England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		25/01/2016

Mr Justice Irwin :

1. This is an appeal against the decision of the North East London Justices, sitting at Barkingside Magistrates' Court on 29 January 2015, by way of case stated. The magistrates took a decision committing the Appellant to prison for 90 days, suspended on payment of £100 per month, in respect of the Appellant's liability for unpaid council tax. The immediate background is that on 5 January 2015, the Respondent council applied to Barkingside Magistrates for the committal in respect of the outstanding unpaid council tax, pursuant to Regulation 47(2) of the Council Tax (Administration and Enforcement) Regulations 1992. The application was heard on 29 January and the magistrates found the following facts:

"(1) The outstanding council tax was due in respect of a dwelling at 315 Green Lane, Seven Kings, Illford, Essex.

(2) The period for which the outstanding council tax was due was 1 January 2005 to 31 December 2010, a period which included seven different financial periods.

(3) Liability for the payment of the council tax originally fell on the tenants, the property being let in multiple occupation. On that fact being discovered in November 2010, the respondent altered the liability for the sums owing to the owners of the property, the appellant and a Mr Boghal. Those two shared joint and several liability in respect of the debt. The respondent council elected to proceed against the appellant and in November 2010 the account was created.

(4) A liability order was made against the appellant under the 1992 Regulations on 30 June 2011 in the sum of £7397.43.

(5) The appellant sought to dispute his liability for the council tax on appeal, both before the valuation tribunal and the High Court. His appeals were dismissed and his liability upheld."

2. In evidence to the Magistrates during the enquiry into his means, the Appellant averred that he had been adjudged bankrupt on 5 January 2006 (although he produced no evidence to verify that) and as a consequence his assets were seized. Prior to that date he said he had been a director of a number of companies. Following his bankruptcy, he claimed that he had been unemployed but had not claimed state benefits. His account was that owing to his age he had been unable to secure further full time employment, but he was now working part time in his brother's business, for which he was paid £500 per month in cash. The Appellant accepted that he owned the property at 315 Green Lane (together with other properties) but he held as trustee only and not as beneficiary. He contended that he had not neglected or wilfully refused to pay the outstanding sum. He offered to repay the debt, initially at the rate of £10 per month and then at £30 per month, the latter offer being made during the course of the hearing.
3. The Appellant was represented before the Magistrates by the duty solicitor.
4. As the case stated recites, the Respondent contended before the Magistrates that the property was being let by the Appellant alongside Mr Boghal and a number of companies owned by the Appellant. The Respondent had received information from the Appellant's "various tenants" that in the majority of cases no formal tenancy agreements were in place, and that rental payments were made to him in cash. It was further asserted by the Respondent on the basis of this evidence that the Appellant had, throughout the relevant period, had the means to pay and had wilfully refused and/or culpably neglected to pay his council tax.
5. The Magistrates went on to recite:

"No cases were cited before us. We were not addressed by either the Respondent or the Appellant on the legal implications of bankruptcy and in particular, whether (a) the debt (for council tax) incurred prior to the bankruptcy can be recovered from a bankrupt after discharge and whether the person can be liable to be sent to prison for the non payment of council tax, (b) the debt (for council tax) incurred during the bankruptcy can be recovered from a bankrupt after discharge and whether the person can be liable to be sent to prison for the non payment of council tax, and (c) a bankrupt can be liable for council tax in respect of bankruptcy assets, which are supposed to pass to his trustee in bankruptcy, and whether the person can be liable to be sent to prison for non payment of council tax on these bankruptcy assets.

We were of the opinion that Mr Soor had concealed the true position regarding occupancy of the property, which resulted in this account being created on 18 November 2010, some four years after his alleged bankruptcy. We found that the Liability Order made on 30 June 2011 confirmed his liability as owner and must be enforced by the Respondent. Further, that Mr Soor has concealed his interest in various companies and properties over the relevant periods; he did not produce any documentary evidence to illustrate his current state of affairs in relation to any of them. We were satisfied that he would have understood the need to produce documents to the court to support his contention.

We were satisfied that he was concealing his true financial position to the extent that he has had adequate means to pay but has culpably neglected to pay for each of the relevant periods and accordingly he was committed to prison for 90 days but the issue of the warrant was suspended on terms …."

6. The question settled by the Magistrates in the course of the case stated reads as follows:

"The question for the opinion of the High Court is, given that the Liability Order was made on 30 June 2011, notwithstanding the Appellant's apparent bankruptcy in 2006, were we correct in law, having found that the Appellant had culpably neglected to pay, to commit him to prison and suspend committal on terms for payment of the sum due."

