Neutral Citation Number: [2009] EWHC 2040 (Ch)

Appeal No: CH/2008/:PTA/0411
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM THE HIGH COURT OF JUSTICE
IN BANKRUPTCY
Date: 7th August 2009
Judgment of Jules Sher Q.C. sitting as a
Deputy High Court Judge
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	THE LONDON BOROUGH OF CAMDEN	Petitioning Creditor/Respondent	
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	MARY TERESA MARTIN	Debtor/Appellant	
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Judgment

Introduction

1.	This is an appeal from the judgment of Deputy Registrar Cheryl Jones handed down on the 2nd June 2008. By the order made in accordance with that judgment Mary Teresa Martin, the Appellant before me, was made bankrupt. This was the culmination of extraordinarily protracted bankruptcy proceedings pursuant to a petition presented by Camden Borough Council (“Camden”) in 2006 for unpaid council tax.

Sole ground of appeal

2.	Ms Martin applied for permission to appeal the bankruptcy order on a number of different grounds and she has been granted permission on only one of those grounds. That ground is simply stated: it is that at a hearing of the petition on the 29th August 2007 Mr Registrar Rawson directed that if Ms Martin paid Camden the sum of £1,285 by the 27th September 2007 (to which date he adjourned the petition) he would dismiss the petition. Ms Martin paid Camden that sum on the 24th September 2007 and she claims, not unreasonably, that the petition should have been dismissed. However, it was not dismissed and, five hearings later, resulted in the bankruptcy order that is under appeal before me. I was told by counsel that there were in the region of sixteen hearings in all and so one can envisage not only the considerable costs that have been incurred (far in excess of the debt sought to be recovered) but also the procedural nightmare into which this bankruptcy file has descended.

Outcome

3.	Let me say at the outset that I am going to allow this appeal and put an end to the bankruptcy order. I do this so that Ms Martin can know the outcome immediately without having to wade through a lengthy judgment with all the anxiety that that involves.

The cause of the unfortunate history

4.	The problem in this case has been the fact that Ms Martin has had no legal representation and little help beyond that of her partner, Mr Iqbal, who was permitted to speak on her behalf as a McKenzie man and who raised every conceivable (and inconceivable) point in her favour, in the end almost burying the one good point she had. The combination of this with late filings of evidence on the part of Camden and a mistake on Camden’s part (as to the validity of certain notifications of its refusal of council tax benefit) has led to the making of a bankruptcy order in circumstances which I cannot accept as just, even though  Ms Martin remains at the present time a debtor to Camden in respect of council tax.

Background

5.	Ms Martin lives with her partner in a flat owned by her at Flat 7, 14 Steeles Road, London, NW3 4SE. The debt which is the subject of the petition is a debt of £6,156.01 based upon seven liability orders made in the Highbury Corner Magistrates’ Court for unpaid council tax in respect of her flat for the years from 2001 to 2006. The petition was presented to the court on the 26th April 2006 and it followed a statutory demand for this sum. Ms Martin had applied to set the demand aside but the application had been stood over on the 20th April 2006 to enable her to make it in proper form. The existence of this application at the time of presentation of the petition had been the subject of one of the grounds of appeal which was not permitted to go forward, and I do not enter into the controversy in this regard. An application (in proper form) to set aside the statutory demand was made at some time after presentation of the petition and then summarily dismissed by Mr Registrar Rawson on the 4th August 2006. A renewed application was made later and was similarly dismissed. These applications are irrelevant to the issues which arise on this appeal. 

6.	As to the petition itself, it was stood over on the 27th June 2006 with costs awarded against HM Courts Service which appears to have mislaid the files. Directions as to evidence were given in respect of the petition on 8th September 2006 with the matter listed for hearing on the 24th November 2006. That hearing was wasted as Ms Martin had (within her rights) taken the point that Camden had failed to put the liability orders into evidence. The hearing was adjourned to the 18th January 2007 when Ms Martin produced an opinion of counsel instructed by the Bar Pro-Bono Unit raising the possibility that certain notices of refusal of council tax benefit may have been invalid because they did not provide Ms Martin with the information required to enable her to appeal the refusal. That opinion is not in evidence but it has given rise to a mistake on the part of Camden which is at the root of what went wrong in this case.

