Claire Jackson of Kings Chambers has acted for Manchester City Council in an appeal relating to the non-payment of council tax, which the council was seeking for a property owned by a Miss Yang.
The council had classified Yang’s house as one in multiple occupancy. Liability orders were obtained and on the basis of such the council successfully petitioned for Yang’s bankruptcy.
The liability orders were later discharged and Yang applied for annulment alternate rescission of the bankruptcy order.
At first instance, the bankruptcy order was rescinded but the application for annulment refused. 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. Yang sought to appeal the decision.
On the hearing of the appeal, HHJ Hodge QC dismissed the appeal on all grounds. The court confirmed that while 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 that 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.