Case Law - Statutory Demands

[reallymadwoman]

This case was mentioned to me as potentially useful a couple of weeks ago, but I don't think it was ever officially reported so I've had real trouble finding any details. This is from a summary in a magazine aimed at the debt advice industry, which I've paraphrased to avoid any copyright issues, originally taken from an official transcript.

 

Griffen v Wakefield MBC

Court of Appeal, 24 March 2000

 

G had council tax arrears. Council issued statutory demand. G paid up. Council applied for costs. G said an SD was excessive, district judge agreed, referring to the attitude of the Companies Court over the use of winding up proceedings to recover debt. High Court allowed councils appeal, G applied for leave to appeal to the Court of Appeal.

 

Leave was refused because SDs are permitted by statute and regulations, and in this case the alternative to bankruptcy was committal to prison. Insolvency proceedings are acceptable to recover debt, but are not acceptable when used to apply pressure when debts are disputed.

 

In the accompanying comment, use of bankruptcy to recover debts is described as an abuse of process where the debt is disputed, but it doesn't say where this comes from. The author suggests that whilst this case can be used to support an SD, demonstrating that there are reasonable alternatives available and that serious and unnecessary hardship is likely to be caused (e.g. homelessness) could counter it.

 

Apologies if the case has already been discussed, but I couldn't find any mention of it. I've not yet received an SD, so I don't really follow these threads.

[pt2537]

bear with me i will check the legal databases, if its there i will find it

[42man]

I'm very interested in this....and would also be interested to receive this case PT !!!

[pt2537]

right it is reported

 

this is the citation [2000] R.V.R. 226 but im still searching for the case itself

[KER]

If you find it on lexisnexis, could you post the link for me please? I'll go have a look for it there too!

[pt2537]

Its not reported on lexis, there is a case summary on Westlaw but i think i need to take a trip to the Law Library as its likely to be in written form

[reallymadwoman]

Thanks for rep, and glad to have maybe helped.

[tiglet]

Great guys - may come in very helpful.

[reallymadwoman]

Leave was refused because SDs are permitted by statute and regulations, and in this case the alternative to bankruptcy was committal to prison. Insolvency proceedings are acceptable to recover debt, but are not acceptable when used to apply pressure when debts are disputed.

 

In the accompanying comment, use of bankruptcy to recover debts is described as an abuse of process where the debt is disputed, but it doesn't say where this comes from. The author suggests that whilst this case can be used to support an SD, demonstrating that there are reasonable alternatives available and that serious and unnecessary hardship is likely to be caused (e.g. homelessness) could counter it.

 

I've been thinking about how this case could be used. We would only need one SD to be set aside as an abuse of process to maybe stop certain DCAs from sending them out like confetti. My thinking is that particular DCAs send SDs out to all and sundry. I think that if one person can show in court that a) the debt was in serious dispute, and the DCA knew about it and b) there are reasonable alternatives to bankruptcy anyway it might be considered abuse of process, but I think it would have to be specifically mentioned in the set aside application.

 

On the reasonable alternatives question, you have to wonder at what they hope to achieve by making someone bankrupt who has no property and is on benefits, when any reasonable person can see that if the bankruptcy proceeds they're going to get nothing, whereas if they went down the county court route they would (they hope!) get at least a token payment. Even if there is a property, making someone homeless for the sake of a debt which often appears to be in the 1K - 5K bracket is rather disproportionate.

 

Of course, all of the above is subject to the actual wording of the judge's decision, which I hope might also refer to some other cases on abuse of process related to SDs.

[confusedmum]

this is great info and thank you, i am waiting to hear from the court and complained under many sections of the OFT debt guidance in my application to have my stat demand set aside, which I am hoping the judge will consider, also I have stated that the DCA Marlin have not gone through the correct process when chasing the debt.

Will keep you informed as to what happens

[boss lady]

I have just received a SD and will certainly put the details in as stated above to have the SD set aside. Found this post very helpful and will keep you informed. Thanks

[MONX]

During my Set Aside Hearing I entered this as a reason for having my costs awarded but it does actually say something about the use of SD to pressure when debt is in dispute.

 

In support of this request, I would also like to refer the court’s attention to the authority of the High Court in the case of:-

 

Hammonds (a firm) v Pro-Fit USA Ltd [2007] EWHC 1998 (Ch)

 

In this case, Mr Justice Warren confirmed that it was usual for an indemnity award to be made:-

 

27 So far as disputed debts are concerned, the practice of the court is not to allow the insolvency regime to be used as a method of debt collection where there is a bona fide and substantial dispute as to the debt. Save in exceptional cases, the court will dismiss a petition based on such a debt (usually with an indemnity costs order against the petitioner).

