Exercising discretion when applying to the court for a Council Tax Liability Order

Roedd y cais yn llwyddiannus.

Dear Plymouth City Council,

The Council Tax (Administration and Enforcement) Regulations 1992 (the "Regulations") confer a duty on the billing authority to exercise discretion under regulation 34(1) when deciding whether to institute a complaint to the Magistrates' court to enforce payment.

Regulation 34(1) as amended by Regulation 15 of SI 1992/3008 states, with the relevant part emphasised, as follows:

"If an amount which has fallen due under paragraph (3) or (4) of regulation 23 (including those paragraphs as applied as mentioned in regulation 28A(2)) is wholly or partly unpaid, or (in a case where a final notice is required under regulation 33) the amount stated in the final notice is wholly or partly unpaid at the expiry of the period of 7 days beginning with the day on which the notice was issued, THE BILLING AUTHORITY MAY, in accordance with paragraph (2), apply to a magistrates' court for an order against the person by whom it is payable."

Regulation 34(2) states as follows:

"The application is to be instituted by making complaint to a justice of the peace, and requesting the issue of a summons directed to that person to appear before the court to show why he has not paid the sum which is outstanding."

The following are examples (but by no means exhaustive) of what are reasonable factors a recovery officer should take into account in exercising discretion to institute a complaint to the Magistrates court under paragraph (2) of regulation 34 of the Regulations:

1. the level of debt outstanding

2. any payments made subsequent to the full amount becoming due and time remaining of the financial year

3. are circumstances indicative of the debt being settled without resorting to enforcement

4. consider if enforcing the debt would unnecessarily subject the taxpayer to additional costs etc. and therefore amount to a penalty (see 3 above)

5. ensure monies have been prioritised to maintaining the in-year debt

6. allocate to the in-year any monies posted to arrears (or sufficient of it) that would if it had not been misallocated prevented the in-year liability also falling in arrears (see 5 above)

7. check for benefit claims or appeals already in the system and refrain from taking enforcement action where such genuine cases are unresolved

Q1. Does Plymouth City Council exercise discretion before proceeding under regulation 34(2) of the Council Tax (Administration and Enforcement) Regulations 1992 to request a summons from a justice of the peace (it may be an automated process)

Q2. If yes to (1) what factors are taken into consideration

Yours faithfully,

Helen Barker

FoI Corporate Services, Plymouth City Council

OFFICIAL

Dear Ms Barker

FoI Ref: 919240

Thank you for your request for information about Council Tax Summons. Your request was received on 27 April 2020 and is being dealt with under the terms of the Freedom of Information Act 2000.

We will aim to provide a response to your request within the statutory timescale of 20 working days, by 27 May 2020 however, we would ask for and would appreciate your understanding and patience, where this is not possible at the present time.

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Yours sincerely

Ms K Forsyth
Customer Advisor
Customer Service and Service Centre
Plymouth City Council
Ballard House, West Hoe Road
Plymouth
PL1 3BJ

T +441752668000
F +441752305538
E [email address]
www.plymouth.gov.uk

dangos adrannau a ddyfynnir

FoI Corporate Services, Plymouth City Council

1 Atodiad

OFFICIAL

Dear Ms Barker

FoI Ref: 919240

Please find attached a reply to your Freedom of Information request.

Kind regards

Ms K Forsyth
Customer Advisor
Customer Service and Service Centre
Plymouth City Council
Ballard House, West Hoe Road
Plymouth
PL1 3BJ

T +441752668000
F +441752305538
E [email address]
www.plymouth.gov.uk

dangos adrannau a ddyfynnir

Dear FoI Corporate Services,

Thank you for your response.

Since I submitted my request a number of anomalies have come to light regarding the enforcement procedure in the area concerned. However, I do not wish to pursue this, though the council might want to reconsider its actions regarding the recovery of Council Tax in light of the issues. Note later on under the heading 'NO LEGAL BASIS TO PURSUE LIABILITY ORDER ONCE AN AMOUNT AGREED' the point discussed is not a discretionary matter. I suggest this and the other points raised are considered by the Monitoring Officer, but that is of course a matter for the council.

