Council tax payment allocation in accordance with R. v Miskin Lower Justices [1953]

Roedd y cais yn rhannol lwyddiannus.

Dear Tonbridge and Malling Borough Council,

The Council makes the statement quoted below from the link:
https://www.whatdotheyknow.com/request/c...

"Our Council Tax system is set up to allocate payments to the oldest debt if a payment is made which does not match another payment that is due"

The council's statement above does not agree with the judgment in the case of R. v Miskin Lower Justices (see below link to the judgment):

http://s000.tinyupload.com/index.php?fil...

The judgment clarifies the position in cases where a creditor has to make a decision as to which account payment should be allocated when a debtor has one account more burdensome for him than another and his payment is unspecified

Clearly the council's statement, if it where to agree with the judgment, would be.....

[[ Where the debtor does not make any reference as to were the payment should be allocated then the creditor must allocate the payment to the account which it is most beneficial to the debtor to reduce. ]]

Q. Where did the council obtain the information regarding the appropriation of payments case law which conflicts with the judgment in R. v Miskin Lower Justices [1953]?

Yours faithfully,

S Staffordson

foi, Tonbridge and Malling Borough Council

Thank you for your e-mail, requesting that certain information is made available to you under the Freedom of Information Act 2000/Environmental Information Regulations 2004. The Council has now started to process your request.

The Council always aims to disclose information as quickly as possible. However, if for some reason we cannot complete your request within 20 working days (ie by 11/10/2019 ) we will write to you again before that date to explain why and to let you know when you will receive the information. Please remember that documents sent by post may take few extra days to reach you.

The Council will normally disclose all the information which you have requested unless there is a good reason for not doing so. If any information will not be disclosed because it is exempt, we will write to you and explain why. Please note that, whilst the Council will disclose documents which already exist and which contain the information which you have requested, the Council is not required to compile documents specifically to deal with your request.

Once the information has been identified, the Council can also ask that you pay a fee to cover the costs of any printing, photocopying, postage, etc., for processing and delivering the information to you. Details of any fee to be paid will be notified to you as soon as possible.

Please quote the reference number 19/647 in any future correspondence about this request.

If you are dissatisfied with this response, then you may ask the Council to conduct an internal review of your case by writing to the Council’s FOI Team ([Tonbridge and Malling Borough Council request email]). If you are still not content after the Council has conducted an internal review of your case, then you may apply directly to the Information Commissioner (ICO) for a decision. Generally, the ICO cannot make a decision unless you have exhausted the internal review procedure provided by the Borough Council.

The Information Commissioner can be contacted in writing at: The Information Commissioner’s Office, Wycliffe House, Water Lane, Wilmslow, Cheshire, SK9 5AF.

Please quote the reference number at the top of this email in any future correspondence about this request.

Adrian Stanfield
Freedom of Information Co-Ordinator

website: www.tmbc.gov.uk

dangos adrannau a ddyfynnir

Glen Pritchard, Tonbridge and Malling Borough Council

Dear S Staffordson

We do not have a written policy, however, where a payment is received which does not match any payment due our system will automatically apply it to the oldest debt irrespective of the recovery action being taken. If that debt is currently in the process of another recovery action e.g. Charging order or Attachment of Earnings then, once identified, it will be manually moved to the oldest non-secured debt.

A customer can choose to have the payment applied to a debt with a recovery action against it so that it can be cleared and the Charging Order or attachment removed. Such a request would need to be completed in writing.

Where the value of a payment received equals that of an instalment/amount owing, the payment will be credited to the relevant matching amount regardless of to which year that bill relates. This is in accordance with the precedence set in the case of R v Miskin Lower Justices 1953

If you are dissatisfied with this response, then you may ask the Council to conduct an internal review of your case by writing to the Council’s FOI Team ([Tonbridge and Malling Borough Council request email]). If you are still not content after the Council has conducted an internal review of your case, then you may apply directly to the Information Commissioner (ICO) for a decision. Generally, the ICO cannot make a decision unless you have exhausted the internal review procedure provided by the Borough Council.

