Lambert v Forest of Dean District Council & Ors

This is an application by Mr Philip Lambert to annul the bankruptcy order made against him on 12^th September 2016 on a creditor’s petition presented on 17^th March 2016. The

This annulment application was filed on 12^th November 2018 and is made under section

The application is opposed by the Council. It does not maintain that the statutory demand or petition were properly served, although it notes that demands were sent to the Service Address before the dissolution of Paragon and the petition was signed for when served by post at that address in accordance with an order for substituted service. It states that its concession in this regard is purely to avoid a prolonged hearing with cross-examination. The more limited scope of its opposition is that the annulment application is an abuse of process. This is the second annulment application that Mr

This application is supported by the witness statement of Mr Lambert, dated 12^th November 2018. Following issue, Deputy ICC Judge Schaffer directed the filing of evidence in answer by the Council and also a witness statement by the Trustees dealing with:

Mr Lambert’s statement exhibits the two witness statements made by the Process Server, dated 1^st February 2016 and 3^rd May 2016. The first statement deals with service of the statutory demand. The Process Server states that he attended the Service Address on 10^th December 2015 and was unable to obtain a reply. On 11^th December 2015 he sent an appointment letter by first-class post to say that he would attend on 21^st December 2015, giving his contact details if Mr Lambert wished to arrange an alternative date for service of the statutory demand. He says that he continued to attend the Service Address periodically, without success, until 29^th January 2016 when he attended at around 7pm and spoke to a woman who confirmed that Mr Lambert lived there. He therefore posted the statutory demand through the letterbox, addressed to Mr Lambert.

In his second witness statement, the Process Server states that he attended the Service

It was on the basis of these statements Mr Registrar Jones made an order on 18^th July 2016 for substituted service of the petition by sending it by first-class post and firstclass recorded delivery to the Service Address. A different process server made a statement dated 25^th August 2016 certifying that service was effected by that method on 16^th August 2016. That having been done the petition came on for hearing and the bankruptcy order was made in Mr Lambert’s absence.

Mr Lambert’s position in relation to all of this is that he has never lived at the Service Address and never traded from it. The address is an office occupied by Made Simple

Mr Lambert contends that the Process Server’s statements are simply lies insofar as they purport to record attendance at the Service Address. He also disputes the debts on which the petition is founded. Although he has not explained his dispute in any great detail in his evidence, the essence of his case is that the properties at Linear Park are occupied and that it is the occupier, not he, who is liable for tax at the relevant property.

The Council’s evidence in answer is in the form of a witness statement, dated 8^th January 2019, from Mr Thomas Clark, who is employed as the Council’s head of revenues and benefits. He sets out the regime relating to the payment of council tax and non-domestic rates and exhibits the liability orders on which the petition was based. He states that, since the making of the bankruptcy order, further debts have accrued such that Mr Lambert was liable for a total debt in the sum of £191,950 at the date of his statement. He explains that Mr Lambert made an application to set aside the liability orders on which the petition was founded in February 2018 but failed to attend the hearing on 26^th February 2018. In his absence, Mr Clark contends, the magistrates considered the three-part test set out in R (on the application of Brighton & Hove City Council) v Brighton & Hove Justices, Michael Hamdan) [2004] EWHC 1800 (Admin) and formed the view that Mr Lambert had not satisfied any of them. He sets out how the Service Address was identified and the course of the bankruptcy proceedings and the First Annulment Application. The Council’s position is that the debts created by the liability orders are still due and owing and the application is abusive in circumstances where the First Annulment Application was struck out and the costs ordered to be paid to the Council were, at the date of the hearing, still outstanding.

Mr Clark was the only witness who was not excused from attending for crossexamination. In his oral evidence, he explained that he understood the ‘hierarchy of liability’ for non-domestic rates and that those rates are levied against the rateable occupier of a property. He said that Mr Lambert had been asked to provide information as to who was in occupation of the Linear Park properties, but had not provided it. He accepted that the Council had Mr Lambert’s residential address in Gloucester, and used it for council tax purposes. He said however that departments within the Council did not share information with each other, otherwise than for the purposes of the detection or prevention of crime. This was the reason that enquiries were made to establish an address for Mr Lambert and the Service Address was discovered on the Companies House website. I am satisfied that Mr Clark was a straightforward and honest witness and I have no reason to doubt his evidence.

