Watts v London Borough of Newham [2009] EWHC 377 (Ch)

[2009] EWHC 377 (Ch)Case No CH/2008/PTA/0652
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 5 th March 2009
Before
MR STEPHEN SMITH QC
Between
HILDRED WATTSAppellantTHE LONDON BOROUGH OF NEWHAMRespondent
Reuben Comiskey (instructed by Citizens Advice Bureau, Royal Courts of Justice) for AppellantNiall McCulloch (instructed by Ford & Warren) for RespondentHearing Hearing dates: 11 th and 12 th February 2009
JUDGMENT

Stephen Smith QC sitting as a Deputy Judge of the Chancery Division :

[1]This is the latest chapter in the saga of Hildred Watts’ battle with the London Borough of Newham over their assessments of Ms. Watts’ council tax liabilities. According to what I have been told or have discovered from the Bankruptcy Court’s files, during the course of the saga there have already been at least the following: 12 orders made by Stratford Magistrates Court (the first as long ago as 13th February 2002); 2 orders made by the Administrative Court of the Queen’s Bench Division; 4 decisions of the Valuation Tribunal; 6 orders made by the Bankruptcy Court of the Chancery Division in respect of Ms. Watts’ application to set aside LB Newham’s statutory demand; 7 orders made by the Bankruptcy Court on LB Newham’s bankruptcy petition; 2 decisions in the Bankruptcy Court on applications by Ms Watts to annul the bankruptcy order made against her on 30th June 2008; and 1 interim order on this appeal. I am also aware from the Bankruptcy Court’s files that Ms Watts’ trustee has brought proceedings in the bankruptcy since 30th June. Not all of the 34 orders or decisions to which I have referred were made at attended hearings, but many were.[2]All of this has taken place in respect of an aggregate basic indebtedness (ie ignoring costs) which at its highest on the papers I have seen was put at £11,480.40 (in the statutory demand); which by the time of the hearing of the petition had been reduced to £7,397.68; and which by the time of the hearing before me had been further reduced to £1,385.[3]The matters I have to decide are appeals by Ms Watts(a) from the decision of Registrar Jaques on 30th June 2008 to make a bankruptcy order against her,(b) from the decision of Deputy Registrar Brettle on 23rd July 2008 refusing to annul the bankruptcy order, and(c) from the further decision of Deputy Registrar Briggs on 9th September 2008, also refusing to annul the bankruptcy order. Ms Watts does not have permission to appeal from any of these decisions: on 3rd December 2008 Mr Justice Arnold directed that her application for permission to appeal be adjourned to be heard along with the appeals if permission was granted. I therefore also have to determine whether Ms Watts should be granted permission to appeal. Additionally, Ms Watts’ Appellant’s Notice was filed late in respect of the two earlier orders (Registrar Jaques and Deputy Registrar Brettle); I therefore also have to decide whether to extend time for her appeals from those orders, or whether, as Ms Watts contends, Mr. Justice Arnold’s order has impliedly granted those extensions.[4]Until shortly before the commencement of the hearing before me, Ms Watts was unrepresented and had been unrepresented, I believe, throughout the saga. Happily that position changed shortly before the hearing commenced, and Mr Reuben Comiskey of counsel, instructed by the Citizens’ Advice Bureau in the Royal Courts of Justice, appeared before me pro bono. I am most grateful for the considerable assistance of Mr Comiskey and the Citizens’ Advice Bureau in enabling me to understand the history of these various proceedings, and the basis of Ms Watts’ complaints in respect of what has transpired.[5]I also wish to express my gratitude to Mr Niall McCulloch of counsel, who appeared for LB Newham, for his help in unravelling a story in which he too had previously played no part, and also for his sanguinity as the amount of paper produced to me grew in thickness from a couple of inches at the outset of the hearing to several times that at its conclusion.[6]LB Newham instructed solicitors based in Leeds in connection with these proceedings in London; Mr. McCulloch was not attended in court, and accordingly he was unable to answer some of my enquiries. There are therefore gaps in the story which have not been filled, though I do not think they matter for the purpose of the rulings I have to make.