The Information Commissioner can be contacted in writing at: The Information Commissioner’s Office, Wycliffe House, Water Lane, Wilmslow, Cheshire, SK9 5AF.

Please quote the reference number at the top of this email in any future correspondence about this request.

Regards

Glen Pritchard IRRV (Hons)
Principal Revenue Officer

Manage your council tax account online and register for paperless billing at www.tmbc.gov.uk/ct-online

dangos adrannau a ddyfynnir

Dear Glen Pritchard,

I will put my request another way.

Where did the council obtain the advice/authority that enabled it to determine that it would be appropriate for the council to allocate payment which did not match a current instalment to the oldest debt outstanding. For example, a lawyer, the council's monitoring officer, the Institute of Revenues Rating and Valuation (IRRV) 10 October 2002 Insight magazine http://s000.tinyupload.com/index.php?fil...

Or here?
https://www.whatdotheyknow.com/request/4...

Yours sincerely,

S Staffordson

Dear Glen Pritchard,

I clarified what I was asking for (FOI request) on 13 October. Have you had time to consider a response?

Yours sincerely,

S Staffordson

Glen Pritchard, Tonbridge and Malling Borough Council

I am currently out of the office until 5 December 2019. If you have any
urgent messages, please redirect your e-mail to
[email address]. Alternatively, I will respond to your email
(if appropriate) as soon as is practicable on my return.

Glen Pritchard, Tonbridge and Malling Borough Council

Dear S Staffordson

There are two pieces of case law that give precedence over different points of law, one over the situation where a customer gives specific instructions, the other when they do not.

Where the value of a payment received equals that of an instalment/amount owing the payment will be credited to the relevant matching amount regardless of what year that bill relates to. This is in accordance with the precedence sent in the case of R v Miskin Lower Justices 1953

Where no instructions are received from the customer and the amount paid does not equal a specific instalment or outstanding bill, the amount can be allocated as the creditor (in this case the Council) deems fit. The authority for this is the case of Peter v Anderson 1814.

Please note the Council does not hold any information in relation to your request. The Freedom of Information Act only covers information held in recorded form, therefore local authorities are not required to create new information or find the answer to a question from staff who may happen to know it. Staff dealing with appropriation of payments are trained in their field of expertise and relevant case law material can be accessed as it is publicly available.

As previously advised, If you are dissatisfied with this response, then you may ask the Council to conduct an internal review of your case by writing to the Council’s FOI Team ([Tonbridge and Malling Borough Council request email]). If you are still not content after the Council has conducted an internal review of your case, then you may apply directly to the Information Commissioner (ICO) for a decision. Generally, the ICO cannot make a decision unless you have exhausted the internal review procedure provided by the Borough Council.

The Information Commissioner can be contacted in writing at: The Information Commissioner’s Office, Wycliffe House, Water Lane, Wilmslow, Cheshire, SK9 5AF.

Please quote the reference number at the top of this email in any future correspondence about this request.

Regards

Glen Pritchard IRRV (Hons)
Revenues Manager

Manage your council tax account online and register for paperless billing at www.tmbc.gov.uk/ct-online

dangos adrannau a ddyfynnir

Dear Glen Pritchard,

"There are two pieces of case law that give precedence over different points of law, one over the situation where a customer gives specific instructions, the other when they do not."

Peter v Anderson 1814 gives precedence over both of the above situations.

I understand that the authority in the Miskin case generally clarifies that where an amount obviously relates to a specific liability, it would be an unwarranted assumption to allocate the payment elsewhere thus payment must be carried to that account which is most beneficial to the debtor to reduce.

Yours sincerely,

S Staffordson

Glen Pritchard, Tonbridge and Malling Borough Council

I am currently out of the office until 13 December 2019. If you have any
urgent messages, please redirect your e-mail to
[email address]. Alternatively, I will respond to your email
(if appropriate) as soon as is practicable on my return.