Mr Butler filed a witness statement dated 29^th January 2019, which is made on his own behalf and that of Mr Nicholls. He notes that the Trustees are neutral on the question of whether the bankruptcy order should be annulled but they have filed his statement for the assistance of the court pursuant to the direction of Deputy ICC Judge Schaffer. He sets out the Official Receiver’s account of his dealings with Mr Lambert and his belated compliance with the Official Receiver’s requests for information. This account is taken from an email sent by Ms Anna-Marie Uddin of the Insolvency Service, dated 25^th January 2019. It explains that the Official Receiver applied for the public examination of Mr Lambert on 7^th March 2017 after a number of appointments were not kept. Mr Lambert contacted another officer of the Insolvency Service, Mr Christopher Finch, on 17^th March 2017 and said that he had no link to the address given in the bankruptcy order but that he had the same date of birth as ‘the bankrupt’ and had owned at least some of the addresses on which the liability orders were founded. The petition was sent to him along with information on annulling the bankruptcy.

According to Ms Uddin’s email, Mr Lambert attended the Official Receiver’s offices on 3^rd May 2017 but declined to be interviewed or to sign any documents. He said that he intended to apply to annul the bankruptcy. Mr Lambert then failed to attend further appointments and the adjourned public examination took place on 9^th August 2017. At that hearing he undertook to return the standard preliminary information questionnaire. A further appointment was arranged for 2^nd October 2017, which Mr Lambert also

The Trustees have received six claims in the bankruptcy, totalling £375,905, although they have not yet advertised for claims. Mr Lambert’s brother has intimated a significant but unquantified claim. Mr Butler also explains that the Trustees made an application for a receiver to be appointed over the properties at Linear Park as a result of Mr Lambert’s failure to provide information as to the occupants of those properties. That application has not been determined as ICC Judge Barber stayed the bankruptcy on 14^th December 2018. According to Mr Butler, a lease was granted by Mr Lambert in respect of some of these properties to a company called Parr Management Limited (‘Parr’) on 15^th August 2016. Parr was incorporated on 13^th April 2016, just under a month after presentation of the petition, and its director is Ms Iryna Tatarevich, Mr

Mr Butler explains that there is some uncertainty as to the value of Linear Park as it is not yet clear who is in occupation of it and on what terms. His agent has suggested that its value may be in the region of £750,000 and it is subject to a mortgage securing about £181,095 due to NatWest Bank. The bank has provided a significantly lower valuation. This is referred to in the Original Trustee’s report to the court dated 28^th November

Mr Lambert made a statement in reply dated 25^th April 2019. The Order of Deputy ICC Judge Schaffer had provided for this to be filed and served by 16^th February 2019. I declined to admit that statement. I was not satisfied that there was a good reason for it being served over two months after the deadline provided for by Deputy ICC Judge Schaffer and after the further expiry of an agreed deadline. It was said that the delay was as a result of Mr Lambert having to collate certain documents and counsel’s pressure of work. In my judgment the failure to file a statement of some 26 pages until shortly before the hearing was serious and those were not good reasons for the failure to comply. Mr Lambert had ample time to prepare and could have applied for an extension, or agreed such an extension with the respondents. Instead, and not for the first time in the history of this matter, he simply chose not to comply with the order of the court.

Having obtained liability orders totalling £74,340.17, the Council wrote to Mr Lambert at the Service Address to demand payment of the sums due under those orders. The first of those demands is dated 30^th September 2015 and required payment in full or completion of an enclosed financial statement setting out questions as to Mr Lambert’s income and expenditure. A letter before action was sent to that address sent on 17^th November 2015. Neither of those letters received replies. This was at a time before

No reply having been received, the Council instructed its solicitors, Wilkin Chapman LLP, to cause a statutory demand to be served on Mr Lambert. I have referred to the

Although Mr Lambert became aware of the bankruptcy in March or April 2017 at the latest, he did not make the First Annulment Application until 24^th October 2017. The basis for the application was that the bankruptcy order should not have been made as the petition debt was not due and the statutory demand and petition were not properly served. In other words, the grounds of the First Annulment Application were identical to the instant application. In his statement in support of the First Annulment Application, dated 10^th October 2017, Mr Lambert says that that he telephoned the Council on becoming aware of the bankruptcy order and spoke to a man called David who told him that the Service Address had been identified as a place at which Mr

