Defendants Grounds of Appeal - Redact

IN THE GRIMSBY MAGISTRATES COURT

CIVIL JURISDICTION (COUNCIL TAX)

Ref: 550XXXXXXX

APPLICATION FOR LIABILITY ORDER

BETWEEN:

NORTH EAST LINCOLNSHIRE COUNCIL

Complainant

and

XXXXX XXXXX

Defendant

DEFENDANTS GROUNDS OF APPEAL

INTRODUCTION

1. The issues in the complaint arise from the provisions of the Council Tax (Administration and Enforcement) Regulations 1992 (the Regulations"). Part V of the Regulations deals with the billing of persons liable to pay Council Tax; Part VI deals with the enforcement of their liabilities to billing authorities such as the Complainant (the Council"). Part V requires where the notice is issued before the beginning of the relevant year that liability be paid in 10 instalments, in accordance with Regulation 21 and Part I of Schedule 1 to the Regulations.

2. Under Part VI, Regulation 33, a liability order cannot be applied for unless a reminder notice under Regulation 23(1) or a final notice, showing the amount for which the application is to be made, has been served. A final notice need not be served where a debtor fails to pay any instalments due within seven days of the issue of a reminder notice.

3. Once a demand notice, that is, the Council Tax bill, has been issued and one or more of the statutory scheme instalments have become due and less than the full amount(s) has

been paid, the billing authority must issue a reminder notice to the taxpayer giving seven days for the outstanding instalment(s) to be paid.

4. Demand for payment in respect of tax year 2015/16 was such that the first payment was due 1.4.15 with remaining instalments due on the first of each subsequent month with the final payment on 1.1.16.

5. The taxpayer (the Defendant) met the first two instalments (April and May) in accordance with the demand notice, i.e. 88.91 in respect of the first payment and 91.00 (as were the remaining instalments) for the second. The following instalment due 1.6.15 was paid by the due date but from two different bank accounts. A payment error resulted in a 1.00 overpayment thus 92.00 was paid in total.

6. The Defendant received an auto-generated reminder dated 12 June 2015 stating that there was an overdue amount of 59.00 at the above date. The reminder continued as follows:

This overdue amount, together with any other instalment that becomes due in the next 10 days, must be received by the 26th June 2015. If payment is not received in accordance with this request the instalment facility will be withdrawn and the total balance of 696.00 will become payable immediately.

The next paragraph warned that:

If payment is not received a summons will be issued without any further notice being given to you and you will incur 60.00 costs.

It is of central importance, so far as the matters giving rise to this appeal are concerned, to contrast the above paragraph with the corresponding text as was standard in the notice before costs were reviewed. The paragraph previously relevant to costs is stated as follows:

If recovery action is taken there will be costs of 32.00 if a summons is issued, and further costs of 25.00 if an application is made to the Magistrates Court for a Liability Order.

The review had the effect of increasing the overall costs by 23% and because both charges had been consolidated into one, the summons rose by 120% (then 70). Advantages of front loading all costs to the summons stage, to which will be referred in detail later, commenced in April 2011 when changes were implemented.

7. Reminders rely entirely on the Council Tax processing system so there is no possibility of spotting anomalies before being sent out. Notwithstanding that the Defendants account was in credit by 1.00 (not overdue by 59.00), the total remaining balance was 636.00 not 696.00 stated on the reminder. The reminder went on to state that if you have made payment since the date of this letter, please ignore this reminder which the Defendant did as his account was not only up to date but in fact in credit.

8. The fourth instalment due 1.7.15 was paid by the due date but a sum of 90.00 instead of the sum specified on the demand notice (91.00) so that the account was no longer in credit. The balance was therefore 546.00 and the correct sum outstanding for the remaining six instalments of 91.00 to pay off the 2015/16 account.

9. The Defendant received a second auto-generated reminder dated 14 July 2015 stating that there was an overdue amount of 60.00 at the above date. The reminder continued as follows:

This overdue amount, together with any other instalment that becomes due in the next 10 days, must be received by the 28th July 2015. If payment is not received in accordance with this request or you fall in to arrears again, your instalment facility will be withdrawn and the total balance of 606.00 will become payable immediately.

If payment is not received a summons will be issued without any further notice being given to you and you will incur 60.00 costs

10. Notwithstanding that the Defendants account was up to date (not overdue by 60.00), the total remaining balance was 546.00 not 606.00 stated on the reminder. The reminder went on to state that if you have made payment since the date of this letter, please ignore this reminder which the Defendant did as his account was up to date.

11. The fifth instalment due 1.8.15 was paid by the due date but similarly to the third instalment, paid from two different bank accounts with the same payment error resulting in a 1.00 overpayment, thus 92.00 was paid in total. The balance was therefore 454.00 (1.00 in credit) which would have been 455.00 but for the overpayment and the correct sum outstanding for the remaining five instalments of 91.00 to pay off the 2015/16 account.

12. The Defendant received an auto-generated final notice dated 12 August 2015 which stated so far as is relevant, as follows:

It appears from our records you have again overlooked payment of your account. Please arrange for the full remaining balance of 514.00 to be received at the Council Offices before 26 August 2015 to avoid further recovery action.

If further action is taken there will be costs of 60.00 if a summons is issued.

