England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR JUSTICE LEWISON)

		Royal Courts of Justice Strand, London, WC2A 2LL
		9th December 2009

Lady Justice Arden:

1. This is a renewed application for permission to appeal from the judgment of Lewison J dated 27 November 2007. Thus, since it is an application for permission for a second appeal, CPR 52.13 applies, and that provides:

"52.23(1) Permission is required from the Court of Appeal for any appeal to that court from a decision of a county court or the High Court which was itself made on appeal.

(2) The Court of Appeal will not give permission unless it considers that --

(a) the appeal would raise an important point of principle or practice; or

(b) there is some other compelling reason for the Court of Appeal to hear it."

2. This matter has been before this court on three occasions already. The application was refused on paper by Rimer LJ; Mummery LJ heard a renewed application but adjourned that application to come on with an appeal to follow if an appeal was granted. The matter then came before the Chancellor on 9 June of this year and an application was made at the last moment that Mr Blakey, who acts for the appellant but who does not have higher court advocacy qualification, should represent the appellant, Mrs Lonergan. The Chancellor and the members of the court sitting with him did not accede to this application and the matter had to be adjourned.
3. A late application was likewise made to this court for Mr Blakey to represent the appellant. This court informed Mr Blakey that it was not prepared to give him permission to appeal on the appeal on behalf of the appellant. We considered that, if permission to appeal was given, it was in the public interest that the appellant should be represented by a duly qualified advocate.
4. In the exceptional circumstances, however, we gave Mr Blakey permission to appear on the renewed permission application, but we informed him that if permission was given the appeal would be listed for a new date. Accordingly, this judgment is a judgment only on the application for permission to appeal in this case.
5. The background is set out fully in paragraphs 1 to 7 of the judgment of the judge which I gratefully adopt. Mr Blakey makes the point that Mrs Lonergan suffers from mental illness and is disadvantaged. He submits that the legal issues on this appeal have to be seen against the background that many people have been bankrupted for unpaid council tax and that this has been a matter of concern expressed in the press and elsewhere. I do not doubt that there has been concern over the issue of bankruptcy proceedings to obtain payment of council tax. In my judgment, however, that affects only the first ground of the proposed appeal; the other grounds turn primarily on matters specific to this case and there can be no question of giving permission for this appeal unless the conditions in CPR 52.13 are satisfied. The initial question will be whether there is a real prospect of success, and, if the court were so satisfied, it would then have to consider whether there was an important point of principle or practice or some other compelling reason for the Court of Appeal to hear the appeal.
6. Ground 1. Was the judge's conclusion that a local authority has power to present a bankruptcy petition for unpaid council tax wrong in law? The legislative scheme was set out by the judge in paragraphs 10 to 13 of his judgment:

"10. The collection of council tax is governed by Schedule 4 of the Local Government Finance Act 1992 and the Council tax Administration and Enforcement Regulations 1992, Schedule 4 paragraph 1 of the Act itself gives the Secretary of State power to make Regulations in relation to the recovery of sums payable. The empowering provision says that the Regulations may provide for a number of different procedures for the making of liability orders, the levying of distress, the committal of a debtor to prison and the making of charging orders. Schedule 4 paragraph 9 is as follows:

'(1) Regulations under paragraph (1) above may provide that where a magistrates' court has made a liability order against a person (the debtor) and the debtor is an individual the due shall be deemed to be a debt for the purposes of section 267 of the Insolvency Act 1986 (Grounds of Creditor's Petition).

(2) The amount due is an amount equal to any outstanding sum which is or forms part of the amount in respect of which the liability order was made.

11. Schedule 4 paragraph 12 deals with the relationship between remedies. I need only refer, I think, to paragraph 12(1)(e) which says:

'Steps by way of attachment, deduction, distress, commitment, bankruptcy, winding up or charging may not be taken while steps by way of another of those methods are being taken.'

12. The Regulations were made pursuant to those enabling provisions. Regulation 49 of the 1992 Regulations in effect repeats the provisions of Schedule 4 paragraph 9 of the Act itself. It says:

'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).'

13. Thus both paragraph 9 and Regulation 49 deem an amount payable under a liability order to be a debt for the purposes of section 267 of the Insolvency Act 1986."