7.	Ms Martin had applied to Camden for council tax benefit in respect of council tax which is the subject matter of five of the seven judgments. Had those applications been granted, counsel for Camden told me, Camden would have applied, at Ms Martin’s request, to revoke the judgments. However, those applications were refused and (in every case) refused on the ground that Ms Martin did not provide sufficient information to enable Camden to assess whether she was entitled to council tax benefit or not. She seems to have produced bank statements, for example, for only fragmented parts of the year and not a continuous series of bank statements. It may be that the missing sheets showed no relevant income. I simply do not know. However, she seems not to have understood the need for the presentation of a connected picture. Whether she could have been helped to put the evidence together, and what that evidence would have shown had she done so, is quite beyond the scope of this appeal and beyond the scope of the evidence before me. It is, however, important to refer to the notices of refusal by Camden of these applications for council tax benefit because the doubt (accepted by counsel for Camden) as to their statutory validity caused Mr Registrar Rawson to adjourn the petition on the 18th January 2007 to enable Ms Martin to file further evidence.

8.	The significance of the failure of the notices of refusal to give her the information necessary to enable her to appeal was that, without such information, the time for appealing those refusals did not begin to run. Ms Martin was accordingly in a position to say that in respect of those five judgments she had, or was likely to have, a set-off which would eliminate the liability in respect of them. The Registrar was sufficiently troubled by this that he adjourned the petition. Camden did not assert that its notices of refusal were compliant with the regulations. Counsel for Camden in this appeal, Mr Tim Chelmick, confirmed to me that Camden was under the impression that those notices were not so compliant as they did not (or so it thought) give details of the procedure and timetable for appealing the refusal. (In fact, however, the notices were compliant because the relevant information was printed on the back of the refusal letter and the reader was directed on the front of the letter to refer to the reverse side for important information. I quote from a witness statement by the relevant officer of Camden dated 25th January 2008 in which, at paragraph 22 she says: “the council merely photocopied the front of the notice when preparing exhibits for these proceedings”.)

9.	I return to consider the continuing journey of the petition. Unfortunately, the order made the18th January 2007 failed to include the directions for the service of further evidence that had been made and the adjourned hearing on the 11th April 2007 was thus ineffective. Mr Registrar Rawson made further orders on that date for the filing of evidence by Ms Martin relating to her claims for council tax benefit with provision for evidence in response by Camden.

10.	At the adjourned hearing on the 5th June 2007 Mr Registrar Rawson appeared to have been satisfied that the indisputable component of the debt exceeded the bankruptcy level of £750 by £227.06. Of the seven judgment debts the Registrar plainly took the view that the five of them I have mentioned above remained subject to being eliminated by a process of appeal against refusal of council tax benefit, which remained available to Ms Martin. What the precise analysis was is not articulated anywhere in the evidence before me. The Registrar may have treated Ms Martin’s extant right to appeal against the refusals by Camden as constituting a potential, indeed likely, set off against the judgment debts or, simply, treated those debts as disputed debts. The precise analysis is academic here because the entitlement of Mr Registrar Rawson, in his discretion, to go behind the judgments in circumstances where there remained an avenue of appeal against Camden’s refusal of benefit is not in issue on this appeal. The case against Ms Martin, it will be seen, is that by the time the petition ultimately came to be heard that avenue of appeal did not exist any more.

11.	I have said little so far about the remaining two judgments. They were as follows: £1,056.70 under an order dated 8th August 2002 and £1,280.27 under an order dated the 10th June 2004. As to the 8th August 2002 judgment, it was for council tax for the period April 2002 to April 2003 and for that year Ms Martin did not make an application at all for council tax benefit. Accordingly, for that year there was no possible basis for challenging the judgment; she was out of time, I understand, to make a back-dated application for that year.