13. The unpaid balance becomes payable immediately in accordance with regulation 23(3) of the Regulations arising from the failure to pay within 14 days from the issue of the reminder notice. Regulation 23(3) provides as follows:

(3) If, within the period of 7 days beginning with the day on which a reminder notice is issued, the liable person fails to pay any instalments which are or will become due before the expiry of that period, the unpaid balance of the estimated amount shall become payable by him at the expiry of a further period of 7 days beginning with the day of the failure.

14. The Defendants account was in credit by 1.00 and payment had at no stage been overlooked. Both reminders and the final notice had been sent erroneously by the Council as the account was either up to date or in credit at all times so the demand for payment under regulation 23(3) was unlawful. In any event, the total remaining balance was 454.00 not 514.00 stated on the final notice. The Council also attempted to exploit the final notice to further its campaign of securing a greater take-up of direct debit, stating so far as is relevant, as follows:

We may consider re-instating your instalments if you bring your account up to date immediately, including your next monthly instalment and pay the remaining balance by Direct Debit....

15. The final notice went on to state that if you have made the above payment since the date of this letter, please ignore this reminder which the Defendant did as his account was again not only up to date but in fact in credit.

16. The sixth instalment due 1.9.15 was paid by the due date but similarly to the fourth instalment, the sum of 90.00 paid instead of that specified on the demand notice (91.00) so that the account was no longer in credit. The balance was therefore 364.00 and the correct sum outstanding for the remaining four instalments of 91.00 to pay off the 2015/16 account.

17. Part VI, Regulation 34(1), provides that if an amount has fallen due under 23(3) Part V of the Regulations and remains unpaid in whole or in part, then the billing authority may

apply to a magistrates court under the provision of regulation 34(2) for a summons to be issued, requiring the debtor to appear before the court to show why the sum stated had not been paid.

18. The Council was not legally entitled to seek a liability order (or add court costs) but did so by applying to the magistrates court for a summons on 15.9.15 and on 19.9.15, a summons was served at the address of the Defendant, in so far as relevant, the following terms:

Complaint has been made before me, the undersigned Clerk to the Justices, by The Executive Director Resources of North East Lincolnshire Council that you, being a person duly subject to and liable for Council Tax, have not paid the sum(s) set out below:

COUNCIL TAX 424.00 SUMMONS COSTS 60.00 TOTAL AMOUNT PAYABLE 484.00

If the total amount outstanding as stated above including summons costs is paid to North East Lincolnshire Council before the date of the hearing, all further proceedings will be stopped.

19. The total amount payable on the summons was 484, an amount 120 in excess of the Council Tax outstanding. The remaining sum outstanding was at the time of the summons, 364.00. Half of the sum (60.00) accounted for the unlawfully applied summons costs, and the remaining sum is with almost all certainty the cause of the Council Tax processing system misallocating payments to an account from another tax period, thus increasing the current years liability by an equal amount. The sum (60.00) relates to 86% of summons costs (70.00) which were disputed as being unreasonable by the Defendant in an appeal to the High Court by way of a case stated in respect of a previous tax year (2012/13).

20. The sum has appeared on the Defendants bill each year since as a separate balance from the current liability described as a sum subject to court proceedings. It is unlikely that there will ever be a determination of the costs as the Magistrates court has made every attempt to prevent the case coming before the High Court. The Council Tax bill states as follows:

Memorandum Note Your instalments for 2015/16 do not include your 2014/15 account balance As at 27-FEB-2015 your 2014/15 Council Tax account balance is 60.00 60.00 of the total is subject to court proceedings

21. The Council has taken recovery action on two previous occasions since the 60.00 sum subject to court proceedings has been incorporated into the Council Tax account. The Defendant has each time taken the trouble to explain to the Council how, and under what circumstances, its Council Tax processing system misallocates payments. On this

third occasion, it has occurred to the Defendant that the Council would again unlikely address the issue and continue allowing the recurring software glitch to trigger unnecessary recovery action, and took the view that defending the complaint may have more impact on the Council to resolve its system failures.

22. The Council had no legal right to serve a summons and demand the outstanding debt, the Defendant therefore intended to continue paying in accordance with the original instalment scheme which entailed a further 4 monthly payments of 91.00 commencing on the 1st of October 2015. The summons costs, which the Council also had no legal right to apply had been added to the Defendants account, somewhere between 13th and 18th of September 2015. The Defendant has since paid Octobers instalment (the 7th) on 30th September 91.00 thus leaving a balance outstanding of 364.00 and the correct sum outstanding for the remaining three instalments of 91.00 to pay off the 2015/16 account.

23. The evidence should be sufficient to satisfy the Magistrates court that the Council had no legal entitlement to pursue recovery and so dismiss the complaint outright. The Defendant will be able to provide records of payment as proof if necessary but the burden of proof lies with the Authority: see Tower Hamlets LBC v Fallows and Fallows [1990] RA 255.

24. There is however in these proceedings an opportunity to make representations about the Councils standard costs in reference to the Regulations, looking at for example, the level at which theyre set and how they were arrived at, and what costs they represent.

THE LEVEL OF COURT SUMMONS COSTS & THEIR APPLICATION

25. Regulation 34 provides that if, after the summons has been issued, an amount is paid, equal to the unpaid balance of the estimated amount and an amount in respect of the

costs incurred by the authority, then the authority must accept the payment and stop the proceedings. The relevant part being paragraph 5 which follows:

(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.

(6)....

26. The billing authority may not itself add an amount to the outstanding liability in respect of instituting proceedings, yet it stated that the total amount outstanding for which the Defendant was liable included summons costs. The complaint at that stage had not been heard and so adding 60 court costs on or around 15.9.15 to the Defendants account was pre-empting the bench awarding the amount applied for (see below para 35).