7. The judge then set out a submission of Mr Blakey which has been repeated in this court:

"14. Mr Blakely contrasts this with the language applicable to the rule making power relating to non-domestic rates which is contained in Schedule 9 to the Local Government Finance Act 1988. Paragraph 3(2) of that Schedule deals with the making of Regulations and provides:

'Regulations under this Schedule may include, as regards the recovery of such a sum, provision:

(a) allowing a liability order to be made;

(b) allowing distress and sale of goods;

(c) allowing commitment to prison;

(d) allowing a bankruptcy petition to be presented;

(e) allowing winding up'."

The judge then concluded:

"16. One might ask why the Act deems the unpaid liability for council tax to be a debt for the purposes of a creditor's petition. Mr Blakey here says that the effect of this deeming provision is that amounts due under a liability order are deemed to be included in a creditor's petition even is the creditor is someone other than the local authority to whom the liability is owed. That would have the consequence that, even if the petitioning creditor had no knowledge of the amount, if any, which was due by way of unpaid council tax, that amount would still be included in the petition. That, in my judgment, is an impossible construction and I reject it.

17. The obvious purpose of the deeming provision is that the local authority can present a petition based on unpaid council tax that is the subject of a liability order. If Parliament's intention was that the local authority could not present a petition based on a liability order, the deeming provision would simply have deemed the amount due under a liability order to be bankruptcy debts within the meaning of section 382 of the Insolvency Act 1986. indeed, having regard to the definition of 'liability' in section 382 subsection (4), which includes liability under an enactment, and the definition of 'creditor' in section 383(1)(b) it is doubtful whether any such amendment was strictly necessary but the fact that they are deemed to be debts within the meaning of section 267 which deals specifically with a creditor's petition makes it plain that the local authority is deemed to be a creditor for the very purpose of presenting a petition.

18. That, in my judgment, is reinforced by Schedule 4 paragraph 12 and the corresponding Regulation made under it is Regulation 52. These plainly contemplate that, in certain circumstances, the local authority may take steps by way of bankruptcy. What could those steps be except the presentation of a petition?

19. In addition, the local authority has a general power to institute proceedings under section 222 of the Local Government Act 1972. that power is wide enough to encompass the presentation of a bankruptcy petition."

8. Mr Blakey submits on this appeal that the judge erred in holding that the provisions of regulation 49 enabled the local authority to present a bankruptcy petition. He submits that regulation 49 is merely a deeming provision; it does not confer power, on his submission, to serve a statutory demand or to present a bankruptcy petition. No conditions are established for presenting the petition in contrast to the restrictive power which enables the court to place a charging order on property of the debtor under paragraph 9.
9. Mr Adam Chambers, for the respondent authority, seeks to uphold the reasoning of the judge. The judge held in effect that regulation 49 would not make any sense unless it was intended to confer a right to apply for a bankruptcy order and I have already set out his detailed reasoning above.
10. In my judgment the judge was clearly correct on this point and there is no real prospect of success on appeal.
11. On first sight it is odd that regulation 49 does not make some more general provision that a liability to pay council tax gives rise to a debt for all the purposes of the Insolvency Act 1986, but in my judgment there was no need to make any such provision. The liability under a liability order for council tax is already a liability and therefore a bankruptcy debt as defined by Section 382. However, a mere liability to make a payment cannot found a petition, and thus the extending provision in relation to Section 267, which states that there are circumstances in which a petition can be presented, was necessary to enable a local authority to become a party to a petition. The point can, in my judgment, be more simply explained by tracking through the relevant provisions of the Insolvency Act 1986.
12. Section 264 deals with who may present a bankruptcy petition. So far as material, Section 264(1) provides that:

"A petition for a bankruptcy order to be made against an individual may be presented to the court in accordance with the following provisions of this Part: (a) by one of the individual's creditors, or jointly by more than one of them…"

That makes it necessary to find the definition of "creditor". This is contained in Section 383(1). I need only read part of that provision. It provides as follows:

"Creditor"--

(a) in relation to a bankrupt, means a person to whom any of the bankruptcy debts is owed (being, in the case of an amount falling within paragraph (c) of the definition in section 382(1) of "bankruptcy debt", the person in respect of whom that amount is specified in the criminal bankruptcy order in question), and

(b) in relation to an individual to whom a bankruptcy petition relates, means a person who would be a creditor in the bankruptcy if a bankruptcy order were made on that petition"

13. So that makes it necessary to go to the definition of bankruptcy debt in Section 382. That provides in subsection (1), so far as material:

"Bankruptcy debt", in relation to a bankrupt, means (subject to the next subsection) any of the following --