The history

[7]Ms Watts owns (or at the relevant times owned) four properties within the London Borough of Newham. She occupies one property herself (with her 2 children); the other properties are, or have been, let out to tenants, when inhabitable, or (in the case of one property) occupied by Ms Watts’ mother.[8]The petition debts represent assessments of council tax in respect of these properties over a period of several years ending in July 2006. Ms Watts has disputed her liability to these charges. As I have already indicated, the first of the 12 orders made by Stratford Magistrates Court was made in February 2002. The basis of Ms Watts’ objections as regards each of the various properties has proved difficult to pin down with precision, but in general terms is to the effect that others were in occupation at all or part of the relevant times and were liable for the whole or part of the relevant charges; or that the properties were uninhabitable and no (or reduced) charges should have been levied; or, in the case of the property occupied by herself and her children, that she has paid (or should be credited in respect of) all the council tax allegedly due.[9]I was informed by Mr. Comiskey that the most appropriate forum for the determination of Ms Watts’ complaints about the council tax assessments was not Stratford Magistrates Court, which made the orders listed in the bankruptcy petition, nor the Administrative Court, to which as I shall shortly relate Ms Watts was directed in 2008. The most appropriate forum was the Valuation Tribunal. Events in this case, particularly after the bankruptcy order was made, bear out this information: upon consideration of Ms Watts’ written evidence filed with the Valuation Tribunal in the latter part of 2008, LB Newham unilaterally withdrew or reduced certain of the assessments which form part of the petition debt. As regards those assessments which were not withdrawn, several were subsequently discharged or reduced by the Valuation Tribunal. These developments explain, in whole or substantial part, the reduction in the amount of the petition debt still outstanding to £1,385.[10]It is a pity that Ms Watts did not make an application to the Valuation Tribunal many months (or even years) ago in respect of her complaints, because if she had done so it is more than likely that the question of how much council tax she was truly liable to pay would have been determined long before LB Newham embarked on the course of seeking to bankrupt her. There is nothing in the material produced to me to suggest that Ms Watts was encouraged to take any grievance she may have to the Valuation Tribunal, but I find it hard to believe that LB Newham does not inform its residents when it is seeking to collect council tax that that is the course which they must follow if they wish to challenge the assessments. If it does not already provide its residents with that information, it will doubtless now give serious consideration to doing so in the light of the significant amount of public resources which this case has consumed.[11]I have not been taken to any communications between LB Newham and Ms Watts when the assessments to charge were being made or when Stratford Magistrates Court was making its orders. I know a little more of what transpired subsequently, in part because, the picture being unclear on the evidence, during the course of the hearing I called for the Bankruptcy Court’s files.[12]LB Newham’s statutory demand, in the sum of £11,480.40, was dated 5th January 2007. Ms Watts applied to set aside the demand. I know nothing of what transpired on that application save that it was ultimately dismissed by Registrar Nicholls on 31st October 2007, following what I was told were 5 previous considerations of the application by the Bankruptcy Court. I cannot explain why it took 6 hearings in total, spanning 9 months or more, to dispose of the application.[13]By his Order Registrar Nicholls authorised LB Newham to present a bankruptcy petition against Ms Watts on or after 14th November 2007.[14]LB Newham’s petition was issued on 11th December 2007. It came before Registrar Rawson on 30th January 2008. The Registrar had before him a statement in writing from Ms Watts in which she disputed her liability to LB Newham. The Registrar directed Ms Watts to file further evidence and gave permission to LB Newham to respond. He also directed that the parties were to file a listing certificate with an estimate of the likely length of the hearing, by 10th March 2008, and for the matter to be reviewed by a Registrar on 17th March 2008 in the absence of the parties.[15]Ms Watts filed her evidence on 20th February 2008. It consisted of 3 short paragraphs referring to a large number of exhibits, many of which appear to have been prepared for Stratford Magistrates Court during an earlier part of the story.[16]In ignorance of Ms Watts’ filing (the Bankruptcy Court seemingly having mistakenly led LB Newham’s solicitors to believe that there had been no evidence filed by Ms Watts), on 25th February 2008 LB Newham’s listing certificate was filed, giving an estimate of the length of hearing of 1 hour. Ms Watts’ estimate was 2 hours.[17]By 3rd March LB Newham had received Ms Watts’ evidence and objected to it on the ground that it was incoherent, and the issues raised had already been dealt with on the application to set aside the statutory demand.[18]The matter was reviewed by Deputy Registrar Schaffer on 17th March, when he adjourned the petition for a hearing on 7th April 2008, with a time estimate of 75 minutes.[19]On 7th April there was a further adjournment to 22nd May 2008, this time with a time estimate of 45 minutes. I do not know the reason for this adjournment, or why the time estimate was revised.[20]On 22nd May Deputy Register Schaffer adjourned the petition to 30th May, reserving the matter to himself. Again, I do not know the reason for the adjournment. I have seen a manuscript submission from Ms Watts dated 6th May 2008 in which she said:
“I respectfully ask for a stay in proceedings to follow V-T, Ombudsman and reply to the protocol for Judicial Review”
[21]Clearly therefore, by early May 2008, Ms Watts was aware of the possibility of approaching other tribunals for a review of her liabilities, including in particular the Valuation Tribunal. By the end of May 2008, the Clerk to the Valuation Tribunal Service was in correspondence with Ms Watts about the assessments made against her.[22]On 30th May the petition was further adjourned, I presume by Deputy Registrar Schaffer (the identity of the judge is not disclosed). Again, I do not know why it was adjourned, though I have seen a note which suggests that it may have been to enable Ms Watts to produce evidence of an application for judicial review which she said she had already made (which in fact she had not done, though she may have been referring to steps taken pursuant to the protocol for judicial review). The petition was directed to be heard by Deputy Registrar Kyriakides on 6th June 2008.[23]Ms Watts wrote a letter to the Court which is dated 5th June. In that letter she said she was waiting for a reply to the judicial review protocol, she was waiting for an evaluation by the Valuation Tribunal, and she was also waiting for the result of an investigation by the Ombudsman.[24]On 6th June Deputy Registrar Kyriakides further adjourned the petition to 30th June 2008. A manuscript note on the court file, I presume made by the Deputy Registrar, reads as follows (I have expanded the abbreviations):
“Adjournment is conditional on debtor issuing an application for judicial review by 4.30 pm on 13.6.08 + debtor filing + serving on petitioning creditor witness statement which deals separately with each liability order referred to in the petition, states in respect of each why liability is disputed and references all relevant documents by page numbers in an exhibit to the witness statement – such witness statement to be filed + served by 4.30pm on 13.6.08. If above is not done by the specified dates, the next hearing will be a final hearing.”
