Tallington Lakes Ltd v South Kesteven District Council

This is an oral renewal of an application for permission to appeal the order of Norris J on 14 January 2011, by which he ordered that, save that the respondent, South Kesteven District Council (“the Council”), be restrained from presenting a winding-up petition against the appellant, Tallington Lakes Limited (“TLL”), at any time on or before Friday 21 January 2011, TLL’s application for an order restraining the presentation of a winding-up petition by the Council be dismissed and the Council shall be at liberty to present a petition after that date.

The application for permission to appeal was dismissed on the papers by Lloyd LJ on 26 May 2011.

TLL was represented at the hearing before Norris J by Mr Neil Morgan, who is recorded in the judgment of the Judge as being the sole director of TLL and the sole shareholder of Tallington Holdings Limited, TLL’s parent company. The Judge said that he agreed to permit Mr Morgan to represent TLL “with some reluctance” because the Judge considered that the determination of the issue raised by TLL’s application would have been much assisted by qualified representation on the part of TLL and “the introduction of a degree of distance and objectivity between TLL and its advocate”.

In dismissing the application for permission to appeal on the papers Lloyd LJ said that, if Mr Morgan wished to apply to represent TLL at this oral hearing, his application should be made in writing in advance of the hearing and it should not be assumed that it would necessarily be successful. Lloyd LJ said that TLL “...would be very well advised to obtain legal advice and representation for such a hearing.” No such written application has been made, and no legally qualified person appears on behalf of TLL today. Mr Morgan has nevertheless asked to be authorised to represent TLL in this hearing. I have permitted him to do so in relation to the question of the amount of outstanding interest as at the date of the hearing before Norris J. In view of the submissions made by Mr Morgan before me, I also consider that it would have been of value if a legal representative had been instructed.

The background is set out in detail in the judgment of the Judge. It is sufficient, for the purposes of this application, to state the following. Liability orders in respect of non-domestic rates were made against TLL in December 2006 and July 2007 in the sum of £99,366. Those demands founded a winding-up petition by the Council. In the course of the petition, the petition debt was reduced by credits to £40,715. The petition was dismissed on 12 January 2009 after TLL paid that sum. TLL was ordered to pay the costs of the petition. Those costs were the subject of a final costs certificate by Costs Judge Gordon-Saker dated 15 July 2009. The assessed costs totalled £9,433, of which just over £1,500 represented the costs of the assessment and the balance the cost of the petition. TLL sought to appeal that costs order, but permission to appeal was refused and the appeal was struck out.

A further liability order against TLL was made on 10 April 2008 by the Grantham Magistrates in the sum of £59,232.50 relating to rates liabilities from 1 April 2006 through to 1 April 2008. On receipt of the summons in respect of the rate liability, Mr Morgan wrote a letter, the tenor of which was that the company previously made liable for the rates had been Tallington Ski Centre Limited. TLL was not present when the liability order was made. TLL says that this is because (a) it was never properly served with a notice of the adjourned hearing of the summons, and (b) it did not receive the recorded delivery letter (which was in fact signed for) sent by the Council giving the date of the revised hearing.

The Grantham Magistrates made a further batch of liability orders on 15 October 2009 relating to liabilities for the years 2008 to 2009 and 2009 to 2010. The total sum due under those liability orders was £133,184. The Council had no evidence at the hearing in support of its summons and complaint, but TLL did. Notwithstanding that, Deputy District Judge Dhaliwal (sitting as part of the Grantham Bench) made the liability orders.

Once the October 2009 liability orders had been made there was a threat by the Council of a petition to wind-up TLL. It was this that led to the application by TLL before the Judge. On 18 January 2010 TLL applied for an injunction to restrain the Council presenting a winding-up petition.

TLL was intending to take Judicial Review proceedings in respect of the liability orders made on 15 October 2009.

On 1 February 2010 Briggs J ordered that (a) provided that TLL had by no later than Friday 5 February 2010 paid to the Council in cleared funds its liability under the costs order and the final costs certificate (dated respectively 12 January and 15 July 2009), and (b) upon the Council’s undertaking (subject to that proviso) not to present a winding-up petition against TLL pending the return date of TLL’s application for an injunction restraining the presentation of a winding-up petition, then (c) that application should be listed for a final determination as an application by order. That application was heard at the hearing which took place before Norris J on 14 January 2011.

In the event TLL did not comply with Briggs J’s order because TLL did not pay “in clear funds” on or before Friday 5 February 2011 the liability under the costs order and the final costs certificate. What happened was that TLL sent a cheque. The evidence of Mr Morgan was that the cheque (which was in the sum of £9,433) was sent on 4 February 2010. I should say that, in his oral submissions this morning, Mr Morgan referred me to an email of 19 January 2010 which he submitted supports his position, or rather that of TLL, that a cheque in the sum of £9,433.07 had been sent in January 2010. It was eventually established, however, that that cheque was not received, or at any event cashed, by the Council.

The Council’s evidence was that it did not receive the cheque sent on 4 February 2010 until 8 February 2010 and that it banked the cheque on 9 February 2010. The Judge observed that the indication in the evidence was that the cheque cleared on 11 February 2010. Mr Morgan’s case is that the cheque was received on 5 February 2010 and could have been banked on the following Monday. It is not in dispute that, on the facts as found by the Judge, interest on the £9,433 remained outstanding at the date of the hearing on 14 January 2011.

By the date of that hearing the Judicial Review proceedings had been concluded in favour of TLL. Mr Stephen Morris QC, sitting as a Deputy High Court Judge, ordered on 25 November 2010 that the four liability orders made by the Deputy District Judge on 15 October 2009 be set aside. I have not seen a copy of the judgment of the Judicial Review proceedings, but Norris J in his judgment stated that the ground of the decision was that the Council had led no evidence, and so there was no material upon which the Grantham Bench could properly base a conclusion, that TLL was in actual occupation or control of the premises sufficient to found a liability for rates. It appears that nothing was said about the liability order of April 2008.

