Insolvency in the Court of Appeal - Bolsover District Council v. Dennis Rye Ltd

The Times has reported the following judgment:
"Court of Appeal Published May 19, 2009. Bolsover District Council v Dennis Rye Ltd. Before Lord Justice Mummery and Lord Justice Elias Judgment May 6, 2009

A judge hearing a winding-up petition against a company, when faced with a cross-claim by the company against the petitioner, had to consider only whether the evidence before him was sufficient to satisfy him that the company’s cross-claim was not merely arguable but was genuine and serious, and not whether the company should have previously taken action on the cross-claim unless it had a good reason for not doing so.

The Court of Appeal so stated in dismissing the application of the defendant, Dennis Rye Ltd, for permission to appeal against the refusal by Judge Cooke, sitting as a Chancery Division judge in the Birmingham District Registry on November 6, 2008, to dismiss a winding-up petition presented by Bolsover District Council, in reliance on a statutory demand served on the company on January 10, 2008, for part of arrears of council tax.

The company contended that it a had a genuine and serious cross-claim for restitution of overpaid council tax on empty properties which it said were effectively blighted in consequence of impending compulsory purchase orders, and in respect of which it therefore ought to have had exemption under class G of the Council Tax (Exempt Dwellings) Order (SI 1992 No 558), which applied where dwellings were kept unoccupied by reason of action taken under powers conferred by or under any Act of Parliament with a view to acquiring it.

The company had not contested the tax when it had been served with bills and had not appealed against those bills. Mr Paul Joseph for the company; Mr James Morgan for the council.

LORD JUSTICE MUMMERY said that if a company had a genuine and serious cross-claim, which was likely to exceed the petition debt, the court would normally exercise its discretion by dismissing the winding-up petition and allowing the company the opportunity to establish its cross-claim in ordinary civil proceedings.

A company was not prevented from raising a cross-claim in winding-up proceedings simply because it could have raised or litigated the claim before the presentation of the petition or it had delayed in bringing proceedings on the cross-claim.

It was undisputed that the company had not claimed the council tax class G exemption when served with the council tax bills; that the company had not exercised its right to appeal to the valuation tribunal, from decisions of which there was a right of appeal to the High Court; and that the company had not contested the making of the liability orders in the magistrates’ court.

The issue for the judge had been whether the evidence before him was sufficient to satisfy him that the company’s cross-claim was not merely arguable, but was genuine and serious.He was entitled to decide that issue against the company and did so without committing any error of law, such as by erecting an absolute requirement that the company should have previously asserted, litigated or issued proceedings for the cross-claim, unless it had a good excuse for not doing so.Lord Justice Elias agreed."
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