27. The Defendant had paid in accordance with the Regulations and so the court, if it is to follow due process, must dismiss the Councils complaint (the court has no discretion in the matter). That, however, does not render the remaining representations academic as the 60.00 summons costs have already been unlawfully added and the level, and what costs they represent etc., involve a matter of general public importance.

28. The costs incurred by the Council in respect of issuing the summons (60.00) may lawfully (by virtue of their application on the summons issue) only include the Councils expenditure up until that point. A costs breakdown produced by the council, to which will be referred in detail later, proves without any doubt that the majority of expenditure is not provided for in the Regulations and those regulations do not provide for the summons costs income to cover the cost of running the service, which is clearly

a mistaken belief that the Council holds.

Case of significant relevance to these proceedings

R (on the application of Reverend Nicolson) v Tottenham Magistrates

29. In R (Nicolson) v Tottenham Magistrates [2015] EWHC 1252 (Admin) (Nicolson v Tottenham Magistrates) the claimant sought judicial review of the decision of justices to make an award of costs in favour of the Interested Party, London Borough of Haringey (LBH) following the granting of a council tax liability order concerning unpaid council tax. It was adjudged that an order for a council tax summons was unlawful because the court had insufficient information to determine the reasonableness of costs claimed, then failed to inquire further into how the sum was calculated (and elements it comprised of) and because the applicant was denied a fair opportunity to challenge the lawfulness of the order before it was made.

Councils policy to review court costs and produce annual breakdown

30. Pressure from various quarters has been the trigger for the Council to keep under review its level of court costs and to produce a breakdown annually supporting them. The first published set of accounts appeared on the Councils website, based on activity in 2012/13 informing the standard costs charged during 2013/14.

31. A Cabinet report dated 17.2.14 reviewing council tax court costs provided the legal framework supporting the Councils decision to reduce its standard summons costs from 70 to 60 which its subsequent years breakdown (2014/15) reflected.

POINTS OF LAW

32. The matters central to this challenge arise from the provision of regulation 34 of the Regulations. The provision enables a billing authority to recover its costs by recharging an amount reasonably incurred to the defendant in relation to an application to the Magistrates Court to obtain a Liability Order. Regulation 34 makes provision for applying costs in three distinct circumstances which are set out in paragraphs (5), (7) and (8).

33. Under paragraph 5 of the Regulations (see above para 25), expenditure which the Council may lawfully claim in respect of instituting the summons is described as costs reasonably incurred. Therefore the billing authority is under a legal duty, before levying the sum, to have properly accounted for each element in arriving at the figure

and ensuring that each element it claims is in fact incurred in connection with the issue of the summons.

34. Costs described under paragraph (5) are distinct from those under paragraphs (7) and (8) in that there are no court proceedings (the latter two require the case be brought before Magistrates). Paragraph (5) provides that if, after a summons has been issued but before the application is heard, there is paid or tendered to the authority the aggregate of the sum outstanding, and 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.

35. Consequently, a defendant settling in the circumstances described under paragraph (5) will not be subject to any costs awarded by the court. This conflicts with the general rule that costs follow the event and the understanding of the way a party to court proceedings is normally awarded costs. It is for this, and examining the primary legislation, that it is viewed that the Regulations, which provide that the parties may agree costs prior to the case being heard, are ultra vires the enabling Act. The incompatibility of bringing the argument into one contesting the defendant parties compliance with the Regulations makes it inappropriate to expand on here; nevertheless, the rationale for asserting that the Regulations are ultra vires the enabling Act is provided separately (see Annex A).

36. Paragraph (7) provides that if after a summons has been issued and the sum has not been paid, an order shall be made in respect of an amount equal to the aggregate of the sum payable, and a sum of an amount equal to the costs reasonably incurred by the applicant in obtaining the order. Paragraph (8) provides that the court shall, subject to an application by the billing authority, grant an order solely in respect of costs, if after the issue of a summons but before the liability order has been made by the court a debtor settles only the sum outstanding (see Annex B).

37. Pursuant to regulation 35, liability orders may be dealt with individually, or, where the court thinks fit may be dealt with collectively. The impracticality of magistrates hearing a thousand or so defendants all summonsed to the same court at the time and on the same day means that debtors are steered away from appearing. It is those defendants not attending who will generally by default have admitted liability and be the ones whose cases will be considered appropriate to be aggregated. It does not mean that because the established practice is to include all cases in a bulk application, the Council has any less

legal duty to properly account for the costs individually where a defendant seeks to make representations, nor ensuring that costs it claims are properly referable to the relevant enforcement process in respect of an individual's circumstances.

38. In the Defendants aforementioned High Court application (see above paras 19-21) the questions of law on which the opinion of the High Court were sought were presented to the Magistrates court in the following terms:

The questions focus on two principle points of law with regards regulation 34 of the Council Tax regulations (SI 1992/613).

Those points being, whether

i) costs being disputed as unreasonable should have been awarded by the court without evidence from the council to support them.

ii) costs specifically incurred by the council for obtaining the liability order should have been charged at the summons issuing stage.

