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

Helen Barker made this Freedom of Information request to North Kesteven District Council

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Dear North Kesteven District 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 North Kesteven District 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

NK - FOI, North Kesteven District Council

5 Attachments

Ref No: 20/27

27 April 2020

Dear Ms Barker,

Thank you for your Freedom of Information request regarding: Exercising
discretion - Council Tax Liability Order.

We can confirm your request was received on 25 April 2020. This will be
dealt with under the terms of the Freedom of Information Act 2000 and
answered within twenty working days.

In some circumstances a fee may be payable and if that is the case, we
will let you know. A fees notice will be issued to you, and you will be
required to pay before we will proceed to deal with your request.

If you have any queries about this request please contact the Corporate
Information Team, quoting the above reference number.

Yours sincerely

Graeme Napier

Freedom of Information
[1]NKDC [2]Facebook [3]YouTube Tel: 01529 414155
Twitter Email: foi@n‑kesteven.gov.uk
[HNG53VF58]​ [4]www.n-kesteven.gov.uk
Kesteven Street ,  Sleaford ,  NG34 7EF
[5]Every Mind Matters

show quoted sections

NK - FOI, North Kesteven District Council

5 Attachments

Ref No: 20/27

13 May 2020

Dear Ms Barker,

We refer to previous correspondence regarding your request for information
relating to: Exercising discretion - Council Tax Liability Order.

The information is given below:

Q1. Does North Kesteven District Council exercise discretion before
proceeding under regulation 34(2) of the Council Tax (Administration and
Enforcement) Regulations 1992 to request a summons from a justice of the
peace (it may be an automated process)

 

Yes – although there is some automation of the process.

 

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

 

We have various parameters– value of arrears, number or months of arrears
and whether a customer has council tax support.

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,
quoting the above reference number, via email at: [North Kesteven District Council request email] or
by post to North Kesteven District Council, Corporate and Customer
Services, Kesteven Street, Sleaford, Lincs, NG34 7EF.

If you are not content with the outcome of the internal review, you have
the right to apply directly to the Information Commissioner for a
decision. The Information Commissioner can be contacted at: Information
Commissioner’s Office, Wycliffe House, Water Lane, Wilmslow, Cheshire, SK9
5AF.

Yours sincerely

Graeme Napier

Freedom of Information
[1]NKDC [2]Facebook [3]YouTube Tel: 01529 414155
Twitter Email: foi@n‑kesteven.gov.uk
[HNG53VF58]​ [4]www.n-kesteven.gov.uk
Kesteven Street ,  Sleaford ,  NG34 7EF
[5]Coronavirus

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Dear NK - FOI,

Thank you for your response.

It looks like the majority of checks are not really discretionary related but prerequisite to issuing a summons, or applied after the summons has been requested. 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 and various other information I have seen indicates that discretion is not exercised at the point where a decision is needed to be made about whether to request a summons. The actual process of running the complaint list and the summonses is automated for which the defendant incurs a £72.50 sum and it is apparent that discretion is applied earlier than this. It is also applied after a summons has been issued but before a liability order is obtained and after a liability order has been obtained, but not at the point which relates to my request.

On receiving the summons the customer then has the option to agree a payment plan as an alternative to enforcement, providing she keeps to the agreed conditions, which include that a Liability Order is obtained and the arrangement includes the £72.50 court costs. This is presumably to compensate the council for the officer time attributed to agreeing the arrangement (in respect of those who choose that option) and making the application for a Liability Order (on day of the hearing). This 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 even those who have settled their accounts before a liability order is applied for.

Although its possible for a customer 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 switches her method of payment to direct debit. 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 will have had the total £72.50 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 order has been obtained in respect of officer time engaging with customers who either agree to changing their payment method to direct debit etc. and/or enter into payment agreements. The costs must therefore with almost certainty cover the general administration of the council tax and enforcement departments.

