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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> London Borough of Tower Hamlets v Naris  EWHC 886 (Ch) (27 March 2019)
Cite as:  EWHC 886 (Ch)
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INSOLVENCY AND COMPANIES COURT
B e f o r e :
| LONDON BOROUGH OF TOWER HAMLETS
|- and -
MS DELGADO (of BENCHMARK SOLICITORS LLP) for the Respondent
Hearing dates: 19 March 2019
Crown Copyright ©
Chief ICC Judge Briggs:
The liability orders.
"The liability orders concern what is stated to be a premises known as [the Highway]. I do not accept there exists any such address…"
"In or around March 2013 the landlord evicted the company from the subject property, the locks to the subject property were changed. The basis of the eviction was not clear. Whilst I was out of the subject property, the landlord sent people into the premises and smashed them up. I then had to bring an appeal to be readmitted. In July 2013 I reached an agreement with the landlord who let me back into the subject property…[UEL] went into liquidation on 29 August 2013…."
"I recall a visit by a rates inspector from the Tower Hamlets Council, Michael Lodge around April 2015. He was enquiring as to who was occupying the premises and he told me that Tower Hamlets Council (the Petitioner) had sent out a number of rates demands to the property recently, but these had been returned in the post. I told him that Fast Drinks Limited was in occupation for the last 2 years but we had not received any rates demands and we had not returned any post. I filled him in with some of the events that had taken place at the premises in 2013 and that, because it had been substantially damaged, the property was not fully occupiable until about March 2014. I suggested that he send the rates demands to 3 Percy Circus as this is the company's registered office. I gave him some contact details and he left me his card. I heard nothing more until I received the statutory demand against me personally which was based on the 3 liability orders …. It now seems apparent that the council had been sending the demands to Unit 4 100 The Highway….which is a different postal address and is why I did not receive them. It is my belief that I did not receive the demands and other documents concerning Liability Orders 3-5 … because the postal address on the demands is incorrect. This is due to the fact that the "Unit 3" address can only be accessed from 110 Pennington Street."
Evidence of the London Borough of Tower Hamlets
"With regard to the 3rd, 4th and 5th debts the Debtor contends that the 'premises known as Unit 3 The Highway do not exist…..My response….is as follows.
First, sections 41 and 42 of the Local Government Finance Act 1988 establish the list which names each hereditament…..the hereditament is listed as "Unit 3 At 100 The Highway, E1W 2BX". Accordingly, correspondence was properly served by the Creditor at this address. Had the Debtor wanted to he could have applied to the Valuation Office Agency to "correct" the entry in the list. He did not do this. Secondly, if any correspondence is returned to the Creditor as undeliverable by the Royal Mail it would be noted on the Creditor's computerised record system and the original would be resent. In the normal post or by email if the Council held an email address. In this case I have checked the Creditor's computerised record system and can confirm that no documents that were sent to the Debtor regarding each of these five debts were recorded as returned. Thirdly, I note that even when the Debtor accepts that he was served such as when they were "served at my residential address"…….he did not respond by either making a payments or attending court to resist the making of a liability order. Fourthly, I am advised that a regular process does not require personal service and that there are irrebuttable presumptions of service that arise under the Local Government Act 1972, s233 (regarding notices served by local authorities) and the Magistrates Courts Rules 1981/552, reg 99 (regarding service of summonses). Finally, this is not an argument that the Debtor raised in the Liability Order proceedings. Indeed, on occasions the Debtor himself referred to the subject premises as "Unit 3,100 The Highway".
The arguments advanced
"Under section 271(1) of the Insolvency Act 1986 the court shall not make a bankruptcy order unless it is satisfied that the debt in respect of which the petition was presented, having been payable at the date of the petition or having since become payable, has neither been paid nor secured nor compounded for. Under section 266(3) of the Insolvency Act 1986 the court has a general power if it appears to it appropriate to do so, on the grounds that there has been a contravention of the rules or for any other reason, to dismiss a bankruptcy petition or stay proceedings on such petition. The history of the doctrine now enshrined in section 266(3) which gives the court discretion in bankruptcy proceedings to go behind a judgment debt.
In McCourt & Siequen v Baron Meat  BPIR 114, 121 Warner J set out five broad principles to be applied. These were:(1) A court exercising the bankruptcy jurisdiction (a 'bankruptcy court') although it will treat a judgment for a sum of money as prima facie evidence that the judgment debtor is indebted to the judgment creditor for that sum may, in appropriate circumstances, go behind the judgment, that is to say, inquire into the circumstances in which the judgment was obtained and, if satisfied that those circumstances warrant such a course, treat it as not creating or evidencing any debt enforceable in bankruptcy proceedings.
(2) The reason for the existence of that power of a bankruptcy court is that such a court is concerned not only with the interests of the judgment creditor and of the judgment debtor, but also with the interests of the other creditors of the judgment debtor. The point was succinctly made by James LJ in Ex Parte Kibble, Re Onslow (1875) LR 10 Ch App 373 at pp 376–377, in the following words: 'It is the settled rule of the court of bankruptcy, on which we have always acted, that the court of bankruptcy can inquire into the consideration for a judgment debt. There are obviously strong reasons for this, because the object of the bankruptcy laws is to procure the distribution of a debtor's goods among his just creditors. If a judgment were conclusive, a man might allow any number of judgments to be obtained by default against him by his friends or relations without any debt being due on them at all; it is, therefore, necessary that the consideration of the judgment should be liable to investigation.'
(3) It follows that the grounds upon which a bankruptcy court may go behind a judgment are more extensive than the grounds upon which an ordinary court of law or equity may set it aside.
(4) In particular, a bankruptcy court will go behind a judgment if satisfied that the judgment creditor manifestly had no claim against the judgment debtor on which the judgment could have been founded.
(5) There are two stages in bankruptcy proceedings at which a court may be called upon to exercise the power in question. The first is at the hearing of the petition, when the court has to consider whether or not to make a receiving order. Section 5(3) of the Bankruptcy Act 1914 provides: 'If the court is not satisfied with the proof of the petitioning creditor's debt, or of the act of bankruptcy, or of the service of the petition, or is satisfied by the debtor that he is able to pay his debts, or that for other sufficient cause no order ought to be made, the court may dismiss the petition.' The words that are particularly material there are 'If the court is not satisfied with the proof of the petitioning creditor's debt or … is satisfied by the debtor that … for other sufficient cause no order ought to be made'."
The affect of the Liability orders
"34(6) The court shall make the [liability] order if it is satisfied that the sum has become payable by the defendant and has not been paid."
"49(1) 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"
"regulation 49(1) of the CTR deems the liability orders to constitute a legally enforceable debt, regardless of the underlying factual position relating to the relevant property, unless and until the liability order is set aside under the specific statutory procedure laid down for doing so. Dictates of certainty and expediency require that a bankruptcy court should not go behind the liability orders, except in the event of fraud or some miscarriage of justice. At the date that the BO was made, the liability orders remained in place and had not been set aside; the effect of regulation 49(1) of the CTR was therefore statutorily to deem them as constituting a legally enforceable debt from the time they were made until the time they were set aside."
"It is apparent from the provisions cited above that liability orders can be made only after a fairly elaborate procedure has been followed, and the defendant has been given an opportunity to explain why he has not paid. The court may make the order only if it is satisfied that the sum has become payable, and that it has not been paid. If the defendant thinks that the order has been wrongly made, he is in principle entitled to challenge it either by judicial review or by an appeal by case stated. In the present case, however, Mr Dias took no active steps to present his case to the court, nor did he challenge or appeal against either of the liability orders."