[25]I have not seen an order drawn up in respect of that adjournment, and have not been told that one was served on the parties.[26]Ms Watts did file a witness statement with the Bankruptcy Court on 13th June. That statement does address each liability order separately and cross-refers to documents contained in an 87 page exhibit. It appears that Ms Watts may not have served her witness statement on LB Newham before the expiry of the deadline set by Deputy Registrar Kyriakides, but LB Newham did receive the statement shortly thereafter.[27]Also on 13th June Ms Watts issued an application for judicial review of the liability orders made by Stratford Magistrates Court. The application states that Ms Watts had also made application to the Valuation Tribunal.[28]On 17th June Ms Watts applied to the Administrative Court for interim relief, seeking to prevent LB Newham or the Bankruptcy Court from dealing with the bankruptcy proceedings. That application was dismissed by Ouseley J. When dismissing the application for interim relief (on paper) Ouseley J said this:
“I refuse any interim relief prohibiting either the London Borough of Newham or the Court dealing with the bankruptcy proceedings. I do not at this stage deal with permission to apply for judicial review because that should be done after the Defendant’s acknowledgement of service. The quicker that is received, the quicker the matter can be resolved on paper. Before being sure there is nothing in it, the Court will be assisted by acknowledgement of service from the London Borough of Newham. Nonetheless I make these points. As I understand matters, the proceedings arise out of Magistrates Court liability orders going back some years. These proceedings cannot be used to review those matters. The statutory demand was made in February 2007, so any challenge to that is a long way out of time. Those are the basis of the bankruptcy proceedings. They do not provide a means to challenge liability to pay the Council Tax. Miss Watts also appears to accept that she owed some Council Tax. It is unclear whether that has been paid. If not, she has admitted owing some of the debt anyway. I caution Miss Watts against the assumption that the agreements which she may have made with her short term tenants absolve her from Council Tax liability in law.”
[29]At the hearing on 30th June 2008 Ms Watts appeared in person and LB Newham was represented by a solicitors’ agent (the same individual had appeared for LB Newham previously on the petition, most notably before Deputy Registrar Kyriakides on 6th June). I have to consider how the hearing progressed, because two of Ms Watts’ complaints concern the manner in which the Registrar conducted it. For this purpose I was provided with a transcript of the hearing.[30]The matter was listed at 11 am, and I assume that the hearing commenced then or shortly thereafter. As one would expect, the Registrar was addressed first by LB Newham’s solicitors’ agent. She informed him that LB Newham were seeking a bankruptcy order that day, the matter having been adjourned for the fifth time on 6th June. The Registrar was told that it was a condition of the adjournment on 6th June that an application for judicial review be made by Ms Watts by 13th June and that an application was made by Ms Watts by that date.[31]The solicitors’ agent than read out to the Registrar what Ouseley J had noted when refusing Ms Watts’ application for interim relief in the Administrative Court.[32]The Registrar was reminded that this was the sixth hearing of the bankruptcy petition, and told that there had been six hearings of the application to set aside the statutory demand. He was told that the petition debt as at 6th June was £7,097 and whilst there was no indication that anything had been paid off that debt, Ms Watts had apparently sent a cheque to LB Newham for £7,000 which had been dishonoured which, the agent submitted, “in itself is indicative of the fact that Ms Watts accepts that she owes the petition debt”. The Registrar was also told that LB Newham’s costs “are now huge”, that the costs “are now punitive against the debtor”, and, it was submitted, the debtor now needed to be protected “from herself”; Ms Watts had produced “inconsistent and incoherent, incomplete paperwork” which she accused the Council of failing to take into account, but the Council said it did take it into account as best it could.[33]The Registrar’s reaction was to state that the Council had liability orders outstanding which were “still in date”, and they bound him as much as they bound Ms Watts; the agent’s response was that that view was reinforced by what Ouseley J had said. The Registrar then turned to Ms Watts and I shall set out the interchange in full (there are obviously errors of transcription, which probably reflect difficulties in the tape picking up what Ms Watts was saying). “MISS WATTS: Your Honour, I have actually since, not even receiving any notification about this liability, on hearing it, and summer of 2006. I have communicated with the London Borough of Newham, sometimes with the help of the local advice centre, to sort this matter because obviously I am not liable for this Council Tax. REGISTRAR JAQUES: Well you are because there is an order outstanding against you. MISS WATTS: But your Honour they haven’t taken the relevant facts into consideration which they have had in their hand since, going back 2001, 2002. I have been able to find old documentation to show that, but they have been unwilling to sit down and actually sort out the matter and actually ignore those relevant facts which is needed to actually calculate the liability. They haven’t done that at all, so I have had to – had a lot of unanswered letters and been unable, even through the Court system. In Stratford Courts, where the liabilities were held, my appeal has been ignored. I was told only to deal with London Borough of Newham but they don’t actually respond to me, so it’s impossible to sort it out with them, even with legal help. Recently, the reason that it has been adjourned, because I have been seeking legal help but those have not been available to me during the short time it has been adjourned each time, it has not allowed enough time to sort this legal help. More recent legal help has been through a local law firm that has actually written to London Borough of Newham in the route of mediation, and they still haven’t replied as they also didn’t in April. REGISTRAR JAQUES: Well