on grounds of proportionality that she should not adjourn the hearing before her in order to resolve disputed questions of fact on oral evidence. No doubt she had in mind the provisions of rule 7.7 of the Insolvency Rules 1986 - which provides for evidence to be given by affidavit or statement unless the court otherwise directs. She thought that the convenient course was to dispose of what was, even then, a long outstanding matter on the basis of those facts which were self-evident. After setting out the history - substantially in the terms which I have already rehearsed - she went on to say this:

"So on whom should these costs fall? Mr Eggleton for Mr and Mrs Housiaux said that Customs & Excise had not acted correctly within the Insolvency Rules (IR). Mr Housiaux had made clear the address for service was to be his home. This is disputed by Mrs Dempsey and is therefore one point on which I cannot make a finding. Even if he had given his home address to Mrs Dempsey, his affidavit says he could be 'contacted' there not that all business should be conducted from there, and his registered address for VAT remained at the shop in Church Street.

Insolvency Rule 6.14 says that service must be effected personally but Insolvency Rule 6.14(2) says 'If the court is satisfied that personal service cannot be effected because the debtor is keeping out of the way to avoid service ... or for any other cause it may order substituted service. The other cause here was Mrs Housiaux. Mr Eggleton said it was not Mr Housiaux's fault that she was leading Customs & Excise a merry dance. I disagree. He knew in October 1998 that there was trouble with the VAT (his affidavit of 18th January 2000 at para 4c) and his investigation amounted to no more than 'I did investigate the paperwork through my wife'. He does not refer to any personal involvement whatsoever.

Mr Boardman for Customs & Excise said that Mr Housiaux should pay the costs because he held out Mrs Housiaux as having authority to deal with his affairs, all correspondence came from 82 Church Street, the registered VAT office was there and he said he could be contacted at his home address not that he should be served there. I agree.

As far as Mrs Housiaux is concerned her actions are entirely responsible for this affair. She said she did not tell her husband because she did not believe there was a debt. That was clearly wrong."

So the District Judge made an order for costs against both Mr Housiaux and Mrs Housiaux.

7. Mr Housiaux appealed to a judge of the High Court, as he was entitled to do, under section 375(2) of the Insolvency Act 1986 and rule 7.48(2) of the Rules. Although he is the only appellant named in the appellant's notice to the High Court - Mrs Housiaux being named as a respondent to that appeal - it appears that all parties and the judge were content to proceed on the basis that the appeal was an appeal by Mr and Mrs Housiaux jointly.

8. The grounds of the appeal to the High Court appear in the appellant's notice dated 24th August 2001:

"As it was the appellant's case that he had not been personally served with either the statutory demand or the bankruptcy petition, and that he had given an address and telephone number for contact, which facts were disputed. The district judge should have heard oral evidence to resolve the issues of factual dispute, or accepted the appellant's evidence.

2. There was no proper compliance with Insolvency Rule 6.11 such as to justify issuing the petition for bankruptcy.

3. The District Judge's ruling on Insolvency Rule 6.14(2) was incorrect in that the order for substituted service was not made for 'any other cause' but because it was said that the appellant was avoiding service which was untrue on the appellant's case.

4. As the proceedings were procedurally defective the First Respondents should have paid the costs of annulling the order."

The relief sought in section 7 of the appellant's notice was that Customs & Excise pay the costs of the appellant relating to the petition and the annulment application.

9. That appeal came before Peter Smith J on 25th April 2002. As I have said, he treated the appeal as an appeal by both Mr and Mrs Housiaux. He dismissed the appeal and affirmed the order of the District Judge. He ordered that the appellants pay the costs of the appeal, which he assessed summarily at £5,095. The costs of the appeal were greater than the amount then at stake, £4,817 - given that the District Judge had made no separate order for the costs of the hearing on 31st July 2001. Peter Smith J reminded himself that, sitting as an appellate court, he ought not to interfere with the decision as to costs made by a judge in a lower court in the exercise of the discretion which she undoubtedly had unless she had exercised her discretion on a false basis. He went on to say this:

"I do not propose to set out in detail the District Judge's judgment which was handed down after the decision was made, but it seems to me, that her judgment, when read as a whole, led her to conclude that the major fault of the making of the bankruptcy order lay with the failure of the husband and the wife properly to communicate between themselves. That is a conclusion which was open to her to make on the evidence before her. I do not see how I could interfere with that conclusion; and, consequently, as a result of that conclusion, she felt it was appropriate that in the exercise of the undoubted discretion she has in relation to costs, that the normal order on the annulment which I accept would be that the petitioner would pay the costs, should not apply. There are, therefore, in my judgment, no bases for challenging the way in which the learned district judge came to the conclusion that she did. And that is, in my judgment, enough to dispose of the appeal.

However, I should say on reviewing the matters and the judgment, had I been hearing the application for the first time, like the District Judge, I would have come to exactly the same conclusion in any event. Mr Eggleton, who appears for the appellants, in very cogent submissions, has suggested that the decision of the District Judge should be overturned. But if one looks at the grounds, the grounds set out are very limited - and are limited primarily to the fact that the procedural requirements for service were defective. Even if that is the case, it does not follow that the costs go in favour of the debtor as a right. The court always retains an overriding discretion; and in the circumstances of this case -as I have said - that in my judgment the District Judge was entirely right in the conclusion that she came to."

10.   Mr Housiaux sought permission to appeal to this court. The grounds of appeal, set out in section 7 of the appellant's notice filed on 15th May 2002, recognise that an appeal to this court would be a second appeal, to which the provisions of CPR 52.13 apply. The requirements of that rule are addressed in the appellant's notice in these terms: 

"1. The important point of principle or practice to be considered is the extent to which a court in insolvency proceedings is entitled to make an order for costs against a party who has successfully applied to have a bankruptcy petition annulled pursuant to section 282(1)(a) of the Insolvency Act 1986 on the grounds that the order ought not to have been made, and the extent of the court's discretion on costs in such circumstances.

2. There is a compelling reason to hear the appeal in that the Court of Appeal's judgment in Christian Leonard v Legal Services Commission (2002) decided on 1st May 2002 (after this first appeal) appears to be contrary to the decision of Peter Smith J in this first appeal."

It may be noted that, although the order for annulment was expressed to be made under section 282(1)(a) of the Insolvency Act 1986, the application was for annulment under paragraph (b) of that subsection. Paragraph 1 in section 7 of the appellant's notice is inaccurate in that respect.

11. The application for permission to appeal was referred to Simon Brown LJ on the papers. He refused it. He expressed his reasons for refusing the application in trenchant terms:

"There is no justifiable basis here for a second appeal, least of all as to costs. No important point of principle or practice arises and no other compelling reason exists for an appeal. I am of course well aware of the decision in LSC v Leonard (having myself given the lead judgment). The district judge's initial decision here was fully reasoned and not only did Smith J conclude that it was within the wide range of the district judge's costs discretion but he expressly agreed with it."

12. Mr Housiaux was not deterred by that refusal. He renewed the application for permission to appeal at an oral hearing before Arden LJ on 25th September 2002. Her view differed from that of Simon Brown LJ. She granted permission to appeal and stayed, pending the appeal, both the costs order made by District Judge Fink on 31st July 2001 and the order for costs made by Peter Smith J. It is plain from her order, and from the transcript of the proceedings before her (with which we have been provided), that she was satisfied that the only application for permission to appeal which was before her was an application by Mr Housiaux. There was no application by Mrs Housiaux; and Mrs Housiaux was not granted permission to appeal. It was therefore a matter of some surprise when Mr Eggleton informed us, at the outset of his submissions, that he appeared for both appellants. That is not the position. There is no appeal by Mrs Housiaux before this court.