[MONX]

Well its official!

 

I am the thread killer!

 

Soon the neighbours will be saying how I was very quiet and I didnt upset anyone on the street, they always thought I was just shy, but then the police will come and dig up my garden and find the bleached bones of several threads!.....one response is all it seems to take in order for a thread to disappear!

[reallymadwoman]

Did anyone ever find any more details of this case?

[42man]

I'd like to see this one too RMW....

[nevos]

An interesting case in this area was finally

concluded last year. The outcome provides a

judgement which could prove useful when taking

bankruptcy or winding-up proceedings.

Wakefield MBC issued a statutory demand,

followed by a bankruptcy petition against

a Mr Griffin, with respect to nonpayment of

council tax. Mr Griffin paid the amount of council

tax “at the doors of the court”. Wakefield continued

with an application for the costs involved.

Refused application for costs

At the hearing, the district judge refused

the application for costs. He referred to Mr Griffin’s

belief that the local authority was using a

sledge hammer to crack a nut. He appeared to

have endorsed that view. He said that the costs

were in his discretion and refused to award costs

against Mr Griffin.

Wakefield appealed to the High Court,

which overturned the decision of the district

judge and awarded the local authority its costs.

Mr Griffin sought appeal to the Court of

Appeal. Lord Justice Walker heard Mr Griffin’s

application for permission to appeal, but refused

it. He stated: “A liability order, once made, can

be enforced in various ways.

“These include attachment of earnings if the

defaulter is in work, the process of distress, committal

to prison or, under regulation 49, bankruptcy

under the Insolvency Act 1986.

“There can be no objection…”

“I cannot accept that the use of a bankruptcy

petition is inherently more draconian than

committal to prison and is objectionable on that

ground. There can be no objection to the use of a

procedure which is permitted by statute and

regulations.

“In this case, although Mr Griffin undoubtedly

thinks differently, I can see no reason for

supposing that the use of bankruptcy against him

was inspired by improper motives rather than a

determination to try and collect the outstanding

sum which it is the local authority’s duty to collect.”

Walker LJ held that the district judge was

wrong in thinking that the companies court or

the bankruptcy court deplore the use of insolvency

proceedings for the collection of any debts.

He also held that the district judge was

wrong to regard the serving of the petition as

taking a sledge hammer to crack a nut, where

the effective alternative to insolvency proceedings

was committal to prison under regulation

48.

Thus the serving of a petition is upheld as

a correct method of seeking to collect unpaid

council tax (and business rates), where other

methods have proved unsuccessful.

From my own experience of providing

training on insolvency, it would appear that

many practitioners, upon receiving notice of a

bankruptcy order and proof of debt form, are in

the habit of apportioning the liability up to the

date of the bankruptcy order (using that figure

for the proof of debt) and starting a new liability

for the undischarged bankrupt from the following

day. This is quite wrong in law.

What should be proved in a bankruptcy is

the amount which has fallen due for payment

and remains due at the date of the bankruptcy

order.

That will depend on whether instalments

are up to date; whether a regulation 23 (council

tax) or regulation 8 (business rates) reminder

notice has been issued, not complied with by

payment within seven days and the further

seven days has elapsed.

If so, the balance remaining for the year

wil1 have become due and should be the proof

of debt.

Section 3S2 of the Insolvency Act 19S6 defines

a bankruptcy debt as being “(a) any debt

or liability to which he is subject at the commencement

of the bankruptcy..[or] (b)...to which

he may become subject after the commencement

of the bankruptcy (including after his discharge

from bankruptcy) by reason of any obligation

incurred before the commencement of the

bankruptcy”.

This means (a) relates to council tax and

business rates while (b) relates to such matters

as outstanding loans, hire purchase agreements,

contracts, damages in tort etc.

This view was supported in the High Court

in the Matter of Nolton Business Centres Ltd;

Eliades v the Common Council of the City of

London, which held that instalments which became

due after a winding-up of a company commenced,

were an expense of the liquidation.

If a liability order has been obtained prior

to the bankruptcy order, then section 347(S) and

(9) of the Insolvency Act provide for the local

authority to levy distress after the bankruptcy

order, even if the trustee in bankruptcy has taken

possession of the goods.

There will be no apportionment undertaken

until the property is vacated, which may

call for a revised proof of debt, if the amount

originally claimed is greater than the eventual

debt following apportionmen

Edited October 17, 2008 by nevos

[42man]

Not much help for caggers to be honest !!!