We have a government fund to prevent homelessness. Our legal section are telling us that when assisting a tenant with bankruptcy we cannot use the fund to pay the bankruptcy fee of £350 and include debts to our ALMO or Council Tax. We hold that we can use the fund for paying fees because we are preventing homelessness however, they say we cannot include the debt owing to the Council. Our legal department say that we cannot use funds given to the council because of a conflict of interest. Has anyone any advice or guidance that they can offer on this issue.

Alan Holden

One thing is certain. The Council Tax debt (assuming there are arrears) is no different from any other debt which is provable in bankruptcy. There is no choice in the matter - it HAS to be included in the bankruptcy.

I can only assume the restriction your legal dept. is trying to place is related in some way to the purposes for which the funds are provided. It seems to me that, unless there is something pretty clear in the documents governing the use of the funds, they are rather unlikely to be right. In any case, what will they do if you do go ahead? They cannot refuse to include the Council Tax in the bankruptcy - they have no legal basis for doing so as far as I am aware.

Incidentally, what is an ALMO?

ALMO = arms length management organisation; a company set up by a local authority to manage and/or improve its housing stock. Technically, the housing stock remains in LA ownership, although it is managed and run by the ALMO.

Mon 22-Mar-10 11:04 AM by alan holden

Thanks Derek

What about the Rent situation? Any views?

Mon 22-Mar-10 03:59 PM by stainsby

The possibility of a conflict of interest was considered in the HB context in CSHC/729/2003 where a person employed by an LA's welfare rights unit represented a clainant in an HB appeal.

Mr Commissioner May QC held at paragraph 5
"5. In relation to the issue in respect of which I directed the oral hearing, I am satisfied that there is no basis for interference by me in regard to the representation by the claimant by the local authority who are also parties to the appeal in their capacity as a housing authority. There was also no basis for such interference by the tribunal and no error in law on their part for having heard the appeal with the claimant being represented by the local authority"

The Commisioner did recognise that the English courts may intervene, but whether such action would be taken would depend on the facts of the case before the court. The Commisioner noted at paragraphs 7-8

"7. Mr Bartos referred me to Geveran v. Skjevesland Trading Company Limited <2003> ALL ER 1, Re L (Minors) (Care Proceedings: Cohabiting Solicitors) <2000> All ER (D) 1087 and Robert Broatch, Petitioner 5 R 702.

8. It was clear that the Court in England has power to intervene in respect of the representation of parties before it. In Skjevesland I was directed to what was said by Lady Justice Arden at paragraph 42 where she said:-

“…..However, the court is concerned with the duty of the advocate to the court and the integrity of the proceedings before it. The court has an inherent power to prevent abuse of its procedure and accordingly has the power to restrain an advocate from representing a party if it is satisfied that there is a real risk of his continued participation leading to a situation where the order made at trial would have to be set aside on appeal. The judge has to consider the facts of the particular case with care (see the words of Lord Steyn in the Man o’War Station case cited at <32>, above). However, it is not necessary for a party objecting to an advocate to show that unfairness will actually result. We accept Mr Jones’ submission that it may be difficult for the party objecting so to do. In many cases it will be sufficient that there is a reasonable lay apprehension that this is the case because as Lord Hewart CJ memorably said in R v Sussex JJ ex p McCarthy <1924> 1 KB 256, <1923> All ER Rep 233, it is important that justice should not only be done, but seen to be done. Accordingly, if the judge considers that the basis of objection is such as to lead to any order of the trial being set aside on an appeal, as in R v Smith (Winston), he should accede to an order restraining an advocate from acting. But we stress that the judge must consider all the circumstances carefully. A connection, for instance, between counsel for one party and a witness on the other side may be an important factor where the evidence is of fact but, depending on the nature of the connection, it may be less important where the evidence is of an expert nature and the cross-examination is likely to be on questions of technical expertise. The judge should also take into account the type of case and the length of the hearing, and any special factor affecting the role of the advocate, for instance, if he is prosecuting counsel, counsel for a local authority in care proceedings or as a friend of the court.”

She also went on to say:-

“<43> A judge should not too readily accede to an application by a party to remove the advocate for the other party. It is obvious that such an objection can be used for purely tactical reasons and will inevitably cause inconvenience and delay in the proceedings. The court must take into account that the other party has chosen to be represented by the counsel in question. …..”

In that case the court did not intervene for the reasons set out by it. Re L (Minors) (Care Proceedings: Cohabiting Solicitors) was a case in which the court did intervene and did so by indicating that it intended after seven days from the day of the judgement to make declaration that Medway’s Head of Legal Administration was no longer representing Medway in the proceedings. It did so in the particular circumstances of that case into which it is not necessary to go for the purposes of this decision. The case of Broatch did not assist in respect that it was an old case relating to the disciplining of a solicitor by the Sheriff for remarks made in relation to the impartiality of the Sheriff substitute. It was not concerned with representation in a particular case."

I cant see any legal reason myself that would prohibit the LA from paying the fee on behalf of the client. Is it possible that your legal depatment simply dont want you to undermine their own performance targets in relation to their part in the debt recovery process?

