Challenging a bankruptcy petition based on disputed liability orders (Tower Hamlets London Borough v Naris)

Challenging a bankruptcy petition based on disputed liability orders (Tower Hamlets London Borough v Naris)

Daniel Webb, barrister at Selborne Chambers, examines a High Court decision concerning a bankruptcy petition which the debtor opposed on the basis that a certain number of the liability orders made against him (on which the petition was based) presented a miscarriage of justice.

Tower Hamlets London Borough v Naris [2019] EWHC 886 (Ch), [2019] All ER (D) 63 (Apr)

What are the practical implications of the case?

Chief Insolvency and Companies Court Judge Briggs reiterated the test for when a bankruptcy court would be prepared to look behind a judgment debt on the grounds of miscarriage of justice. Drawing on the dictum of Etherton J (as he then was) in Dawodu v American Express Bank [2001] BPIR 983, [2001] All ER (D) 251 (Jan), it was stated that the debtor would have to provide evidence that there was no properly conducted judicial process and demonstrate that, had there been a properly conducted judicial process, it would have been found—or very likely would have been found—that nothing was in fact due to the claimant.

Tower Hamlets London Borough v Naris suggests that this test is a high one. It was not met where the liability orders for unpaid council tax and non-domestic rates were made following service in accordance with relevant legislation, and a properly conducted legal process. Thereafter, the liability orders became legally enforceable debts. While the appeal against them failed for lack of promptness and the appeal court did not hear the debtor’s substantive defence, the judge held that this did not equate to an unfair hearing or a miscarriage of justice.

Perhaps more fundamentally, Tower Hamlets London Borough v Naris also suggests that the test is not likely to be met where the debtor admits a debt in excess of the bankruptcy level (presently £5,000) which has not been paid, secured or compounded for.

What was the background?

The debtor, Mr Naris, was subject to eight liability orders, which formed the basis of London Borough of Tower Hamlets’ (LBTH) bankruptcy petition against him. Mr Naris accepted liability for three of the liability orders, which were all for council tax for a property at 53 Barnfield Place. Mr Naris also accepted liability for further liability orders, which were for non-domestic rates for a property at Unit 3, 100

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.