Claire Jackson acted for Manchester City Council in an appeal relating to non payment of Council tax. The Council sought payment of council tax for a property owned by a Miss Yang, which the Council had classified as a house in multiple occupancy. Liability orders were obtained and on the basis of such the Council successfully petitioned for Miss Yang’s bankruptcy. The liability orders were later discharged and Miss Yang applied for annulment alternate rescission of the bankruptcy order.
At first instance the bankruptcy order was rescinded but the application for annulment refused. Miss Yang was also ordered to pay the costs of the bankruptcy which included the costs of the Council on both the petition and the application. Miss Yang sought to appeal the decision.
On the hearing of the appeal HHJ Hodge QC dismissed the appeal on all grounds. In an important and noteworthy decision the Court confirmed that whilst on the hearing of a bankruptcy petition it was permissible to go behind a default judgment a liability order was not the equivalent of a default judgment, rather it was a debt which could found a creditor’s petition. Where a liability order had been set aside, it could be said that at the time the bankruptcy order had been made, there had been no liability properly founding it, but it did not mean that the bankruptcy order “ought not to have been made”. If a liability order was subsequently set aside, then the appropriate course was to apply to rescind the bankruptcy order rather than to apply to annul it.