It does not constitute discretion if a decision of whether to apply it or not depends on being prompted by the customer, parameters being agreed in advance relating to the outstanding monetary value of a customer's account or other information that can be input so the council tax processing system can detect it when running the complaint list. Discretion could only be appropriately applied at a stage when the summons is normally requested, i.e. when all the relevant circumstances are known about the customer's account at that particular time.

Information obtained indicates that discretion is not exercised at the point where a decision is needed to be made about whether to request a summons. Discretion is applied earlier than this, after a summons has been issued but before a liability order is obtained and after a liability order has been obtained, primarily to make payment arrangements which need to be monitored after the debt is secured by a liability order. The actual process of running the complaint list and the summonses is automated for which the defendant incurs disproportionate costs.

It is apparent from information obtained that the defendant incurs a £23.40 sum in respect of the council requesting the issue of a summons (an automated procedure). However, that sum actually covers the council's additional expenditure in respect of sending out reminders and officer time engaging with customers who query their accounts at this point. Also the same for final notices (see below) and after a summons has been issued in respect of customers who query their accounts to arrange payment plans which are conditioned upon the council obtaining a Liability Order (to secure the debt). A total £47.40 court costs are added comprising summons costs of £23.40 plus a further £24.00 for the Liability Order. The £24.00 sum is added to the £23.40 costs already incurred for the request of the summons in respect of the accounts of all customers who have not paid the total amount outstanding of their liability before the court hearing, whether or not they take advantage of the pre-arranged payment plan. This is to compensate the council for the officer time attributed to making the application for a Liability Order (on day of the hearing).

Before the summons stage (final notice), a customer will be able to avoid summons costs, for example, a taxpayer who has lost her right to pay by instalments may have them effectively re-instated if she manages to negotiate a payment arrangement. Discretion whether to enter into a payment agreement with a taxpayer is applied again once the council has obtained a liability order (as an alternative to taking recovery action) but by that time she would have had the total £47.40 court costs added to the debt and included in the payment plan.

So the costs in reality cover the council's expenditure (additional to the issue of the summons) attributable to before the summons is requested, both after the summons is requested but before the liability order application and after the liability order has been obtained in respect of officer time engaging with customers who agree to enter into payment arrangements. The costs must therefore with absolute certainty cover the general administration of the council tax and enforcement departments.

RELEVANT LEGISLATION AND CASE LAW

I understand that the council must adhere to the Council Tax (Administration and Enforcement) Regulations 1992 and also be mindful of all established case law regarding the area concerned.

I am aware of a number of cases but particularly two which I would like to refer to regarding your response namely R (Nicolson) v Tottenham Magistrates [2015] EWHC 1252 (Admin) and Williams v East Northamptonshire [2016] EWHC 470 (Admin).

Williams v East Northamptonshire [2016] EWHC 470 (Admin)

The Council's website states that once a summons is issued the customer is charged £23.40 court costs. I am making the assumption that the costs are actually added to the customer's account at this point because it is generally the approach taken by local authorities.

I am aware that in the East Northamptonshire case, the judgment went to some lengths to clarify the position with regard to when, i.e. at what stage it was permissible for a billing authority to add summons costs to a customer's account. In essence, what the judgment determined was that it was entirely lawful for the billing authority to inform the customer by stating on the summons the amount of costs it would ask for in the event it proceeded to make the application at court for a Liability Order. Implicit in this is that it is impermissible to add to the customers account at this point the costs claimed by the billing authority because there is only any legal basis to do so once the court has granted the Liability Order. The following in paragraph 28 of the judgment bears this out:

"...I have come to the clear conclusion that the summons is not an abuse of the process or otherwise invalid by reason of the fact that it includes reference to a claim for costs. The heading of the summons makes clear it seeks recovery of the Council Tax only. The complaint is therefore only as to the non payment of the Council Tax. The tax due is the Council Tax which is separately identified both on the first page and on the subsequent page. It is abundantly clear that the subject matter of the summons is therefore the recipient’s liability for the Council Tax...."