39. In Nicolson v Tottenham Magistrates it was held unlawful for the court to award costs without having sufficient relevant information from the billing authority to support them. Consequently the first question of law in the Defendants appeal (which has not, and unlikely to be determined) appears to be resolved in Nicolson v Tottenham Magistrates judgment at paragraph 61 which states as follows:

This application for judicial review of the decision taken by the Magistrates must therefore succeed. I was told that since the hearing the order for costs against the Claimant has been withdrawn, but that does not render the proceedings academic; as I have said, it raises issues of wider public importance. Had the order not been withdrawn, I would have quashed it. Since it has been withdrawn, I will declare that the order was unlawful, because:

i) the Magistrates did not have sufficient relevant information before them to reach a proper judicial determination of whether the costs claimed represented costs reasonably incurred by the Council in obtaining the liability order;

ii) the Magistrates erred in law by failing to make further inquiries into how the 125 was computed and what elements it comprised; and

iii) the Claimant was denied a fair opportunity to challenge the lawfulness of the order before it was made, by reason of the failure to answer his

requests for the provision of information as to how the sum of 125 was arrived at.

40. It would be helpful at this point to consider the matter in the context of two Freedom of Information (FOI) requests submitted to the Council, after which, the opinion of the Information Commissioner and subsequently the Information Rights Tribunal was sought on whether on the balance of probabilities a calculation was held by the Council and whether the Regulations provided a legal obligation to be able to support its costs.

41. Firstly some conflicting evidence should be highlighted that arises from the Councils representations which are recorded in the draft statement of the case (the Draft Case) produced on 22.7.13 in relation to the Defendants High Court appeal, which potentially brings into question the reliability of the Councils evidence. The Draft Case claimed (3(d)), as follows (emphasis added):

The level of costs sought had been calculated to reflect both administrative and legal costs in bringing the proceedings to court, including the court fees.

The above was stated despite the Councils fervent denial of the existence of a calculation in both FOI requests, the first of which (see below paras 52-53) was submitted on learning that the Council had increased the summons costs by 120%, but before the Magistrates court and the Defendants High Court proceedings commenced; the second submitted subsequent to both. Both the Information Commissioner and Information Rights Tribunal agreed unanimously with the Council that on the balance of probabilities such a calculation was not held and with whom it also agreed there was nothing legally obliging it to support its costs.

42. The second FOI request focussed solely on the Councils incurred expenditure to issue a summons (the matter central to the Defendants High Court appeal) which escalated to an appeal to the First-tier (Information Rights) Tribunal (FtT), 'Gilliatt v Information Commissioner' (Appeal No: EA/2013/0285). The appeal relied in part on the Council being legally obliged to demonstrate how it came by the figure in order to persuade the FtT that it would in fact know this cost and enable its disclosure.

43. The Response to the FtT appeal (4.2.14) supported the Commissioners findings in the Decision Notice (the DN) reference FS50505226, which were reiterated to the extent necessary to respond to the appeal grounds. In the matter of a legal requirement, and

with reference to the Governments good practice guide1, it records in paragraph 27(1) of the Commissioners Response that the documentation is merely guidance and does not entail a legal obligation to hold the information requested (DN, para. 16). In the same matter, but with reference to regulation 34(5) of the Regulations, it records in paragraph 27(2) of the Response, as follows:

The legislative provisions referred to by the Appellant, specifically regulation 34(5) of the [Regulations], provide that public authorities shall not proceed with summonses for unpaid council tax if there is paid/tendered to the authority both the outstanding sum and a sum equal to the costs reasonably incurred by the authority in connection with the application up to the time of the payment or tender [of the outstanding council tax payment]. However, neither this provision, nor any other statutory provisions, provides any obligation on local councils to hold information enabling them to provide a breakdown of those reasonable costs (DN, paras. 17, 19).

In Judge Farrers Final Decision dated 22.5.14 dismissing the appeal it is evident that the FtT had been persuaded that a local authority is under no legal obligation to be able to support the incurred costs it recharges to those debtors against whom complaint is made. Under heading The Tribunals Decision (paras 7 and 8) it is held, so far as is relevant, as follows (emphasis added):

7 Regulation 34(5) of the [Regulations] does not oblige a council to hold the requested information. It reads -


(a) ...... (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,

1 In June 2013 the Government produced a guide entitled Guidance to local councils on good practice in the

collection of Council Tax arrears." Paragraph 3.4, the document states as follows:

Local Authorities are reminded that they are only permitted to charge reasonable costs for the court summons and liability order. In the interests of transparency, Local Authorities should be able to provide a breakdown, on request, showing how these costs are calculated. While it is likely that authorities will have discussed costs with the Clerk to Justices it should be recognised 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.


8 The obligations imposed are those set out in the last line, no more. A council may use a standard estimate of the costs that it reasonably incurs but, as the Guidance says, a court may question it so keeping the relevant data is good practice. This basis for rejecting the Councils denial therefore fails. Even had there been such an obligation, that would not have demonstrated that the Council must have complied with it.