Dear Tonbridge and Malling Borough Council,

You will probably not wish to take this into consideration but for what it's worth, there was no precedent set in the Miskin case based on payments matching the instalment amount of a particular year.

https://tinyurl.com/vk2pwhn

It is clear from the first paragraph of the judgment that the debtor (husband) did not in any of the amounts paid once make a payment matching an amount that he was required to under the terms of the maintenance/committal orders. The judge held that an appropriation was inferred from the circumstances to be the debt which it was most beneficial for the debtor to reduce (see quoted from the judgment).

"...the question whether the payments made by the husband should be appropriated to the original debt depended on the particular facts of the case. The husband would be likely to wish the payments to be utilized in discharge of the original debt..." (so that he would secure his release from the committal order)

Yours faithfully,

S Staffordson

Dear Tonbridge and Malling Borough Council,

In anticipation of you not responding, I have decided against pursuing this. However, when a decision is made with potentially legal implications the council is required to consult the Monitoring Officer and such procedures should be formally recorded. A decision that requires setting the parameters of a council tax payment processing system to automatically allocate non-specific payments to the oldest account rather than to the in-year account is one such decision.

If the proper legal process was followed when the decision was made then there will be a record of it comprising a background outlining the relevant legal requirements and risk assessment highlighting the degree to which the council would be exposed to legal challenge if not complied with. The following is an example of the kind of assessment that should have been documented.

https://democracy.npt.gov.uk/documents/s...

So my thoughts are that this issue should be put before the council's Monitoring Officer as it is his duty to ensure all decision making is lawful and the legal process described above should have been followed in arriving at the decision.

I understand that the software supplied to local authorities for the purpose of payment allocation has a parameter which can typically be set so that when a payment fails to match one of the rules it will, option 1, be applied to the in-year account, or option 2, be applied to the oldest years account. Therefore, it is within the council's control to maximise the frequency with which non-specific payments would be correctly applied i.e. to maintain the in-year account as a priority.

Regarding the Miskin case law, despite being decided in 1953, it is obviously relevant to Council Tax or there would unlikely be guidance tailored specifically for the benefit of Local Authorities. For example, Ipswich Council demonstrates its awareness of the case and other case law relevant to Council Tax liability in the following page exhibited presumably from a book entitled "Local Authority Revenues" https://www.whatdotheyknow.com/request/4...

The relevant passage summarises a billing authority's obligations regarding the allocation of payments where a customer has several accounts payable to the council in the context of R v Miskin Lower Justices and associated case law. The Institute of the Revenues Rating and Valuation (IRRV) has published similar in its 10 October 2002 Insight magazine https://tinyurl.com/y3hoyx9v

In respect of the council's statement; "if a payment is made which does not match...", there was no precedent set in the Miskin case based on payments matching the instalment amount of a particular year.

https://tinyurl.com/vk2pwhn (R v Miskin)

It is clear from the first paragraph of the judgment that the debtor (husband) did not once in any of the payments he made, make a payment matching an amount that he was required to under the terms of the maintenance/committal orders. The judge held that an appropriation was inferred from the circumstances to be the debt which it was most beneficial for the debtor to reduce (see quoted from the judgment).

"...the question whether the payments made by the husband should be appropriated to the original debt depended on the particular facts of the case. The husband would be likely to wish the payments to be utilized in discharge of the original debt..." (so that he would secure his release from the committal order).

As for the Council defending the practice of applying non-specified payment to the oldest year where a debt remains outstanding, the overwhelming evidence is that this does not accord with established case law.

