Bolsover District Council & Anor v Ashfield Nominees Ltd & Ors

The six-year limit for recovering unpaid council tax operates at the liability-order stage. Regulation 34(3) of the Council Tax (Administration and Enforcement) Regulations 1992 prevents an application for an order concerning a sum more than six years after it became due. Once the order is made, the enforceable liability is the liability under the order, including permitted costs. Section 9 of the Limitation Act 1980 does not impose a second six-year period running from the order. A winding-up petition enforcing sums covered by a liability order is therefore not barred merely because the order is more than six years old. Unpaid council tax may constitute a debt for insolvency purposes before an order, subject to the statutory limit on obtaining the order.

The respondent councils sought a declaration concerning their ability to present winding-up petitions against companies owing council tax under liability orders. Some orders had been made more than six years before the proposed petitions.

At an earlier stage, His Honour Judge Cooke held that petitions could proceed in respect of recent liabilities or liability orders, but that there was a genuine dispute concerning older orders. After the undisputed sums were paid, he dismissed the petitions because winding-up proceedings were not the appropriate forum to resolve the time-bar issue. He later decided the declaratory proceedings in favour of the councils.

The companies appealed. The central question was whether section 9 of the Limitation Act 1980 imposed a further six-year period running from the making of a liability order.

The appeal was dismissed unanimously. The court agreed with the judge that the presentation of a winding-up petition to enforce sums due under council-tax liability orders was not barred by section 9 of the Limitation Act 1980.

1. Statutory scheme. Under the Local Government Finance Act 1992 and the 1992 Regulations, a billing authority may apply for a liability order for council tax that is due and unpaid. Regulation 34(3) imposes a six-year limit running from the date on which the sum became due. Regulation 49 permits the amount under an order to be treated as a debt for insolvency purposes, although unpaid council tax is already a debt for those purposes before an order is made.
2. Effect of the order. The original obligation to pay council tax merges into the obligation under the liability order. The order also includes costs that were not previously due. The liability being enforced is therefore the liability under the order, rather than the original statutory tax liability.
3. Limitation. Regulation 34(3) supplies the equivalent restriction at the point when recovery is initiated. It either displaces section 9 under section 39 of the Limitation Act 1980 or makes section 9 superfluous. There is no additional six-year period beginning when the liability order is made. If section 9 were applicable, time would in any event run from the failure to pay on demand, not from the order: China v Harrow UDC [1954] 1 QB 178.
4. Comparison with judgments. The result accords with the treatment of post-judgment enforcement in Lowsley v Forbes [1999] 1 AC 329 and Ridgeway Motors (Isleworth) Ltd v ALTS Ltd [2005] EWCA Civ 92. It also avoids an unexplained anomaly between liability-order and civil-judgment routes for non-domestic rates. A tax that became due more than six years earlier, and for which a liability order can no longer be obtained, cannot found valid insolvency proceedings.

The winding-up petitions were therefore not time-barred merely because the liability orders were more than six years old.

• Court of Appeal (Civil Division): dismissed the companies’ appeal.
• High Court of Justice, Chancery Division: Judge Cooke decided the declaratory proceedings in favour of the councils, holding that more than six years after the making of a liability order did not prevent enforcement by winding-up petition.