Absence of Claim Does Not Mean Claim Not Genuine

When council tax isn't paid, a council will normally take action to recover it. In the case of a company with serious council tax arrears and a balance sheet showing assets from which payment might be forthcoming, a winding-up petition is likely to be served.

In a recent case, this was precisely what happened to a company which owned several residential properties. When the winding-up petition was heard, the company concerned resisted it on the ground that it had overpaid council tax. It indicated that it was intending to raise a counterclaim. Several of the properties on which the tax had been charged were empty and were blighted because of the fact that compulsory purchase orders were pending on them. The properties should therefore have received relief from council tax, because properties are exempt when they are empty in such circumstances.

As the counterclaim would exceed the debt concerning which the winding-up order was sought, a stay of the order was requested.

In court, the council argued that since no claim had yet been made by the company, its request for a stay of liquidation proceedings should be rejected.

The court ruled that the winding-up petition should proceed. The company appealed. The winding-up order was then withdrawn (the company having paid the tax in dispute), so the appeal was largely about who would pay the legal costs.

In the Court of Appeal, it was decided that just because the company's claim had not yet been pursued did not mean that there was not an arguable case for it or that it was not genuine.

Regarding costs, in the view of the Court, the original judge was entitled to decide that the evidence adduced by the company was insufficient to support its case. The costs were therefore awarded to the council.

Prompt action is especially important when dealing with claims against entities that are likely to seek a winding-up order if their own claims are not met. Contact us for advice on all contentious property matters.

Partner Note
Bolsover District Council v Dennis Rye Ltd. Reported in the Times, 19 May 2009. Applicable law: Council Tax (Exempt Dwellings) Order (SI 1992 No 558).

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