The Judge took the view that, notwithstanding the decision of the Deputy High Court Judge in the Judicial Review proceedings, in view of the lapse of time there was no real prospect of the April 2008 liability order being successfully challenged. The reasoning of the judge (at paragraph [22] of his judgment) was as follows:

“TLL knew of the summons which led to the liability order. The liability order was referred to in evidence that was filed in April 2008. The liability order was specifically referred to in a letter dated 10 November 2009 (which even on its own case TLL accepts it received on 15^th November 2009): and yet no application was made to the council until February 2010 to set aside the order. That seems to me clearly not the degree of promptness that is required if this exceptional jurisdiction is to be exercised.”

The reference of the Judge to the “exceptional jurisdiction” was intended to reflect the principles set out in the judgment of Stanley Burnton J in R (on the application of Brighton and Hove City Council) v Hamdan [2004] EWHC 1800 (Admin), which were quoted by the Judge in paragraphs [20] and [21] of his judgment.

The Judge concluded, therefore, that the Council was a creditor of TLL under the April 2008 liability order, and the Council’s ability to collect under that liability order is not the subject of any dispute on substantial grounds. He observed that the outcome of the Judicial Review proceedings concerning the October 2009 liability order was not determinative of the validity of the liability order in April 2008, since there was no evidence before the Judge as to what grounded the magistrates’ decision on that occasion, or what evidence was led and what arguments were advanced, and it could not be assumed that the evidence was the same as in relation to the October 2009 liability orders.

The Judge dealt briefly with the issue whether there was a bona fide dispute over the amount of interest due under the costs order made on 12 January 2009 on the dismissal of the winding-up petition. The Judge said that a judgment debt was not paid or satisfied until the judgment creditor was in possession of cleared funds; and there was no suggestion that the cheque cleared through TLL’s account on any date earlier than 11 February 2010. He said that by 11 February 2010 the interest due on the costs liability exceeded £750. He rejected Mr Morgan’s argument that interest ceased to run on the day after he posted the cheque, which Mr Morgan said was 4 February 2010. Accordingly, the Judge held that, were it necessary to do so, he would have held that the interest liability was also a debt in respect of which the Council was a creditor and which was not subject to any bona fide dispute on substantial grounds.

For those reasons, the Judge refused to grant the injunction sought. He nevertheless granted an injunction restraining presentation of the petition for seven days following the date of the order, in order to enable TLL to avail itself of the opportunity to pay what the Judge regarded as undisputed debts and to avoid the consequences attendant upon the issue of a winding-up petition.

As I have said, I have been addressed this morning by Mr Morgan on the question of the outstanding interest on the assessed costs of £9,433, which were the subject of the final costs certificate dated 15 July 2009. The point is a very short one, namely whether or not interest ceased to accrue on 5 February 2010, which is the day after Mr Morgan says that the cheque was sent, and the date by which he says the Council would have received the cheque and should have paid it into its bank account, or, at any event, on 8 February 2010 when on its own admission the Council did receive the cheque at the latest. Mr Morgan, not surprisingly, has not produced any legal authority in support of his submission that the payment of a cheque is to be regarded as having been paid by way of cleared funds the moment it is presented by the payee at the payee’s bank.

In my judgment, the law is clear on this. Payment of sums due under a court order, such as a costs order, is only satisfied if and when the payment is made in cleared funds, and for this purpose cleared funds are those funds which are available once the cheque has been cleared through the payer’s account. The point is simply not capable of further elaboration. There is no dispute, on that basis, that on the date of the hearing on 14 January 2011 the accrued interest in the sum of £9,433 was in excess of £750. For that reason, permission to appeal is refused.

Mr Morgan has, told me that, since the hearing before Norris J, TLL has paid not merely the sum of £9,433 but also all outstanding interest due under the costs order. He has also told me that an application has been made to the Grantham Magistrates to set aside the April 2008 liability order. For what it is worth, although I have not heard Mr Morgan on the point, it seems to me there would have been a real prospect of successfully challenging on appeal the decision of the Judge in relation to liability under the April 2008 costs order. I certainly agree with the Judge that, in view of the delay that has taken place in challenging the April 2008 liability order, whether by application to the Grantham Bench to set aside the liability order, or by way of Judicial Review proceedings, TLL’s case for doing so would have been far from strong or straightforward. Nevertheless, this aspect of the case has some unusual features. There was no evidence before Norris J, and there has been none before this court, that any more evidence was presented to the Grantham Bench by the Council on 10 April 2008 then on 15 October 2009. At any event, there was certainly no evidence from the Council before the Judge that the liability order of 10 April 2008 was procured on the basis of more evidence placed before the Grantham Magistrates than on 15 October 2009. Had that been the case, I would have expected the Council, in its evidence before the Judge, to have dealt with the point since, by that date, the decision in the Judicial Review proceedings was known. Further, in response to a letter from Mr Morgan to the Grantham Bench dated 2 February 2010, the clerk to the Grantham Bench indicated that, if the Judicial Review proceedings were successful in relation to the October 2009 liability orders, he would advise the magistrates that an application to set aside the April 2008 liability order should be allowed to be made.

I have to emphasise, however, in this context that it is well established that the threshold for establishing that a debt is disputed on substantial grounds in the context of a winding-up petition is not a high one for restraining the presentation of the winding-up petition, and may be reached even if, on an application for summary judgment, the defence could be regarded “shadowy”.

However, it is not necessary to deal with the point more fully than that because, in view of outstanding interest exceeding £750 at the date of the hearing before Norris J, permission to appeal must be refused.