44. The Appellant applied for permission to appeal to the Upper Tribunal contending that the judge was wrong in law to have considered that the Council was under no duty to hold the requested information by virtue of regulation 34(5) of the Regulations. The grounds of challenge to the FtT determination in paragraphs 7 and 8 are set out in the application for permission to appeal (3-5). The appellant attempts to persuade the FtT (para 5) that the issue involves the interpretation of regulation 34(5) because the judge held that a legal obligation for a council to show how the sum it claims in costs is arrived at does not exist explicitly in the statutory language. The Appellants interpretation is summarised as follows:

After a summons has been issued but before the case is heard, Magistrates have no jurisdiction over costs until the case is brought before the court where they then may fall under scrutiny. There is no prescribed amount and the court can not, in a legal context, agree a standard sum, so is open to the council to accept payment, mindful that the amount may vary from case to case. Proceedings are not yet before the court, so if on payment or tender, the authority fails to agree the sum, then it must, by virtue of regulation 34(5)(b) be obliged to support its claim in order to justify the sum is no more than costs reasonably incurred. To proceed once an amount has been paid or tendered would be unlawful, as it clearly states: the authority shall accept the amount and the application shall not be proceeded with

45. Permission to appeal was refused by the FtT in a Decision promulgated on 4.7.14 (DRP). The FtT declined to review the decision because it was not satisfied that any arguable issue of law arose from its decision to dismiss the appeal, which states at paragraph 5, so far as is relevant, as follows:

Its response remains the same as in its Decision; Reg. 34(5) does not impose the asserted duty and, if it did, the Tribunal was entitled to find as a matter of fact that NELC did not comply with it by holding the requested information.

46. The FtT was concerned in determining whether on the balance of probabilities the Council had any demonstrable way of supporting its costs, so the mere existence of a legal duty would not in itself be evidence. It was nevertheless something that the FtT had a duty to assess, which in the context of Nicolson v Tottenham Magistrates (61) had done erroneously. Having no way of verifying its costs, the Council is left unable to provide Magistrates with sufficient relevant information...to reach a proper judicial determination of whether the costs claimed represented costs reasonably incurred.

47. Though the matter was FOI and concerned information the Council held rather than what it should hold, there may be merits in considering the FtTs reasons for declining to review its decision to better understand how it fits within the context of this challenge and as a point of comparison in Nicolson v Tottenham Magistrates. Paragraph 6 of the DRP states, so far as is relevant, as follows:

As to the supposed duty, it is evidently based on the claim that the duty under Reg. 34(5) to accept the paid or tendered amount can only be discharged if, in every case, the taxing authority is able to specify precisely the ...amount equal to the costs reasonably incurred by the authority in connection with the application up to the time of the payment or tender, (Reg. 34(5)(b))

There is nothing in that wording to preclude the application of a standard charge, provided it represents a reasonable estimate of the average cost of the application at the prescribed time.

48. Nicolson v Tottenham Magistrates agrees (46) in so much as it considers in principle, provided that due consideration is given to the dangers of artificially inflating costs, it may be a legitimate approach to provide an average figure which could be levied across the board in "standard" cases. It does however go further and add that such costs could be amplified in circumstances where there was justification for incurring additional legal and/or administrative costs.

49. This approach would require the average figure being derived from the aggregate recoverable costs, which (i) excluded any expenditure that was not common to every application, and (ii) be properly referable to the summons/liability order. That is to say in broad terms the exclusion of those elements which are referred to later (see below paras 78-115). It would then be open to the council in cases where it incurred additional administrative costs (where they were lawful and there was justification to do so) to amplify the standard costs, but again subject to them always being properly referable to the enforcement process. There is however another factor arising due to the fact that the

standard summons costs is added to the taxpayers account routinely at the point when the processing software triggers the summons issue. In doing this the Council has imposed upon itself a greater restriction in the amount of expenditure it may lawfully claim than otherwise regulation 34(5) entitles. This could be viewed as a policy which backfires but for the fact that there has thus far been a free rein given by the Magistrates court for the Council to set its own costs and apply them in a way without regard for the Statutory Instrument that governs them.

50. It is open to those against whom the council proceeds, to challenge the application, and where representation is made about costs, Magistrates must look at the case on an individual basis but need not involve the onerous task of calculating the level of costs incurred in each individual case. In seeking to standardise costs, the very least requirement would be to have a standard sum for the summons and another for the liability order; then only where costs are challenged or an amount tendered, as per the Regulations, would they need individually assessing to ensure that the debtors are treated lawfully.

51. The Governments good practice guide states (see above para 43) 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 because the Regulations provide for individual costs. Moreover, the court would not require satisfying on an individual basis for any arbitrary reason, but because an individual sought to challenge the costs, which is why regulation 35(1) of the Regulations provides that a single liability order may deal with one person and one amount. Regulation 35, so far as is relevant, is as follows:

Liability orders: further provision

35.(1) A single liability order may deal with one person and one such amount (or aggregate amount) as is mentioned in regulation 34(7) and (8), or, if the court thinks fit, may deal with more than one person and more than one such amount.

The court was provided no evidence supporting a 120% summons costs rise

52. A copy of a breakdown was asked for via FOI that was assumed would be supplied by the Council to the Magistrate's Court in support of a near 120% increase of its standard council tax summons costs. The Councils 2011/12 budget setting revealed it aimed to

achieve savings by generating 188,000 additional each year in court costs income and was what brought about the request.

53. The FtT (in whose hands the matter had been placed) took the decision to strike out the appeal on the basis that there was no reasonable prospect of the case, or any part of it, succeeding. Though plainly the attempt to obtain a breakdown via the FtT was unsuccessful, it has nevertheless provided formal judgment in support of the Magistrates not having sufficient relevant information before them to reach a proper judicial determination of whether the costs claimed were reasonably incurred by the Council. See paragraph 4 of the Appendix to the Order of Judge Taylor dated 27.4.12 striking out the appeal in case 'Gilliatt v Information Commissioner' (Appeal No: EA/2012/0050):

Following a complaint to the Information Commissioner, a Decision Notice was issued concluding that the Council had complied with the Freedom of Information Act 2000 (the Act), and no further information was held. This was because on the balance of probabilities the Council had provided all of the information it held that fell within the scope of the information request, and:

a. The Information Commissioner considered the Council had explained why it did not hold more information falling within the scope of the request there was no business need for it to hold information in the detail and context requested.

b. Request A: The Council had explained that it had not supplied the Magistrates Court with a breakdown of the increased summons costs. It had explained that it did not hold a breakdown for the calculation of the 70.00 fee, as it was based on comparisons with the fees charged by neighbouring authorities (including Hull City Council and East Riding of Yorkshire Council) and then compared against national averages, and as previously identified checked to ensure that the monies raised from costs would not be greater than the cost of the service.

