Ahmad v Inland Revenue

J U D G M E N T

1. Lord Justice Chadwick: This is an application for permission to appeal from an order made on 23rd July 2004 by Evans-Lombe J sitting on an appeal in bankruptcy. The applicant, Mr Musabbir Ahmad, is the bankrupt. The background may be summarised as follows.

2. Under section 268(1)(a) of the Insolvency Act 1986, demanding payment from Mr Ahmad of £309,561. Particulars of the sum alleged to be due were set out in the demand. Those were tax liabilities which the Revenue asserted were due from him. On or about 17th September 2001, the Inland Revenue served a statutory demand (dated 30th July 2001).

3. On 1st October 2001 Mr Ahmad, as he was entitled to do, under rule 6.4 of the Insolvency Rules 1986, made an application to set the demand aside. That application was made under rule 6.4 of the Insolvency Rules 1986. On 18th June 2002 that application was dismissed in the Croydon County Court by Deputy District Judge Armstrong. Mr Ahmad appealed from that decision to the High Court under section 375(2) of the Insolvency Act. His grounds of appeal, in a notice dated 3rd July 2002 at section 6, were shortly stated:

"No action can bring after six years due to Limitation Act 1980, section 9 and section 23 Limitation Act 1980."

4. An appeal on that basis was, if I may say so, plainly misconceived. Mr Ahmad had overlooked the provisions of section 37(2) of the Limitation Act which excludes from the Act claims for tax of any kind.

5. It is not clear whether or not the applicant's notice was served on the Inland Revenue. But two events occurred thereafter. First, the High Court gave Mr Ahmad a date in October 2002 for the hearing of his appeal. That was done by letter dated 15th July 2002. The date fixed for the hearing was 10th October 2002; or on the following two working days. In those circumstances, Mr Ahmad was entitled to think that no petition would be presented until his appeal had been heard.

6. But, second, whether or not the Revenue knew of that pending appeal, they did present a petition for bankruptcy on 2nd August 2002. That petition came before Mr Registrar Derrett on 18th September 2002. Mr Ahmad did not attend on that day; and so he did not tell the registrar that he had an outstanding appeal against the refusal to set aside the statutory demand. Nor, I assume, did the solicitors for the Revenue tell the registrar that there was an appeal pending. In those circumstances -- there being an unsatisfied statutory demand, which the registrar could not have appreciated was under appeal -- the registrar made a bankruptcy order.

7. Mr Ahmad took immediate steps to annul that bankruptcy order, by issuing an application on 24th September 2002. He took the point, understandably, that the petition should not have been presented on 2nd August 2002 or at all because there remained outstanding an appeal against the refusal to set aside the statutory demand. He asserted that the effect of the pending appeal was that there was an outstanding application to set aside the statutory demand for the purposes of section 267(2)(d) of the Insolvency Act 1986. A An outstanding application to set aside the statutory demand is a bar to presenting a petition.

8. It does not appear that the appeal to set aside the statutory demand was ever heard. But the application for annulment came before Mr Registrar Jacques on 4th February 2003. On that day the registrar dismissed the application to annul. He took the view, it seems, that the requirement under section 267(2)(d) was satisfied on 2nd August 2002, notwithstanding the pending appeal against the refusal to set aside the statutory demand.

9. On 19th August 2003 -- that is to say some six months or more later -- Mr Ahmad filed an appellant's notice out of time seeking to appeal from the order of 4th February 2003. He applied for an extension of time. On 11th November 2003 the registrar made an order refusing to extend the time for filing the appellant's notice; but he rescinded that order on 17th December 2003 on the grounds, I think, that Mr Ahmad had not had proper notice of the hearing.

10. The matter came back before Mr Registrar Jacques on 5th February 2004. He reconsidered the question whether or not to extend time to file an appellant's notice against the order of 4th February 2003. On 5th February 2004 the registrar dismissed the application to extend time, as he had done on the previous occasion. The position, therefore, was that Mr Ahmad did not have an extension of time in which to file an appellant's notice from the order refusing to annul his bankruptcy.

11. It was from that order of 5th February 2004, that Mr Ahmad appealed to the High Court, as he was entitled to do. He was appealing, therefore, against a refusal of an extension of time. He was not appealing, at that stage, against the order refusing to annul his bankruptcy, nor was he appealing against the bankruptcy order itself.

12. That appeal from the order refusing an extension of time came before Evans-Lombe J on 23rd July 2004. Evans-Lombe J dismissed the appeal. It is from that decision of Evans-Lombe J that Mr Ahmad now wants to appeal to this Court.

