Imposing unlawful costs – Non-Domestic rates enforcement

The request was partially successful.

Dear Hounslow Borough Council,

In addressing this FOI request, please refer to Hounslow Borough Council's website:

http://www.hounslow.gov.uk/index/advice_...

"The court proceedings can be stopped by PAYMENT IN FULL, INCLUDING THE AMOUNT OF THE SUMMONS COSTS. We must receive payment before the hearing. If the costs are not paid we will still apply for a liability order for the outstanding amount, which, if granted, will incur the additional liability costs detailed on the summons."

It was stated by a billing authority (North East Lincolnshire Council) on 26 July 2013 that the above procedure (demanding costs without obtaining a liability order) was unlawful. (see below)

https://www.whatdotheyknow.com/request/n...

[I can confirm that as you state for Business Rates there is no provision for the payment in respect of costs to be made before the Court hearing date, which would halt the Liability Order application.]

The Department for Communities and Local Government (DCLG) was made aware shortly after regarding the risk local authorities faced of being legally challenge in the way regulations are applied.

My question therefore, is whether Hounslow Borough Council have plans to update the information on its website to bring its recovery procedures for NNDR enforcement in line with lawful provisions.

Please give details of guidance (if any) which Hounslow Borough Council has been provided by DCLG on this matter.

Yours faithfully,

Cherie Jerez

Harminder Persad, Hounslow Borough Council

2 Attachments

Dear Ms Jerez

 

Please find attached response to your Freedom of Information request.

 

Regards

 

Harminder Persad IRRV Tech | Assistant Head Revenues & Benefits 

 

London Borough of Hounslow

 

Office: 020 8583 4751

 

[1]www.hounslow.gov.uk

 

Follow us online: Twitter: @LBofHounslow and Facebook:
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Dear Harminder Persad,

Where only a summons has been issued, the application for a liability order has not been made. The application has merely been instituted by making complaint to the court. As the council's legal representative would not yet have presented the case (there has been no hearing), the bench would not have had the opportunity to consider the appropriate level of costs. Therefore the rate payer could not refuse to pay the costs, as there has been no order for costs.

A provision exists in the 1992 Council Tax regulations that gives a householder who has been issued with a summons the opportunity to make payment of the outstanding liability or an offer of payment (including reasonably incurred costs) to put an end to the billing authority's application for a liability order (regulation 34(5)). Presumably it was parliament's intention to give the domestic ratepayer a chance to pay less of the total costs that the authority would incur if it had need to proceed with the application to obtain a liability order.

Regulation 34(5) has no equivalent in the 1989 Non-Domestic regulations. There is no lawful reason why a council tax defaulter may offer to pay a sum of costs before the authority goes to court other than for the existence of regulation 34(5). The provision in its entirety has been omitted from the 1989 regulations but the majority of billing authorities are enforcing business rates (with regard to applying costs) in the same way as Council Tax.

There appears either to have been a major cock-up in the parliamentary process of enacting SI 1989/1058 with the effect being that if there was intended to have been an equivalent to regulation 34(5) of SI 1992/613 it was forgotten, or as is more likely, the concessionary provision was not intended as it considered a more aggressive recovery process was required in the case of business chargepayers.

The Statutory Instrument governing Business rates recovery (SI 1989/1058) makes no provision for the billing authority to apply costs to a ratepayer's account. It is without question the Magistrates' decision to agree the level of expenditure incurred by the authority at the Liability Order hearing and only when the order has been granted would the council be justified in stating an amount (with respect to costs) to be added to the ratepayer's account.

In essence, a billing authority may not lawfully impose court costs on a business ratepayer without first obtaining a liability order.

In any event, stating a sum which the council expects to be awarded in costs implies a financial penalty or deterrent. The council obtains a court order merely for the greater powers of enforcement it permits; nothing more. The law does not permit the local authority to set the level to either act as a deterrent or provide additional income.

Note:

It might be helpful if I describe the provision in the following terms:

The summons is issued in respect of the "SUM" outstanding (the "SUM" is the unpaid NNDR excluding costs)

The ratepayer, if after receiving a summons, may if he wishes pay the "SUM" before the application is made.