Further conflicting evidence Draft Case in Defendants High Court application

54. Paragraph 3.4 of the Governments good practice guide (see above para 43) is reproduced in Nicolson v Tottenham Magistrates (56) where it is affirmed thereafter that the information was asked for in that case and was not forthcoming. Paragraph 57 which states as follows:

The Claimant asked for that information and it was not forthcoming. The Magistrates did not have that information before them either. It was not good

enough for them to be told in general terms that the costs had something to do with administrative time and the number of people who were involved in the process for making the application. Nor was it good enough for them to be told that some arrangement or agreement had been reached in 2010 between the Council and the clerk to the justices about the level of the costs without carrying out any investigation of what the agreement was and the basis for it. Looking to see whether the costs were broadly in line with costs being charged by other local authorities was all well and good, but it was not enough to discharge the courts obligations.

It was also found unsatisfactory in Nicolson v Tottenham Magistrates (29) that the Magistrates accepted LBHs justification that the costs claimed were reasonably incurred on the basis that they were no more than the standard amount claimed in every case. Paragraph 29 states so far as is relevant, as follows:

The Magistrates sought to rely on the fact that the 125 claimed was no more than the standard amount claimed in every case; but the fact that a standard sum is attributed to costs recoverable in every case where a summons has been issued was one of the matters that gave rise to the Claimants concerns. That is why the Claimant was seeking to find out how it was computed and what was the Councils justification for claiming it across the board. For all he knew, there might well have been a plausible justification, but in the absence of further information he was in no position to tell and neither were the Magistrates.

55. It was also in the Defendants High Court case broadly the same criteria that satisfied Magistrates that the costs were reasonably incurred. The Councils representations are recorded in the Draft Case in sub-paragraphs (a) to (d) of paragraph 3 which are summarised as follows:

The costs were the same level as were sought in all similar proceedings arising in cases on or after 1.4.11 which was a sum previously notified to the Court on 4.3.11. They did not exceed the prescribed amount described in regulation 34(8) of the Regulations and were within the range sought by other local authorities in similar proceedings. The level sought had been calculated to reflect both administrative and legal costs in bringing the proceedings to court, including the court fees.

56. The courts findings are recorded in sub-paragraphs (a) to (g) of paragraph 7 of the Draft Case which are summarised as follows:

We recognise that in all cases where costs are claimed we have discretion whether to order them and in what sum, so the fact that the Council asked for the normal amount did not prevent us from reducing the sum or refusing to order any costs.

The Council has taken a broad approach to the question of costs and has sought a similar amount to all others in the same court list. This is normally appropriate, though we accept we must look at each case individually, so in principle, the respondent could have sought a greater amount in an individual case where more costs were incurred, subject to any limitations set by regulations, had it chosen to do so.

The amount requested in all cases before us was a sum advised to the court over a year before these proceedings commenced and the court in the intervening period has considered it appropriate by making orders in favour of the respondent in that sum. That fact of course did not prevent us from considering the amount requested here. A court fee payable in respect of each application as well as other administrative and legal costs of bringing the proceedings satisfied us that 70 was an amount reasonably incurred by the respondent in making the application before the court and obtaining the liability order.

On the basis of the information presented to us by both parties, the contention that the amount claimed by the Council was in the nature of general revenue raising did not succeed and we were satisfied that it was instead an amount to cover the cost of bringing council tax enforcement proceedings to court. This case had no features to distinguish it significantly from other cases in our list to suggest a different level of costs. The appellant should pay the full amount of the costs sought. We could not see that it was just to order the appellant to pay less or we would have so ordered. We ordered that the costs requested by the respondent should be paid by the appellant in the proceedings and made a liability order against him to enable that sum to be recovered.

57. There is nothing left to question or take apart any further from the accounts. The Magistrates in the Defendants High Court case clearly sought to rely on the same criteria that satisfied Magistrates in Nicolson v Tottenham Magistrates which had in that case all been considered unsatisfactory. There is however a need to focus on the declarations which raise issues beyond simply whether or not they were considered satisfactory.

58. The court expressed in the Draft Case (7(f)) that the case had no features to distinguish it significantly from other cases in its list to suggest that a different level of costs should be considered. It is understood that the data provided on the complaint list relating to each case simply consists of the defendants personal details, liability period, summons notice value, costs and the total, therefore unrealistic to expect that this information would enable the court to go through a judicial exercise of distinguishing different levels of costs from one case to another.

59. The Council declared under representations in the Draft Case (3(b)) that the level of costs sought did not exceed the prescribed amount described in regulation 34(8) of the Regulations which is an incorrect reference to costs (See Annex B). Regulation 34(8) describes the expenditure incurred in bringing the case before the court and obtaining the liability order whilst the costs contended were those of instituting the complaint in regulation 34(5). This was similarly misconceived by the court as evidenced by the fact that in its findings in the Draft Case (7(d)) it stated that they considered 70 was an amount reasonably incurred by the Council in making the application before the court and obtaining the liability order.