13. The judge dismissed the appeal essentially for three grounds. First, because he took the same view as the registrar had taken in relation to the effect of section 267(2)(d) of the Insolvency Act 1986. Second, he took the view that the appeal against the refusal to set aside the statutory demand -- on the grounds set out in the appellant's notice -- had been hopeless because of the provisions in section 37(2) of the limitation act. Third, he took the view that there was plainly a discretion whether or not to extend time. The judge said this at paragraph 12 of his judgment:

"As an additional ground I would add this: the registrar undoubtedly had a discretion whether or not to extend time. There is evidence before me -- it was not before the registrar -- from the trustee in bankruptcy, that Mr Ahmad is substantially insolvent. That is set out in paragraph 6 of the witness statement of Mr Philip Smith, where he recites a debt of £350,000 now due to the Inland Revenue; a further £44,000 to the Customs and Excise; and an asset, namely the bankrupt's interest in a house, which has been sold for something more than £100,000, but in respect of which his estranged wife herself claims an interest. So on those figures there is a very substantial insolvency of some £300,000 or thereabouts."

14. The judge directed himself that on that basis and as a matter of discretion this was not a case in which to extend time for appeal; even if the grounds of the proposed appeal would otherwise be arguable and indeed persuasive. He relied on the decision of this Court in Re Noble (A Bankrupt) [1965] Ch at 129, where both Russell and Harman LJJ, with whom Davis LJ agreed, explained that there was no point in extending time in this type of case if that would lead to no useful purpose.

15. In Noble the Court was satisfied that the point which the debtor wanted to argue -- against the making of a receiving order -- would have succeeded if the appeal had been made in time -- see page 143 in the judgment of Harman LJ and page 146 letter G in the judgment of Russell LJ. But although an appeal in that case would not merely have had a prospect of success, but would actually have succeeded, this Court held that there was a discretion to refuse to extend time because all that would happen if time were extended and the appeal allowed would be that the debtor would be made bankrupt on a further petition. So that the sensible course was to allow the existing bankruptcy to take its course.

16. That is the position in this case. The only purpose of extending time to appeal against the refusal to annul the bankruptcy order would be to enable Mr Ahmad to argue the point that he raised on his appeal against the refusal to set aside the statutory demand; that is the point on limitation which he raised in his appellant's notice of 2nd July 2002. But that point, as the judge explained, is hopeless in the light of the provisions in section 37(2) of the Limitation Act; so that appeal would be bound to fail. The Inland Revenue would then present a further petition based on the statutory demand already served; and another bankruptcy order would be made. It was much more sensible, the judge thought, to let the existing bankruptcy stand. There were no circumstances in which there would not be a bankruptcy.

17. An appeal to this Court would be a second appeal, to which CPR 52.13 of paragraph 2 applies. The Court of Appeal is unable to give permission unless it considers that an appeal would raise an important point of principle or practice, or that there is some other compelling reason for the Court of Appeal to entertain a second appeal.

18. Had an appeal from the order of 4th February 2003 been brought in time I would have taken the view that the true effect of section 267(2)(d) -- in circumstances in which there is a pending appeal against a refusal to set aside a statutory demand -- was an important point of principle. I confess some surprise that the position appeared to both the registrar and the judge in the way that it did. So, had the appeal been brought in time, I would have held that the condition under CPR 52.13(a) had been satisfied. But the application to me is not an application for permission to appeal against the refusal on 4th February 2003 to annul the bankruptcy order. It is an appeal against the refusal on 5th February 2004 to extend time. Mr Ahmad, for reasons which are unexplained, had allowed time to pass without taking the steps that were open to him; indeed, as I have indicated, he had allowed some six months to pass without taking those steps.

19. In those circumstances, it would be wrong to allow an appeal to this Court unless it could be said that the judge's decision to uphold the registrar's refusal to extend time raised some important point of principle. As I have indicated, that decision is put on the basis that an appeal in this matter would serve no sensible purpose, because the challenge to the refusal to set aside the statutory demand would be bound to fail; so that there would simply be another bankruptcy order. In my view, that decision raises no point of principle. The power of the Court to refuse to extend time is well recognised. This Court has given guidance in ReNoble; and there is no need for that point to be revisited. And there is no other compelling reason for this Court to hear a second appeal from Evans-Lombe J.

20. For those reasons, this application is refused.

ORDER: Application refused. No order as to costs.