(a) any debt or liability to which he is subject at the commencement of the bankruptcy"

Subsection (2) deals with liability in tort, and I need not refer to that. Subsection (3) states that:

"For the purposes of references in this Group of Parts to a debtor liability, it is immaterial whether the debtor liability is present or future, whether it is certain or contingent or whether its amount is fixed or liquidated, or is capable of being ascertained by fixed rules or as a matter of opinion…"

Then, importantly, subsection (4) of Section 382 provides that:

"In this Group of Parts, except in so far as the context otherwise requires, "liability" means (subject to subsection (3) above) a liability to pay money or money's worth, including any liability under an enactment, any liability for breach of trust, any liability in contract, tort or bailment and any liability arising out of an obligation to make restitution."

14. So a liability includes a liability under an enactment, and thus would include a liability under a liability order made by a magistrate, but, when one goes back to Section 267, what a creditor must have in order to present a petition is a "debt". Section 261 provides that a creditor's petition must be in respect of one or more debts owed by the debtor and the petitioning creditor, or each of the petitioning creditors, must be a person to whom the debt, or, as the case may be, at least one of the debts, is owed; and accordingly to enable a petition to be presented it would be necessary to convert a liability into a debt. That, in my judgment, is what has been achieved by regulation 49. The net result is that, as a result of regulation 49, the local authority is able to present a petition.
15. Mr Blakey submits that what was intended was simply that the local authority should be joined into a bankruptcy petition presented by another creditor with a debt of a normal kind but that the local authority should not be able to present a petition on its own. He submits that this is so that the local authority could be reminded that it would need to make a claim in the bankruptcy. Previously, he informs us, when rates were preferential debts of the bankruptcy, trustees in bankruptcy adopted the practice of approaching local authorities for statements as to amounts due from the bankrupt in respect of unpaid rates. I say nothing about whether that was the old practice or what the practice is now, but in my judgment it cannot be assumed that the regulations were intended to achieve that which Mr Blakey has explained. If it was intended to give the local authority power to present a bankruptcy petition for unpaid council tax, the only amendment, as I see it, necessary to the relevant provisions of the Insolvency Act was to Section 267. In my judgment, the drafter did not intend simply to enable a liability in respect of unpaid council tax to be added in to a petition for no apparent purpose otherwise than reminding the local authority to make a proof in due course.
16. For the purposes of presenting a bankruptcy petition, the minimum amount is £750. This may be achieved by aggregating debts owed to several debtors. This contrasts with £1,000 in the case of a charging order, but in my judgment that difference is not significant as a bankruptcy petition is a collective remedy and there would be likely to be other debts to be taken into account. In any event, the difference is not so significant as to give rise, in my judgment, to any real doubt that the local authority is empowered to present a bankruptcy petition.
17. My conclusion, in this regard, is confirmed by the decision of Robert Walker LJ, as he then was, on a permission to appeal application in Griffin v Wakefield Borough Council. This decision is only reported in note form in the Rating and Valuation Reports. Nonetheless, the note we have been given is useful and we are grateful for it. The date of the decision was 24 March 2000 and the relevant passage in the judgment of Robert Walker LJ, who was sitting on his own, states:

"A liability order [that is a liability order for unpaid council tax] once made can be enforced in various ways. These include attachment of earnings if the defaulter is in work, the process of distress committal to prison or under regulation [and I am afraid the copy is blanked out] bankruptcy under the Insolvency Act 1986"

I assume, however, that the regulation referred to was 49.

18. Although that decision is not binding on this court because it was merely an application for permission to appeal, in my judgment it is not only from a very authoritative source, but is, in my judgment, correct on the point of statutory interpretation. Accordingly, it is unnecessary to consider Mr Blakey's further argument that a local authority cannot, by relying on Section 111 of the Local Government Act 1972 ("LGA 1972"), bypass any restriction on taking bankruptcy proceedings contained in regulation 49. It is also unnecessary to consider Section 222 of the LGA 1972 on which the judge relied. I would observe, however, that Section 222 could not of itself be used to overcome any deficiency in regulation 49 had there been one: see Birmingham City Council v Shafi [2008] EWCA Civ 1186 at paragraphs 23 and 24. Accordingly, on that matter I would respectfully differ from the judge. But, in summary, I do not consider that there is any real prospect of success on appeal on ground 1.
19. Ground 2. Was the judge's conclusion that the respondent did not properly delegate the power to institute bankruptcy proceedings to the actual decision-maker wrong in law? The judge dealt with this matter in some detail between paragraphs 21 to 36 of his judgment. The power of the Chief Executive Officer or the head of finance is that contained in Section 151 of the LGA 1972, which provides:

"Without prejudice to section 111 above, every local authority shall make arrangements for the proper administration of their financial affairs and shall secure that one of their officers has responsibility for the administration of those affairs."

