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

The request was partially successful.

Dear The Local Government and Social Care Ombudsman,

The Ombudsman makes the statement quoted below from the document link:
https://www.whatdotheyknow.com/request/4...

"The allocation of payments can give rise to problems, especially when there are arrears or summonsed debt. Council officers do not watch each account and decide where each payment will go. The computer system will allocate it, according to some simple rules. Usually payments which are exactly equal to instalments or exact multiples of instalments will be allocated to the current instalment debt. After a summons is issued the computer may then allocate instalment payments to any arrears – as the right to pay by instalments is been lost once a final notice has been issued.

You will need to establish what system the council uses, how it decided which payments went where and how the taxpayer was told."

The Ombudsman'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 Ombudsman'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 Ombudsman 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 Officer, The Local Government and Social Care Ombudsman

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Mandy Cashmore, The Local Government and Social Care Ombudsman

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Our ref: 19/178

           

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Dear S Staffordson

 

INFORMATION ACCESS REQUEST – REFERENCE 19/178

 

I acknowledge your request for information received on 16 September 2019.

 

We aim to respond to all requests within 20 working days, and therefore
you can expect my response to be issued on or before 14 October 2019.

 

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Yours sincerely

 

 

 

 

 

 

Mandy Cashmore

Information and Records Officer

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Mandy Cashmore, The Local Government and Social Care Ombudsman

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Dear S Staffordson

 

INFORMATION ACCESS REQUEST – REFERENCE 19/178

 

Please find attached my response to your request for information received
on 16 September 2019.

 

Yours sincerely

 

 

 

 

Mandy Cashmore

Information and Records Officer

Tel: 0330 403 4734

 

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Dear Mandy Cashmore,

"My response

We do not hold the information requested."

Please review your response because on the balance of probabilities the Ombudsman must have obtained the requested information from somewhere in order for him to base his advice on which is given to investigators. For example, a lawyer, a local authority, 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

Trish Farman, The Local Government and Social Care Ombudsman

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Dear S Staffordson

 

Please find acknowledgment letter attached.

 

Yours sincerely

 

Trish Farman I Executive Assistant

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Trish Farman, The Local Government and Social Care Ombudsman

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Dear S Staffordson

 

Please find response letter attached.

 

Yours sincerely

 

Trish Farman I Executive Assistant

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Dear Trish Farman,

The Director of Investigation's review response contains the following which is an admission that the Ombudsman does hold the information I requested (as opposed to not holding it):

"I have now had the opportunity to review the original decision.

I have spoken to the person who maintains our guidance on this subject. Our guidance is based on our normal practice in dealing with cases, rather than on any specific written information.

There are several legal cases about where to credit payments made, none of which relate directly to local taxation. We take account of any relevant case law in writing our guidance and making our decisions. However, we do not hold copies of case law, but rather subscribe to an on-line legal service.

I therefore uphold Ms Cashmore’s decision that we do not hold the information you requested."

Please disclose the information I requested (identify the on-line legal service) and if at all possible provide the information obtained specifically regarding the laws of the appropriation of payments which the Ombudsman relies on to deal with complaints.

Yours sincerely,

S Staffordson

Dear Trish Farman,

Will you please acknowledge my 12 November correspondence and inform me whether the information requested (see below) will be considered as part of this request or handled as a new one.

"Please disclose the information I requested (identify the on-line legal service) and if at all possible provide the information obtained specifically regarding the laws of the appropriation of payments which the Ombudsman relies on to deal with complaints."

Yours sincerely,

S Staffordson

Mandy Cashmore, The Local Government and Social Care Ombudsman

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Our ref: 19/253

           

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Dear S Staffordson

 

INFORMATION ACCESS REQUEST – REFERENCE 19/253

 

I acknowledge your request for information received on 12 November 2019.

 

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Yours sincerely

 

 

 

 

Mandy Cashmore

Information and Records Officer

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Jayne Spence, The Local Government and Social Care Ombudsman

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Dear S Staffordson

 

INFORMATION ACCESS REQUEST – REFERENCE 19/253

 

Please find attached my response to your request for information received
on 12 November 2019.

 

Yours sincerely

 

 

 

 

Mandy Cashmore

Information and Records Officer

Tel: 0330 403 4734

 

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Dear Jayne Spence,

Your response:

"1. The online legal service we use is LexisNexis.
2. We do not hold the information."

Answering the following queries (or providing any other relevant information) would put the above in context.

1. Do you not hold the information because LexisNexis does not send its customers or allow them to download its advice / case law etc. (only view it online)?

2. Although the online legal service you use is LexisNexis you have never sought or been unable to obtain the case law or legal advice relevant to the appropriation of payments?

Yours sincerely,

S Staffordson

FOI Officer, The Local Government and Social Care Ombudsman

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Dear S Staffordson

 

INFORMATION ACCESS REQUEST - REFERENCE 19/253

 

Thank you for your email dated 08 December 2019.

 

I am treating this latest correspondence as a follow-up rather than a new
request.

 

Lexis Nexis is a subscription based online legal service which gives us
access to up to date versions of legislation, case law and government
guidance.   We do not hold the information -  we pay to access the
information.