NO LEGAL BASIS TO PURSUE LIABILITY ORDER ONCE AN AMOUNT AGREED

The council's Collection Framework document states that 'when a summons has been issued and the customer wishes to enter into an arrangement to pay by regular instalments which will clear the debt within a reasonable period of time, this will be agreed. However, the customer should be informed that the application for a liability order together with liability order costs will continue'.

These costs are incurred at a point after the customer has tendered payment. Therefore, the cost attributable to this activity could not lawfully be included in the costs claimed because expenditure may only be recharged that has been incurred by the authority up to the time of the payment or tender and clearly resources called upon by engaging staff in the matter would occur after payment was tendered. Expenditure incurred by the authority after that point falls on the wrong side of line to be referable to the summons and would only be lawfully recharged (if eligible) in respect of those who had not paid or tendered to the authority the aggregate of the outstanding amount and costs before the court hearing because only those customers may be proceeded against further and incur additional costs.

To be clear, it is not just the costs in these circumstances which are artificially inflated by either front loading or being charged where there is no legal basis at all which is a point of contention. The consequences are that for all those cases against whom the council proceeds in order to secure the debt once an amount has been agreed (the payment arrangement), the action is unlawful because regulation 34 of SI 1992/613 provides that the authority shall accept the amount and the application shall not be proceeded with in these circumstances.

Paragraph 34(5) of the regulations, are as follows (with emphasis):

“(5) If, after a summons has been issued in accordance with paragraph (2) but before the application is heard, there is paid or TENDERED to the authority an amount equal to the aggregate of—

(a) the sum specified in the summons as the sum outstanding or so much of it as remains outstanding (as the case may be); and

(b) a sum of an amount equal to the costs reasonably incurred by the authority in connection with the application UP TO THE TIME OF THE payment or TENDER,

the authority shall accept the amount and the application shall not be proceeded with.”

The authority could not defend its actions on the grounds that an arrangement does not constitute payment therefore it is entitled to obtain a liability order to secure the debt because the law does not say that the amount must be paid for the application not to be proceeded with, only that the amount tendered is accepted (the aggregate of the outstanding amount and costs). By agreeing a payment plan which encompasses the outstanding amount and costs (costs which are properly referable to the enforcement process) the authority has accepted the amount and so there is no legal basis to proceed to obtain a liability order from the Magistrates' court.

Notwithstanding the lack of provision to proceed once the aggregate of the outstanding amount and costs has been agreed by the council, even if it were permissible, these costs and any other incurred would have further criteria to meet for the court to be satisfied that they were reasonably incurred.

R (Nicolson) v Tottenham Magistrates [2015] EWHC 1252 (Admin)

The Tottenham case provides in the judgment some general guidance regarding Council Tax Liability Order court costs and give clues (paragraphs 35 and 46) as to what should not be included in the costs and an approach that might be legitimate in respect of averaging the costs.

“It is clear that there must be a sufficient link between the costs in question and the process of obtaining the liability order. It would obviously be impermissible (for example) to include in the costs claimed any element referable to the costs of executing the order after it was obtained, or to the overall administration of council tax in the area concerned.” (Paragraph 35)

"In principle, therefore, provided that the right types of costs and expenses are taken into account, and provided that due consideration is given to the dangers of double-counting, or of artificial inflation of costs, it may be a legitimate approach for a local authority to calculate and aggregate the relevant costs it has incurred in the previous year, and divide that up by the previous (or anticipated) number of summonses over twelve months so as to provide an average figure which could be levied across the board in "standard" cases.." (Paragraph 46)

However, the above does not go so far as to specify what the right types of costs and expenses are, plus the 1992 Council Tax Regulations (and associated guidance) also apply so any provisions in those capable of establishing what are "relevant costs" need taking into account. Crucially, the possibility that the approach of averaging the costs is conditional upon the right types of costs and expenses being taken into account and being mindful of the dangers of artificially inflating the costs.