I am going to stop you because this is just, this is an open and shut case. There is a liability, there are liability orders against you. There is a debt very significantly in excess of the statutory threshold of £750 payable, outstanding under those liability orders. This is the sixth hearing of the petition following six, I am told, statutory demand set aside application hearings, and the matter has been going on for over a year. I cannot see any answer than this.” MISS WATTS: But your Honour, I have actually tried to sort this out with the London Borough of Newham ... REGISTRAR JAQUES: I am sure you have. MISS WATTS: ... and they have not made attempts to actually reply, which is not reasonable behaviour when it could have been resolved before the litigation process which they initially took out as a statutory demand. We were in communication with them and they did not respond at all, and nor did the Court giving the wrong instructions about my appeal for liabilities has not been addressed correctly and lawfully, and it is in the process of being sorted out now with the Stratford Court as they lost a lot of the documents. REGISTRAR JAQUES: I am satisfied that there is no reasonable prospect of the debt being paid within a reasonable time, and accordingly I propose to make a bankruptcy order. MISS WATTS: But your Honour, I have offered to pay the debt, with ... it being sorted out properly with London Borough of Newham. REGISTRAR JAQUES: Bankruptcy order 11.13, you are time wasting Miss Watts. You are philibustering, you have got no defence and you have not paid the debt. Bankruptcy order... 11.13.”[34]The reference to 11.13 is the time at which the Registrar pronounced his Order. The hearing concluded very shortly afterwards. It had lasted less than 15 minutes.[35]Ms Watts was so disappointed with the outcome of the hearing that within 3 hours she filed an application to annul Registrar Jaques’ Order. Her reasons for seeking an annulment are written in manuscript over 3 pages of the application. Essentially she made the following complaints:(a) that she was not liable for the petition debts;(b) that LB Newham had acted unfairly and unreasonably;(c) that she had made no progress with her challenge in the Stratford Magistrates Court;(d) that the bankruptcy petition was an abuse of process;(e) that she cannot afford legal assistance and was finding it hard to fight the legal process;(f) that the paperwork she had submitted had been ignored;(g) that she was not allowed to speak further in the hearing. Together with this one:(h) “A Valuation Tribunal is in process, and having made the Bankruptcy Court aware, they have not allowed reasonable time for this process.”[36]That first application to annul the bankruptcy order was considered by Deputy Registrar Brettle on paper (ie without convening a hearing) on 23rd July 2008. He dismissed it. His Order, which was not filed until 7th August 2008 and not received by Ms Watts before that date, states:
“AND UPON READING THE EVIDENCE 1. the application be dismissed 2. there be no order as to costs”
[37]It is not clear what evidence Deputy Registrar Brettle had read. But he obviously read more than just Ms Watts’ application, because he observed:
“The Debtor Applicant was informed on 17/6/2008 in QBD that Bankruptcy proceedings do not provide a means to challenge liability to pay council tax.”
This observation was communicated to Ms Watts in the Court Services’ letter to her dated 5th August 2008 in which she was thanked for her application to annul but advised that it had been dismissed.[38]Also on 5th August 2008 Ms Watts was advised that Judge Roger Kaye QC sitting as a judge of the Administrative Court of the Queen’s Bench Division had considered Ms Watts’ application for judicial review of the liability orders made by Stratford Magistrates Court, but had refused Ms Watts permission to apply for judicial review. The Judge’s reasons were:
“Ms Watts was made bankrupt based on non-payment of council tax. The bankruptcy was founded on her failure to comply with a statutory demand. The statutory demand was in turn based on non-payment of liability orders for council tax made by Stratford Magistrates Court on various dates between 2002 and 2006. Failure to pay the statutory demand or set it aside inevitably led to her bankruptcy on a bankruptcy petition ... Unable to set aside her bankruptcy, Ms Watts now seeks to set aside the liability orders. 1. However, it is now far too late and Ms Watts is well out of time under CPR 54.5. No grounds to extend time are made out. 2. Ms Watts would have had ample opportunity to make the points she now seeks to do either at the hearing of the liability orders (ie before they were made) or by earlier application for judicial review if she was unaware of them, or by application to set aside the statutory demand (if there was real and substantial merit in the points she makes), or on the hearing of the bankruptcy petition (likewise). Accordingly I see absolutely no basis for review”
Accordingly I see absolutely no basis for review”[39]In giving his ruling in these terms it seems unlikely that the Judge was aware of the adjournments of the bankruptcy petition during 2008 for evidence to be filed, and the encouragement to apply for judicial review which Ms Watts was given by the Deputy Registrar at the hearing on 6th June 2008. However, since it is now accepted that the more appropriate forum for Ms Watts’ challenge to the liability orders was not the Administrative Court but the Valuation Tribunal, the decision of the Judge to refuse permission to apply for judicial review was obviously correct.[40]One month later, on 5th September 2008, Ms Watts made a further application to annul the bankruptcy order. She prefaced the 12 numbered grounds in that application with the following in bold print “I respectfully request a hearing in person”. In her numbered grounds Ms Watts essentially repeated what she had set out in her previous application to annul. I need recite only the eighth of these:
“The order should not have been made also because I was denied the chance to represent myself on 30/6/08 hearing which is my constitutional right in English and European Law and therefore an unlawful proceeding – check transcript of 30/6/08 DUE TO UNFAIR PROCEEDING OF 30/6/08, A RELISTING IS REQUESTED there is a VT and JR pending. I was unable to request adjournment in order to secure legal representation in order to receive a fair trial.”
