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

The request was successful.

Dear Cheshire East 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 Cheshire East 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

CCR FOI Investigation Team, Cheshire East Council

[1]Cheshire East New Logo
 
 
 
 
 
 
Date: 24 April 2020
Our Reference: 8226081
 
Dear Ms Barker
 
Freedom of Information Act 2000
 
Thank you for your request regarding Exercising discretion when applying
to the court for a Council Tax Liability Order.
 
Your request has been identified as falling within the scope of Freedom of
Information Act 2000 and It will be treated as a request for information
within the meaning of the Freedom of Information Act: this means that we
will send you a full response within 20 working days, either supplying you
with the information which you want, or explaining to you why we cannot
supply it. 

We will either supply you with the information which has been requested,
or explain why we cannot supply it. If we need any further clarification
or there is a problem, we will be in touch.
 
The due date is 26 May 2020.  
 
Cheshire East Council aims to respond to you as soon as it is able.
However, during the ongoing Coronavirus Pandemic, we ask that you be
patient should the response be delayed.
 
In the meantime if you wish to discuss this further please contact me. It
would be helpful if you could quote the reference number quoted above.
 
Yours sincerely
 
 
Kate Tomlinson
Compliance and Customer Relations Assistant
Cheshire East Council
 
NOTE: Please do not edit the subject line when replying to this email.

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CCR FOI Investigation Team, Cheshire East Council

1 Attachment

[1]Cheshire East New Logo
 
 
 
 
 
 
Date: 12 May 2020
Our Reference: 8226081
 
Dear Ms Barker
 
Thank you for your request for information received on 24 April 2020.
 
Please find attached our response to your request.
 
Yours sincerely
 
 
Gill Clowes
Customer Relations and Compliance Assistant
Cheshire East Council
 
NOTE: Please do not edit the subject line when replying to this email.

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Dear CCR FOI Investigation Team,

Thank you for your response. On a related matter I would like it clarifying what the council's procedure is regarding recovery. For example, I would like it confirming the level of costs and at what stage of recovery they are applied. Also whether an arrangement is possible at final notice or after the summons stage and whether this avoids costs/proceeding to liability order. I have been unable to find this specific information on the council's website nor have I been able to find a publicly available debt recovery policy.

Yours sincerely,

Helen Barker

CCR FOI Investigation Team, Cheshire East Council

[1]Cheshire East New Logo
 
 
 
 
 
 
Date: 8 October 2020
Our Reference: 9710541
 
Dear Ms Barker
 
Freedom of Information Act 2000
 
Thank you for your request regarding Council Tax Recovery Policies and
Procedures.
 
Your request has been identified as falling within the scope of Freedom of
Information Act 2000 and It will be treated as a request for information
within the meaning of the Freedom of Information Act: this means that we
will send you a full response within 20 working days, either supplying you
with the information which you want, or explaining to you why we cannot
supply it. 

We will either supply you with the information which has been requested,
or explain why we cannot supply it. If we need any further clarification
or there is a problem, we will be in touch.
 
The due date is 5 November 2020.  
 
Cheshire East Council aims to respond to you as soon as it is able.
However, during the ongoing Coronavirus Pandemic, we ask that you be
patient should the response be delayed.
 
In the meantime if you wish to discuss this further please contact
[2][email address] . It would be helpful if you could quote
the reference number quoted above.
Yours sincerely,
 
Helen Sweeney
Senior Compliance & Customer Relations Officer
Cheshire East Council
 
NOTE: Please do not edit the subject line when replying to this email.

References

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2. mailto:[email address]

CCR FOI Investigation Team, Cheshire East Council

2 Attachments

[1]Cheshire East New Logo
 
 
 
 
 
 
Date: 12 October 2020
Our Reference: 9710541
 
Dear Ms Barker
 
Thank you for your request for information received on 8 October 2020.
 
Please find attached our response to your request.
 
Yours sincerely,
 
Gill Clowes
Customer Relations and Compliance Assistant
Cheshire East Council
 
NOTE: Please do not edit the subject line when replying to this email.

References

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Dear CCR FOI Investigation Team,

Thank you for clarifying your response.

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

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

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

It is apparent from information obtained that the defendant incurs a £52.50 sum in respect of the council requesting the issue of a summons (an automated procedure). However, that sum actually covers the council's additional expenditure in respect of sending out reminders and officer time engaging with customers who query their accounts at this point. Also the same for final notices (see below) and after a summons has been issued in respect of customers who query their accounts to arrange payment plans which are conditioned, in the latter case, upon the council obtaining a Liability Order (to secure the debt). A total £87.50 court costs are added comprising summons costs of £52.50 plus a further £35.00 for the Liability Order. The £35.00 sum is added to the £52.50 costs already incurred for the request of the summons in respect of the accounts of all customers who have not paid the total amount outstanding of their liability before the court hearing, whether or not they take advantage of the pre-arranged payment plan. This is to compensate the council for the officer time attributed to making the application for a Liability Order (on day of the hearing).