Government guidance from 1993 and 2013 both provide within them that "the Court may wish to be satisfied that the amount claimed by way of costs in any individual case is no more than that reasonably incurred by the authority". They do so because the court is obliged to hear individually anyone wishing to raise a defence and regulation 35(1) of the Regulations provides that a single liability order may deal with one person and one amount.

The streamlining of the process, i.e. by hearing cases of all the defendants in a bulk application who decline the invitation to defend themselves would if the law was properly applied be met with a forfeiture of costs income because only expenditure which is common to every defendant may lawfully be included in a standard sum. For example, even if expenditure attributable to engaging with customers agreeing payment arrangements was not impermissible for the reasons discussed, they would not otherwise be deemed "relevant costs" to be included in the calculation because the expenditure is not common to every defendant but also because it would be impermissible to include in the costs any element referable to the overall administration of council tax in the area concerned (para 35, Tottenham judgment).

There is also the anomaly that the customers who to the greatest degree drive the level of activity are ironically avoiding the recovery process and not incurring any costs. These are generally those customers who have negotiated their instalments being re-instated, whilst customers who settle their debt without causing additional work are left subsidising this expenditure when bizarrely none is incurred in connection with their summonses.

Expanding further on the concept of "reasonably incurred". If the costs are to be recharged lawfully to the customer it must have been reasonable for the council to have incurred them. Any expenditure recharged to the customer in respect of costs has not been reasonably incurred which is attributable to activity carried out by the council above what is necessary to secure the court order. Obtaining the order is merely a formality and it functions simply as the vehicle empowering the council to make use of a range of enforcement measures to pursue monies owed should it be necessary once it is in place, so with that in mind and that applications are made en masse, then the vast majority of costs typically claimed by local authorities are not necessary in a process which amounts to no more than seeking permission from the court.

Expenditure attributable to work carried out, which is clearly by its nature referable to the overall administration (in the area of council tax concerned) would not by virtue of it coinciding with when the complaint is in progress be sufficient to link it to the actual process of obtaining the liability order. This is separable from any that is permissible to be included in the costs claimed and would need omitting from the calculation because it would not be reasonable to expect those paying them to subsidise general administration or to be exploited as a means of funding revenues/recovery staff - and - because it is not common to every defendant.

BREAKDOWN OF COSTS

A breakdown has been obtained relating to the councils 2018/2019 court costs. The sum determined to be the amount which the council deems it is entitled to for taking its customers to court is £1,318,529. This figure is then split between the cost of issuing a summons and obtaining the Liability Order, i.e. £688,463 (52%) and £630,066 (48%) respectively.

It should be noted that the £1,318,529 figure equates to the cost in terms of the time spent on recovery work, i.e. an element (48%) of the aggregated Local Tax Collection budget of £2,653,500 and Systems Costs of £110,357 (total £2,763,857).

The £688,463 figure is divided by the total number of summonses issued per year (24,015) and the £630,066 figure divided by the corresponding liability orders granted (21,978) to arrive at a cost of £28.67 and £28.67 per case in respect of the summons and liability order costs. However, the costs charged to the customer have been confirmed to be £47.40 in total with £23.40 incurred at the summons stage and a further £24.00 if the case proceeds to a hearing and a liability order obtained. On the face of it the council charges its customers a lesser sum than the law permits which would presumably be enough to satisfy the court that the breakdown needs no further scrutiny. It is reasonable to assume that presenting the figures like this is intended as a red herring because what matters more than the final figure is that the expenditure included in the calculation has been reasonably incurred in the context of what the law deems relevant to the process of obtaining the liability order. The court is likely to have been diverted from noticing that expenditure attributable to work done outside the process of applying for and obtaining the liability order is included in the breakdown and /or referable to the general administration in the area of council tax concerned and if the costs were properly referable to the enforcement processes.