Possibly the council has been influenced by the ruling in Devaynes v Noble 1816 merivale 529 (Clayton's Case). Clayton's Case is confined to cases where there is an unbroken account between the parties, or “one blended fund,” as in the case of a current account at a bank or between traders; it does not apply where there is no such account or fund, but merely distinct and separate debts. Snells Principles Of Equity's gives a definition in the document here: https://tinyurl.com/y3uzpd5n

A number of billing authorities wrongly rely on the Clayton Case ruling to justify allocating non-specific payment to the arrears because the effect of the rule is that in the absence of any express appropriation, each payment is impliedly appropriated to the earliest debt that is not statute-barred (payments are presumed to be appropriated to debts in the order in which the debts are incurred). They are of course misinformed because the rule does not apply to Council Tax as it consists of distinct insulated debts, between which a plain line of separation can be drawn (a bill is issued each year relating specifically to that year's liability).

Conveniently in the Clayton Case judgment the rules by which the application of indefinite payments are governed have been discussed. Clearly before any consideration is given as to the order in which the debts have arisen it must be asked, to which of the debts would the allocation be most beneficial to the debtor? (where the purpose for which a payment is made is unspecified it must be carried to that account which it is most beneficial to the debtor to reduce). Only if it was of no more benefit to the debtor which of the accounts payment was applied to could it be said that allocating non-matching payments to any arrears would be in accordance with established case law.

https://en.wikipedia.org/wiki/Devaynes_v... (Clayton's Case)

It is noteworthy that the Sri Lankan case, Ephraims v. Jansz (1895) 3 N.L.R. 142, similarly discussed the rules relating to the appropriation of payments in the context of the onerous nature of debt due on several accounts. The condition in the below quoted from the judgment could not be more relevant to the circumstances that are in issue with Council Tax liability:

https://www.lawnet.gov.lk/wp-content/upl... (Ephraims v. Jansz)

"If no such appropriation is made at the time of payment, the creditor must apply it to some claims which could be enforced at the time of payment and which at the moment is not in controversy."

Council Tax may be enforced (subject to payments being met) so a customer's in-year liability is not in controversy, providing his instalments are paid when due. An unspecified payment then, applying this principle, would have clearly been misappropriated if the council applied it to arrears so causing his in-year liability instalment to have not been met.

But regardless of whether the principle in the Sri Lankan case can be relied on, a customer having one liability more onerous for him than another must have his payment if it were unspecified carried to that account which it is most beneficial for him to reduce in line with other case authority mentioned.

The council's processing system applies payments in respect of the customer's implied intention but on a severely restricted basis (solely on the sum paid corresponding with an instalment amount). A payment matching a specific liability covers only one of several ways that the taxpayer's election may be implied. For example, case authority has consistently found that a debtor's intention may be indicated from the circumstances of the transaction (see Khandanpour v Chambers [2019] EWCA Civ 570 "Appropriation" from para 25). https://www.bailii.org/ew/cases/EWCA/Civ...

A debtor's payment pattern could indicate a debtor's intention to appropriate payment to a particular debt, so if a pattern had emerged of a customer's payment being made and accepted as credited to a particular debt then it would be inferred from the nature of the transaction, even if not expressed at the time by the customer, that he intended to ascribe it to that account. A customer having one liability more onerous for him than another must have his payment if it were unspecified carried to that account which it is most beneficial for him to reduce.

A customer who would be caused the additional burden from recovery action being taken in respect of his in-year liability as a consequence of payment being applied to his arrears, would clearly have intended his payment to be appropriated to his in-year liability to avoid unnecessary additional costs etc. Evidence of an intent to appropriate, although falling short of being express, would be provided in those particular circumstances to be an election to pay specifically on the current year's liability (the inference from the circumstances of a transaction is just as valid an election to pay specifically on one of several accounts as if his election were expressed).

A customer who made payment in an amount sufficient to prevent his in-year liability falling in arrears would have good cause to bring legal proceedings against the council if it were to allocate his payment to a previous year's charge (thus unnecessarily burdening him further) merely because it did not match the instalment amount. In any event, I understand that a billing authority's duty, as a priority, is to maintain a customer's in-year account with payments received in respect of his liability, so logically the frequency with which payment would be correctly applied would be maximised (under automated conditions) if the parameters in the Council Tax processing system were set so that any unspecified payments were applied to the current year's charge.

