Dias v London Borough of Havering

A bankruptcy court should go behind a liability order only in exceptional circumstances, such as fraud, collusion or a miscarriage of justice. A properly conducted statutory liability-order process will ordinarily preclude reopening the underlying debt.

Rating occupation may be shared where a supposed licensee is the occupier’s one-man company, the licence does not confer exclusive occupation, or the occupier retained possession of part of the hereditament.

Mr Sam Dias sought permission to appeal against District Judge Mullis’s refusal to set aside a bankruptcy petition presented by the London Borough of Havering. The petition debt comprised unpaid business rates and costs founded on two magistrates’ court liability orders.

The District Judge had gone behind those orders and found that Mr Dias was personally liable because he shared occupation of the premises with his company, Decathlon Indoor Market (Romford) Ltd. The central issues were whether the bankruptcy court could investigate the underlying rating liability and, if so, whether the company had exclusive occupation.

1. Permission and primary ground. Permission to appeal was refused because this was not an appropriate case in which to go behind the liability orders.
2. Applicable test. The liability-order procedure required demand and reminder notices, gave Mr Dias an opportunity to attend and explain why the sums were unpaid, and permitted challenge by judicial review or case stated. It had the basic hallmarks of a judicial process and was not inherently unfair.
3. In the absence of an outstanding appeal or an application to set aside, fraud, collusion or a miscarriage of justice had to be shown. A miscarriage of justice required material from which the court could conclude that, had there been a properly conducted process, nothing was in fact due, or very likely would have been due. No such case was established. The District Judge was therefore wrong to investigate the underlying rating liability.
4. Alternative merits. Even if the underlying liability could be examined, the finding of shared occupation was not open to interference. The licence covered Units 1 and 2, not the car parking spaces, so Mr Dias retained possession of a substantial part of the property. It did not expressly grant exclusive occupation. Since DIM was Mr Dias’s one-man company, it was open to infer that he retained sufficient control to amount to shared occupation. His own evidence also showed that DIM did not occupy Unit 2 until 28 October 2007.
5. The court noted that an appeal would ordinarily be confined to reviewing the District Judge’s decision and would not receive evidence not before him. Had permission been granted on the merits, the appeal would have been dismissed.

• Romford County Court: District Judge Mullis dismissed the application to set aside the bankruptcy petition on 20 April 2010.
• High Court (Chancery Division): permission to appeal was refused. The court stated that, if permission had been granted, the appeal would have been dismissed.