What is clear, is that if the court had not allowed itself to be thrown off the scent by the presentation of a lesser sum charged than the amount calculated, it would have noticed the incontrovertible evidence that the majority of the expenditure included in the costs claimed is impermissible and be satisfied that the costs were not reasonably incurred.

The fact that the £1,318,529 claimed to be recoverable through the court costs represents the costs as a percentage of the time spent on recovery work It is a good indication that the significant majority of it is made up from expenditure which is referable to the overall administration of council tax (in the area concerned). It is not the expenditure attributable to the time spent on recovery work that is permissible to be recharged to the customer, merely the the obtaining of a liability order.

It is difficult to verify from the limited information whether expenditure attributable to activity pre-summons is accounted for in the breakdown but it could hardly be denied that the issue and preparation of reminders/final notices and dealing with queries as a consequence is improperly included. The point at which the process of enforcement gets underway is defined in the Tottenham judgment (para 43) to be when a decision has been made to pursue a complaint to the court (only then can costs be incurred in connection with the application). Consequently, all expenditure which accounts for pre-summons activities is impermissible because the decision to actually pursue a complaint can not be taken by the council until either the Statutory reminder or Final Notice has failed to obtain payment.

Adapting calculation to obtain desired level to charge

The council decides how much it would like to charge customers in respect of court costs and adapts the way it calculates them to suit. Various data confirms this to be the basis upon which the council justifies the amount it charges.

For example, the council shows for its calculated costs in 2014 that the total revenue cost of Council Tax administration was £2.65 million. The corresponding figure in the presently discussed breakdown is approximately the same (£2,653,500). However, in the earlier breakdown the percentage of workload and time spent on recovery process was deemed to much less (30.2%) than the 48% now estimated. The amount which the council deemed it was entitled to then was £0.8 million as opposed £1.32 million currently.

Note that in the earlier calculation the the figure by which the relevant expenditure is divided was 8,065. This related to the number of Liability Orders (not summonses) for which the Council aimed to recover costs. The calculated costs were artificially inflated because of the lower figure used in the division (logically there are less Liability Orders than summonses) but were inflated further due to a bad debt provision that had been factored in, thus the gross expenditure was split between a much lesser figure than the actual number of Liability Orders. The council viewed it was justified in doing so because they were unable to collect all of the costs raised (those who did pay subsidised those who did not). 

Note also regarding the 2014 breakdown it was stated that total income forecast generated from costs was £0.67 million to emphasise the fact that it was less than the council's then £0.8 million budget for council tax recovery.

The council implicitly considered the £0.8 million to be the limit up to which its costs income would be lawful (a check to ensure that the monies raised from applying costs are not greater than the actual cost of recovery). Presenting the figures this way is presumably a ploy to justify that the costs need no further scrutiny and the court unlikely to insist on a more detailed breakdown. If the law permitted the full cost of recovery to be funded via the costs awarded by the court for applying for a liability order then it would have a point (to a degree), but it is only the costs incurred for the process itself that regulation 34 authorises to be recharged to the customer which is a fraction of the overall costs of recovery. In other words the provision is intended to reimburse the council with the costs it incurs to obtain the court's permission to enforce; recovering the debt (as is the expenditure incurred in doing so) is another matter. What matters is that the expenditure has been reasonably incurred in the context of what the law deems relevant to the process of obtaining the liability order and of that which is deemed relevant is properly referable to the enforcement processes.

Returning again to the current breakdown, it no longer looks like the calculation factors in a bad debt element which is probably because the Tottenham Magistrates' court case had highlighted that doing so artificially inflated the costs and was therefore impermissible. With this effectively prohibiting the council from taking the approach, a measure was needed to counteract the effects of factoring in a significant increased number of summonses which would have had the effect of reducing the costs per case significantly, had the comparable level of expenditure been used. This was evidently achieved by increasing the estimate of the workload and time spent on recovery from 30% to 48% (i.e. the detrimental affect of no longer being able to factor in a bad debt element was cancelled out).