P.S. Your Monitoring Officer might wish to look at this from the following perspective:

Let's say a Customer has an outstanding balance of £60.00 secured by a Magistrates' court Liability Order from a previous year's charge. This gives councils the power to use various enforcement methods to collect the debt and adds costs to the arrears. The standard costs rubber stamped by the court are in the sum of £100.00 so the total amount owing the council for that year's charge has increased to £160.00. The customer now has his in-year Council Tax obligation to meet as well as the amount secured by a court order from the previous year's charge.

The customer's in-year payments are set at £121.95 for the first instalment and £120.00 for the remaining nine (£1,201.95 in total). The customer makes his first payment of £122.00 but because the council's system applies payments that do not exactly match to the oldest debt, his in-year Council Tax obligations have been detected by the computer system to have not been met even though the payment was made in sufficient an amount to prevent his in-year liability falling in arrears. Although Council Tax liability consists of distinct insulated debts, between which a plain line of separation can be drawn, the benefit to the council is the same (£122.00) whether payment is applied to the in-year account or arrears so there is no legitimate advantage for the council nor justification in engineering a further burden for the customer in respect of his in-year liability. The previous year's debt has already been secured with a court order which has no time limit restricting its use.

It is therefore reasonable to suspect that the council allocates non-matching payments to the arrears thus imposing an additional £100.00 standard costs in respect of the in-year engineered non-payment for a non-legitimate reason. But there is no theoretical advantage to the council in respect of the costs it claims because the law only entitles it to claim the actual expenditure it incurs. It would therefore be self defeating if the council were to go about obtaining court orders merely to benefit from the application if its costs claim was genuine and not inflated. Another possible motive would be to punish the customer, but this is troublesome for the council because it is making use of the Magistrates' court unnecessarily and in so doing burdening the customer with a further £100.00 debt. This by definition is penalising the customer with imposed costs which is impermissible according to established case authority. It was held on judicial review of a licensing case R v Highgate Justices ex parte Petrou [1954] 1 ALL ER 406 that costs should not exceed the proper costs incurred and should not be a penalty.

In the more recent case it was held that the Magistrates were bound to decide the matter of costs in accordance with the Council Tax (Administration and Enforcement) Regulations 1992 (the court needs to be satisfied that it was reasonable for the council to incur them) i.e. they would not reasonably have been incurred if it was not reasonable for the council to take steps to enforce payment (see paras 34 and 51 of R (Nicolson) v Tottenham Magistrates [2015] EWHC 1252) http://www.bailii.org/ew/cases/EWHC/Admi...

In the aforementioned scenario the council would have impermissibly obtained a court order to enforce the misappropriated £122.00 element of the liability TWICE. This is because the payment which was intended to be applied to the in-year liability was misapplied to the arrears.

Each year's liability is a distinct debt so if the council has a secured debt in respect of one year's charge it cannot use the same court order to enforce payment if a customer defaults in a subsequent year (another order must be obtained from the court). However, the court order securing £160.00 debt from a previous year was effectively used to collect the sum of £122.00 which was actually paid in respect of the in-year liability (the amount secured by the previous court order reduced to £38.00). The customer's in-year liability did not only remain unchanged as a result of the misapplied £122.00 payment it actually increased by £100.00 because of the court costs attributable to the council's further application to the Magistrates' court (the in-year liability increased to £1,301.95 which was secured by a fresh court order).

The upshot of all this is that the customer has outstanding liability relating to two separate debts, each independently subject to enforcement by the various oppressive methods enabled by the court order. The customer's overall indebtedness arising from the misappropriated payment has immediately increased by £100.00 because of unnecessary court costs. In engineering the default, the council has clearly been shown to have unlawfully used an order securing a previous year's debt to enforce payment from the in-year liability which was perversely the cause of the Council Tax processing system triggering recovery in respect of the in-year liability (the same £122.00 amount has been subject to enforcement by two separate court orders).

Yours faithfully,

S Staffordson