Bolsover District Council & Anor v Ashfield Nominees Ltd & Ors

The Court of Appeal held that section 9 of the Limitation Act 1980 does not impose a fresh six year limitation running from the date of a liability order for unpaid council tax so as to preclude subsequent enforcement by winding-up petition. The statutory recovery and enforcement regime for council tax in the Local Government Finance Act 1992 and the Council Tax (Administration and Enforcement) Regulations 1992, in particular regulation 34(3), govern the relevant six year limitation. Once a liability order has been made the liability to pay is that of the liability order and is enforceable by the insolvency routes; the Limitation Act does not re-impose a separate six year bar running from the date of the liability order. The court also reaffirmed that unpaid council tax is a debt for insolvency purposes even if a liability order has not yet been made.

Background and parties. The appellants are companies owning numerous houses in the areas of the respondent district councils. The councils obtained liability orders in the magistrates' court for unpaid council tax and subsequently presented winding-up petitions in respect of those liabilities. Some liability orders had been made more than six years before presentation of the petitions.

Procedural history. Winding-up petitions were challenged and, after an initial hearing in which the judge dismissed the petitions where only time-barred amounts remained, the councils sought a declaration that a period in excess of six years after the making of a liability order does not prevent enforcement by way of winding-up petition. The High Court (His Honour Judge Cooke) decided in favour of the councils on 18 December 2009; permission to appeal was initially refused but was later granted by Longmore LJ. This appeal to the Court of Appeal followed.

Nature of the claim / relief sought. The councils sought a declaratory ruling that the passage of more than six years after the making of a liability order does not prevent enforcement by insolvency proceedings (including winding-up petitions) in respect of sums under liability orders for unpaid council tax.

Issues framed. (i) Whether section 9 of the Limitation Act 1980 applies to a proceeding to enforce a liability order by way of winding-up petition such that the petition must be presented within six years of the making of the liability order; (ii) the effect of the Council Tax (Administration and Enforcement) Regulations 1992 (in particular regulation 34(3) and regulation 49) and the Local Government Finance Act 1992 in relation to limitation and enforcement; (iii) whether application of section 9 would create an anomaly when compared with the regime for non-domestic rates.

Court's reasoning. The court analysed the council tax statutory regime and the scope of the Limitation Act. It noted that regulation 34(3) prevents an application to the magistrates' court in respect of sums which became due more than six years earlier. The court concluded that section 9 did not impose an additional separate six year period running from the date of a liability order; either regulation 34(3) displaced any such application of section 9 pursuant to section 39 of the Limitation Act or rendered a parallel rule unnecessary because it already achieves the same policy outcome. The court accepted that unpaid council tax is a debt for insolvency purposes even if no liability order has yet been made, but observed that if the tax fell due more than six years earlier so that a liability order could no longer be obtained, that sum could not validly form the basis of insolvency proceedings. The court also relied on policy and consistency reasons, noting the potential anomaly that would arise vis-à-vis non-domestic rating where a council may choose between civil proceedings and a liability-order route.

Subsidiary findings: the decision clarified that the relevant six year protection for council taxpayers operates at the stage of the application for a liability order, not by running anew from the date of the liability order.

Appeal dismissed. The Court of Appeal agreed with the High Court that section 9 of the Limitation Act 1980 does not impose a further six year bar from the date of a liability order preventing enforcement by winding-up petition; regulation 34(3) of the Council Tax (Administration and Enforcement) Regulations 1992 governs the relevant time limitation and, in any event, the liability to be enforced after a liability order is that of the order itself rather than the original statutory obligation.

Appeal from the High Court of Justice, Chancery Division (Birmingham District Registry), His Honour Judge Cooke (decision recorded 18 December 2009 in the judgment). Permission to appeal was initially refused by the judge but was later granted by Longmore LJ. Prior related appellate authority in the matter included Dennis Rye Ltd v Bolsover DC [2009] EWCA Civ 972 (and related reserved judgment cited as Dennis Rye Ltd v Bolsover DC [2009] EWCA Civ 372 in the judgment). Final determination in this Court of Appeal: [2010] EWCA Civ 1129.