But this does not address whether the costs are properly referable to the enforcement processes. The costs as currently applied are in the sum of £23.40 for instituting the complaint (summons) and a further £24.00 for those cases where it is necessary to obtain the liability order. However, the breakdown only tells you that the recoverable expenditure is split between the summons and Liability Order, i.e. 52% and 48% (no information justifying this particular composition), which would give the court every reason to question whether the expenditure has been split disproportionately to enable costs to be front loaded to the issue of the summons. Hence, there is not enough relevant information to satisfy the court that the costs are properly referable to the enforcement processes. 

The court also needs to be able to verify that the number of accounts with summonses issued and liability orders granted are accurate and haven't been estimated on the low side to artificially inflate the costs. This information is normally available for all councils in the Revenue Collection Statistics, collected and published by the Chartered Institute of Public Finance & Accountancy (CIPFA), but relies on the local authority submitting the data in its returns. The last time Bradford Council submitted this data relates to the 2013-14 CIPFA return and has for some reason omitted to do so in all other subsequent years to date (as is the practice of many other councils).

What should be immediately clear to the court is that the costs represents an amount that could nowhere near be claimed to have been reasonably incurred, and what is generally considered reasonably incurred expenditure is not shown to be properly referable to the enforcement processes.

For the court to properly consider a breakdown it would be necessary for it to contain sufficient information as to how the figure was arrived at, and what costs it represents. It would also need to contain enough information to satisfy the court that the costs were incurred in obtaining the order and not for carrying out general council tax administration. But there is clear enough evidence in the breakdown to satisfy the court that expenditure attributed to work done outside the process of applying for and obtaining the liability order is being claimed.

Clearly the calculation contains sufficient information to satisfy the court that the costs are not reasonably incurred, but it is quite obvious that in the majority of cases the court simply rubber stamps the orders without questioning them. It is hardly credible that the Magistrates would be mindful of the regulations, guidance and case law relevant to costs which is what the majority of councils must rely on to succeed in getting council tax administration funded from the costs recharged to customers for the formality of summonsing them to court.

It is generally accepted by billing authorities that defences against the issue of a Liability Order at the court hearing which are considered to be valid are restricted to no more than a handful. However, there are seven obvious additional defences that would be valid if no discretion is exercised prior to requesting the issue of a summons and expenditure incurred by the council outside the process of applying for and obtaining a liability order is included in those costs. They would be that;

1. the billing authority has not (does not) comply with regulation 34(1) of the Council Tax (Administration and Enforcement) Regulations 1992;

2. expenditure amounting to £23.40 was not incurred by the council in respect of instituting the complaint;

3. the costs have been inflated to subsidise customers who opt to make payment in line with the pre-arranged payment plans;

4. the costs in respect of instituting the summons include expenditure which is incurred by the council after that action;

5. the costs have been inflated to subsidise expenditure incurred by the council in respect of potential applications to the court but which are not made by virtue of negotiations that have taken place to reinstate instalments;

6. the costs in general have been inflated to subsidise expenditure incurred by the council in respect of officer time monitoring arrangements and/or engaging with customers after the process of applying for and obtaining the liability order has ended; and

7. the costs in general have been inflated to fund the running of the council tax and enforcement departments and/or the overall administration of council tax in the area concerned.

Yours sincerely,

Helen Barker

Gadawodd Helen Barker anodiad ()

For anyone interested or wondering where the breakdown of costs referred to in the above 24 September 2020 correspondence was obtained it can be found in the FOI response here:

Court Costs.pdf
https://www.whatdotheyknow.com/request/h...

Gadawodd Helen Barker anodiad ()

The Local Government Ombudsman decision into complaint against Plymouth City Council (17 012 756) confirms in paragraph 14 that summonses are sent out automatically and council tax enforcement is a largely an automated process.

https://www.lgo.org.uk/decisions/benefit...

" 14. Mr X says the Council could have stopped the summons because he sent an email on 2 October. However, council tax enforcement is a largely an automated process and staff cannot always respond to emails immediately. "