Local authority lessons learned in 2018

4th February 2019

This year there have been some interesting cases looking at the conduct of local authorities and creditors when commencing bankruptcy proceedings or serving court documents on debtors.  It is important for local authorities to be aware of these and to consider the correct steps to take when pursuing debts such as unpaid council tax and non-domestic rates.

Harriet Lock -v- Aylesbury Vale District Council [2018] EWHC 2015 (CH) was heard in the High Court on 30 July 2018 and highlights that in cases of unpaid council tax, the burden of proof falls on a local authority to show that a bankruptcy order will serve a useful purpose.  The council had not notified Ms Lock of its belief that she was due to receive inheritance and as they had not included this in their evidence, Ms Lock was not given an opportunity to address this.  The court found that there was no evidence that a bankruptcy order would serve any useful purpose because Ms Lock had no assets and the bankruptcy order made against her, which was considered to be unjust in the circumstances, was set aside.  The High Court Judges made it clear that where a court is not convinced that there are any assets or that any assets will come into existence, it would be justified in exercising its discretion by refusing to make a bankruptcy order.  Local authorities should therefore inform debtors of their knowledge and request that they provide details to avoid situations such as this and to demonstrate the rationale of the bankruptcy proceedings.

Sajid -v- Nuur (unreported) was heard on 30 July 2018 in the Central London County Court, on appeal to HHJ Richard Roberts.  A landlord had issued proceedings against a tenant claiming arrears of rent and the claim form was served at the property that the tenant had rented from the landlord.  However, the landlord in this case knew that the tenant had left the property and on appeal, HHJ Richard Roberts ruled that service of the claim form at the tenant’s “last known address” was not proper service in accordance with Rule 6.9 of the Civil Procedure Rules.  Whilst it is sometimes difficult to establish an individual’s address, it was clear that the landlord in this case knew that the tenant was no longer residing there and failed to take reasonable steps to ascertain a current address.  Local authorities should consider undertaking a trace in these circumstances and if it is not possible to find an alternative address, but where there are known email addresses for the individual, it should consider making an application to the court for permission to serve documents using this alternative method.  Whilst there might be additional cost to this, the risks are far higher if proceedings are subsequently dismissed because of service issues.

Anjam Amin -v- London Borough of Redbridge, Paul Atkinson (as Trustee in Bankruptcy of Anjam Amin) [2018] EWHC 3100 (CH) was heard on 15 November 2018 on appeal to Mr Justice Nugee and serves as a useful reminder that conduct will be relevant when determining liability for costs.  Mr Amin was made bankrupt in June 2010.  The petition was based on an extant statutory demand relating to unsatisfied Liability Orders for unpaid Council Tax.  On discovery of the bankruptcy a number of years later, Mr Amin claimed he was not liable as he had never resided at the property.  Instead, the property was let to another individual, who sub-let the downstairs, using  Mr Amin’s name to do so.  It was confirmed by the Valuation Tribunal in September 2017 that Mr Amin was not liable as he was not in occupation.  The Liability Orders were, accordingly, set aside and the Bankruptcy Order was rescinded, despite the local authority having made numerous visits to the property to gather evidence, which indicated that Mr Amin resided at the address.  Mr Amin, after some delay, eventually made an application to annul the bankruptcy and argued that the council should pay all the costs. However, the appellate court in this case upheld DJ Dodsworth’s first instance decision, made on 5 January 2018 and ruled that Mr Amin was liable for the council’s legal costs in bringing the petition, together with the costs incurred by the Trustee and the Official Receiver.  Mr Justice Nugee considered the events following Mr Amin’s discovery of the bankruptcy petition and whilst he agreed that the council was justified in opposing his application for annulment, he suggested that the council should have informed Mr Amin that the correct application was for rescission and not annulment.  This decision highlights that a local authorities’ conduct is important in relation to liability for legal costs where a Bankruptcy Order, properly made in the first place, is later rescinded.

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