Lambert v Forest of Dean District Council & Ors

An application to annul a bankruptcy order may be an abuse of process where an earlier, materially identical application was struck out for failure to comply with an unless order. The proper course is ordinarily to seek relief from sanction under rule 3.9 of the Civil Procedure Rules.

Under section 282(1)(a) of the Insolvency Act 1986, the court retains a discretion even where the order ought not to have been made. Liability orders create statutory debts capable of founding bankruptcy proceedings and will not ordinarily be reopened unless there is fraud, collusion, absence of jurisdiction or a miscarriage of justice. Procedural defects, including dishonest service, do not necessarily justify annulment where the debt remains due, insolvency is established or likely, and annulment would frustrate the administration of the estate.

Philip Lambert applied under section 282(1)(a) of the Insolvency Act 1986 to annul a bankruptcy order made on a creditor’s petition by Forest of Dean District Council. The petition debt comprised council tax and non-domestic rates liability orders.

The Council accepted, for the purposes of avoiding a contested evidential hearing, that the statutory demand and petition had not been properly served at the address used. Mr Lambert had previously made an essentially identical annulment application, which was struck out after he failed to comply with an unless order requiring payment of costs. The issues were whether the renewed application was an abuse of process and, if not, whether the bankruptcy order should be annulled despite the service defect and the continuing existence of the petition debt.

1. Abuse of process. The renewed application was materially identical to the earlier application and bypassed the relief-from-sanction regime. The failure to comply with the unless order was serious, unexplained and part of a wider pattern of non-compliance, delay and failure to cooperate with the trustees. Applying the approach in Securum Finance Ltd v Ashton [2001] Ch 291, and the guidance concerning serious disregard of procedural rules in Aktas v Adepta [2010] EWCA Civ 1170, the application was an abuse and was dismissed on that ground.
2. If relief from sanction had been sought, it would have been refused under rule 3.9. The failure was serious and significant, there was no good reason for it, and the circumstances, including the need to enforce compliance with court orders and to conduct litigation proportionately, militated against relief. The three-stage approach in Denton v TH White Ltd [2014] EWCA Civ 906 was applied.
3. Merits. The court accepted, for the purpose of the alternative analysis, that the process server’s evidence was deliberately untruthful and that the statutory demand had not been served. The petition should therefore not have been presented and the bankruptcy order should not have been made. That engaged the discretion under section 282(1)(a), but did not compel annulment.
4. Liability orders under regulation 34 and regulation 49 of the Council Tax (Administration and Enforcement) Regulations 1992, and the equivalent provisions in the Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 1989, constituted statutory debts capable of founding a bankruptcy petition. Following Yang v Official Receiver [2017] EWCA Civ 1465, the bankruptcy court should not go behind such orders except for fraud, collusion, lack of jurisdiction or a miscarriage of justice. No such miscarriage was shown. The debt remained due and Mr Lambert had not established solvency or a realistic prospect of discharging it.
5. The court also took account of the likelihood that a fresh bankruptcy petition would succeed, the absence of any demonstrated defence to the debt, and the need to preserve the trustees’ ability to investigate the estate and address post-petition dispositions under section 284 of the Insolvency Act 1986. The application was dismissed.

First instance decision. The judgment records earlier interlocutory and bankruptcy proceedings, but no appeal from the decision determined here.