13. So it is that there is now, before three judges of this court, a second appeal against an order for costs in the sum of £4,818 made some 18 months ago in respect of bankruptcy proceedings which, but for the dispute about costs, would have been disposed of three years ago when the bankruptcy order was annulled by consent. It may well be questioned whether the time and resources which the courts have been required to allot to this matter can be reconciled with the overriding objective set out in CPR Part 1 - in particular CPR 1.1(2)(c) and (e). A fortiori, in the circumstances that the decision appears to have been taken -- for what reason we do not know -- that Mrs Housiaux would not appeal the order of Peter Smith J. She remains liable to pay some £10,000 whatever the result of Mr Housiaux's  appeal. It has not been explained to us why Mr Housiaux should choose to pursue an appeal against a debt for which his wife will remain liable in any event.

14. Following the grant of permission to appeal on 8th October 2002, the appellant lodged a further skeleton argument; replacing an earlier skeleton dated 10th July 2002. The purpose of the new skeleton is to address the grounds upon which permission to appeal was granted by Arden LJ. It seeks to do so under two main heads. First, the effect of the consent order of 29th February 2000; and, second, the failure of the District Judge to make findings of fact on matters which were disputed. It is said that the District Judge's failure to appreciate the statutory framework within which the bankruptcy order was made and subsequently annulled, independently or in combination with her failure to make the necessary findings of fact, led to a position in which her exercise of discretion under CPR 44.3 was flawed.

15. In order to do justice to those submissions, it is necessary to have in mind the relevant provisions of the bankruptcy code. A creditor may present a petition to the court seeking an order that his debtor be adjudged bankrupt if, but only if, the four conditions set out in section 267(2) of the Insolvency Act 1986 are met. In the present context the relevant provision is that in subsection (2)(c): that the debt is one which the debtor appears to be unable to pay. Section 268(1) provides an exclusive definition of the circumstances in which, for the purposes of section 267(2), a debtor is made to appear unable to pay a debt. Subsection (1)(a) of section 268 requires that the creditor should have served on the debtor a demand in the prescribed form requiring payment of the debt, and that, three weeks having elapsed after the service of the demand (called "a statutory demand"), it has neither been complied with nor set aside in accordance with the rules.

16. The power to make a bankruptcy order on a creditor's petition is conferred by section 271 of the Act. The section requires that the court shall not make an order unless satisfied that the debt in respect of which the petition was presented was a debt payable at the date of the petition and has been neither paid, nor secured, nor compounded for. Section 282(1) is in these terms:

"The court may annul a bankruptcy order if it at any time appears to the court -

(a) that, on any grounds existing at the time the order was made, the order ought not to have been made, or 

(b) that, to the extent required by the rules, the bankruptcy debts and the expenses of the bankruptcy have all, since the making of the order, been either paid or secured for to the satisfaction of the court."

17. Those provisions are supplemented by the Insolvency Rules 1986, made under section 412 of the Act. Rules 6.1 and 6.2 prescribe the content and form of a statutory demand and the information which it is to contain. Rule 6.3 contains requirements as to service. Subrule (1) of that rule provides that rule 6.11 is to have effect in relation to service of the statutory demand. Subrule (2) of rule 6.3 is in these terms:

"The creditor is by virtue of the rules under an obligation to do all that is reasonable for the purpose of bringing the statutory demand to the debtor's attention and if practical in the circumstances to cause personal service of the demand to be effected."

Those provisions are reflected in paragraph 11.4 of the Insolvency Practice Direction. I shall need to return to rule 6.11. Rule 6.4 provides for an application to be made by a debtor to set aside a statutory demand. Rule 6.5 sets out the grounds on which the court may make such an order. The obvious purpose is to ensure that a petition is not presented in circumstances in which the court would be bound to refuse a bankruptcy order.

18. So the rules provide - in conjunction with section 268 of the Act - that there must first be a statutory demand; and an opportunity to apply to set the statutory demand aside. If that application to set aside is successful, then no bankruptcy petition will follow. But if no application is made - or, if made, is unsuccessful - the debtor is not necessarily made bankrupt. It is still necessary for the creditor to present the petition; and for the court to determine on the petition whether the bankruptcy order should be made.