12.	The second judgment referred to above was made on the 10th June 2004. The story here is more complicated. Ms Martin did apply for benefit for this year (which was April 2004 to April 2005). Camden refused but in this case Ms Martin did lodge an appeal and won, at least in part. The decision notice dated the 6th January 2006 contains the following statement by the Chairman of the Appeals Service: “I know of no law which provides that a ground for closing a claim is because someone has not replied to a letter. It is a ground for closing a claim if the information requested has not been provided and in this case such information was provided as can be seen from the preceding paragraph. Accordingly I allow this appeal and the Appellant is eligible for council tax for the period 26/4/2004-11/7/2004.”

13.	There is no explanation in the evidence as to why only a part of the year was allowed. Camden determined that the maximum benefit to which Ms Martin could be entitled for that part of the year was £253.01 but that she would still have to provide information to substantiate this figure. The chairman of the Appeals Service noted in his decision that the appellant had raised questions about council tax for previous years but that he had no jurisdiction to deal with these questions. 

14.	I return to the hearing before Mr Registrar Rawson on the 5th June. As I have said, he appeared to be satisfied that the indisputable component of the debt exceeded the bankruptcy level by £227.06. It is clear that he got to this figure by focusing on this second judgment of £1,280.27 from which he deducted the maximum entitlement for the fragmented part of the year of £253.01. This produced a sum of £1,027.26. A deduction of the £750 bankruptcy level would have left a figure of £277.26. Someone made an error in this calculation and came out with the figure of £227.06 instead of £277.26 but I am satisfied that the methodology of the calculation was as I have stated. The Registrar thus considered that the indisputable element of the debt was only £227.06 over the bankruptcy level and he said that if Ms Martin paid this sum by the date to which he was adjourning the petition, he would dismiss the petition. He accordingly stood the petition over to the 29th August 2007, ordering Ms Martin to put in further evidence in respect of her claims to benefit for the years in respect of which the avenue of appeal remained available. Camden remained at this date (5th June 2007) under the (erroneous) impression that that avenue of appeal remained open. In turn the Registrar was under the same (erroneous) impression. The fault, I put to counsel for Camden, Mr Chelmick, was the fault of Camden, which he accepted. I am quite unclear how much of all that went on at this hearing was understood by Ms Martin. My guess is not much. Certainly, Mr Chelmick did not lay any responsibility for the error on her shoulders.

15.	It will not be overlooked that yet another error crept in on the 5th June and that is that no attention appears to have been given to the judgment of the 8th August 2002, in respect of which no avenue of appeal can have been available, even on the basis of the erroneous impression I have referred to above. This last error had the consequence that £1,056.70 of indisputable debt was entirely overlooked. However, this additional indebtedness was picked up on the next occasion on the 29th August 2007.

16.	On the 29th August 2007 the petition came on for hearing before Mr Registrar Rawson. Ms Martin had filed further evidence but it still did not present a continuous connected picture of her income for the relevant periods. She had not paid the £227.06 to Camden, and Camden, not for the first or last time, was very late in filing its evidence in response. This gave rise to an unnecessary squabble about letting in the evidence. I have a full transcript from the official court transcribers of this important hearing, which is at the heart of this appeal. Counsel for Camden pointed out to the Registrar that, in addition to the £227.06, there had been no application for benefit for the year April 2002 to April 2003 in respect of which judgment had been given for £1,056.70. Accordingly, the indisputable element of the debt had increased since the 5th June hearing to £2,033.76 so that, to bring it below £750, Ms Martin would have to pay the sum of £1,283.76. Counsel added: “£2,033.76 is the lowest amount that, on the evidence before you, you can conclude is owing. I make no concessions that in fact there is anything less than the £6,156.01 owing. However giving all reasonable assumptions, then the amount owing is” [£2,033.76].

