England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		The Rolls Building 7 Rolls Buildings Fetter Lane London EC4A 1NL
		1st February 2017

1. MR JUSTICE NEWEY: I have before me an appeal by Mr Ajaz Choudhry from a bankruptcy order which was made against him by District Judge White on 16 June 2015 in the County Court sitting at Luton. The petition in respect of which the order was made was founded on four liability orders which the petitioner, Luton Borough Council, had obtained in the Magistrates Court in respect of council tax. The orders in question were made in 2011, 2012 and 2013 and related to a period from September 2003 through to March 2013.
2. It has been and remains Mr Choudhry's position that he was not aware of the liability orders when they were made and in that regard he has explained that he was not living at the relevant property. He was, however, sent a formal demand for payment of the total of the orders, that is £11,068.26, by the council on 24 February 2015. That letter was followed up by a statutory demand which was served personally on Mr Choudhry on 30 March. Mr Choudhry not having applied to set aside the statutory demand or taken any steps to challenge the liability orders, the petition followed. It was presented to the court on 5 May and served on Mr Choudhry personally on 15 May.
3. The petition came before the court, as I have indicated, on 16 June 2015. The council was professionally represented and Mr Choudhry was present in person. That same day Mr Choudhry made a witness statement in these terms:

"1. I confirm that the bankruptcy matter relates to council tax at 71 Icknield Way and at that time the bill had to be paid by the tenant and the bankruptcy petition is made incorrect facts.

2. I confirm that my father-in-law had passed away on 18.5/2015 in Pakistan and on this day I flew to Pakistan and returned back to the UK on 7.6.15 and, me still mourning his death, I could not deal properly with this matter"

(quote unchecked).

4. I have the benefit of a transcript of the hearing before the district judge, although unfortunately certain words were found to be inaudible. It can be seen from it that Mr Choudhry asked for time. There is, for example, a passage in the transcript in these terms:

"I request to you just to give me a time and I can bring all of the documents"

(quote unchecked).

Mr Choudhry was understood to be seeking to bring into question the liability orders. In that connection, Mr Choudhry said that he had not received letters from the council and made reference to the position of a tenant (whom I take to be the tenant referred to in the witness statement).

5. The district judge towards the conclusion of the hearing, finding that he should make a bankruptcy order, said:

"Liability orders are to do with the magistrates who make those orders. I have to accept the order is correct, so I do not have any choice. So the money is owed; it has not been paid; so I am going to make a bankruptcy order at 10:25"

(quote unchecked.)

The district judge also said this:

"(a) It is too late because you have known about this since March; and (b) you have been served, I am sure, with these orders, and they were made 11, 13, 14. It is too late. You should have sorted this out a long time ago."

(quote unchecked).

The district judge said too:

"the court has already decided that you owe the money … so that is all finished actually."

6. Following the making of the bankruptcy order Mr Choudhry filed the appellant's notice that I have before me today. He said in section 10 of the notice:

"I am also gathering evidence to show that at the relevant period for the liability I was not the occupier and therefore not liable for the liability of Council Tax. I had requested further time at the hearing of 16 July [I think that should be 16 June] but I was not granted this. I had taken a passport to confirm that I was out of the country and only recently came back to the UK"

(quote unchecked).

7. The appeal is pursued before me on the basis that District Judge White should have adjourned to allow a challenge to the liability orders rather than immediately adjudging Mr Choudhry bankrupt. Mr Liam Varnam, who appears for Mr Choudhry, submits, having regard to the transcript of the hearing, that the district judge can be seen to have directed himself that he had to accept that the liability orders were correct and that he therefore had no choice but to make Mr Choudhry bankrupt. The reality, Mr Varnam argues, was otherwise. In particular, says Mr Varnam, while it was not open to the district judge to set aside the liability orders himself, there was an appeal route available by way of the valuation tribunal. The district judge accordingly erred in concluding that the matter was necessarily "all finished". According to Mr Varnam, the district judge can be seen not in truth to have exercised a discretion as to whether or not to adjourn at all, but if he is to be taken to have exercised a discretion he did so on a flawed basis, with the result that his decision is vitiated.
8. In considering the merits of the appeal it is relevant to note that, as was pointed by the Court of Appeal in Sekhon v Edginton [2015] EWCA Civ 816, [2015] 1 WLR 4435, a petitioning creditor who establishes that the statutory conditions are fulfilled for the making of a bankruptcy order is, prima facie, entitled to such an order. In that same case, the Court of Appeal said, "Delay is inimical to all forms of litigation and especially so in a collective enforcement process such as insolvency." On the facts, which concerned a district judge's refusal to adjourn a bankruptcy petition to allow the debtor to put forward proposals as to payment, the Court of Appeal said that the judge had been entitled to take into account the very late stage at which the application was made and noted, too, that the debtor "had no formulated proposal about the time which he considered reasonable or the offer he proposed to make, let alone any evidence in support."
9. That case evidently concerned a somewhat different situation from the present case and in this context Mr Varnam relies particularly on the decision of HHJ Hodge QC, sitting as a judge of the High Court, in Yang v Official Receiver [2013] EWHC 3577 (Ch), [2014] BPIR 826 and the more recent decision of Mr Robin Hollington QC, sitting as a deputy High Court judge, in Okon v London Borough of Lewisham [2016] EWHC 864 (Ch), [2016] BPIR 958.
10. As Mr Varnam points out, these authorities bring out the fact that a liability order can potentially be challenged by way of an appeal to the valuation tribunal. In the Yang case, moreover, HHJ Hodge referred to guidance given by Hoffmann LJ in Royal Bank of Scotland v Farley [1996] BPIR 638. As HHJ Hodge noted, Hoffmann LJ said in the Royal Bank of Scotland case:

"If [a debtor] has a bona fide appeal or application to set aside the judgment in existence at the time when the petition comes on to be heard, it is the invariable practice to adjourn the hearing of the petition until that application or appeal has been decided."