19. If the statutory demand has been served and no application to set aside has been made - or, if made, has been dismissed - the creditor may present a bankruptcy petition if, after 21 days, the debt remains unpaid. Rule 6.8(2)(a) requires that there shall be stated in the petition the date and manner of service of the statutory demand. Rule 6.11(1), to which reference is made in rule 6.3(1), provides that where, under section 268, the petition must have been proceeded by a statutory demand, there must be filed in court with the petition an affidavit or affidavits proving service of the demand. Subrule (3) applies where the statutory demand has been served personally. Subrule (4) applies where service has been acknowledged in writing by the debtor or by some person stating himself in the acknowledgment to be authorised to accept service on the debtor's behalf. Neither of those subrules is in point in the present case. Subrule 6.5 is in these terms:

"If neither paragraph 3 nor paragraph 4 applies, the affidavit or affidavits must be made by a person or persons having direct personal knowledge of the means adopted for serving the statutory demand and must -

(a) give particulars of the steps which have been taken with a view to serving the demand personally and

(b) state the means whereby those steps having been ineffective, it was sought to bring the demand to the debtor's attention, and

(c) specify a date by which, to the best of the knowledge and information and belief of the person making the affidavit, the demands were brought to the debtor's attention."

Paragraph (a) must be read in conjunction with subrule (6), which requires that the steps - of which particulars are given for the purposes of sub-rule (5)(a) - must be such as would have sufficed to justify an order for substituted service of a petition. That is a reference to the provisions in rule 6.14(2), which are in these terms:

"If the court is satisfied by affidavit or other evidence on oath that prompt personal service cannot be effected because the debtor is keeping out of the way to avoid service of the petition or other legal process or for any other cause, it may order substituted service to be effected in such manner as it thinks fit."

20. On the hearing of the petition the court may make a bankruptcy order if satisfied that the statements in the petition are proved - see rule 6.25(1). That requires the court, on the hearing of the petition, to be satisfied that the statements in the petition as to the manner of service of the statutory demand are true - see rule 6.8(2)(a). Customs & Excise sought to comply with those requirements by the statement in paragraph 3 of the petition that:

"On the 22nd June 1999 a statutory demand was served upon the debtor by insertion through the letterbox at 1700 hours on the 15th June 1999 in respect of the above mentioned debt. To the best of my knowledge and belief the demand has not been complied with nor set aside ..."

That must be read with the description of the debtor at the beginning of the petition as a person whose residential address was unknown but who was trading at 82 Church Street, Weybridge, Surrey. The petition was supported by (i) a statement of truth made on 16th September 1999 in the usual statutory form - which we have not been shown - and (ii) by a statement of truth made on 21st October 1999 by a process server which described the circumstances in which attempts had been made to serve the petition personally and on which the order for substituted service was made on 26th October. It was on that material that the bankruptcy order was made on 15th December 1999.

21. The application made by Mr Housiaux in January 2000 was supported by the affidavit which he had sworn. At paragraph 4(b) of the affidavit he said this:

"While the business was mine, Julie, my wife, to whom I have been married since 1983, played an active part, taking telephone calls, operating the accounts computer, and paying suppliers and statutory authorities. The business was registered at 82 Church Street for VAT purposes and I know the VAT office also have my home details."

He elaborated that, at paragraph 4(c), by reference to a meeting at 82 Church Street which he put in or about October 1998, with Mrs Dempsey:

"I stated that she should contact me at home as the shop is only for display equipment. I gave her my home address and private telephone numbers, both verbally and in writing. This was done in front of the other people in my shop. My handwritten note on Harpers headed paper stated my two private telephone numbers (land and mobile) where I could be contacted both day and night. After telling her that the business was solely mine, her response was 'I am from the VAT office, you owe us money.' I argued that I knew nothing about this and in any case felt that it could not be correct and we had reclaimed the VAT due to the work undertaken on the shop between January and July 1998, and that there was likely to be a balance in our favour. Her response was that she was not going to argue, but if it was not sorted a bailiff would come in and take my property in seven days. Due to her aggressive attitude in front of other members of the public, I escorted her from the shop and telephoned her superior (Mr David Lelliot). He also took details of my correct address and telephone number ..."