17.	The Registrar then said this: “Do you follow that on any footing, on the evidence before me, Ms Martin owes £2,033.76. I am leaving aside any questions about the balance which is still somewhat hazy, and there may be a genuine dispute as to that. But so far as those figures are concerned, unless she is able to pay off £1,283.76 the Council are, on any footing, entitled to a bankruptcy order…..What I am therefore going to do is I am going to stand this over for a short period to enable her to pay off the amount which is, in any event, owing. If she pays it off, that, so far as I am concerned, will be the end of this petition. But if she fails to then I won’t have any option but to make an order…. I can give you until the 27th. I think that is about the first day when I can bring it back. 27th September.”

18.	Later on in that hearing, when asked to incorporate this in an order, the Registrar said “No, I don’t make an order that you have to pay it, that is not the way we do it. But I am telling you that is the figure. I am going to say £1,285 because it is a round figure”. The Registrar then made a note on the file that if Ms Martin paid the sum of £1,285 by the next hearing the petition would be dismissed. The actual order as drawn merely adjourned the petition to the 27th September 2007 with costs in the petition.

19.	On the 24th September, three days before the return date, Ms Martin paid Camden the £1,285. Accordingly, I would have expected the petition to be dismissed when it came before the Court on the 27th September. But that was not to happen. 

20.	The petition came before Mr Registrar Simmonds on the 27th September 2007. I have no official transcript of what took place before him. However, I have what I think is a transcript created by Ms Martin and her partner Mr Iqbal after the event, the accuracy of which is not challenged. It seems that the Registrar’s immediate reaction (on being told that Ms Martin had paid off “some money but there is an outstanding debt of £4,871.01”) was that he could not go behind the judgments. Counsel for Camden agreed but said that she could appeal against the judgments so Camden was asking for a stay of the petition so that Ms Martin could appeal. Prompted by Mr Iqbal Ms Martin then said that Mr Registrar Rawson had said that if she paid the £1,285 he would dismiss the petition. The Registrar said: “he should not have done that”. He then adjourned the petition to the 22nd November 2007 to enable her to appeal the decisions of the Camden in respect of council tax benefit.

21.	Mr Registrar Simmonds and Camden paid scant regard to the clear and unequivocal direction of Mr Registrar Rawson that if Ms Martin paid the £1,285 he would dismiss the petition. I cannot see any justification for failing to honour the clear direction of Mr Registrar Rawson. There was not even a change of circumstances since the 29th August (other than, of course, the critical fact that Ms Martin had paid the £1,285, and in time). Camden had got the benefit of that £1,285 rather than be left to face the risk of a dividend in the bankruptcy on that £1,285.

22.	The Registrar then told Ms Martin that Camden would write to her within a week to allow her to appeal. In the event Camden did write, on the 10th October 2007, and pointed out that the necessary information about the right to appeal and the period within which an appeal should be made was, after all, included in all the notices of refusal, that the attention of the reader was drawn to the information on the reverse side of the refusal notices and that, under the appropriate regulations, therefore, the time for appealing had expired. Camden was, in this letter of the 10th October 2007, correcting the erroneous impression which had persisted ever since the hearing in January 2007 , which had fuelled Mr Registrar Rawson’s relegation of £4,121.01 of the original debt of £6,156.01 to a status of disputed debt and thus, in accordance with the exercise of his discretion, eliminated that £4,121.01 as a basis upon which to make a bankruptcy order against Ms Martin on this petition.

23.	Now, of course, circumstances had indeed changed from those obtaining on the 29th August 2007 because, if the Council was correct in its letter of the 10th October 2007, the time for appealing in relation to the £4,121.01 had indeed gone by and that element of the original debt was not capable of dispute. At the next hearing, on the 22nd November 2007, taken again by Mr Registrar Simmonds, he asked Ms Martin about the value of her flat and the outstanding mortgage upon it and he plainly was concerned that she would lose her substantial equity in that flat if  she were bankrupted for this single debt  of  £4,871.01  (£6156.01 less the payment of £1285). So he gave her an opportunity to pay the £4,871.01 before the next adjourned hearing which he set at 11 am on the 10th January 2008.

