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

Helen Barker made this Freedom of Information request to Southampton City Council

This request has been closed to new correspondence from the public body. Contact us if you think it ought be re-opened.

The request was successful.

Dear Southampton 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 Southampton 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

Information, Southampton City Council

Thank you for contacting Southampton City Council.

Your enquiry will be passed to the relevant team/officer for action.

If you have made a request for information, you will receive a response
promptly, and within the statutory timeframe for compliance. Once your
request has been logged, you will receive further details of this, and you
may be contacted if we require further information from you.

IMPORTANT INFORMATION:

Due to unprecedented challenges facing the Council during the coronavirus
(COVID-19) pandemic, resources are being diverted from service areas, so
that key services can be provided. As such, there may be a delay in
providing you with the information requested within the statutory
timeframe.

The Council is will still process your request promptly, and you will
receive a response as soon as possible. I hope that this is understandable
during this extraordinary period.

If you have any queries, please contact the Council's Corporate Legal Team
on 023 8083 2129.

This email is confidential but may have to be disclosed under the Freedom
of Information Act 2000, Environmental Information Regulations 2004 or
data protection legislation. If you are not the person or organisation it
was meant for, apologies, please ignore it, delete it, and notify us. SCC
does not make legally binding agreements or accept formal
notices/proceedings by email. E-mails may be monitored. This email (and
its attachments) is intended only for the use of the person(s) to whom it
is addressed, and may contain information that is privileged and/or
confidential. If it has come to you in error, you must take no action
based on it, nor must you copy or show it to anyone.

Information, Southampton City Council

Dear Helen Brown,

 

Thank you for your Freedom of Information request received on 15/04/2020.
This matter has been logged under reference number FOI-2021-0022-036126.

 

Due to unprecedented challenges facing the Council during the coronavirus
(COVID-19) pandemic, resources are being diverted from service areas, so
that key services can be provided. As such, there may be a delay in
providing you with the information requested within the statutory
timeframe.

 

The Council is will still process your request promptly, and you will
receive a response as soon as possible. I hope that this is understandable
during this extraordinary period.

 

Unless clarified otherwise, your request is being dealt with under the
terms of the Freedom of Information Act 2000, and will be forwarded to the
service area(s) holding the information. The Council will do everything it
can to ensure your request is answered promptly, and within twenty working
days of the date your request was received. However, there may be
instances where this not possible.

 

Please note, the service area(s) holding the information may need further
information from you to locate the information sought once they have
received the request, and you will be contacted should this be necessary.

 

If you have any queries about this request do not hesitate to contact us
at [1][email address]. Please remember to quote the
reference number above in any future communications.

 

Please note, the Council routinely publishes information on its
Publication Scheme:

 

[2]http://www.southampton.gov.uk/council-de...

 

You may wish to view our Publication scheme to ascertain whether the
information you are seeking is already published. If you find the
information you are seeking, please let us know accordingly and we will
close your request. If we do not hear from you further we will continue to
process your request in accordance with the relevant legislation.

Regards,

 

Nathan Matterson
Information Governance Officer

Legal & Governance

Southampton and Fareham Legal Services Partnership
Southampton City Council
Tel: 023 8083 3000 (switchboard)

[3]@SouthamptonCC    [4]facebook.com/SotonCC

 

FOI-2021-0022-036126/01534743

This email is confidential but may have to be disclosed under the Freedom
of Information Act 2000, Environmental Information Regulations 2004 or
data protection legislation. If you are not the person or organisation it
was meant for, apologies, please ignore it, delete it, and notify us. SCC
does not make legally binding agreements or accept formal
notices/proceedings by email. E-mails may be monitored. This email (and
its attachments) is intended only for the use of the person(s) to whom it
is addressed, and may contain information that is privileged and/or
confidential. If it has come to you in error, you must take no action
based on it, nor must you copy or show it to anyone.

References

Visible links
1. mailto:[email address]
2. http://www.southampton.gov.uk/council-de...
3. https://urldefense.proofpoint.com/v2/url...
4. https://urldefense.proofpoint.com/v2/url...

BSS FOI, Southampton City Council

1 Attachment

 

Dear Helen Brown,

 

I refer to your Freedom of Information request FOI-2021-0022.

 

Please find attached the Council’s response to your recent Freedom of
Information Act request.