At paragraph 4(g) of that affidavit, after exhibiting the bundle of the documents which were served at 82 Church Street, Mr Housiaux said this:

"On the basis that the VAT office did know I was based at 135 Stubbington Lane, I believe they could and should have enquired further and made an attempt to serve me personally with the documentation. I would have been in a position to pay the debt had I known about it."

22. In her statement made on or about 27th January 2000 Mrs Housiaux referred to that meeting shortly. She put it in November 1998. She was not there; but she understood that Mrs Dempsey saw her husband that day. She said this:

"After that meeting my husband informed me that there would be no more Roz Dempsey and that someone else was dealing with it. It has to be said that my husband spent a lot of money and effort on the shop on the first fitting and subsequently 2 of our returns were for repayments due to my husband so I knew my husband had said what he did regarding the belief that monies were due to him."

She acknowledged in that statement that a copy of a statutory demand was received by post on 11th June 1999 and that she had sent a letter of reply in response to it.

23. There was further support for Mr Housiaux's case in a statement from Mr Gary Law, also made at the end of January 2000. He referred to the same meeting in these terms:

"Mr Housiaux then went on to explain that he did not work from the showroom but out of his Stubbington address, and proceeded to show her as per the service of document address which was pinned to the wall. Mr Housiaux then instructed that all communication should be directed to himself at his Stubbington address, and he proceeded to write the address and telephone number down and handed this to the VAT officer. Mr Housiaux also commented that he had in fact already informed the tax office of this address and closure of the showrooms."

24. It was on that basis that Mr Housiaux applied for an order under section 275 of the 1986 Act rescinding the bankruptcy order or, alternatively, an order under section 282(1)(b) annulling the bankruptcy order on the ground that the debt had been paid or secured. There is nothing in that material which sought to support an application under section 282(1)(a); that is to say, that on grounds existing at the time the order was made the order ought not to have been made. Nevertheless the Croydon County Court felt able to make an order under section 282(1)(a) on 29th February 2000 by consent and without investigating the position.

25. In my view the order of 29th February 2000 ought not to have been made in the form in which it was made. It is plain from the recital that Customs & Excise were not admitting liability; and the provisions reserving questions of costs showed that they were not accepting the factual account in Mr Housiaux's affidavit, Mrs Housiaux's statement or Mr Law's statement. That was to be left for consideration at a future date. Even if those statements were correct, it is not clear why this was thought to be a case for an annulment order under section 282(1)(a) rather than an order rescinding the bankruptcy order under section 375. A court when asked to make an order under section 282(1)(a) of the Insolvency Act 1986 ought to satisfy itself, by such investigation of facts as it thinks necessary, that the bankruptcy order ought not to have been made. Bankruptcy is a class remedy. A court should not annul a bankruptcy order by consent and without investigation.

26. That is not to say that the petitioning creditor may not agree - quite properly - not to oppose an annulment of the bankruptcy order. But if he does so, he must make it clear that he does not challenge the factual basis - or identified parts of the factual basis - upon which the application for annulment is made. That was not this case; as the correspondence which preceded the making of the bankruptcy order makes plain.

27. It follows that I would hold that the appellant cannot rely on the order of 29th February 2000 as a basis for asserting either (i) that Customs & Excise were accepting the allegations in Mr Housiaux's affidavit of 18th January 2000, or (ii) that the court had made any determination in relation to those allegations. The position was that all those matters were in dispute. Mr Housiaux was anxious, understandably, to have the bankruptcy order removed so that he could continue his trade. Customs & Excise were content for that to happen, on the basis that they would be secured by a charge over his house for the amounts which they claimed. The proper course in those circumstances was to rescind the order on the basis that, had the creditor known of the petition, the petition debt would have been secured.

