Property Owners Must Pay Council Tax Despite Six Year Delay


The Court of Appeal has confirmed that when a local authority has obtained a liability order to claim unpaid council tax and wishes to enforce it using insolvency proceedings, the authority does not have to do so within six years of the granting of the order. This is because such actions do not fall within the scope of section 9 of the Limitation Act 1980, which in most cases means that an action for debt must be pursued within six years.
The decision was made whenthe Court dismissed the appeal of Ashfield Nominees Ltd. and others against a High Court judgment in favour of Bolsover and Mansfield District Councils.
The case came about after the two Councils issued winding-up petitions to recover amounts of unpaid council tax against Ashfield Nominees and other companies owning properties in the Councils’ districts. Under relevant legislation, local authorities do not sue for unpaid council tax. Instead, they apply to the Magistrates’ Court for a liability order and can then enforce the debt in a number of ways, including the use of insolvency proceedings.
When the case first came to court, it was found that liability orders relating to some of the amounts due were issued more than six years before the winding up petitions. The companies claimed that they did not have to pay these amounts. The undisputed amounts, however, were paid promptly following the initial hearing.
At appeal it was argued that the companies should be able to rely on the Limitation Act, which limits debt recovery proceedings to six years from the date of the cause of the action. This argument was rejected by the Court of Appeal on the grounds that remedies for non-payment of council tax are governed by local government finance legislation and not by section 9 of the Limitation Act.
Under local government finance legislation, application for a liability order must be made within six years of the council tax payment becoming due and remaining unpaid. It was held by the Court of Appeal, however, that no such limitation applies to subsequent proceedings for recovery of the unpaid tax.
The appeal by the companies was duly dismissed.
“Clearly, the companies involved were hopeful of escaping council tax liability by virtue of the six-year limitation rule,” says <<CONTACT DETAILS>>. “Unfortunately for them, the Court of Appeal did not oblige.”
Partner Note
[2010] EWCA Civ 1129: Bolsover District Council & Mansfield District Council v Ashfield Nominees Ltd. & others. See

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