High Court Decision On Business Rates And Provable Debts In CVAs

The High court has determined that non-domestic property rates falling due following approval of a Company Voluntary Arrangement are provable debts.

In the case of Kaye v (1) South Oxfordshire District Council and (2) Certain Exhibitions Limited [2013] EWHC 4165 (Ch), it fell to be decided whether the full amount of non-domestic rates should be a provable debt within the company voluntary arrangement (CVA) or whether only instalments that had already fallen due should be subject to the CVA. It was held that the full amount was provable.

The Facts

A company (Certain Exhibitions Limited) suffered a severe fire in April 2013, destroying the company's property. Shortly before the fire, on 12 March 2013, South Oxfordshire District Council had issued a notice to the company in respect of non-domestic (or business) rates for the company's workshop and premises, setting out the rates for the full year from 1 April 2013 to 31 March 2014. Accompanying the notice was direct debit confirmation, highlighting that the company had a statutory right (in terms of the Local Government Finance Act 1988) to pay by monthly instalments.

Provoked by the loss incurred as a result of the fire, the company entered into a CVA on 10 July 2013. The following day, the company received a reminder notice from the local authority indicating that the monthly instalment for June had not been paid and that if this instalment and the July instalment were not paid by 21 July 2013, the local authority would raise legal proceedings against the company.

Creditors were then asked to prove their debt under the CVA and the local authority submitted a claim for the sum of £1,918.26 for the period 1 April to 10 July 2013 (the latter being the date the company entered into the CVA). Mr Kaye, the supervisor (or nominee) and applicant, wrote to the local authority querying how that sum was calculated and suggesting that the claim should be for the full year's business rates and not merely for the amount due up until the date on which the company entered into the CVA since the full annual amount had fallen due on 1 April (prior to the commencement of the CVA).

The local authority's argument was that, although the bill for the full amount had been issued on 1 April, the option was available to pay by instalments and consequently all payments were not required on that date. The parties...