Revenue and Customs Commissioners v Garwood


The Revenue petitioned for the bankruptcy of the taxpayer (G) on a statutory demand for unpaid taxes and interest. G had offered a charge over his beneficial interest in a property of which he was the joint owner. The Revenue had rejected the offer. There had been a serious of adjournments and G had repeatedly reduced the sale price until firm offers had been received but there was still adequate equity to discharge the debt. The joint owner had been declared bankrupt and had moved out and there was an order for sale already in place. The Revenue submitted that the petition should be granted as G had caused unreasonable delay by asking too high a price for the property. Further, the Revenue claimed that it was entitled to consider its own interests and that it lacked the resources to act as a mortgagee. G argued that the security was adequate to cover the debt, and that a charge and sale would better serve the interests of both creditor and debtor since recovery would be quicker and greater than in a bankruptcy, in which the costs of a trustee would be substantial. Petition dismissed. The starting point was an objective test: whether a hypothetical creditor in the position of the petitioner would accept the offer when viewed at the date of the hearing. The court had to consider all the relevant facts, not only those the petitioner had considered, and the history of the matter. The debtor must have provided full information. A rigid institutional policy of rejection or bureaucratic inflexibility were relevant considerations. However, the creditor was entitled to have regard to his own interests, was not forced to take a chance, or be patient, or generous and could take into account his own costs and resources, Debtor (No.32 of 1993), Re [1994] 1 W.L.R. 899, Debtor (No.6349 of 1994), Re [1995] B.C.C. 971, Customs and Excise Commissioners v Dougall [2001] B.P.I.R. 269, and Ross v Revenue and Customs Commissioners [2010] EWHC 13 (Ch), [2010] 2 All E.R. 126 applied (see para.23 of judgment). The Revenue appeared to have given G's offer no real thought that could satisfy the objective test. Though there had been considerable delay and no less than eight adjournments, G had been actively trying to sell the property throughout and the Revenue had acted unreasonably in rejecting his offer (para.34). The costs of bankruptcy would be considerably greater than accepting the charge and there was an obvious advantage to the Revenue in being a secured creditor, rather than an unsecured creditor in a bankruptcy (para.37).


The Revenue had acted unreasonably in rejecting a charge over the debtor's beneficial interest in a property and petitioning for his bankruptcy.