Before the summons stage (final notice), a customer is 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 agree a payment arrangement. Discretion whether to enter into a payment agreement with a taxpayer is applied again once the council has obtained a liability order (as an alternative to taking recovery action) but by that time she would have had the total £87.50 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 Highgate Justices ex parte Petrou [1954] 1 ALL ER 406 and Williams v East Northamptonshire [2016] EWHC 470 (Admin).

Regina v Highgate Justices ex parte Petrou [1954] 1 ALL ER 406

It is implicit in the Council's Recovery Guidance document that the liability order application process is exploited as a means of encouraging a change in behaviour because of the suggestion that a customer's circumstances/ payment history can influence a decision whether or not to allow the outstanding amount to be paid by instalments when the entitlement to has been lost. Presumably a customer whose payments are usually made on time will be given favourable consideration regarding a decision to allow them to continue with instalments (potentially avoiding enforcement and costs). A decision like this in these particular cases suggests that pursuing court action would not be the proper use of discretion because the circumstances indicate that the debt would be settled without resorting to enforcement. However, in a wider sense, because of the discrimination generally between customers who are considered prompt payers and those who are not, the decision to enforce regardless of whether it is necessary in respect of the latter suggests that the enforcement process is exploited for an improper purpose, i.e. to penalise the customer with the costs of enforcement.

It is likely that the council would prefer not to have to pursue payment by the various recovery methods permitted by the liability order because it would be more convenient and cause less administration not to and in any event, the chances of the whole amount being recovered would be greater (and quicker) if Enforcement Agents acting for the Council were not first having to be paid their enforcement fees. Whether the recovery action is pursued and costs imposed hinges on how the customer engages with the council and the type of debtor the council perceives the customer to be who has defaulted on payment. Pursuing recovery in some cases but not others suggests that rather than enforcement being necessary and the most appropriate course of action in every case, the costs of the court application are exploited to act as a penalty.

The law makes no provision for one party wishing to make use of the court to do so in order to inflict a penalty on the other by way of the costs which the court may order against the defendant. The judgment in the Highgate Justices case held that costs should not exceed the proper expenditure incurred and should not be a penalty. If the council requires further powers to enforce the debt, the court's permission must first be obtained, so the costs are incurred as a consequence, rather than the purpose of the application. Local authorities which exploit the judicial procedure to act as a deterrent in a way that penalises the defendant or to act as a threat to encourage prompt payment are doing so for an improper purpose.

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

The council has stated that the costs incurred for serving the summons are £52.50. I am making the assumption that the costs are actually added to the customer's account at the point when the summons is issued because it is generally the approach taken by local authorities.

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

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

NO LEGAL BASIS TO PURSUE LIABILITY ORDER ONCE AN AMOUNT AGREED

The council has also confirmed that when a summons is issued, but before the Court hearing, it is possible to agree a payment arrangement but on the basis that the court will still be asked to grant a Liability Order (to secure the debt) and the payment plan will include the costs incurred in obtaining the Liability Order (£52.50 summons and £35.00 liability order).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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 eight obvious additional defences that would be valid if no discretion is exercised prior to requesting the issue of a summons, expenditure incurred by the council outside the process of applying for and obtaining a liability order is included in those costs and a decision to charge costs can depend on whether the council wants them to act as a penalty. 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 £52.50 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. decisions whether to enforce (and impose costs) which hinge on the type of debtor the council perceives the customer to be who has defaulted on payment is evidence that the enforcement process is exploited for an improper purpose, i.e. to encourage behaviour (a penalty), see Regina v Highgate Justices ex parte Petrou;

6. 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;

7. 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

8. 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

CCR FOI Investigation Team, Cheshire East Council

Dear Ms Barker -
 
I acknowledge receipt of your email and have noted its contents. The
correct course of action would be to consider this as a Policy Complaint
through our Corporate Complaints process. For more information, please
click on the following link:
[1]https://www.cheshireeast.gov.uk/council_...
 
However, in order to do this I will need you to supply the authority with
a personal email address as it would not be appropriate to email the
complaint response to the What Do They Know App. I understand that this is
also outside their house rules too.
 
I will log this as a corporate policy complaint on receipt of a personal
email address from you. This can be sent to
[2][email address]
 
Kind regards.
 
Helen.
 
Mrs H M Sweeney,
Senior Compliance & Customer Relations Officer.

--------------------------------------------------------------------------

Dear CCR FOI Investigation Team,

Thank you for clarifying your response.

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

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

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

It is apparent from information obtained that the defendant incurs a
£52.50 sum in respect of the council requesting the issue of a summons (an
automated procedure). However, that sum actually covers the council's
additional expenditure in respect of sending out reminders and officer
time engaging with customers who query their accounts at this point. Also
the same for final notices (see below) and after a summons has been issued
in respect of customers who query their accounts to arrange payment plans
which are conditioned, in the latter case, upon the council obtaining a
Liability Order (to secure the debt). A total £87.50 court costs are added
comprising summons costs of £52.50 plus a further £35.00 for the Liability
Order. The £35.00 sum is added to the £52.50 costs already incurred for
the request of the summons in respect of the accounts of all customers who
have not paid the total amount outstanding of their liability before the
court hearing, whether or not they take advantage of the pre-arranged
payment plan. This is to compensate the council for the officer time
attributed to making the application for a Liability Order (on day of the
hearing).

