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

The request was partially successful.

Dear Tower Hamlets Borough Council,

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

"Any payments received are initially checked for matching against current years instalments and if matched allocated accordingly, thereby avoiding additional costs being incurred to the council tax payer.

If the payment does not match the instalment due, it will then be checked against any existing arrangement, if this doesn’t match it will be allocated to the oldest debt."

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

London Borough of Tower Hamlets, Tower Hamlets Borough Council

Information request
Our reference: 18304489

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Dear  Ms Staffordson,
 
Freedom of Information Act 2000
 
Thank you for your request for information that was received on 16
September 2019  requesting:

The Council makes the statement quoted below from the link:
https://www.whatdotheyknow.com/request/3...
"Any payments received are initially checked for matching against current
years instalments and if matched allocated accordingly, thereby avoiding
additional costs being incurred to the council tax payer.
If the payment does not match the instalment due, it will then be checked
against any existing arrangement, if this doesn't match it will be
allocated to the oldest debt."
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]?
 
We are dealing with your request under the Freedom of Information Act
2000  and we aim to send a response by 14 October 2019.
 
In some case, a fee may be payable. If we decide a fee is payable, we will
send you a fee notice and we will require you to pay the fee before
proceeding with your request.
 
The Freedom of Information Act 2000  may restrict the release of some or
all of the information you have requested. We will carry out an assessment
and if any exemptions  apply to some or all of the information then we
might not provide that information to you. We will inform you if this is
the case and advise you of your rights to request an internal review and
to complain to the Information Commissioner's Office.
 
We will also advise you if we cannot provide you with the information
requested for any other reason together with the reason(s) why and details
of how you may appeal (if appropriate).
 
Yours faithfully
 
 
INFORMATION GOVERNANCE
Complaints and Information
020 7364 4736
[Tower Hamlets Borough Council request email]
 
NOTE: Please do not edit the subject line when replying to this email.

London Borough of Tower Hamlets, Tower Hamlets Borough Council

1 Attachment

Information request
Our reference: 18304489

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Dear S Staffordson,
 
Your request for information has been considered under the requirements of
the Freedom of Information Act 2000. 
 
Please find attached our response to your request.

If you are dissatisfied with the handling of your request, you have the
right to ask for an internal review. Internal review requests should be
submitted within two months of the date of receipt of the response to your
original letter and should be addressed to:
 
Complaints and Information
Town Hall
Mulberry Place
5 Clove Crescent
E14 2BG
icw[Tower Hamlets Borough Council request email] 
 

If you are still dissatisfied with the Council's response after the
internal review you have a right of appeal to the Information Commissioner
at:
The Information Commissioner's Office
Wycliffe House
Water Lane
Wilmslow
Cheshire SK9 5AF.
Telephone: 01625 545 700
Website: www.ico.gov.uk 
 
Yours faithfully
 
 
INFORMATION GOVERNANCE
Complaints and Information
020 7364 4736
[Tower Hamlets Borough Council request email]
 
NOTE: Please do not edit the subject line when replying to this email.

 
 

Dear London Borough of Tower Hamlets,

Your attached response includes the following:

"If a payment received matches an instalment for the current year it would cause havoc for the vast majority of customers if the council did not match it to the current years account & therefore it is the place most beneficial to the debtor."

Which is incompatible with the paragraph below (in the request):

"If the payment does not match the instalment due, it will then be checked against any existing arrangement, if this doesn’t match it will be allocated to the oldest debt."

Yours sincerely,

S Staffordson

Roger Jones, Tower Hamlets Borough Council

Dear S Staffordson,

Both statements are compatible with each other.............the first saying if the payment is matched it will be allocated to that instalment, and the second saying where there is no match it will be allocated to the oldest debt.

Thanks

Roger Jones
Head of Revenue Services

show quoted sections

Dear Roger Jones,

Sorry I should have explained why I did not consider the two responses compatible.

The first considers implied payments which are not in dispute, i.e. the payment matches an instalment amount. This impliedly identifies the year's liability to which the debtor intended his payments to be allocated. This is accepted and would (I guess) be in accordance with all the relevant case authority.