28. Determination as to the truth or otherwise of the allegations made in the affidavits and statements and their legal effect was left to the future. On 14th August 2000 Mrs Dempsey made a witness statement. She dealt with the visit to the shop in November 1998; and, at paragraphs 9 and 10 of that statement, with a subsequent visit on 1st December 1998 at paragraphs 12, 13 and 14. It is clear she puts the visit to which Mr Housiaux referred in his affidavit at the later date of 1st December; but nothing turns on that. As to the allegation that she was told that Mr Housiaux could be contacted at his Fareham address, she said this:

"No mention was made to either myself or Mr/Mrs Housiaux of a potential transfer of the principal place of business to Fareham on any occasion. The possibility of my paying a visit to the trader's home to examine the computerised records was however discussed."

At sub-paragraph 6:

"No discussion took place regarding a change of address to the trader's home in Fareham and I was given nothing in writing which Mr Law has suggested."

29. It was on that basis that the matter came before District Judge Fink. As I have said, she took the view that considerations of proportionality required that the matter should be dealt with that day. She rejected the alternative of an adjournment for what was said to be a further day or day and a half to enable witnesses to be cross-examined. It is important to have in mind that this was a dispute about less than £5,000. Accordingly, she directed herself, as I have indicated, that she should reach her decision on facts which were self-evident. She was entitled to take that view.

30. The District Judge cannot be criticised for taking the view that considerations of proportionality weighed against an adjournment for a lengthy oral hearing in a case of this nature. Having decided against an adjournment, she recognised that she could not make an order against a party who was relying on some material fact which she was not going to decide unless she assumed that fact in favour of the party against whom the order was to be made. Or she could take the view that the facts which were disputed made it impossible for her to reach any conclusion, so that the only order open to her was no order as to costs. Fairness required no less.

31. I do not understand those propositions to be in dispute. The District Judge made the order that she did for the two reasons which she gave in the passage to which I have referred. Her first reason was that the service of the statutory demand - by putting it through the letterbox - was a reasonable way of effecting service in the circumstances of this case. Mr Housiaux had held out to the VAT office that his business was being carried on at 82 Church Street and that Mrs Housiaux would be in charge of administrative matters at those premises. Secondly, assuming in his favour that he had told Mrs Dempsey in November or December 1998 that he could be contacted at his Stubbington Lane address, he had not told her that that was the place to which formal communications - such as demands for payment should be sent; nor that that was the place to which he wished to transfer his registered VAT office. It is, of course, not at all surprising that nothing was said about service in October 1998 because the bankruptcy proceedings were still some six months in the future.

32. The District Judge made an order against Mrs Housiaux for a different reason. She held that Mrs Housiaux's actions were responsible for the failure of Mr Housiaux to have knowledge of the statutory demand and the petition which had been left at or sent to 82 Church Street. It is plain that the District Judge took the view that Mrs Housiaux had acted irrationally or irresponsibly in failing to bring to her husband's attention documents which she knew were important; while, at the same time, encouraging Customs & Excise to think that those documents had been received and were being dealt with.

33. In my view, those were findings which the District Judge was entitled to make. On the basis of those findings she was entitled to reach the conclusion that the costs of the petition and its annulment should fall on Mr and Mrs Housiaux.

34. It is important to keep in mind the statutory obligations in respect of VAT that are imposed upon a trader. The obligations of the trader are to make returns and to keep records available for inspection. Those obligations include the provision of a registration address at which the trader can be contacted. A trader cannot be heard to say: "I never open my post at my registered VAT office" or "I do not have in place a system which brings to my attention the communications from Customs & Excise which are addressed to that office." It was Mr Housiaux's responsibility, in the circumstances of this case, to ensure that documents which were left at, or sent to, 82 Church Street came to his attention or were dealt with by someone under his authority. If he had delegated the authority to deal with those documents to Mrs Housiaux, then it was her responsibility to ensure that those documents were dealt with; or were brought to her husband's attention. At the least she was required to tell Customs & Excise that she had not done what they had been led by her to think that she would do.