Like Council Tax, rent arrears are a debtr provable in bankruptcy. The difference is that the debtor pays nothing towards the CT arrears unless he has to enter into a Income Payments Agreement with the Official Receiver (which only happens if he/she is judged to have at least £100 p mth surplus income) but any rent arrears can still be collected by the landlord provided there was an agreement in place - or a Court order - to pay them before the bankruptcy occurred.

This is an extract from the Insolvency Service Technical Manual:

"31.7.31 Rent arrears

In a recent unreported Court of Appeal hearing, the Court of Appeal held that the right of a landlord to recover his/her property from a defaulting tenant, irrespective of whether the landlord does or does not require a court order to do so, is not affected by bankruptcy.

The Court of Appeal case concerned the situation where a possession order had been obtained against a tenant in respect of rent arrears by the relevant District Council. The possession order was then suspended when the tenant agreed to pay current rent plus an amount to discharge the arrears. Subsequently the tenant was declared bankrupt and the Court of Appeal did not dispute that rent arrears outstanding at the date of bankruptcy became a provable debt in the bankruptcy proceedings.

However, the Court of Appeal determined that the possession order was not a remedy against the property or person of the bankrupt and therefore was not restricted by the provisions of the Insolvency Act section 285 (3) (with reference to earlier cases of Ezekial v Orakpo <1977> QB 260 and Razzaq v Pala <1997> BPIR 726 ). The Court of Appeal made it clear that the local authority might have sought possession of the property both before and after the date of the bankruptcy order.

The consequence of this is, where a possession order is made in respect of rent arrears, the court may suspend that order on the condition that the rent arrears will be discharged over a period of time. Where the individual concerned is an undischarged bankrupt then it is anticipated that any amount ordered by the court to discharge the rent arrears would be taken in to consideration when assessing the individual's ability to make payments under an income payments agreement/order."

In practice the OR accepts any written agreement to repay the arrears as being binding.

But the arrears still have to be listed as a debt in the bankruptcy - the payment towards the arrears is then included in the I & E section of the form.

What this particular case illustrates is that bankruptcy may not stop eviction. The possession proceedings are separate from the rent arrears. This means that a private landlord (perhaps less likely than a local authority or housing association to be willing to wait for payment) can get rid of an unprofitable tenant and crystallise his loss. Indeed, some tenancies have a provision entitling the landlord to terminate the tenancy if the tenant becomes bankrupt.

The original post raises interesting issues of potential conflict, for sure.

My understanding of the "funds from government" cited in the post would usually relate to Dept for Communities & LG grants paid as Homeless Prevention Funds for LA's to administer in their individual homelessness strategies....

These strategies are of course policy and subject to the scrutiny (and agreement) of elected officers. There would normally be a strategy/ policy proposal which effectively allocates the funding to the strategy.

Examples of some of the usual content in any strategy would be effective use of DHPs (including the secondment of HB officers to Housing Options/use of the funds to assist people to remain in work etc etc etc..and many similar). All of these have effects on the administration and the finances of the Local Authority...any homeless strategy would!

I see nothing which would generally prevent such funds being used to make up the deposit in a bankruptcy if that particular action were to prevent homelessness and achieve the goal set out. However, as others have commented, the use of bankruptcy to remove rent arrears is dicy in terms of the landlord's ability to seek possession due to ongoing liability notwithstanding Personal Insolvency iro the arrears.

The use of Personal Insolvency regarding Council Tax arrears is much less problematic in many ways, but is not easily linked as directly to homelessness.

Debt management and advice etc as a whole is certainly a factor in preventing homelessness (eg robbing landlord/lender Peter to pay non-priority Paul), and as such Personal Insolvency may very well be the remedy which fits..in which case (as has again been said) you have NO choice but to include CT arrears as provable.

What about DRO's ? would this not offer an alternative.

I would suggest that you check the homeless strategy with an eye on the use of the Homeless Prevention Fund within it, speak to the officer responsible for the strategy document (which will have been approved by the Council) and then speak to your legal department.....sounds more a political than legal issue, all this.

If the purpose of the bankruptcy is to avoid eviction by getting the rent arrears written off (which is not something I understood from the original post) then I don't think it will work. Yes - the arrears are a provable debt & bankruptcy law provides that the debtor is not to make any payments on his debts (other than to the OR/trustee under a payments agreement), but in practice ORs are accepting that bankrupts do continue paying rent arrears & landlords (or most of them) just do not write off these arrears.

If the purpose of the bankruptcy is to get rid of other debts then there should be no risk of eviction as a result of the bankruptcy provided there is a written agreement with the landlord (or a Court order) to pay the arrears at £x p mth & the tenant continues to pay this in addition to the current rent.

So far as rent arrears are concerned, the situation in a DRO is the same as in bankruptcy. But a DRO might be easier to justify because the cost is only £90 compared with £360 - going up to £450 from 6 April - for bankruptcy. (I assume the Court fee of £150 will be remitted.) To qualify for a DRO there are rigid other requirements to be met, including that total debts must not exceed £15000.