It is the second paragraph which the request deals with (and contends), i.e. the practice of automatically allocating payments which do not match an instalment amount to the oldest debt. I don't agree that allocating payments in this manner would be considered most beneficial for council tax payers (the debt would not necessarily be cleared as a consequence of the allocation). This would almost certainly result in the Council's automated recovery procedure being triggered to the detriment of the taxpayer by way of unnecessary additional costs relating to the enforcement of the in-year account which would have fallen in arrears not as a result of the taxpayer failing to maintain his account but as a consequence of the billing authority misappropriating payment.

The council is most likely to have already obtained a liability order adding costs in respect of any older debts that the taxpayer might have and the council cannot repeat this procedure adding more costs again for the same year's liability.

Yours sincerely,

S Staffordson

Roger Jones, Tower Hamlets Borough Council

I do not agree with your account of what might happen.............older debts may well be a lot further down the enforcement route and may even have reached a potential insolvency position or be referred to Enforcement Agents and therefore would incur substantial costs if the payment is not allocated to the oldest debt...............in any case if the debtor indicated the payment was meant for a specific year we would have no issues transferring it.

Thanks

Roger Jones

show quoted sections

London Borough of Tower Hamlets, Tower Hamlets Borough Council

Dear Mr Staffordson,
 
Thank you for your email.
 
Both statements are compatible with each other, the first saying if the
payment is matched it will be allocated to that instalment, and the second
saying where there is no match it will be allocated to the oldest debt.
 
Kind Regards
 
INFORMATION GOVERNANCE
Complaints and Information
020 7364 4736

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Dear London Borough of Tower Hamlets,

Your attached response includes the following:

"If a payment received matches an instalment for the current year it would
cause havoc for the vast majority of customers if the council did not
match it to the current years account & therefore it is the place most
beneficial to the debtor."

Which is incompatible with the paragraph below (in the request):

"If the payment does not match the instalment due, it will then be checked
against any existing arrangement, if this doesn't match it will be
allocated to the oldest debt."

Yours sincerely,

S Staffordson

show quoted sections

Dear London Borough of Tower Hamlets,

Re your 18 August comments:

"I do not agree with your account of what might happen.............older debts may well be a lot further down the enforcement route and may even have reached a potential insolvency position or be referred to Enforcement Agents and therefore would incur substantial costs if the payment is not allocated to the oldest debt"

I don't think the above takes into account my previous points. Potentially, the taxpayer would not only be at risk of the burdens you describe on the earlier year's account, he would potentially have two year's liability subject to those burdens.

Yours sincerely,

S Staffordson

Dear Tower Hamlets Borough Council,

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

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

I allowed myself to be side tracked by the council's response which did not actually deal with the request but rather gave its opposing opinion about why it considered its approach to payment allocation was lawful.

What I actually asked was where did the council obtain the information regarding the appropriation of payments case law?

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

Dear London Borough of Tower Hamlets,

In anticipation of you not replying, I have decided against pursuing this. However, further to my email of 13 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; "if the payment does not match the instalment due...", there was no precedent set in the Miskin case based on payments matching the instalment amount of a particular year.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Let's say a Customer has an outstanding balance of £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 £110.00 so the total amount owing the council for that year's charge has increased to £160.00. The customer now has his in-year Council Tax obligation to meet as well as the amount secured by a court order from the previous year's charge.

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

It is therefore reasonable to suspect that the council allocates non-matching payments to the arrears thus imposing an additional £110.00 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 £110.00 debt. This by definition is penalising the customer with imposed costs which is impermissible according to established case authority. It was held on judicial review of a licensing case R v Highgate Justices ex parte Petrou [1954] 1 ALL ER 406 that costs should not exceed the proper costs incurred and should not be a penalty.

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

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

Each year's liability is a distinct debt so if the council has a secured debt in respect of one year's charge it cannot use the same court order to enforce payment if a customer defaults in a subsequent year (another order must be obtained from the court). However, the court order securing £160.00 debt from a previous year was effectively used to collect the sum of £122.00 which was actually paid in respect of the in-year liability (the amount secured by the previous court order reduced to £38.00). The customer's in-year liability did not only remain unchanged as a result of the misapplied £122.00 payment it actually increased by £110.00 because of the court costs attributable to the council's further application to the Magistrates' court (the in-year liability increased to £1,311.95 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 £110.00 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