[41]This second application to annul was considered by Deputy Registrar Briggs, on paper, on 9th September. Deputy Registrar Briggs dismissed the application. Again there is a general reference in the Order to the evidence having been read. It appears from the Court file that Deputy Registrar Briggs’ reason for dismissing the application was as follows:
“This is a renewed application to annul following a dismissal of the same application on 23.7.08. Her correct procedure is to seek leave to appeal but she is already out of time for appealing.”
[42]Ms Watts’ Appellant’s Notice challenging the decisions of Registrar Jaques and Deputy Registrar Brettle is dated 22nd August. It was seemingly amended in September 2008 to include a challenge to the decision of Deputy Registrar Briggs, after notification of his decision had been received.[43]In a letter dated 8th October 2008, LB Newham advised Ms Watts that having received certain information from the Valuation Tribunal, LB Newham had made two tenants of Ms Watts liable for council tax in respect of a particular period at one of the properties owned by Ms Watts, thus reducing the assessment against Ms Watts. In a further letter dated 10th November 2008 LB Newham informed Ms Watts that, having regard to the evidence presented by Ms Watts to the Valuation Tribunal in respect of one of her other properties, LB Newham had decided to cancel the assessments made against Ms Watts in respect of that property and instead to make Ms Watts’ mother liable for the council tax which should have been paid during the relevant period.[44]Under cover of letters dated 9th December 2008 the Valuation Tribunal provided its rulings in respect of 3 of the 4 properties owned by Ms Watts; the decision in respect of the fourth property was provided on 24th December. Ms Watts’ applications were allowed in full in respect of the property where LB Newham had decided to assess tax on Ms Watts’ mother instead; allowed in part in respect of 2 other properties; and dismissed in respect of the fourth property (Ms Watts having accepted liability for payment). I was told that the net result of these decisions was that there remained outstanding £1,385 of the original petition debt. Submissions (1). The Bankruptcy Order of 30.6.08[45]On behalf of Ms Watts, Mr. Comiskey submitted that Registrar Jaques erred when he made the bankruptcy order on 30th June 2008, for any of the following 4 reasons:(i) because he should have adjourned the petition to await the outcome of the application for judicial review;(ii) because he should have adjourned the petition to await the outcome of the application to the Valuation Tribunal;(iii) because it was unfair and unjust for a bankruptcy order to be made on 30th June, when Ms Watts “had been told at the previous hearing that she would avoid a final hearing on 30 June 2008 on condition that she made an application for judicial review”;(iv) because the Registrar “did not permit [Ms Watts] to inform him of her appeal to the Valuation Tribunal”, and had he permitted her to do so, he could “only have adjourned the bankruptcy hearing in order to await the outcome of that appeal”, and that there had therefore been a serious procedural or other irregularity.[46]I shall deal with each of these complaints in turn.[47]Mr. Comiskey reminded me that the Bankruptcy Court is not obliged to accept that the debt on which a bankruptcy petition is founded is properly due, simply because that debt is a judgment debt. The authorities were summarised thus by Warner J in McCourt and Siequien v. Baron Meats Ltd [1997] BPIR 114 at p.120:
“(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. ... (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...”
[48]This summary of the authorities was approved by Etherton J in Dawodu v. American Express [2001] BPIR 983, with the following qualification (at p. 990):
“My only qualification to the summary by Warner J is that the cases establish that what is required before the court is prepared to investigate a judgment debt, in the absence of an outstanding appeal or an application to set it aside, is some fraud, collusion or miscarriage of justice. The latter phrase is of course capable of wide application according to the particular circumstances of the case. What in my judgment is required is that the court be shown something from which it can conclude that had there been a properly conducted judicial process it would have been found, or very likely would have been found, that nothing was in fact due to the claimant.”
Mr. Comiskey placed particular reliance on the last sentence of this passage, even though Etherton J had in mind when he uttered that sentence a case where there was not a pending appeal or application to set aside the judgment on which the bankruptcy petition was based.[49]Mr. Comiskey also drew my attention to an observation of Hoffmann LJ when giving the only reasoned judgment in the Court of Appeal decision in the case of Royal Bank of Scotland v. Farley [1996] BPIR 638, at p. 641H:
“The bankruptcy procedure has ample safeguards built into it for enabling the bankrupt to challenge the existence of the debt. He may ... do so on an application to set aside the statutory demand. If he 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.”
