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

Roedd y cais yn rhannol lwyddiannus.

Dear Exeter City Council,

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

"Currently Exeter's software is set to recover the oldest Council Tax debt first as standard on non-specific payments."

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 were to agree with the judgment, would be.....

[[ Where the debtor does not make any reference as to where 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

Freedom Of Information, Exeter City Council

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Kind regards

FOI Officer

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Exeter City Council

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email: [Exeter City Council request email]

 

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Carrie-Anne Bainbridge, Exeter City Council

Thank you for your request for information, which has been dealt with
under the Freedom of Information Act 2000. 

 

I can confirm the Council does not hold any recorded information in
relation to your request. 

 

Exeter City Council is committed to openness and transparency. If you wish
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here: [2]https://ico.org.uk/global/contact-us/. 

 

Kind regards

Carrie

 

Carrie-Anne Bainbridge

Policy Officer

Executive Support

Exeter City Council

 

01392 265875

 

 

From: S Staffordson [mailto:[FOI #604062 email]]
Sent: 17 September 2019 09:40
To: Freedom Of Information <[Exeter City Council request email]>
Subject: Freedom of Information request - Council tax payment allocation
in accordance with R. v Miskin Lower Justices [1953]

 

Dear Exeter City Council,

The Council makes the statement quoted below from the link:
[3]https://www.whatdotheyknow.com/request/e...

"Currently Exeter's software is set to recover the oldest Council Tax debt
first as standard on non-specific payments."

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):

[4]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 were to agree with the judgment,
would be.....

[[ Where the debtor does not make any reference as to where 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

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Dear Carrie-Anne Bainbridge,

I would have expected that the information would be held because 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.

Yours sincerely,

S Staffordson

Dear Exeter City Council,

Please pass this on to the person who conducts Freedom of Information reviews.

I am writing to request an internal review of Exeter City Council's handling of my FOI request 'Council tax payment allocation in accordance with R. v Miskin Lower Justices [1953]'.

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...

A full history of my FOI request and all correspondence is available on the Internet at this address: https://www.whatdotheyknow.com/request/c...

Yours faithfully,

S Staffordson

Carrie-Anne Bainbridge, Exeter City Council

Thank you for your email. 

 

I am out of the office until Thursday 2 January.  I will respond to your
email when I return. 

 

Kind regards

Carrie

See our [1]privacy notice for details on how we manage personal
information.

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Bruce Luxton, Exeter City Council

Dear S Staffordson,

 

Thank you for your request, dated 1 January 2020, for an internal review
of your Freedom of Information enquiry.

 

Please note that your request for an internal review does fall outside of
the timescale prescribed by the Council however I have reviewed the
Council’s response and I can confirm that the Council does not hold any
recorded information in relation to your original question, which was
“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]?”

 

The Council operates in accordance with its’ Debt Collection Policy. This
policy was approved by Council on 23 February 2016. The report and policy
can be accessed here:
[1]http://committees.exeter.gov.uk/document...

 

This policy is currently under review and an updated Debt Collection
Policy will be presented to Council for approval once the review has been
completed. If you would like me to confirm when this has been done, please
let me know.

 

Please be assured that the Council does operate in a way that agrees with
the judgement. Where there are council tax debts for one or more previous
years we work with the taxpayer to prioritise  paying the current years’
liability while chipping away at the debt. We will change payment
priorities if requested by a taxpayer or where we are recovering arrears
and it is identified as beneficial to the taxpayer for their payments to
be re-allocated to prevent further recovery action needing to be taken, to
reduce additional costs and reduce financial vulnerability in accordance
with our debt collection policy and to meet the requirements of the case
law.

 

If you are dissatisfied with my response, you may refer the matter to the
Information Commissioner's Office for determination. The contact details
are available here: [2]https://ico.org.uk/global/contact-us/.

 

Yours sincerely

 

 

Bruce Luxton

Corporate Manager

Executive Support

Exeter City Council

 

01392 265166

 

See our [3]privacy notice for details on how we manage personal
information.

Disclaimer: [4]http://www.exeter.gov.uk/disclaimer

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Dear Bruce Luxton,

Thank you for your reply in which is stated, 'where there are council tax debts for one or more previous years we work with the taxpayer to prioritise paying the current years’ liability'.