7. As part of the background of this case it is helpful to focus on the decision of Wyn Williams J in Harminder Singh Soor v The London Borough of Redbridge [2013] EWHC 1239 (Admin). This decision was an appeal by the Appellant and Mr Boghal from the decision of the valuation tribunal of February 2012, whereby the tribunal determined that the two Appellants were responsible for council tax. In the course of the decision (paragraph 23) the judge recited that the Appellants had disputed before the tribunal being "owners of the premises". Their letter of August 2011 had pointed out that Mr Soor:

"held his interest in the premises on trust and that he had no beneficial interest in the premises. It was also pointed out that on 5 January 2006, Mr Soor had been made bankrupt so that any beneficial interest in the premises had devolved upon his trustee in bankruptcy."

8. In paragraphs 40 and 41 of the judgment, Wyn Williams J recited the argument advanced by Mr Soor to the effect that he had no beneficial interest in the premises at the material time, and that he relied upon what he claimed to be "the general presumption that a person should not be liable for taxation in respect of property in which he has no beneficial interest". The tribunal rejected those submissions and their decision was upheld in the High Court, despite the bankruptcy.
9. This gives some context to the position which was made clear by the justices that before them, this Appellant contested the facts but advanced no argument based on his bankruptcy of 2006.
10. In the instant application, which is concerned with enforcement of his liability rather than the primary question of the liability itself, the Appellant now seeks to advance argument far beyond the question set by the Magistrates in response to his request. I have recited the question above and will not repeat it. The question does not address liability for council tax but rather the enforcement of the payment of the sum due. Counsel for the Appellant now appearing advances five grounds of appeal. Firstly, he says the decision of the justices was perverse in that they failed to consider all the evidence before them and/or to afford proper weight to it. Secondly, he argues the decision was wrong in law, and that the justices failed to have regard to the effect of the Appellant's bankruptcy. Thirdly, counsel submits that the justices failed to consider Regulation 42(7) of the 1992 Regulations and failed to observe the requirement to hold an adequate means enquiry. Fourthly, the justices failed to take account of the letter from the Appellant's employer setting out his monthly wage. In the absence of other evidence, the justices should have accepted that as setting out the true position as to the Appellant's income. Fifthly, the Appellant argues that in breach of the principle laid down in R(Broadhurst) v Sheffield Justices [2000] CO/1114/2000, the justices made an order meaning that the period for repayment would exceed six years; they failed to make separate findings in respect of each liability period, and failed to consider remission of part or all of the outstanding sums. I deal in sequence with the grounds advanced.
11. I reject roundly the submission that the decision of the justices was perverse. In my view they addressed directly the evidence before them and they were fully entitled to evaluate that evidence and reach the conclusions that they did as to the approach taken by this Appellant. For similar reasons I reject the second ground: there was sufficient evidence before the court for them to reach their factual conclusions. Moreover, in arguing so broadly that the justices "failed to have regard to the effect of the Appellant's bankruptcy" it is difficult to avoid the view that the Appellant is seeking to set to one side the decision of Wyn Williams J in the High Court, where liability for council tax was established in full knowledge of the bankruptcy.
12. In relation to Regulation 47(2) of the 1992 Regulations, I reject the submission made in broad terms that there was an insufficient means enquiry so as to satisfy Regulation 47(2) and 47(3). In developing this ground orally, counsel took the Court to Section 382 of the Insolvency Act 1986. The relevant part of the section reads as follows:

""Bankruptcy debt", etc.

(1)"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,

(b) any debt or liability to which he may become subject after the commencement of the bankruptcy (including after his discharge from bankruptcy) by reason of any obligation incurred before the commencement of the bankruptcy."