Mr Blakey does not appear to contest that this is the relevant provision. As the judge explained, that provision has been considered in decisions of the House of Lords, in respect of which it has been made clear that arrangements for the proper administration of financial affairs within Section 151 include having machinery for the enforcement and collection of amounts due by way of local revenue (see paragraphs 28, 16 and 31 of the judge's judgment). The judge concluded that the power to bring bankruptcy proceedings was a power conferred on the head of finance and that the head of finance was entitled to and had delegated that power to a subordinate officer, Mr Townsend.

20. Mr Blakey's argument is that the judge omitted to take account of Section 13 of the Local Government Act 2000 ("the LGA 2000") which, on his submission, makes it unlawful for the power to collect council tax to be delegated. He also relies on Section 100G of the LGA 1972, inserted by the Freedom of Information Act 2000.
21. Section 13 of the LGA 2000 is a very extensive section. Subsection (1) provides:

"This section has effect for the purpose of determining the functions of a local authority which are the responsibility of an executive of the authority under executive arrangements."

Subsection (2) provides that:

"Subject to any provision made by this Act or by any enactment which is passed or made after the day on which this Act is passed, any function of a local authority which is not specified in regulations under subsection (3) is to be the responsibility of an executive of the authority under executive arrangements."

22. Subsection (3) deals with the power of the Secretary of State to make regulations and then subsection (4) provides:

"Executive arrangements must make provision for any function of a local authority specified in the regulations …

(b) to be a function which may be the responsibility of such an executive under such arrangements, or

(c) to be a function which—

(i) to the extent provided by the regulations is to be the responsibility of such an executive under such arrangements, and

(ii) to the extent provided by the regulations is not to be the responsibility of such an executive under such arrangements."

Section 13 of the LGA 2000 continues in subsections (9) and (10):

"Any function which is the responsibility of an executive of a local authority under executive arrangements –

(a) is to be regarded as exercisable by the executive on behalf of the authority, and

(b) is to be discharged in accordance with any provisions made by or under this Part which relate to the discharge of any such function by that form of executive.

(10) Accordingly, any function which is the responsibility of an executive of a local authority under executive arrangements --

(a) may not be discharged by the authority,

(b) is not to be a function to which section 101(1) of the Local Government Act 1972 applies, and

(c) may be the subject of arrangements made under section 101(5) of that Act only if permitted by any provision made under section 20."

23. Executive arrangements are defined in Section 10 (1) of the LGA 2000 as arrangements by a local authority for and in connection with the creation and operation of the executive of the authority and under which certain functions of the authority are the responsibility of the executive.
24. Subsection (2) provides:

"Executive arrangements by a local authority must conform with any provisions made by or under the Part which relate to such arrangements."