On the same date Mr Lambert issued an urgent, without notice, application for an order restraining the Original Trustee from dealing with properties that were legally and/or beneficially owned by Mr Lambert immediately before his bankruptcy. An interim injunction was granted by Rose J, as she then was, on the same day, but was discharged by Warren J on 31^st October 2017 on the giving of undertakings by the Original

The First Annulment Application came before Registrar Barber on 29^th November

On 19th December 2017, the First Annulment Application came before Mr Deputy Registrar Barnett. It seems that there was a dispute as to whether an agreement had in fact already been reached as to costs. Mr Lambert contended that it had not. Mr Deputy Registrar Barnett adjourned the application to allow time for agreement as to the payment of costs related to the bankruptcy (or production of evidence by the Council that agreement had been reached) and for payment of the costs that Warren J had ordered Mr Lambert to pay to the Original Trustee.

On 17^th January 2018 the application came back before Mr Chief Registrar Briggs. The Chief Registrar ordered that, unless Mr Lambert paid the costs ordered by Warren J to be paid to the Council and the Original Trustee by 30^th January 2018, the First Annulment Application would be struck out and Mr Lambert would pay the costs of the Council and the Trustee to be assessed if not agreed. The costs not having been paid in accordance with the unless order the application was struck out by the order of Deputy Registrar Jones on 16^th February 2018.

I should note at this point that the Original Trustee died suddenly and, in February 2018, was replaced by the Trustees.

It seems that at some point Mr Lambert applied for permission to appeal the order of Warren J dated 31^st October 2017 and that of Mr Deputy Registrar Barnett dated 19^th December 2017. The latter application was struck out on 25^th April 2018 for failure to comply with an order to file an appeal bundle by 15^th February 2018. Permission to appeal the former was refused on 2^nd April 2019.

The Council obtained a default costs certificate against Mr Lambert in respect of the costs of the First Annulment Application on 31^st May 2018. An application to set that aside succeeded but Mr Lambert was ordered to pay £600 in costs. The costs of the First Annulment Application costs were then assessed in the sum of £3,821.50 on 18^th December 2018, by which time the instant application had been made. At the time of the hearing before me the costs that Mr Lambert had been ordered to pay were still outstanding.

Following the hearing however, I received a letter from Mr Lambert dated 10^th May

On 13^th May 2019, he wrote a further letter in which he said:

Finally, I have received a letter dated 15^th May 2019 in which Mr Lambert states that:

I invited the representatives for the Council and the Trustees to comment on the contents of these letters by email. Both did so on 2^nd July 2019. Ms Brooke for the Council has confirmed that it has received £5,228.10 covering:

In respect of the revised non-domestic rates she notes that none of the demands relate to the period covered by liability orders on which the petition was based and Mr Lambert has not provided any evidence to show that he was not liable during that period. The recent demands relate only to a small number of properties that featured in the petition.

Mr Titmuss, for the Trustees, has confirmed that they have received sums of £5,830.20 and £200, although no allowance for interest has been made. He says that, despite several requests, Mr Lambert has refused to confirm where the monies came from. The Trustees are also concerned that they may derive from rents received from Linear Park and would thus be assets of the bankruptcy in any event.

Mr French, counsel for Mr Lambert, did not reply to those emails, though he acknowledged my request for a response from the Council and the Trustees and was copied in to the replies. He did not say that his client challenged any part of the emails following the circulation of this judgment in draft. He provided a list of possible typographical corrections in the usual way on 5^th July 2019. Prior to handing down this judgment however, I discovered from the court’s electronic file that a letter, dated 2^nd July 2019, had been lodged by Mr Lambert on 3^rd July 2019. Mr Lambert states as follows in this letter:

Having summarised the positions of the parties and the evidence, I shall deal with the submission that the current application should not be considered on its merits at all. The Council says that the application is abusive and should be dismissed on that ground alone. Ms Brooke referred me to the decision of the Court of Appeal in Securum Finance Ltd v Ashton [2001] Ch 291. In that case, proceedings had been struck out on the grounds of inordinate and inexcusable delay. The claimant then issued a second claim, which included a claim that had been included in the first set of proceedings, but also a claim that had not and could not, have been brought in those earlier proceedings.