24.	On that day the petition came before the Chief Registrar Baister who noticed on the file a note by Mr Registrar Rawson: “When Ms Martin pays £1,285, I will dismiss the petition”. He also noticed that the petition had been reserved to Mr Registrar Rawson and that that had not been rescinded by Mr Registrar Simmonds. He therefore adjourned the petition to the 29th January 2008 to be heard by Mr Registrar Rawson. On that return date Mr Registrar Rawson was plainly embarrassed by all this history. It was pointed out to him by counsel for Camden that his direction made on the 29th August was predicated on the basis that the Camden notices of refusal were invalid and, by the time of the January 2008 hearing, that assumption had been proved wrong. On this basis he adjourned the petition yet again to come on before him on the first open day after the 13th March 2008 to enable Ms Martin to pay off the debt. Mr Registrar Rawson passed away before that adjourned hearing.

25.	On the 19th March 2008, the matter came before Mr Deputy Registrar Schaeffer who ordered that the court obtain a transcript of the hearing of the 29th August 2007 and circulate it to the parties, and then adjourned the petition to 1st May 2008 when it came before Deputy Registrar Cheryl Jones, whose judgment is now under appeal before me.

Ground of Appeal

26.	As I have said the only ground upon which Ms Martin was given leave to appeal is that, having been told by the Registrar that if she paid the sum of £1,285 by 27th September 2007 the petition would be dismissed, it should have been dismissed because she paid that sum and paid it in time. The point was put slightly differently by her in her notice of appeal. She says in that notice of appeal that there was an agreement or promise by Camden that if she paid the £1,285 the petition would be dismissed and Camden had reneged upon that promise. Deputy Registrar Cheryl Jones dealt with this at page 17 of her judgment on the basis that Ms Martin was asserting (as she indeed was before the deputy Registrar) that Camden had promised to settle the indebtedness for £1,285. It is quite clear from the transcript that Camden were not making any promise or agreement at all and certainly not a promise or agreement to settle the outstanding debt for £1,285. It is crystal clear from the above quotation from counsel’s submissions that he was making no such settlement. He expressly said that he was making no “concessions that in fact there is anything less than the £6,156.01 owing”. As it happens, I think that Ms Martin is asserting in her grounds of appeal before this court no more than that Camden had promised that if she paid £1,285 the petition would be dismissed. But even that cannot be substantiated from the transcript. It is plain that it was Mr Registrar Rawson who was making such direction: there was no element of promise by Camden at all.

27.	However, that leaves us with the simple fact that Mr Registrar Rawson made the clear direction that if she paid the sum by the 27th September the petition would be dismissed. The fact that the direction was not drawn up in the order is, in my judgment, neither here nor there. Its absence from the order might have led to a dispute about precisely what was said, but there is no difficulty about that in this case. The evidence could not be clearer. Further, its absence from the order might have raised doubts about whether he intended to commit himself to the particular course set out in his direction but, again, the transcript clearly shows that the reason why he did not want to include it in the order was because he thought he was being invited to make an actual order for payment and, in his words, “that is not the way we do it”. It is clear to me that he was making an unqualified direction.

28.	 Mr Chelmick submits that, put at its highest, “ the Registrar was indicating how he may exercise his discretion at the next hearing. He was not pre-judging the issue, nor could he do so.” I do not accept that submission. It seems quite plain to me that the Registrar was exercising his discretion there and then. He was at pains to clear out of the way any part of the overall indebtedness which, on Camden’s concession and in Camden’s mistaken perception, remained appealable. The Registrar could not have thought that any such appeal could have been made and disposed of by the next return date of 27th September 2007, some four weeks away. He plainly, in his discretion, treated £4,121.01 of the original indebtedness as disputed and focused solely on the rounded up figure of £1,285, payment of which would have brought the indisputable indebtedness down to less than £750.

