Does A Bankrupt Have Legal Standing To Challenge Liability Orders?
We consider the judgment of Mr Justice Swift in Agba v Luton Borough Council  WLUK 59 which serves as a timely reminder on this point.
Luton Borough Council had successfully obtained Liability Orders against Miss Agba in respect of unpaid council tax between 1 April 2008 and 31 March 2017. Subsequently, the Council presented a bankruptcy petition and Miss Agba was declared bankrupt by the Court on 29 March 2017.
Miss Agba applied to the Court to set aside the Liability Orders, however her application was dismissed as she did not have standing, due to being bankrupt. Miss Agba then successfully applied for the Magistrates to state a case to the High Court for appeal on the issue of her standing.
Miss Agba was unrepresented and unable to attend the hearing listed for 19 March 2020 due to feeling unwell and self-isolating in line with the COVID-19 guidelines applicable at that time. The appeal was heard in her absence and dismissed.
Miss Agba applied to set aside this decision, which was heard by Mr Justice Swift on 4 June 2020.
The application was made pursuant to CPR 39.3 (failure to attend the trial). The Court considered the application in compliance with CPR 3.1 namely CPR 3.1(m), a power to take any step or make any other order for the purpose of managing the case and furthering the overriding objective; and CPR 3.1(7), a power to vary or revoke any order that has been made by the court.
Mr Justice Swift applied the principles from CPR 39.3(5):-
- Did Miss Agba act promptly to set aside the order?
- Did she have good reason for not attending the hearing on 19 March 2020?
- Did Miss Agba have a reasonable prospect of success at a restored hearing?
The Court found that Miss Agba had acted promptly to set aside the order. When the hearing was listed there was a serious threat to health from COVID-19 and therefore she had good reason for not attending. However, she did not have a reasonable prospect of success. The question of whether she had standing as a bankrupt to challenge liability orders was correctly answered by the Judge at first instance – she did not. Only the appointed trustee in bankruptcy could challenge the liability orders (Yang v Official Receiver  10 WLUK 9 applied). The argument that council tax payments are a personal liability was rejected –payment of council tax was no different to any other liability to pay tax.
The question “can a party, being an undischarged bankrupt whose estate is now vested in the trustee in bankruptcy, personally commence legal proceedings to challenge a liability order?” has been determined, and simply, the answer is no.
This was consistent with the earlier decision in Heath v Tang  1 WLR 1421, in which Lord Justice Hoffman considered whether it would be open to a bankrupt to pursue proceedings in respect of the debt that had resulted in the bankruptcy order. He concluded that no such proceedings could be pursued by the bankrupt. Such proceedings could only be pursued by a trustee in bankruptcy.