I was also referred to Aktas v Adepta [2010] EWCA Civ 1170 in which the Court of Appeal considered a second action pursued following the striking-out of a first action due to the failure to serve a claim form in time. Rix LJ, with whom Longmore and Atkins LJJ agreed, said at paragraph 90:

Mr French points out that this is not a case where Mr Lambert is seeking to relitigate a case decided on its merits. He referred me to the speech of Lord Millett in Johnson v Gore Wood [2002] 2 AC 1, 59 where he said as follows:

This is not a case in which the First Annulment Application was, in itself, abusive. Nor is it a case in which Mr Lambert is seeking to relitigate issues which have been decided, or which should have been included in an earlier application. Nonetheless, in my judgment this application is an abuse of process, which should be dismissed on that basis alone.

The change of litigation culture introduced by the Civil Procedure Rules, referred to by Lord Woolf in Securum, and changes to those Rules, with the emphasis on compliance with the court’s directions, introduced following Jackson LJ’s recommendations for reform are relevant here. Paragraph 1.1(2) of the Rules, as amended, now provides that the court’s overriding objective of dealing with matters justly and at proportionate cost includes:

Where a party has been subject to a sanction, such as the striking out of their case, relief from that sanction is obtained by an application under Rule 3.9, which provides as follows:

Mr Lambert bypassed that exercise by issuing a fresh application that was in all material respects identical to the first, without having complied with the obligation that the court had specified as a condition of proceeding with the annulment. That in itself appears me to be an abuse of the processes of the court. Were I to approach this application as if it had included an application for relief from sanction I would refuse it. The failure to comply with the unless order was serious. There is no good reason for Mr Lambert not to have complied with it. Although he paid the outstanding costs after the hearing before me, no reason has been given as to why he could not have paid them sooner. The fact that he sought permission to appeal the order of Warren J giving rise to the costs liability is not a good reason. The order was not stayed and the costs were

It seems to me that those factors, taken with Mr Lambert’s attempt to circumvent the relief from sanction regime, also demonstrate a wholesale disregard for the orders of the Court and the procedures it has in place for dealing with cases justly and at proportionate cost. His disregard of the court’s orders led to the striking out of the First Annulment Application. His disregard for the court’s procedures is evidenced by the fact that he has made this application without paying the costs which led to the striking out of the prior application, putting the parties to expense and using court time in hearing what is now a contested application. That is not a proper use of the court’s procedures. The proper course would have been to apply for relief from sanction promptly after the first application was struck out, which might have had the effect of restoring a largely uncontested application. It is not appropriate for me to take the alternative course of staying the application pending payment of outstanding costs liabilities in circumstances where the source of funds remains unknown and there is a real question as to whether they are monies within the bankruptcy estate.

I would dismiss the application on that ground alone.

If I am wrong about that, I must consider the merits of the application to annul on the ground that the order ought not to have been made. The jurisdiction is set out in section 282 of the 1986 Act, which provides, insofar as it is material:

It is extremely concerning that the Process Server’s evidence in relation to the service of both the statutory demand and the attempted service of the petition appear to be at odds with the appearance of the Service Address. The account given by Mr Jackson of Made Simple as to the opening hours of the Service Address has not been challenged. It appears most unlikely that the Process Server could have spoken to anyone at the Service Address who would have confirmed that Mr Lambert lived there. I cannot on the evidence before me conclude whether the Process Server was mistaken or is simply being untruthful. For the purposes of this application, however, I will accept Mr

The first ground for that decision is that the petition debt was, and remains, indisputably due and owing. The petition was founded on statutory debts and, to explain that, I should briefly refer to the legislation concerning liability orders. The making of liability orders in respect of council tax is dealt with by regulation 34 of the Council Tax (Administration and Enforcement) Regulations 1992. This provides, insofar as is material:

In Yang v Official Receiver [2017] EWCA Civ 1465 Gloster LJ considered the 1992 Regulations as follows:

“55 In my judgment, the only sensible interpretation of section 282(1)(a) of the IA86 is that contended for by the local authority: namely that regulation 49(1) of the CTR deems the liability orders to constitute a legally enforceable debt, regardless of the underlying factual position relating to the relevant property, unless and until the liability order is set aside under the specific statutory procedure laid down for doing so. Dictates of certainty and expediency require that a bankruptcy court should not go behind the liability orders, except in the event of fraud or some miscarriage of justice. At the date that the BO was made, the liability orders remained in place and had not been set aside; the effect of regulation 49(1) of the CTR was therefore statutorily to deem them as constituting a legally enforceable debt from the time they were made until the time they were set aside. The fact that the liability orders were subsequently set aside was not a ground “existing at the time the [BO] was made”, as required by section 282(1)(a) of the IA86. It was only later, in August 2012, when the liability orders were in fact set aside, that the debt ceased to exist. Thus, even if all the underlying facts in relation to the property had been known at the time that the BO was made, the court would none the less have been entitled to make a bankruptcy order. (Of course, whether it would have done so, as opposed to adjourning the petition to enable the applicant to have obtained an order setting aside the liability orders, is irrelevant.)