60. Apart from there being an incorrect reference in the Defendants High Court case, it was implied that the then 70 costs (the same whether a case proceeds to court or payment renders a hearing unnecessary) included an element of front loaded expenditure in applications which were not proceeded with.

61. The remaining question to be determined in the Defendants High Court case i.e. whether the costs of obtaining an order which have not been incurred are claimed lawfully in respect of instituting the complaint has now been established in Nicolson v Tottenham Magistrates. The judgment focuses on the legislative provisions that sets apart costs which may be claimed in respect of obtaining the liability order and those which are limited to a lesser amount (by virtue of payment or tender) under the provision of regulation 34(5) of the Regulations. It concludes (37-38 & 49-50) that additional costs in obtaining an order (which have not been incurred) may not be lawfully claimed in respect of instituting the complaint.

Costs set at same level whether applied at the summons or liability order stage and/or including costs arising post liability order

62. A legislative provision for capping costs in Welsh authorities (See Annex B 8-10) is set out in the Council Tax and Non-Domestic Rating (Amendment) (Wales) Regulations 2011 (the Amendment). The Amendment and particularly its Explanatory Memorandum suggest that the Regulations were formulated, intending to give a person issued a summons an incentive to settle liability before the case proceeded to court. Although there is no provision for each stage to be capped independently, the language is implicit (Annex B 9) that costs in respect of instituting the complaint, form one distinct part of an aggregate amount (capped at 70) in respect of the authoritys total incurred expenditure to obtain a liability order.

63. LBH made representations in Nicolson v Tottenham Magistrates defending the setting of costs at the same figure, regardless of whether payment was made before the case is heard. The Explanatory Memorandum provided the rationale behind why the councils approach to applying costs was legitimate, which on the face of it, appeared not in accordance with the Regulations. The explanation is contained in paragraph 49 of the judgment which, in so far as relevant, is reproduced below (emphasis added):

.....It explains why the limit was not set at 35 for each of the two stages, on the basis that during the consultation process "several local authorities pointed out that the greatest amount of work is incurred before the initial summons is issued and argued that the charge should be higher at this stage. Ms Henderson said that this explained why in the case of some local authorities, such as the Council in the present case, the costs were set at the same figure regardless of whether payment was made after the summons was issued. The costs of obtaining a liability order were very small in comparison with the costs incurred in connection with the issue of the summons.

The explanation was accepted in principle but it expressed that in practical terms the approach provides no incentive....to pay up after the summons is issued. It concluded (in that matter) in paragraph 50, so far as relevant, as follows:

.....What matters is that the costs that it does decide to claim are properly referable to the enforcement process.

64. Observing legislative restrictions that limit costs to expenditure incurred up to the point where an amount has been paid or tendered and that some authorities claim an identical sum in cases that proceed to court then those that make no distinction would be falling foul of the law if the further cost incurred in obtaining an order were not borne by the taxpayer. The same would be true if continuing expenditure incurred by the authority after obtaining the order in respect of securing payment etc. was claimed as court costs (at either stage). However, in order that the cost of recovery does not fall on the taxpayer as a whole, many billing authorities express a view that rechargeable costs in respect of applying for a liability order should extend to cover all expenditure which is considered attributable to recovery and enforcement (See Annex C).

65. In this respect there is some assistance to be derived from Chiltern District Councils 16 March 2010 Cabinet report into Court costs (See Annex D), see in particular paragraph 4, where the essential point being made is that, the majority of costs it incurs arise from

the court hearing to obtain the order and the additional work required to secure payment thereafter. Paragraph 4 of the report is as follows:

The level of costs should be realistic but reflect the fact that we do not believe in principle that it is fair to pass on the costs of recovery from the few people who default on payment of Local Taxes to the vast majority who do not. Most of the costs the Council incurs arise from the application for a liability order at Court and the additional work required to secure payment once we have the liability order.

66. Understandably, expenditure varies in proportion to the authoritys size and may be affected by economies of scale, but that has no bearing on at what stage in the process it is incurred. It is therefore rational that one authority incurs recovery expenditure in much the same way as another.

67. With it established that a billing authoritys priority is to ensure that no cost of recovery is borne by the taxpayer, the following line of reasoning must lead to the conclusion that billing authorities in general, account for expenditure in their standard court costs which falls outside the boundaries defined by law:

a billing authoritys incurred expenditure in securing a liability order makes up only a small element of its overall cost of recovery due to non and late payment (Annex C 2-3); however

billing authorities endeavour to ensure that no cost of recovery is borne by the council tax payer in general; but

the law restricts costs that can be recharged, to an amount incurred in obtaining a liability order, or limited further to an amount in connection with instituting the complaint (in the circumstances described under regulation 34(5) of the Regulations).

68. In context of the Defendants case the Council implies that its priority is to safeguard the taxpayer from having to bear any element of recovery administration by setting its standard court costs at a level which includes expenditure that falls outside the boundaries defined by law (Annex C 4-10). The Councils Cabinet report, Review of Council Tax court costs, dated 17.2.14 briefly outlines the risks of members opting either to levy a higher level of court costs than recommended or a lower level. The relevance in this context, was the risk outlined which was associated with opting for a lower level than recommended, as follows:

Members may choose to levy a lower level of costs than that recommended, however, this would mean that additional costs incurred by the Council due to non-payment are borne by those Council Tax payers who pay on time in accordance with their instalment plan.