 

Our investigators have access to the online legal service if they have a
specific query which is not covered by our internal guidance.

 

We have previously provided our internal guidance under reference 19/178
and explained that this was not based on any particular case law or
guidance. 

 

We do not hold information you have asked for in part 2 of your email.

 

You can submit a new request detailing the specific case law, a date range
and confirmation of what the payments you refer to are for if you wish to
know whether a specific case law relating to the "appropriation of
payments" has been considered through the course of an investigation.  As
Mrs Sykes advised in her appeal response dated 11 November 2019, there are
several legal cases about where payments made should be credited, but none
relate to local taxation.  It would aid our search to establish if the
information is held if we know which case law you are referencing.

 

If you are dissatisfied with my response to request 19/253 you have the
opportunity to request a review as detailed in the Access Review leaflet
that accompanied the response.

 

Yours sincerely

 

 

 

 

Mandy Cashmore

Information and Records Officer

Tel: 0330 403 4734

 

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Dear FOI Officer,

Your suggestion of submitting another request with reference to a specific case law etc. is not the appropriate way of going about this.

You have already stated the following:

"We take account of any relevant case law in writing our guidance and making our decisions. However, we do not hold copies of case law, but rather subscribe to an on-line legal service."

If you could disclose the information that was taken into account in order to write the guidance then this request will be done with. I notice the guidance refers to the IRRV Insight magazine on a couple of occasions.

Alternatively, you could say that no information was referred to, but it looks to me like the information is based on what billing authorities have taken upon themselves to decide is appropriate.

Yours sincerely,

S Staffordson

FOI Officer, The Local Government and Social Care Ombudsman

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FOI Officer, The Local Government and Social Care Ombudsman

Dear S Staffordson

INFORMATION ACCESS REQUEST - REFERENCE 19/253

Thank you for your email dated 12 December 2019.

We do not record the sources used in the guidance. If a resource has bene used it will been named in the guidance.

Yours sincerely

Mandy Cashmore
Information and Records Officer
Tel: 0330 403 4734

Listen - Understand - Communicate - Learn

www.lgo.org.uk

show quoted sections

Dear FOI Officer,

I would appreciate non-evasive responses please.

Is it correct that the information is based on what billing authorities have taken upon themselves to decide is appropriate?

Yours sincerely,

S Staffordson

FOI Officer, The Local Government and Social Care Ombudsman

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FOI Officer, The Local Government and Social Care Ombudsman

Dear S Staffordson

We have responded to your request, and a follow-up question. If you are unhappy with our response (issued 6 December) you are able to ask for a review. Information on how to do this was provided to you in that response. If you remain unhappy with our response after a review, you can complain to the Information Commissioner.

Information and Records Office

show quoted sections

Dear The Local Government and Social Care Ombudsman,

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

I am writing to request an internal review of The Local Government and Social Care Ombudsman's handling of my FOI request 'Council tax payment allocation in accordance with R. v Miskin Lower Justices [1953]'.

I have carefully considered all of the evasive responses regarding this request and arrived at the conclusion that on the balance of probabilities the Ombudsman has not dealt with it in accordance with the Freedom of Information Act.

If this request had been properly considered it would have disclosed that the information regarding the appropriation of payments was based upon what billing authorities in general have informed the Ombudsman.

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

Trish Farman, The Local Government and Social Care Ombudsman

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Dear S Staffordson

 

Please find acknowledgment letter attached.

 

Yours sincerely

 

Trish Farman I Executive Assistant

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Trish Farman, The Local Government and Social Care Ombudsman

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Dear S Staffordson

 

Please find response letter attached.

 

Yours sincerely

 

Trish Farman I Executive Assistant

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Dear Trish Farman,

The following reply is a non answer:

"Our guidance is based on our normal practice in dealing with cases, rather than on any specific written information."

All the evidence points to the Ombudsman's guidance being based upon how councils in general apply non matching payments and essentially what council's themselves would like the guidance to be based upon.

May I remind you that it amounts to an offence under Section 77 of the Freedom of Information Act 2000 if a public body conceals information with the intention of preventing disclosure.

Yours sincerely,

S Staffordson

Dear Trish Farman,

The Local Government and Social Care Ombudsman (LGSCO) has dealt with this matter without any regard for the review grounds, though I have decided it would be futile to pursue this further. However, my thoughts are that the LGSCO should be concerned about the potential legal implications of routinely finding in favour of Local Authorities who automatically allocate non-specific payments to the oldest debt rather than maintaining the in-year account. Clearly the issue demands scrutiny by the Ombudsman's legal department as a matter of public interest.

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 statement in question; "payments which are exactly equal to instalments", 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. The LGSCO's legal department might wish to look at this from the following perspective (a possible scenario involving Hull Council Tax payers):

Let's say a Customer has an outstanding balance of £50.00 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 £80.00 so the total amount owing the council for that year's charge has increased to £130.00. 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 £80.00 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 £80.00 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 £130.00 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 £8.00). The customer's in-year liability did not only remain unchanged as a result of the misapplied £122.00 payment it actually increased by £80.00 because of the court costs attributable to the council's further application to the Magistrates' court (the in-year liability increased to £1,281.95 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 £80.00 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 sincerely,

S Staffordson