…

58 My conclusion is supported by various authorities: see Muir Hunter, vol 1, para 3-310.1 (references as at 29 March 2017). The finality of liability orders is a point also made by Mummery LJ in Bolsover District Council v Dennis Rye Ltd [2009] 4 All ER 1140, para 5:

“liability orders are orders of the court like ordinary civil judgments. If a winding up petition is based on such orders the court will seldom look into them, or go behind them, in the absence of fraud, or in the absence of jurisdiction in the court that made the orders, or ‘some other truly compelling circumstance’.” (Emphasis supplied.)”

The effect of making a liability order, whether under the 1989 Regulations or the 1992 Regulations, is thus to create a statutory debt that may found a bankruptcy petition. The court will not look behind a statutory debt or a court order unless there is collusion, fraud or a miscarriage of justice. A miscarriage of justice in this context requires evidence:

It is clear that the liability orders on which the petition was founded are unassailable, even if Mr Lambert were able to produce some evidence that someone else was in occupation of the properties at the time. In R (on the application of Brighton & Hove

The petition debt is thus due, as are the debts due under the liability orders for which the Council have proved in the bankruptcy. There is no evidence that those debts can be paid and I cannot be satisfied as to Mr Lambert’s solvency. Ms Brooke drew my attention to Askew v Peter Dominic Ltd [1997] BPIR 163, in which the Court of Appeal considered an annulment application in the context of a bankruptcy order made on a statutory demand and petition which were ‘sheer nonsense’. The judge at first instance had nonetheless exercised his discretion against annulling the bankruptcy order on the grounds that the bankrupt was indebted to the petitioner. She would have no defence to a claim brought for the debt. The only effect of annulling the bankruptcy would be to compel the petitioner to issue a fresh statutory demand and petition. Again, in Omokwe v HFC Bank Ltd [2007] BPIR 1157 the court considered an application to annul a bankruptcy order on the basis that the bankrupt had not been served with the statutory demand or bankruptcy petition. In dismissing the application, the Chief Registrar commented that, even if he had accepted the bankrupt’s evidence regarding service, he would have dismissed the application in the exercise of his discretion on the basis that there was no evidence of any defence to the petition.

That is precisely the position here. Were I to annul the bankruptcy order, it is very likely that the petition would fall to be dismissed for want of proper service of the statutory demand and the Council would be entitled to present a further statutory demand and petition. The debt due to the Council, at least to the extent set out in the petition, would be indisputable. No suggestion has been made that Mr Lambert would or could pay that debt and a further bankruptcy order would be inevitable.

While I have considered whether the serious concerns over the truthfulness of the Process Server’s statement should lead me to annul the bankruptcy order even if it means that the Council will need to go through the bankruptcy process again, though this time on an indisputably proper procedural basis, I do not think it would be right to do so. Artman v Artman [1996] BPIR 511 was another case in which the likelihood that if the bankruptcy were annulled the bankrupt would soon be made bankrupt again weighed against the annulling the bankruptcy order. Moreover, Robert Walker J (as he then was) said that he was ‘strongly disposed’ against annulment for reasons including strong prima facie evidence that the bankrupt had concealed assets from his trustee. That is of weight here. There remains a significant doubt as to the extent of the bankrupt’s estate and a background of non-cooperation with his trustees, in particular as to the occupants of Linear Park and the income from the properties therein. Where there has been cooperation it has been delayed and has increased the costs of administering the estate. It would not be right, in my view, to hamper further the Trustees’ investigation of the extent of Mr Lambert’s estate and get it in for the benefit of creditors with the benefit of the 1986 Act’s provisions for avoiding dispositions made after the presentation of the petition and its machinery for adjusting prior transactions.

I will therefore dismiss the application.