Regardless of any amount paid, the application is made. However, in cases where the "SUM" has been paid before the application is made, the authority has the option (not a requirement) of requesting that the court make the order in respect of costs alone.

Yours sincerely,

Cherie Jerez

Dear Harminder Persad,

It's uncertain whether my comments in respect of NNDR enforcement have been useful, however in case they have, there are some more observations I've made:

It is evident that Hounslow Borough Council applies costs in a percentage of NNDR cases without a court order. SI 1989/1058 does not provide for this neither do any amendments.

Regulation 13(1) SI 1989/1058 as amended leaves no doubt that a liability order must be granted even in cases where the request has been made for costs alone (see below):

"13. (1) A single liability order may deal with one person and one such amount (or aggregate amount) as is mentioned in regulation 12(6) and (7) (in which case the order shall be in the form specified as form A in Schedule 2, or a form to the like effect), or, if the court thinks fit, may deal with more than one person and more than one such amount (or aggregate amount) (in which case the order shall be in the form specified as form B in that Schedule, or a form to the like effect). "

Note:

Notwithstanding the error following the regulations it would seem that there is has been further legislative error in enacting the Statutory Instrument. Regulation 12(7) of SI 1989/1058 inserted by Regulation 7 of the Non Domestic Rating (Collection and enforcement regulations) Miscellaneous Provisions Regulations 1990 appears to be ultra vires.

The primary legislation laying down the boundaries from which regulation 7 of SI 1990/145 derived is the Local Government Finance Act 1988. The relevant provision inserted by paragraph 13 SCHEDULE 5 (section 139) of the Local Government and Housing Act 1989 (Local Government Finance Act 1988: Amendments), as below:

13.—(I) Schedule 4 (enforcement) shall be amended as follows.

(2) In paragraph 3 (liability orders) the following sub-paragraph shall be inserted after sub-paragraph (2)—

"(2A) The regulations may include provision that, where the sum payable is paid after the order has been applied for but before it is made, the magistrates' court shall nonetheless make the order in respect of a sum (of an amount determined in accordance with prescribed rules) in respect of the costs incurred in APPLYING FOR IT."

As aforementioned, the statutory instrument SI 1990/145 with regards regulation 7 appears to have been enacted without the legal powers of the primary legislation. The paragraph inserted by regulation 7 is as follows:

"(7) Where the sum payable is paid after a liability order has been applied for under paragraph (2) but before it is made, the court shall nonetheless (if so requested by the charging authority) make the order in respect of a sum of an amount equal to the costs reasonably incurred by the authority in MAKING THE APPLICATION."

The primary legislation does not give legal powers such that the regulations may include provision that the court shall make the order in respect of a sum of an amount equal to the costs reasonably incurred by the authority in "MAKING THE APPLICATION".

There is an important distinction in that the primary legislation provides for an order in respect of the costs incurred in "APPLYING FOR IT"

This means that if the respective secretaries of state had made the regulations within the powers conferred on them, regulation 12(7) would make provision for where the sum payable is paid after a liability order has been applied for but before it is made, the court shall nonetheless (if so requested by the charging authority) make the order in respect of a sum of an amount equal to the costs reasonably incurred by the authority in INSTITUTING THE SUMMONS.

Of importance is that this would essentially be a lesser sum than the sum which is claimed to be an amount equal to the costs reasonably incurred by the council in obtaining the order (regulation 12(6)(b)).

Yours sincerely,

Cherie Jerez

Sacksen Molar left an annotation ()

IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
ADMINISTRATIVE COURT
( http://tinyurl.com/zajxnun )

ANNEX C

STATUTORY INSTRUMENT ULTRA VIRES

".......
4. In contrast, the Statutory Instrument which provides for costs in the comparable procedure for the recovery of Business Rates DO NOT provide that if, after the summons has been issued, the outstanding balance and an amount equal to reasonable costs incurred is paid or tendered to the authority, the application shall not be proceeded with.

5. The relevant law governing liability order applications for Business Rates is the Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 1989 (the “1989 Regulations”). Regulation 34(5) of the Regulations has no equivalent in the 1989 Regulations, the provision in its entirety has been omitted which leaves no doubt that an order for costs may only be made by the court when the case is heard.
......."