I notice page 1 of the Exeter City Council Debt Collection Policy December 2015 (Page 143 of the document provided) states as follows which agrees with the above:

"Where we need to take enforcement action to recover money owed to us, we use the following key principles:
......................
 Ring fencing previous year’s debts and in-year recovery focus"
......................"

However, the statement previously made (below) in my mind contradicts both of the above:

"Currently Exeter's software is set to recover the oldest Council Tax debt first as standard on non-specific payments."

I would appreciate the apparent inconsistency clarifying if at all possible.

Yours sincerely,

S Staffordson

Bruce Luxton, Exeter City Council

Dear S Staffordson,

 

Thank you for your further email. The Council has provided a response in
accordance with its obligations under the Freedom of Information Act 2000.
This email is by way of explanation in relation to your email below.

 

Exeter City Council’s council tax processing system is currently set so
that if a payment is received which doesn’t match the payment profile for
the current year, it will automatically be allocated to the oldest debt if
there are arrears on previous years. As has been previously stated, there
is then a risk that recovery action will be taken on the current year due
to expected payments not being received.  However, there is also the
possibility that if the system parameter was set so that any unmatched
payments allocate to current year only, there is a risk that recovery
action being taken for arrears on previous years could escalate.

 

Neither situation is ideal for taxpayers and that is why we encourage
taxpayers who are struggling to pay to contact us so that we can work with
them and agree a sustainable payment arrangement moving forward and update
the system accordingly to match that arrangement.  If contact is made,
either by a taxpayer approaching us, or by an officer successfully
contacting a taxpayer, then we are able to manually override that
parameter for that account. We can then re-allocate payments to a
different year if necessary and set up priorities for which debt is
cleared first when payments come in, so tailoring the account to the needs
of that particular taxpayer.  When agreeing payment arrangements with
taxpayers we encourage paying the current year as it should be paid and
ring-fencing any previous years’ debt to chip away at, however, not all
taxpayers are agreeable to this, wanting their payments  to go to the
oldest debt first.

 

As previously mentioned, the Debt Collection Policy is currently being
reviewed and parameter settings will be considered as part of that review.

 

Your sincerely

 

 

Bruce Luxton

Corporate Manager

Executive Support

Exeter City Council

 

01392 265166

 

 

 

 

From: S Staffordson [mailto:[FOI #604062 email]]
Sent: 30 January 2020 16:01
To: Bruce Luxton <[email address]>
Subject: Re: Freedom of Information request - Council tax payment
allocation in accordance with R. v Miskin Lower Justices [1953]

 

Dear Bruce Luxton,

Thank you for your reply in which is stated, 'where there are council tax
debts for one or more previous years we work with the taxpayer to
prioritise paying the current years’ liability'.

I notice page 1 of the Exeter City Council Debt Collection Policy December
2015 (Page 143 of the document provided) states as follows which agrees
with the above:

"Where we need to take enforcement action to recover money owed to us, we
use the following key principles:
......................
· Ring fencing previous year’s debts and in-year recovery focus"
......................"

However, the statement previously made (below) in my mind contradicts both
of the above:

"Currently Exeter's software is set to recover the oldest Council Tax debt
first as standard on non-specific payments."

I would appreciate the apparent inconsistency clarifying if at all
possible.

Yours sincerely,

S Staffordson

dangos adrannau a ddyfynnir

Dear Bruce Luxton,

Thank you for your response. I don't see any point in pursuing this but further to my email of 1 January 2020 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 in that email 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 that it; "allocates non-specific payments to the oldest liability...", 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)

"In the absence, therefore, of any express declaration by either, the inquiry was, what application would be most beneficial to the debtor. The payment was, consequently, applied to the most burthensome debt...and, if the debts were equal, then to that which had been first contracted."

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 £95.00 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 £37.50 so the total amount owing the council for that year's charge has increased to £132.50. 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 £37.50 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 £37.50 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 £132.50 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 £10.50). The customer's in-year liability did not only remain unchanged as a result of the misapplied £122.00 payment it actually increased by £37.50 because of the court costs attributable to the council's further application to the Magistrates' court (the in-year liability increased to £1,239.45 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 £37.50 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 sincerely,

S Staffordson