11. In Yang HHJ Hodge took the view that that was also the appropriate way of dealing with a challenge on the hearing of a bankruptcy petition to a liability order in respect of unpaid council tax. "If," HHJ Hodge said, "there is pending an appeal to the valuation tribunal, then the debtor can ask for the hearing of the petition to be adjourned pending the final determination of that appeal."
12. Yang was taken a stage further by Mr Hollington in Okon. Having quoted from HHJ Hodge in Yang and said that he agreed with what HHJ Hodge had said, Mr Hollington said this:

"In my judgment, the issue before the Judge at the hearing on 9 June 2015 was whether the Applicant's intended appeal to the valuation tribunal was bona fide and substantial and whether in the exercise of her discretion she ought to adjourn the bankruptcy petition in order to await the outcome of that appeal."

13. As I have mentioned, Mr Varnam argues that the position is comparable in the present case. Mr Choudhry had indicated, he says, his wish to challenge the liability orders on which the bankruptcy petition was founded. Although Mr Choudhry did not refer to the possibility of an appeal to the valuation tribunal, that is understandable since he was appearing in person and in any event the district judge can be seen to have proceeded on an erroneous basis. He took the view that there was no scope for challenge to the liability orders when in fact there was. So, says Mr Varnam, the district judge's decision cannot stand and the bankruptcy order should be set aside.
14. The council, represented by Miss Madeline Dixon, argues otherwise. Miss Dixon maintains that to allow this appeal would be to take a step further even than Mr Hollington took in Okon. Yang and Okon taken together suggest that an adjournment for the purposes of an appeal to the valuation tribunal will or can be appropriate both if there is a pending appeal and if the debtor has indicated an intention to appeal and the intention can be seen to be bona fide and substantial. The present case, Miss Dixon says, does not fall into either category. There was no pending appeal and no reference to an appeal to the valuation tribunal; nor, given the exiguous materials before the district judge, could he have concluded that there could be a substantial challenge to the liability orders.
15. Miss Dixon argues, moreover, that to require a district judge to consider the possibility of an adjournment for the purposes of an appeal to the valuation tribunal in circumstances such as these would go too far and impose unreasonable burdens on district judges hearing busy lists. She says that District Judge White can be seen to have considered the possibility of a challenge in the Magistrates Court and to have correctly dismissed that. She says, further, that, having regard to what Mr Choudhry said in the course of the hearing before the district judge, what he appeared to have in mind was bringing documents to the Bankruptcy Court, and that again could not have been appropriate and was a possibility rightly dismissed by the district judge.
16. Miss Dixon recognises that the district judge did not refer to the possibility of an appeal to the valuation tribunal, but she says that he cannot have been under a duty to consider such a possibility when not only had no such appeal been initiated but there was no reference to it. More than that, she says that, even after the hearing, neither in the appellant's notice nor in a witness statement that Mr Choudhry made was there reference to an appeal to the valuation tribunal, and extra evidence that Mr Choudhry has relied on does not show there to be a basis for an appeal of substance, or at any rate one going to much of the total period covered by the liability orders.
17. In the end, despite Mr Varnam's attractive submissions, I have concluded that Miss Dixon is right. Come the hearing on 16 June 2015, the council had satisfied the statutory conditions for the making of a bankruptcy order and was prima facie entitled to one. Mr Choudhry asked for time, but on the face of it what he was asking for was the opportunity to bring further documents to a future hearing in the county court, something which could not have helped him in a challenge to the liability orders. The district judge also had in mind, and was entitled to dismiss, the possibility of a challenge in the Magistrates Court. I do not think that he can be criticised for not also addressing the possibility of an appeal to the valuation tribunal when no such possibility was raised either in Mr Choudhry's witness statement or in the course of the hearing.
18. Going beyond that, it seems to me that the district judge could not anyway have concluded on the basis of the materials before him that there was a bona fide and substantial intended appeal to the valuation tribunal. Aside from the fact that Mr Choudhry did not raise the possibility in the hearing and had not previously taken any steps to challenge the liability orders, despite on any view having been aware of them for a matter of months, there simply was no evidence from which the district judge could conclude that a substantial challenge could be made. All that really bore on that was the first paragraph of the witness statement which took matters very little further.
19. It can be seen from what the district judge said that he had in mind, too, the fact that Mr Choudhry had known about the potential for a petition based on liability orders since March but done nothing about it. That plainly was a matter that he was entitled to take into account. I recognise that, rather as was the case with Edginton, a different district judge might possibly have given Mr Choudhry a little time. A different district judge might himself have raised the possibility of an appeal to the valuation tribunal or thought that it was anyway appropriate to give Mr Choudhry a brief opportunity to assemble more documentation. I do not, however, consider that District Judge White was under any obligation to take that course. It seems to me that the decision that he took was one that was open to him and it follows from that that I must dismiss this appeal.