Amin v London Borough of Redbridge & Anor

When a bankruptcy order was properly made but is later rescinded because the underlying liability is removed, costs are considered under separate regimes.

• The petitioning creditor will ordinarily recover the petition costs because the liability order created a deemed debt, although misconduct may justify a different order.
• Official Receiver and trustee costs ordinarily remain payable from the estate or are otherwise protected. A personal order against a party requires particular circumstances.
• Costs of the rescission application are litigation costs. The court should apply the general rule while considering success, conduct, delay and the parties’ positions. Where both parties have contributed to the costs, an order that each bears its own costs may be appropriate.

Anjam Amin appealed against a County Court order made after his bankruptcy order was rescinded. The bankruptcy had followed liability orders for unpaid Council Tax obtained by the London Borough of Redbridge. The Valuation Tribunal later found that Mr Amin was not liable for the Council Tax because he had not occupied the property.

The Deputy District Judge ordered Mr Amin to pay Redbridge’s petition and application costs, the Official Receiver’s costs, and the Trustee’s costs as expenses of the bankruptcy. The central issue was the proper allocation of costs where a bankruptcy order was properly made on the basis of liability orders but was later rescinded.

1. Appeal partly allowed. The orders requiring Mr Amin to pay the petition costs and the Official Receiver’s costs were upheld. The order protecting the Trustee’s costs from the bankruptcy estate was also upheld. The appeal was allowed only in relation to the costs of Mr Amin’s applications, for which there was to be no order as between Mr Amin and Redbridge.
2. The costs of the petition and the rescission application were litigation costs governed by CPR Part 44, subject to the court’s discretion and the conduct of the parties. The Official Receiver’s and Trustee’s costs were governed by a different regime.
3. Under regulation 49(1) of the Council Tax (Administration and Enforcement) Regulations 1992, a liability order created a deemed debt for the purposes of section 267 of the Insolvency Act 1986. The bankruptcy order was therefore properly made even though the underlying Council Tax liability was later disproved. The approach in Yang v Official Receiver [2017] EWCA Civ 1465 meant that rescission under section 375, rather than annulment under section 282, was the appropriate remedy.
4. A trustee who has acted properly and without wrongdoing should ordinarily have reasonable expenses paid or protected from the estate. The court has inherent jurisdiction to decide whether a trustee should be paid, and by whom, but a personal order against the petitioner or bankrupt is not automatic and depends on the particular circumstances.
5. Redbridge’s conduct before and after the bankruptcy order was not unreasonable. It was entitled to investigate conflicting evidence and await the Valuation Tribunal’s decision. The court made no general ruling on when a local authority must use regulation 36A to seek the quashing of a liability order.
6. For the rescission application, however, Mr Amin had succeeded in establishing that he had no underlying Council Tax liability, while Redbridge had positively defended the merits. That success had to be weighed against Mr Amin’s delay, procedural errors and unsuccessful service arguments. The fair result was no order as to costs between them.

• High Court (Chancery Division): appeal from the County Court at Romford order of DJ Dodsworth dated 5 January 2018. Appeal allowed only as to the costs of Mr Amin’s applications; otherwise dismissed.