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

The request was partially successful.

Dear Luton Borough 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 Luton Borough 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

LBC Feedback, Luton Borough Council

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Nawaz, Khurram, Luton Borough Council

Our Reference: B57497

 

Dear Sir/Madam

 

Re: Your Freedom of Information Request

 

I write in response to in response to your Freedom of Information request.

 

Your Request related to Council Tax

 

 

We have considered your request under the Freedom of Information Act 2000
(FOIA).

 

Response

I can confirm we do hold information within scope of your request.

Q1. Does Luton Borough 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)

 

Yes

 

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

 

We accept special arrangements, place holds on accounts to ensure a
Summons isn't issued if they have made a claim for UC etc, if they pay up
to date even on the day of the Summons the Summons is not issued, we place
holds on accounts to ensure a Summons isn't issued if they are vulnerable,
just been made redundant etc.

 

Basically we only issue a Summons if they haven't paid anything, or are at
least 2 months behind on their instalments and they haven't contacted us.

 

 

I hope this information is helpful.

 

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Yours sincerely,

 

Khurram Nawaz

Complaints and Information Compliance Officer

Business Intelligence

Luton Council

01582 547373

 

 

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Dear Nawaz, Khurram,

Thank you for your response in which you state that the council accepts special arrangements implied to be before the summons is issued. However, the council's website states that 'if you have received a summons, you can still make an arrangement to pay but you will have to pay the court costs [£77.00] and we will still apply for a Liability Order at the Magistrates’ Court'. I note from the council's most recently available breakdown of costs (see later) that the Liability Order costs are £4.00 which are additional to the costs already incurred by the customer in respect of issuing the summons (£75.00). The breakdown includes a note stating that 'the Council will only charge for the summons costs', though it is unclear what this means because the figure does not align with the £77.00 costs quoted on the council's website.

Notwithstanding the above anomaly, 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) 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).

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

There are a couple of issues regarding the breakdown mentioned at the beginning of this email which require pointing out. Firstly the total cost of administration and enforcement is taken as a starting point to be £1.94 million. That figure is arbitrarily split between Billing (3%), Collection up to statutory reminder (26%), Statutory reminder (34%), Enforcement from complaint up to hearing of liability order (33%), Enforcement post complaint up to grant of liability order (3%) and enforcement post liability order (1%) with the first, second and last items taken out of the equation. So, with 70% (£0.37 million) of the total amount attributable to obtaining the liability order it is evident that the ratios have been applied disproportionately in order to subsidise significantly the funding of the council tax and enforcement departments. Apart from this being fairly obvious, the category descriptions reinforce the assertion as they do not properly refer to the enforcement process in accordance with the regulations etc. relevant to costs.

The summons costs have been arrived at by aggregating the expenditure attributed to the "Statutory reminder" and "Enforcement from complaint up to hearing of liability order" which represents 96% of the total expenditure attributable to the costs. However, the Council Tax regulations (SI 1992/613) refer to this as a sum equal to the costs reasonably incurred by the authority in connection with the application up to the time of the payment (or tender). Though in practice, this amounts to the cost of issuing the summons because the council incurs no more expenditure once this has been done in respect of those who pay their outstanding liability before the hearing whether they do so straightaway or leave it until immediately before the court hearing. Also 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). The consequences of this alone would mean that the element attributable to the "Statutory reminder" (£0.66 million) would be 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.

The breakdown includes additional information explaining why it had reduced its costs from £110 to £75. However, the reasons indicate that the types of costs and expenses taken into account are not those permissible but referable to the overall administration of council tax in the area concerned.

For the court to properly consider the 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 (though there is evidence of the latter). That would, for a start, require itemising the activities referable to the total cost of administration and identifying what types of cost are attributable to the enforcement categories which represent 34%, 33% and 3% of the figure respectively to verify that the costs are properly referable to enforcement process. 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. However, as is the practice of many other councils, Luton frequently omits to submit this data, though on an occasion it has done (2012-13 CIPFA return), the number of summonses recorded is 15,975 but in corresponding breakdowns the much lower figure of 10,000 is quoted and influenced the calculation.

Clearly the calculation does not contain sufficient information to satisfy the court that the costs are reasonably incurred (though suggests the opposite), 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.

Yours sincerely,

Helen Barker

Helen Barker left an annotation ()

For anyone interested or wondering where the breakdown of costs referred to in the above 30 May 2020 correspondence was obtained it can be found in the FOI response here:

https://www.whatdotheyknow.com/request/h...