[50]Mr. Comiskey submitted that by 30th June 2008 Ms Watts had issued an application for judicial review of the Magistrates Court orders, that that application had not been determined, and therefore the bankruptcy petition should have been adjourned by Registrar Jaques more or less automatically.[51]Mr. McCulloch did not agree that where there is an outstanding challenge to a judgment, it is the invariable practice of the Bankruptcy Court to adjourn the bankruptcy petition to await the outcome of the challenge.[52]Mr. McCulloch referred me to the decision of Arden J in Westminster City Council v. Parkin [2001] BPIR 1156. That was a case where a bankruptcy petition was based on a county court judgment for mesne profits, in respect of which the debtor was seeking leave to appeal from the Court of Appeal when the petition came to be heard. The Registrar made a bankruptcy order and Arden J dismissed the debtor’s appeal. Arden J gave the following guidance at p. 1158:
“... the question arises what the bankruptcy court should do, if it is faced with a judgment debt and ... is in a position in which it finds that the judgment debtor is proposing to appeal? In those circumstances, the approach which [the Registrar] took was to look at the grounds of the appeal. He concluded that the appeal was not a strong one but did not comment on the prospects of the appeal before the Court of Appeal. In those circumstances, now that the court is apprised of the situation that there is an application for leave to appeal pending before the Court of Appeal, what should be the appropriate approach by this court? In my judgment, the court should consider whether or not the appeal has a reasonable prospect of success.”
[53]In my judgment it is not sufficient without more to enable a debtor resisting a bankruptcy petition based on a judgment debt to obtain an adjournment of the petition, for the debtor merely to issue an application for permission to appeal or an application to set aside the judgment. The Bankruptcy Court is entitled to consider all the circumstances of the case when determining whether there is a genuinely arguable case that the petition debt is not due, including in particular whether the appeal or application to set aside would have a reasonable prospect of success.[54]In this case Registrar Jaques was told of the existence of the application for judicial review by LB Newham’s solicitors’ agent. But he also had read out to him the observations of Ouseley J when refusing to grant any interim relief to Ms Watts to prevent LB Newham from pursuing the bankruptcy proceedings. Those observations, which I have set out in paragraph 28 of this judgment, were a strong indication that the application for judicial review would not succeed; indeed they were a strong indication that Ms Watts would not even be granted permission to apply for judicial review (the accuracy of which was of course borne out 5 weeks later when Judge Roger Kaye QC dismissed the application for permission without a hearing). Registrar Jaques was entitled to have regard to those observations when deciding to conclude, as he obviously must have concluded, that the fact that Ms Watts had made an application for judicial review of the liability orders did not preclude him from making a bankruptcy order against Ms Watts.[55]I therefore reject this challenge to Registrar Jaques’ decision.[56]Mr. Comiskey’s second complaint is that Registrar Jaques should have adjourned the bankruptcy petition to await the outcome of Ms Watts’ application to the Valuation Tribunal.[57]The difficulty with this complaint is not only that Registrar Jaques was not actually asked to adjourn the petition for this (or any other) reason, but that he does not appear to have been told by Ms Watts that she had already made an application to the Valuation Tribunal (there was dispute at the hearing before me whether Ms Watts had actually made an application to the Tribunal by 30th June 2008 but on balance it seems likely that she had). An argument that a bankruptcy order should not have been made because of the existence of a circumstance which was not brought to the court’s attention may be a good argument for annulling the bankruptcy order (see below), but it is not a good argument for saying that the Bankruptcy Court should have adjourned the bankruptcy petition. I therefore also reject this challenge to the bankruptcy order.[58]Mr. Comiskey’s third challenge was that it was unfair and unjust for a bankruptcy order to be made on 30th June, when Ms Watts, it is said, was told on 6th June that if she made an application for judicial review by 13th June (and served further evidence in the bankruptcy petition), the hearing on 30th June would not be a final hearing.[59]It can scarcely be denied that there was an element of judicial toing and froing by the Bankruptcy Court in respect of Ms Watts’ claims, until the hearing on 30th June 2008. The application to set aside the statutory demand was (eventually) dismissed and LB Newham were directed to file a petition after a specified date. When the petition was filed and met with similar resistance from Ms Watts, however, a timetable for evidence was laid down by Registrar Rawson on 30th January 2008 which appeared to contemplate a (possibly further) detailed investigation into the council tax liability by the Bankruptcy Court. A similar approach would appear to have been behind the initial time estimate for the hearing of the petition of 75 minutes given by Deputy Registrar Schaffer on 17th March. Then there was the reduction in the time estimate to 45 minutes on 7th April. Then three further adjournments, culminating in the condition regarding evidence and an application for judicial review imposed by Deputy Registrar Kyriakides on 6th June which I have set out in paragraph 24 of this judgment.[60]There are two ways in which the last sentence of Deputy Registrar Kyriakides’ condition can be read. One is that, provided Ms Watts filed the application for judicial review and filed the evidence referred to, the next hearing would not be a final hearing; the other is that, if Ms Watts did not make the application or did not file the evidence, the next hearing would definitely be a final hearing, whereas if she did comply with the requirements, it might or not be a final hearing (depending on the view the Court took of the case at that hearing).