29.	 The only thing that changed by the time he saw the matter again on the 29th January 2008 was that Camden had realized its mistake in conceding that the £4,121.01 remained appealable. This was Camden’s mistake and no submission was made to me that it was caused or contributed to by Ms Martin. Even if she had some responsibility (and one can see that if she read the notices carefully, she would have appreciated Camden’s mistake), the major responsibility plainly rests with Camden. Mr Registrar Rawson was perfectly entitled to make the direction he made on the basis of the case as presented by Camden. No criticism whatsoever can be attributed to him. In my judgment, Camden cannot simply walk away from its concession, which has been acted on by the Registrar and, in turn, by Ms Martin. The petition should have been dismissed by Mr Registrar Simmonds on the 27th September 2007 and, not having been dismissed on that date, should have been dismissed at the latest by the 29th January 2008.

30.	Deputy Registrar Cheryl Jones saw the issue as a narrow issue as to whether Mr Registrar Rawson’s direction was binding on him or on her or created any estoppel or bar to the making of a bankruptcy order. In my judgment, it is not just a narrow question whether the direction was, technically, binding : it is a question of what is fair and just. Camden made an error in conceding to the Registrar that the appeal procedure remained available. On that basis he made the direction that if £1,285 was paid the petition would be dismissed. Once that direction was acted upon and the money was paid, it should not have been open to Camden to withdraw that concession so far as this petition was concerned. It is no answer to say that she was obliged to pay this money in any event. Camden was put into a stronger position once this money was paid and Ms Martin into a correspondingly weaker position. We do not know to what lengths she went to  raise the money or where it came from. Camden’s concession has no effect upon Ms Martin’s continuing liability for the sum of £4,871.01. It simply has the consequence that Camden should not have been able to use this petition to bankrupt Ms Martin on the basis of that debt. 

31.	Deputy Registrar Cheryl Jones prepared a lengthy and careful judgment which has been of considerable help to me but, in my view, looked at the matter too narrowly. The issue went beyond a question whether the court was itself bound by the Registrar’s direction and beyond any analysis of the doctrine of estoppel. The deputy Registrar should have taken wider considerations of fairness into account and considered whether Mr Registrar Simmonds ought to have dismissed the petition when it came before him on the 27th September 2007, bearing in mind that there had by then been no change of circumstances since the direction of Mr Registrar Rawson had been made on the 29th August 2007. The further proceedings in this petition on the 22nd November 2007 and the 29th January 2008 were plainly dependent upon and, in my view, tainted by the decision on the 27th September 2007. It is true that, by the time of the last hearing before Mr Registrar Rawson on the 29th January 2008, it appeared that there was much more than the £750 bankruptcy level that was indisputable and, ordinarily, that would have left it open to him to adjourn the petition to give Ms Martin more time to pay. But he had plainly said that he would dismiss the petition if she paid the £1,285, not stay it or adjourn it to abide the outcome of the appeal procedure. In those circumstances, even if there had been no intervening hearings before Mr Registrar Simmonds, I think that the just course would have been to dismiss the petition.

32.	As the deputy Registrar has not taken into account all the considerations she should have done, the appropriate course is that I should exercise the discretion myself. Taking everything I have said in this judgment into account I think that the just course is to bring these bankruptcy proceedings to finality by allowing this appeal and dismissing this petition. Accordingly, I shall allow Ms Martin’s appeal and will hear the parties on the form of the order and the question of costs at a time to be arranged.

33.	I add only one observation. Ms Martin must understand that, although she has won this appeal and thus overturned the bankruptcy order and succeeded in securing the dismissal of the petition, this does not affect her indebtedness to Camden in respect of the balance of £4,871.01 mentioned above. This appeal has been allowed for the reasons contained above in this judgment and irrespective of any considerations  concerning  that  remaining balance.  I can only hope that, in the future, a greater degree of co-operation between Camden and Ms Martin might avoid a recurrence of the wasted costs that have been incurred in this case, way in excess of the underlying debt sought to be recovered.