13. Mr Dipré's argument centres on the meaning of the word "obligation" in Section 382(1)(b). He submitted that there is no authority on the meaning of this word in insolvency legislation, a proposition which went uncontradicted by the Respondent. Mr Dipré argues that the term in this context must mean, or be capable of meaning, all obligations and duties arising from the trusteeship of the beneficial ownership in the property. If the trusteeship was entered into (as it was) before the commencement of the bankruptcy, and liability for the payment of council tax derives from the Appellant's trusteeship of the property, then the liability for council tax arose by reference to "that obligation". Hence, any liability for council tax in respect of property held as trustee becomes, by operation of statute, a bankruptcy debt. By that route Mr Dipré argues that the Magistrates could not lawfully have held that the failure to pay was due to the Appellant's "wilful refusal or culpable neglect", since, at least until the point of the Appellant's discharge from bankruptcy, his obligation was to put any available means at the disposal of his trustee in bankruptcy.
14. I reject this approach on several grounds.
15. It seems to me to be unarguable that the term "obligation" in Section 382 carries so broad a meaning as to incorporate the Appellant's status as trustee or his duties and "obligations" as trustee of the property. The interpretation of the subsection advanced by Mr Dipré would mean that any trustee who became bankrupt would acquire an indefinite protection from enforcement in respect of the debts or liabilities arising from the trusteeship, extending even to the period after discharge from bankruptcy. I reject that.
16. However, there is a refinement of the argument which may be correct, but which was not satisfactorily developed in the hearing before me. Moreover, for reasons set out later in this judgment, the argument is academic so far as the current appeal is concerned. I indicate here tentative views only for those reasons.
17. In my view, it is arguable that liability to pay council tax incurred by the Appellant as a result of his trusteeship should be regarded as an "obligation" within Section 382(1), insofar as that liability had crystallised before the date of the bankruptcy in 2006. It is also arguable that the specific liability so arising, which crystallised during the currency of the bankruptcy, would by operation of statute be a bankruptcy debt. A debt or specific financial liability arising from the trusteeship, in respect of a period before the commencement of the bankruptcy, but which did not crystallise until after the commencement of the bankruptcy might well fall within Section 382(1)(b). Ownership of the relevant property bringing liability for council tax might bring the matter within Section 382(1)(b) even where the liability crystallised after the commencement or discharge from the bankruptcy, but only in respect of the period of trusteeship before the commencement of the bankruptcy.
18. The Magistrates did not enquire as to the details of the Appellant's bankruptcy and in particular as to when he was discharged. They were not asked to consider Section 382 or its effect when addressing the decision under Regulation 47(2) and the question of whether the non payment was due to the Appellant's "wilful refusal or culpable neglect". They did issue a warrant of commitment against this Appellant in respect of the whole of the council tax liability, on the understandable basis that they found him an unreliable witness who was not frank as to his means. At least to the extent of the council tax liability arising before the discharge of the bankruptcy, that may have been an error. However, as I have indicated it is an academic point in this case for reasons which follow.
19. I turn to the fourth ground advanced. I dismiss this ground roundly. The Magistrates were, in my view, fully entitled to reject the letter describing the Appellant's means from his cousin and casual employer. They had evidence before him that he had other properties and other means, and there was a long pattern of avoidance and unreliability. I reject this ground.
20. The fifth ground is the straightforward point that the effect of the order is that the period for repayment will exceed six years, and in reliance upon the Broadhurst case and subsequent well-established authority, that is simply too long. Here I agree with the Appellant's argument. Even if the payments were made promptly throughout, as the Court in Broadhurst remarked (see paragraphs 22 and 23), a period of five years to discharge such a debt has for long been regarded as excessive. A period of three years is "unassailable".
21. I return to the question for the opinion of the High Court which for convenience I repeat:

"…given that the Liability Order [for council tax] was made on 30 June 2011, notwithstanding the Appellant's apparent bankruptcy in 2006, were we correct in law, having found that the Appellant had culpably neglected to pay, to commit him to prison and suspend committal on terms for payment of the sum due."

22. My answer to this question, as I have indicated, is that the period over which the Appellant would be required to pay off this liability was excessive, and thus the order was unlawful.
23. The decision of the Magistrates must be quashed. I have considered whether I should myself remit part of the liability and substitute a different order. However, I have concluded I should not do so. The proper course is to remit the matter to the Magistrates for re-hearing. The Magistrates should establish when the Appellant was discharged from bankruptcy and consider what liability for council tax arose after that date from the Appellant's position as Trustee of the relevant property. The Appellant will remain liable for the council tax from the earlier period. However, in respect of that earlier liability he may not have failed to pay "due to his wilful refusal or culpable neglect" so as to satisfy Regulation 47(3). The Magistrates will no doubt enquire as to whether his non-payment of the later liabilities for council tax was as a result of such a refusal or neglect. If so satisfied, they may then impose a fresh order committing him to prison, suspended on payment of a sum per month commensurate with their view of his means and always provided that the period for payment is not excessive.