[61]I am entirely satisfied that what Deputy Registrar Kyriakides intended by the last sentence of the condition was the latter meaning: the Deputy Registrar would not have sought to fetter the exercise of discretion on a later occasion by reference to material which had not yet even been produced (even ignoring the fact that the Administrative Court might make an interim pronouncement as regards the application in the meantime, as indeed happened). But I was initially troubled whether Ms Watts, as a litigant in person, might have understood the condition to have the former meaning. In other words, that she might have thought that so long as she made the application to the Administrative Court and filed further evidence as directed in the Bankruptcy Court, she would not be at risk of a bankruptcy order being made on 30th June. If she had had that understanding, I could see force in the submission that what actually happened on 30th June was unfair to her.[62]Upon reflection, however, I am confident that Ms Watts did not believe when she left court on 6th June that all she had to do to stave off an effective hearing of the petition on the next occasion was to make the application for judicial review and file (and serve) the evidence which had been directed. I say this for four reasons. First, because Ms Watts did not submit to Registrar Jaques that Deputy Registrar Kyriakides had said that a bankruptcy order would not be made on the next hearing of the petition provided that she complied with the condition which Deputy Registrar Kyriakides laid down. Secondly, because when she sat down immediately after the hearing on 30th June and listed out her grievances about what had happened that day, she did not say that she had been misled by Deputy Registrar Kyriakides’ earlier order. Thirdly, because she made no such submission when she made her second application for annulment, over 2 months later, which was not made in the heat of the moment but after more than enough time for reflection. Fourthly, because it is evident that LB Newham did not have that understanding of what Deputy Registrar Kyriakides had said, otherwise its solicitors’ agent, who was present at both hearings in June, could scarcely have pressed the Court to make a bankruptcy order at the second hearing.[63]It follows that I reject Ms Watts’ assertion in paragraph 7 of her witness statement in support of the appeal (which is dated 26th November 2008), that she understood from what Deputy Registrar Kyriakides had said on 6th June that no bankruptcy order would be made against her at the next hearing if by then she had complied with the condition imposed by the Deputy Registrar.[64]I therefore reject the third challenge to the bankruptcy order.[65]The fourth and final challenge to the decision of Registrar Jaques concerns his conduct of the hearing on 30th June. It is said that he “did not permit” Ms Watts to inform him of her appeal to the Valuation Tribunal, and that Registrar Jaques’ decision was therefore “unjust because of a serious procedural or other irregularity” (per CPR 52.11(3)(b)).[66]I reject this complaint also. It is not the case that the Registrar failed to permit Ms Watts to tell him anything. He gave Ms Watts an opportunity to address him, an opportunity of which she availed herself without informing him of any ground on which he could properly decline to make the bankruptcy order. True it may be that the Registrar’s approach was a more robust one than the approach any of the other Registrars and Deputy Registrars who had considered the petition had taken, and true also it may be that he seemingly quickly made up his mind. But if a degree of impatience was displayed, that was perhaps not all that surprising on the sixth hearing of the petition (which itself was presented after six hearings of Miss Watts’ ultimately unsuccessful application to set aside the statutory demand, as the Registrar himself observed). In my judgment these criticisms do not come close to satisfying the onerous ground of challenge provided by CPR 52.11(3)(b), whether taken individually or cumulatively.[67]It follows that I have rejected each of the challenges to the Order of Registrar Jaques. However, as I have not found all of those challenges fanciful, the order I propose to make is to extend time for the application for permission to appeal (to the extent that an extension is necessary notwithstanding the order of Arnold J, which I believe it probably still is) and to grant permission to appeal, but to dismiss the appeal. (2). The Order of 23rd July 2008[68]When Mr. Comiskey confirmed that the application to annul the bankruptcy order had been determined on paper, I expressed some surprise. Mr. Comiskey informed me, however, that it is not unusual for applications to annul to be determined without requiring any attendance, even where the bankrupt acts in person, and that on behalf of Ms Watts he did not challenge the Court’s general practice in this regard.[69]The gravamen of the challenge to the decision of Deputy Registrar Brettle focussed on the brief reasons for his decision, viz. that Ms Watts was informed on 17.6.08 in the proceedings before the Administrative Court that bankruptcy proceedings are not a way to challenge a liability to pay council tax, and the Deputy Registrar’s failure to call for an oral hearing of the application having regard to the matters disclosed by Ms Watts in her application.[70]The relevant jurisdiction to annul a bankruptcy order is contained in s. 282(1) (a) of the Insolvency Act 1986, viz: “The court may annul a bankruptcy order if it at any time appears to the court – (a) that, on any grounds existing at the time the order was made, the order ought not to have been made ...[71]It was common ground that on an application to annul the Court was not confined to information which had been available to the Bankruptcy Court when it made the bankruptcy order, see Guinan III v. Caldwell Associates Ltd [2004] EWHC 3348, [2004] BPIR 1022.[72]S. 282(1) gives the court a discretion to annul the bankruptcy order. The proper approach of an appellate court when reviewing the exercise of a discretion by a lower court has been explained in many authorities. For present purposes it is sufficient to refer to the judgment of Lord Woolf MR in AEI Rediffusion Music Ltd v. Phonographic performance Ltd [1999] 1 WLR 1507, at p. 1523:
“Before the court can interfere it must be shown that the judge has either erred in principle in his approach or has left out of account or has taken into account some feature that he should, or should not, have considered, or that his decision was wholly wrong because the court is forced to the conclusion that he has not balanced the various factors fairly in the scale.”