 

 

Kind Regards,

 

Business Support Officer

Business Support Service

Southampton City Council

 

Please ensure all emails go directly to [1][email address]

 

 

This email is confidential but may have to be disclosed under the Freedom
of Information Act 2000, Environmental Information Regulations 2004 or
data protection legislation. If you are not the person or organisation it
was meant for, apologies, please ignore it, delete it, and notify us. SCC
does not make legally binding agreements or accept formal
notices/proceedings by email. E-mails may be monitored. This email (and
its attachments) is intended only for the use of the person(s) to whom it
is addressed, and may contain information that is privileged and/or
confidential. If it has come to you in error, you must take no action
based on it, nor must you copy or show it to anyone.

References

Visible links
1. mailto:[email address]

Dear BSS FOI,

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.

The council's website 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 I have seen that the defendant incurs a £67.50 sum in respect of the council requesting the issue of a summons (an automated procedure). However, that sum will actually cover the council's additional expenditure in respect of sending out reminders and officer time engaging with customers who query their accounts at these points. 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, in the latter case, upon the council obtaining a Liability Order (to secure the debt). The £67.50 sum is added to the accounts of all customers who have not paid the total amount outstanding of their liability, whether choosing to query their accounts or not and those who have settled their accounts before a liability order is applied for. This is to compensate the council for the officer time attributed to dealing with customers (in respect of those who contacted them) and 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 of course by that time she would have had the total £67.50 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 three which I would like to refer to regarding your response namely R (Nicolson) v Tottenham Magistrates [2015] EWHC 1252 (Admin); Regina v Miskin Lower Justices [1953] and Williams v East Northamptonshire [2016] EWHC 470 (Admin)

Regina v Miskin Lower Justices [1953]

The council effectively states in its response that any payments made which do not exactly match the instalment amount will be allocated to the oldest arrears (instead of the in-year account) should the customer have outstanding liability on a previous year's account. The council's priority is to maintain a customer's in-year account so if an unspecified payment is made it has a duty to apply it to the in-year account thereby reducing the risk of unnecessary enforcement also being taken for that year's liability.

The relevance of the Miskin authority here is that it clarified the position in cases where a creditor has a decision to make 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. In such circumstances the creditor must allocate the payment to the account which it is most beneficial to the debtor to reduce.

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

The council's website advises that once a summons is issued the cost (£67.50) will be added to the customer's bill.

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 website informs customers that it is possible to agree a payment arrangement once a summons has been issued which is conditioned on the application for a Liability Order still going ahead (to secure the debt) and the £67.50 costs being included in the payment plan.

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).

Looking now just at general expenditure incurred in dealing with customer's queries in the context that all the £67.50 costs are applied on issue of the summons so that the same sum is incurred by customers whether or not their cases proceed to court. For those customers whose cases do not proceed, their costs are artificially inflated because the amount they're charged requires to be a lesser sum than the £67.50 total claimed to have been incurred by the council to obtain the order which is referable to regulation 34(7). The costs claims in connection with issuing the summons, which are relevant for these customers, are provided in regulation 34(5). The Tottenham judgment reinforces this in para 46, warning that a standard sum would require the right types of expenses being taken into account with due consideration given to the dangers of double-counting, or of artificial inflation and in para 50 saying that "what matters is that the costs that it does decide to claim are properly referable to the enforcement process". So, even if the work was not referable to the overall administration of council tax (which arguably it is) and considered referable to 'the right types of costs and expenses', the expenditure attributable to dealing with those customer's queries who subsequently pay to the authority the aggregate of the outstanding amount and costs before the court hearing would have paid an element of front loaded costs, i.e. which were not properly referable to the enforcement process.

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.

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 £67.50 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

BSS FOI, Southampton City Council

Thank you for contacting Southampton City Council – Freedom of Information
requests.

We aim to respond to all queries within 20 working days.

This email is confidential but may have to be disclosed under the Freedom
of Information Act 2000, Environmental Information Regulations 2004 or
data protection legislation. If you are not the person or organisation it
was meant for, apologies, please ignore it, delete it, and notify us. SCC
does not make legally binding agreements or accept formal
notices/proceedings by email. E-mails may be monitored. This email (and
its attachments) is intended only for the use of the person(s) to whom it
is addressed, and may contain information that is privileged and/or
confidential. If it has come to you in error, you must take no action
based on it, nor must you copy or show it to anyone.