35. When the matter came before Peter Smith J, there was additional evidence in the form of a statement made by Mr Lelliot, Mrs Dempsey's superior officer, dated 3rd April 2002. He referred to the telephone conversation with Mr Housiaux at the end of November or the beginning of December 1998. He said this:

"I have not been asked to comment on the allegation of complaint only whether in that conversation Mr Housiaux asked me to change his principal trading address from the address at 82 Church Street Weybridge Surrey KT13 8DL which was the address given when Mr Housiaux registered for VAT. I do not recall mention of the change of address in that conversation or any other conversation I may have had with Mr Housiaux. Even if the conversation about the change of address had taken place as alleged by Mr Housiaux I would certainly not have confirmed that the principal trading address would be changed as explained below."

He went on, in paragraph 3:

"To comment generally about traders who wish to change their principal trading address as regards their registration for VAT ('Trading Address'). If I am contacted by a trader who wished to change their trading address I would explain to the trader that this would need to be done in writing to the local VAT office which would not become effective until agreed by HM Customs & Excise in writing. Before HM Customs & Excise would agree to a change in the trading address it would be necessary for the trader to show some evidence that this was indeed the principal trading address. This practice is in place since HM Customs & Excise could in theory be led on a wild goose chase by an unscrupulous trader constantly changing their trading address so that when an officer called to inspect their records they would state that their trading address had changed so the officer would have to call at a different address to inspect the records. Furthermore, if the trader's records were not up to date, as was the case with Mr Housiaux, HM Customs & Excise would certainly not have agreed to the change of the trading address until all records were up to date to their satisfaction."

Mr Lelliot pointed out, in respect to Mr Laws' suggestion that Mr Housiaux had already informed the VAT office that he was closing the office at Weybridge, that Mr Housiaux continued to trade as Harpers of Weybridge; and, as of the date of his statement, still used as his registered trading address 82 Church Street Weybridge Surrey KT13 8DL - as he had done in 1998.

36. I should make it plain that I do not find it necessary to decide whether the service of the statutory demand did or did not satisfy the requirements of rule 6.3. There is ground for criticism in relation to the statement in the petition that the residential address of the debtor was unknown. I put my decision on the basis that the purpose of the relevant rules is to bring to the attention of the debtor that he has an opportunity to challenge the debt by seeking to have the statutory demand set aside; and to bring to his attention the petition which follows a failure to challenge a statutory demand. In the present case the reason why Mr Housiaux did not become aware of the matters of which he should have become aware was not because there were formal defects in the service of the statutory demand, or in the petition. It was because his internal arrangements for dealing with communications from Customs & Excise sent to his VAT registered office failed. That failure was brought about by the lack of communication between Mr and Mrs Housiaux. They were living as man and wife; and it was reasonable, in the circumstances of this case for Customs & Excise to assume that they would communicate, about the administration of the business. Mr and Mrs Housiaux should not now be entitled to shelter behind insolvency rules which are intended to meet a real, and not a self-generated, failure to bring to the debtor's attention that which he needs to know.

37. Our attention was drawn to the decision of this court to which reference has already been made - Legal Services Commission v Leonard [2002] EWCA Civ 744, [2002] BPIR 994, decided on 1st May 2002. I note that Simon Brown LJ - when dealing on paper with the application for permission to appeal in this case - felt able to say that there was nothing in the Legal Services Commission case which touched upon the facts of this case. I take the same view. In that case, the Legal Services Commission had presented a bankruptcy petition at a time when execution on the petition debt was stayed. That was an abuse for which the Commission were penalised by being refused the costs of the petition. I respectfully endorse the observations of Arden LJ as to the nature of bankruptcy and the effects of the presentation of a bankruptcy petition; and I share her view that the court is entitled to expect that a public body will observe the standards required of other petitioning creditors in the bankruptcy court. But I do not take the view that this is a case in which the Customs & Excise can be criticised in relation to the steps which they sought to take to bring the statutory demand and the bankruptcy petition to the notice of Mr Housiaux.

38. For those reasons I would dismiss this appeal.

39. MR JUSTICE MORLAND: I agree.

40. LORD JUSTICE THORPE: I also agree.

ORDER: Appeal dismissed with costs with costs assessed in the sum of £5,000.