Choudhry v Luton Borough Council

A bankruptcy petition founded on council tax liability orders may be adjourned where the debtor has a bona fide and substantial appeal or application challenging those orders. The court must, however, assess the evidence and the stage at which the challenge is raised. A petitioning creditor who satisfies the statutory conditions is prima facie entitled to a bankruptcy order, and delay is particularly significant in insolvency proceedings. A district judge is not obliged to raise the possibility of an appeal to the valuation tribunal where the debtor has not identified that route, has not previously challenged the liability orders, and provides no material from which a substantial appeal could be inferred.

Luton Borough Council presented a bankruptcy petition against Mr Choudhry based on four council tax liability orders made between 2011 and 2013. The orders covered council tax said to be due for a period from September 2003 to March 2013. After service of a statutory demand, Mr Choudhry sought time at the bankruptcy hearing to produce documents and said that he had not been the occupier of the relevant property.

District Judge White made a bankruptcy order in the County Court at Luton. Mr Choudhry appealed, arguing that the hearing should have been adjourned to enable him to challenge the liability orders before the valuation tribunal. The central issue was whether the district judge had been required, or entitled, to adjourn in the circumstances.

1. Appeal dismissed. The Council had satisfied the statutory conditions for a bankruptcy order and was prima facie entitled to the order.
2. A debtor may seek an adjournment where there is a bona fide and substantial appeal or application challenging the judgment or liability order on which the petition is based. The authorities, including Royal Bank of Scotland v Farley, [1996] BPIR 638, Yang v Official Receiver, [2013] EWHC 3577 (Ch), and Okon v London Borough of Lewisham, [2016] EWHC 864 (Ch), did not require an adjournment on these facts.
3. The district judge was entitled to take account of the absence of any prior challenge, the debtor’s knowledge of the potential bankruptcy petition since March 2015, and the lack of evidence showing that a substantial appeal could be made. The request to bring further documents to a future county court hearing would not itself have assisted in challenging the liability orders.
4. The district judge was entitled to reject a proposed challenge in the Magistrates Court. He was not obliged also to consider an appeal to the valuation tribunal when that possibility had not been raised in the witness statement or at the hearing.
5. A different judge might have allowed a short period to assemble documents or might have raised the valuation tribunal route. That did not make such a course obligatory. The decision to make the bankruptcy order was one open to the district judge.

• High Court (Chancery Division): Mr Justice Newey dismissed the appeal from the bankruptcy order made by District Judge White in the County Court sitting at Luton on 16 June 2015.