Before the summons stage (final notice), a customer is 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 agree
a payment arrangement. Discretion whether to enter into a payment
agreement with a taxpayer is applied again once the council has obtained a
liability order (as an alternative to taking recovery action) but by that
time she would have had the total £87.50 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 Highgate Justices ex parte
Petrou [1954] 1 ALL ER 406 and Williams v East Northamptonshire [2016]
EWHC 470 (Admin).

Regina v Highgate Justices ex parte Petrou [1954] 1 ALL ER 406

It is implicit in the Council's Recovery Guidance document that the
liability order application process is exploited as a means of encouraging
a change in behaviour because of the suggestion that a customer's
circumstances/ payment history can influence a decision whether or not to
allow the outstanding amount to be paid by instalments when the
entitlement to has been lost. Presumably a customer whose payments are
usually made on time will be given favourable consideration regarding a
decision to allow them to continue with instalments (potentially avoiding
enforcement and costs). A decision like this in these particular cases
suggests that pursuing court action would not be the proper use of
discretion because the circumstances indicate that the debt would be
settled without resorting to enforcement. However, in a wider sense,
because of the discrimination generally between customers who are
considered prompt payers and those who are not, the decision to enforce
regardless of whether it is necessary in respect of the latter suggests
that the enforcement process is exploited for an improper purpose, i.e. to
penalise the customer with the costs of enforcement.

It is likely that the council would prefer not to have to pursue payment
by the various recovery methods permitted by the liability order because
it would be more convenient and cause less administration not to and in
any event, the chances of the whole amount being recovered would be
greater (and quicker) if Enforcement Agents acting for the Council were
not first having to be paid their enforcement fees. Whether the recovery
action is pursued and costs imposed hinges on how the customer engages
with the council and the type of debtor the council perceives the customer
to be who has defaulted on payment. Pursuing recovery in some cases but
not others suggests that rather than enforcement being necessary and the
most appropriate course of action in every case, the costs of the court
application are exploited to act as a penalty.

The law makes no provision for one party wishing to make use of the court
to do so in order to inflict a penalty on the other by way of the costs
which the court may order against the defendant. The judgment in the
Highgate Justices case held that costs should not exceed the proper
expenditure incurred and should not be a penalty. If the council requires
further powers to enforce the debt, the court's permission must first be
obtained, so the costs are incurred as a consequence, rather than the
purpose of the application. Local authorities which exploit the judicial
procedure to act as a deterrent in a way that penalises the defendant or
to act as a threat to encourage prompt payment are doing so for an
improper purpose.

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

The council has stated that the costs incurred for serving the summons are
£52.50. I am making the assumption that the costs are actually added to
the customer's account at the point when the summons is issued because it
is generally the approach taken by local authorities.

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

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

NO LEGAL BASIS TO PURSUE LIABILITY ORDER ONCE AN AMOUNT AGREED

The council has also confirmed that when a summons is issued, but before
the Court hearing, it is possible to agree a payment arrangement but on
the basis that the court will still be asked to grant a Liability Order
(to secure the debt) and the payment plan will include the costs incurred
in obtaining the Liability Order (£52.50 summons and £35.00 liability
order).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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 eight
obvious additional defences that would be valid if no discretion is
exercised prior to requesting the issue of a summons, expenditure incurred
by the council outside the process of applying for and obtaining a
liability order is included in those costs and a decision to charge costs
can depend on whether the council wants them to act as a penalty. 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 £52.50 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. decisions whether to enforce (and impose costs) which hinge on the type
of debtor the council perceives the customer to be who has defaulted on
payment is evidence that the enforcement process is exploited for an
improper purpose, i.e. to encourage behaviour (a penalty), see Regina v
Highgate Justices ex parte Petrou;

6. 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;

7. 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

8. 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

show quoted sections

Dear CCR FOI Investigation Team,

I suggest the points raised are considered by the Monitoring Officer, but that is of course a matter for the council.

Yours sincerely,

Helen Barker

CCR FOI Investigation Team, Cheshire East Council

Ms Barker -
 
I acknowledge receipt.
Please supply a personal email address to [1][Cheshire East Council request email] and
the matter will be considered accordingly once received.
 
Kind regards.
 
Helen.

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Dear CCR FOI Investigation Team,

I suggest the points raised are considered by the Monitoring Officer, but
that is of course a matter for the council.

Yours sincerely,

Helen Barker

show quoted sections

Dear CCR FOI Investigation Team,

I consider I've done my bit by highlighting the areas of concern. Whether the council acts on it is another matter and one which I would prefer not to get embroiled in.

Yours sincerely,

Helen Barker