25. Section 13 of the LGA 2000 does not refer to section 151 of the LGA 1972. Nor have we been taken to any regulation made under s.13 or any provision made under the relevant Part of the LGA 2000. Therefore, on the material provided, s13 of the LGA 2000 does not affect the authority of the head of finance, as such, to deal with these matters falling within section 151 of the 1972 Act. The most that has happened is that new requirements have been put in place for formalities to be carried out in relation to the organisation of functions within a local authority. But, however that may be, the position, as it seems to me, is that Mr Blakey has not submitted that the effect of these provisions on the decision that was made was that it would be invalid. It is impossible on the material provided to reach the conclusion that point is arguable. Mr Blakey has relied on Section 100G of the Freedom of Information Act 2000. This provides for publicity in relation to affairs of the local authority. It provides that a principal council shall maintain a register stating the name and address of every member of the council for the time being in the ward or division which he represents, and the name and address of every member each committee or sub-committee of the council for the time being and that the principal council shall maintain the list specifying those powers of the council which are exercisable by officers of the council in pursuance of arrangements made under the Act or any other enactment for their discharge by those officers and stating the title of the officer by who on each of the powers so specified is for the time being exercisable.
26. Then provision is made for inspection of that register; but Mr Blakey has not taken us to any provision, which means that, if it were the case that Mr Townsend's name was not duly recorded in an appropriate register, his decision to bring insolvency proceedings in this case would have been invalid as a matter of law so that the court could now review the question. The purpose of Section 100G is undoubtedly to achieve greater transparency but it does not follow that is has the effect of invalidating decisions made when the section had not been complied with, if that were the case.
27. At the end of the day, however, whatever the full analysis of these arguments may be, this particular point was not raised before the judge and therefore not fully canvassed before him and no findings of fact were made. It is a highly technical point. In all the circumstances it does not seem to me that this is a matter which is an important point of principle or practice which brings this case within CPR 52.13.
28. That leads me to the last two grounds on which appeal is sought and Mr Blakey took them together, which I will do likewise. Ground 3 relates to the conclusion of the judge that there were no proper practices, policies or procedures in place to ensure that a person such as the appellant, who was vulnerable, disadvantaged, mentally ill, was not made bankrupt, and ground 4 relates to the judge's conclusion that the respondent decision-maker did not unlawfully exercise the council's discretion or was wrong in law. I leave on one side the extent to which these sorts of issues can properly be brought on an annulment proceeding since these points were permitted to be raised below with the concurrence of the local authority. The judge dealt with these matters in detail in paragraphs 37 to 50 of his judgment. He concluded that the decision to present the petition was not on the facts an unreasonable one. Mr Blakey had submitted to the judge that there were triggers of concern about the mental health of Mrs Lonergan which should have caused the local authority to take a decision. The judge set out the evidence in some detail. He concluded that the District Judge's conclusion that there was nothing in the triggers to create concern and that it was a decision which the District Judge was entitled to reach. He added that he also considered that it was the right conclusion.
29. The judge, therefore, reached the conclusion that there was nothing in these grounds of appeal. In my judgment these grounds do not give rise to an important point of principle or practice and that therefore they would not in any event be suitable as a ground for a second appeal. Accordingly, I do not propose to go further into the grounds on which the judge concluded that the District Judge reached the right conclusion.
30. Finally, Mr Blakey submits that the decision violated Mrs Lonergan's right to respect for her home and her right of property contrary to Article 8 of the Convention on Human Rights and Article 1 of the First Protocol to that Convention. I do not consider that these matters raise a real prospect of success. I should point out that they were not as such raised below. The question was whether the decision to present a bankruptcy petition engaged Article 8 and the right to respect for her home. As I see it, there is no real prospect of success on this argument since it is not an application for possession of the home, which would or might engage the question of a right to respect for the home. In any event, insofar as the right to respect for private and family life or the home is engaged, Article 8 is a qualified right. Accordingly no violation occurs if there was interference by a public authority which met the conditions in Article 8(2). That provides that the interference must be in accordance with the law necessary in a democratic society and proportionate. Article 8(2) provides that what is necessary in a democratic society can include the interests of national security, public safety, or the economic well-being of the country, the prevention of disorder of crime, the prevention of health or morals or the protection of rights and freedoms of others. In view of the judge's conclusions on grounds 3 and 4, in my judgment no case is made out for saying that Article 8(2) could not be satisfied.
31. In relation to Article 1 of the First Protocol to the Convention (the right to protection and peaceful enjoyment of one's possessions and the right not to be deprived of one's possessions) is subject to the qualification in accordance with the second paragraph of that Article that that right should not impair the right of the state to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties. That provision means that the presentation of a petition to enable council tax to be collected would violate Article 1 of the First Protocol.
32. In saying that Article 8 is not engaged, I bear in mind my first conclusion that the presentation of the petition was in accordance with the law and could not bypass the powers of the local authority under Section 111 of the Local Government Act 1972. In my judgment it has not been shown that to take bankruptcy proceedings was more draconian than to take a charging order. The judge explains that point in paragraph 50 of his judgment and I agree with what he says. It is not essential as I see it that the local authority should choose one remedy rather than another, and in any event it must have some measure of discretion to choose the appropriate course. The evidence in this case shows, as is apparent from the background which I have adopted in the judge's judgment, that the arrears go back a very long time and that many steps were taken before the liability order was sought.
33. In those circumstances I would dismiss this application. I would direct that this judgment may be cited even though the application before us is only an application for permission to appeal.

Lord Justice Pill:

34. I agree

Lady Justice Smith:

35. I also agree.

Order: Application refused