[73]If the appellate court decides that the decision under appeal was “wholly wrong”, not only is it entitled to interfere, but the order it should make is clear: it should allow the appeal and exercise the discretion in the way which substitutes the correct decision which, ex hypothesi, it has already identified. But if the appellate court is of the view that the judge made an error of principle, or took into account a feature which he should not have taken into account or failed to take into account a feature which he should have taken into account, then whilst it is entitled to interfere, it falls to that court to exercise the discretion afresh. That may mean that the appellate court reaches the same decision as the one the judge reached, notwithstanding the errors which the judge had made.[74]I am satisfied that Deputy Registrar Brettle failed to take into account a material matter when he dismissed Ms Watts’ application to annul. He failed to take into account that Ms Watts had made an application to the Valuation Tribunal challenging some or all of the assessments made against her, and that this was a circumstance which, although it was in existence at the time of the bankruptcy order, was not drawn to the attention of Registrar Jaques. Whilst the Deputy Registrar did not have before him a transcript of the hearing on 30th June, it is apparent from his observation recorded in the Court’s letter to Ms Watts of 5th August, that like Registrar Jaques his focus was on the doomed application for judicial review, and he seemingly took no account of the clear reference in Ms Watts’ application to the Valuation Tribunal proceedings. Had the Deputy Registrar appreciated the significance of the reference to the Valuation Tribunal proceedings, he ought in my judgment to have called for an oral hearing of the application.[75]At that oral hearing, the significance of the Valuation Tribunal proceedings would doubtless have been explored, almost certainly in the context of the witness statement which Ms Watts had filed pursuant to the order of Deputy Registrar Kyriakides. It seems to me that that hearing might very well have lasted the 75 minutes predicted by Deputy Registrar Schaffer on 17th March.[76]It follows that I am entitled to interfere with the exercise of discretion by Deputy Registrar Brettle, and to exercise that discretion afresh myself. The question arises, however, whether I should exercise that discretion by reference only to the material available as at 23rd July 2008 when the Deputy Registrar considered the application, or whether I should have regard to all the material available to me now. The critical difference between the two dates is of course that whereas on 23rd July 2008 there may have been an element of uncertainty as to the likely outcome of the Valuation Tribunal proceedings and in particular whether a challenge to all the assessments would succeed, now I know that whereas Ms Watts was largely successful in the Valuation Tribunal, there remains a rump of £1,385 of the petition debt outstanding. £1,385 is greater than the “bankruptcy level” of £750 required for a bankruptcy petition by s. 267(4) of the Insolvency Act 1986.[77]I have no doubt that I must proceed to re-exercise the discretion on the basis of the information presently before me, and not approach the question by trying to recreate the right decision only by reference to the facts as they were at a point in time over 6 months ago. The latter exercise would seem arbitrary and artificial: why should I speculate about what might eventually happen, when I now know what did happen? The exercise in speculation might also seem unfair to LB Newham, not all of whose assessments were ultimately quashed.[78]The four conditions for a bankruptcy petition are set out in s.267(2) of the Insolvency Act:(1) the debt must equal or exceed £750;(2) the debt must be for a liquidated sum and be unsecured;(3) the debt must be one which the debtor appears either to be unable to pay or to have no reasonable prospect of being able to pay;(4) there must be no outstanding application to set aside a statutory demand served in respect of the debt.[79]Conditions (1), (2) and (4) are obviously met in this case. What about condition (3)?[80]S. 268(1) of the 1986 Act provides that a debtor appears unable to pay a debt if but only if the debt is payable immediately and either the petitioning creditor has served on the debtor a statutory demand in the prescribed form requiring the petitioner to pay the debt, or execution or other process in respect of the debt has been returned unsatisfied.[81]In this case LB Newham did serve a valid statutory demand, but it transpires that that demand was overstated by a factor of at least 3, possibly even 4 or more. Does that matter? The answer is no. Insolvency Rule 6.25(3) provides:
“A petition preceded by a statutory demand shall not be dismissed on the ground only that the amount of the debt was over-stated in the demand, unless the debtor, within the time allowed for complying with the demand, gave notice to the creditor disputing the validity of the demand on that ground; but, in the absence of such notice, the debtor is deemed to have complied with the demand if he has, within the time allowed, paid the correct amount.”
See too in this connection Re a Debtor [1992] 1 WLR 507, and a more recent decision on facts not dissimilar to the present case, Mohammed v. London Borough of Southwark [2006] BPIR 782.[82]Moreover, there is no suggestion in Ms Watts’ Appellant’s Notice, nor in the skeleton argument submitted by Mr. Comiskey on her behalf, nor in any of the other material available to me, that Ms Watts is in a position to pay the £1,385 outstanding. The amount remained outstanding at the time of the hearing before me.[83]All the conditions for a valid bankruptcy petition being met, in the exercise of my discretion I therefore refuse to annul the bankruptcy order made by Registrar Jaques. Again, the right order would seem to me to be to grant Ms Watts an extension of time to file her Appellant’s Notice, to grant her permission to appeal from the decision of Deputy Registrar Brettle, but to dismiss her appeal.

The Order of 9th September 2008

[84]Mr Comiskey criticised the dismissal of Ms Watts’ second application to annul on the ground that Deputy Registrar Briggs failed to appreciate that the application was in substance, albeit not in form, an application (made out of time) for an oral hearing to review the dismissal of the first application to annul, pursuant to CPR 3.3(5)(a). I need not consider this interesting argument, however, because Mr. Comiskey also readily conceded that if I were to extend time for service of an Appellant’s Notice in respect of the decision of Deputy Registrar Brettle, which I have now done, the appeal against the decision of Deputy Registrar Briggs would not be pursued.[85]It follows that Ms Watts’ appeals fail.