The councils website also suggests what would be valid defences against the issue of a Liability Order at the court hearing and what are not valid defences. 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 are 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 £72.50 was not incurred by the council in respect of instituting the complaint;

3. the costs have been inflated to subsidise customers who elect to make payment arrangements;

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 arrange for direct debit payments;

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.

I would appreciate the council confirming that the response to my request is "No" to (Q1) and therefore "N/A" in respect of (Q2).

Yours sincerely,

Helen Barker

NK - FOI, North Kesteven District Council

5 Attachments

Dear Ms Barker,

The answers provided were believed to cover the questions that have been
asked.

In response to your further issues raised:

It is for any customer to argue their case at the liability order hearing
and it is for the court to determine what is a valid defence. Some
examples are given on our website but this is not an exhaustive list of
either valid or non-valid defences.

All our summonses are issued with a further payment plan, this is to help
customers understand what they have to pay to clear their account before
the end of the financial year after the liability order has been obtained.

The matters regarding court costs have been established in case law and as
an authority we are mindful of all established case law and legislation.

The Council stands by its original responses to the questions asked as
they were understood. If you have further questions please submit them at
the same address and we will answer them.

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,
quoting the above reference number, via email at: [North Kesteven District Council request email] or
by post to North Kesteven District Council, Corporate and Customer
Services, Kesteven Street, Sleaford, Lincs, NG34 7EF.

If you are not content with the outcome of the internal review, you have
the right to apply directly to the Information Commissioner for a
decision. The Information Commissioner can be contacted at: Information
Commissioner’s Office, Wycliffe House, Water Lane, Wilmslow, Cheshire, SK9
5AF.

Yours sincerely

Graeme Napier

Freedom of Information
[1]NKDC [2]Facebook [3]YouTube Tel: 01529 414155
Twitter Email: foi@n‑kesteven.gov.uk
[HNG53VF58]​ [4]www.n-kesteven.gov.uk
Kesteven Street ,  Sleaford ,  NG34 7EF
[5]Coronavirus

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Dear NK - FOI,

Thank you for your response, which included the assertion that the council is mindful of all established case law and legislation regarding court costs.

I am aware of a number of cases but particularly two which I would like to refer to regarding your response namely R (Nicolson) v Tottenham Magistrates [2015] EWHC 1252 (Admin) and Williams v East Northamptonshire [2016] EWHC 470 (Admin)

Williams v East Northamptonshire [2016] EWHC 470 (Admin

I note the council's "Fair Collection and Debt Recovery Policy" states that "if the whole remaining balance is not paid within the 7 days we will apply to the Magistrates Court for the issue of a Summons, and court costs will be added to the bill". I am making the assumption that the costs are actually added to the customer's account at this point 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...."

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

The point I would like to make about the Tottenham Magistrates' case concerns the approach of the council to apply all of its costs to the issue of the summons so that the whole £72.50 sum is incurred by the customer whether their case proceeds to court or not, and whether the types of expenses accounted for are eligible and/or have been claimed as a means of artificially inflating them. Also, the practice of obtaining a liability order to secure the debt after the council has agreed an amount is ultra vires the Council Tax Regulations (reg 34 of SI 1992/613).

Paragraph 35 and 46 of the Tottenham judgment give clues as to what should not be included in the costs and an approach that might be legitimate regarding 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, the expenditure incurred which is attributable to engaging with customers agreeing payment arrangements could not be deemed "relevant costs" to be included in the calculation. Not only because they are 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) but ultimately, for a the different reason that there is no legal basis to continue with the application once a payment plan has been agreed which is argued in more detail later.

Looking now just at general expenditure incurred in dealing with customer's queries in the context that all the £72.50 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 £72.50 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 by agreeing to switch their payment method to direct debit, 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.

Turning again to expenditure incurred which is attributable to setting up payment arrangements, this is 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 the 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 the issue. 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 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 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.

Yours sincerely,

Helen Barker