69. Responses by the Council to FOI requests asking for breakdowns of its costs underpin this. For example, as a final safeguard in a series of checks to be satisfied its costs are claimed lawfully, the Council consistently refers to ensuring that the monies raised from costs do not exceed the cost of the service (see above para 53).

70. If the law made provision for the cost of the service to be recharged to the taxpayer, it might be good enough, but that reference has been confirmed to relate to the costs reasonably incurred for Council Tax collection and recovery. The cost of the service must include expenditure attributable to the court application but only as an element of the aggregate amount and so the idea of ensuring income is kept within this budget is misconceived as a measure of what might be lawful.

71. The Council implies that because court costs income is within its annual budget (1.1 million) for all activity associated with recovery of Council Tax etc., it considers that its claim is lawful. The DN (ref: FS50400874) records this in para 6:

...The [Regulations] do not require the Council to justify the amount charged to each individual, only that the costs have been reasonably incurred by the authority in connection with the application up to the time of payment or tender. The annual budget for all activity associated with recovery of Council Tax and Business rates amounts to approximately 1.1 million.

It is reinforced further at paragraph 15 of the DN that the Council sets it costs, not at a level to cover the court application, but for recovering Council Tax, ultimately in a bid to safeguard the taxpayer from having to bear any element of recovery administration:

...The monies raised from costs are not greater than the cost of the service. The increase in summons costs does not represent income generation but a saving that can be made in the cost of the delivery of the service, that would otherwise ultimately be passed on to the Council Tax payers of North East Lincolnshire... As stated the costs raised from the increased Summons costs are to cover the cost of recovering Council Tax, and do not represent income generation but a saving that can be made in the cost of the delivery of the service for the benefit of all Council Tax payers of North East Lincolnshire

72. The view held by perhaps all billing authorities that costs claimed in an application for a liability order should encompass all recovery and enforcement administration, appears to be endorsed by the Ministry of Justice (the MoJ). In a response to a FOI request on related matters (FOI-87328) the MoJ stated that the level of costs applied for is calculated by reference to the actual expenditure incurred in recovering council tax debts...

Policy to review court costs and produce annual breakdown

73. The calculation produced by the Council, subsequent to the Defendants High Court application, attributed the vast majority of expenditure to instituting the complaint (the summons). Only 5% of what was accounted for as the Gross Recoverable costs was estimated as being attributed to further work in obtaining a liability order. The breakdown shows, in apparent compliance with the law, that the estimated 5% was deducted from the gross figure before dividing that sum by the number of summonses issued to arrive at the average cost per summons.

74. In accounting terms therefore, the relatively small cost attributed to additional work in obtaining a liability order after a summons has been issued is absorbed by the taxpayer. In this matter it is agreed in Nicolson v Tottenham Magistrates (50) that In principle there is no reason why a local authority should not decide to limit the costs it claims to the costs in connection with issuing the summons.

75. The breakdown allowed the Council to demonstrate, in theory at least (or to an acquiescent body willing to endorse the figures), that the requirements of the Regulations were met. Under proper scrutiny however, validation would require further proof that the expenditure was reasonably incurred and the gross recoverable costs were in fact lawfully recoverable. The very minimum that would be expected from the court to be satisfied of this would be that:

a) estimated further work attributed to obtaining the liability order was not determined as negligible, merely to justify charging all costs up front,

b) average costs do not include subsidy for bad debt arising from waived or unrecoverable costs,

c) costs do not include subsidy for administration expenditure arising from setting up payment plans, dealing with queries etc. (Annex H 9)

d) costs claimed do not include any element attributable to the expenditure of enforcing the order after it is obtained

a) Further work to obtain liability order determined as negligible

76. The calculation would have to be dismissed on the basis that it provides nothing at all that could satisfy the court that the expenditure attributed to obtaining the liability order only represented 5% of the gross recoverable costs, based as it appeared to be on an arbitrary estimate. In any event, the Councils claim to incur the vast majority of expenditure in respect of instituting the complaint conflicts entirely with Chiltern District Councils view (see above para 65) as to where most of the costs arise which would reinforce justification for the court to require evidence.

77. The probability that the split is random is reinforced further by the fact that the Council once weighted costs contrary to how they are applied now. In 1998/99 there were no summons costs applied; only debtors against whom liability orders were obtained had costs added. From then on the weight shifted until after the April 2011 review, the entire costs were applied on instituting the complaint (Annex E).

b) Subsidising bad debt arising from waived or unrecoverable costs

78. The Councils breakdowns are to be dismissed similarly because they have established that the standard costs included a subsidy for bad debt. It is clear from subsequent breakdowns relating to 2013/14 (Annex F) and 2014/15 that the standard sum recharged to customers in respect of summons costs include a significant element of bad debt brought about by defendants, who for example, may have no means to pay. Those debtors are then being subsidised by those from whom payment is more easily recovered. The Councils Cabinet report, Review of Council Tax court costs, dated 17.2.14 confirms this, as follows:

The Council recognises the difficulties some residents have encountered in paying Council Tax as a result of Welfare Reform changes, and as a result has been more flexible with instalment arrangements. In cases where residents owe a modest amount, and have subsequently made an arrangement which clears the balance within the financial year, costs have not been applied. It is anticipated that such action will continue into 2014/15.

79. It is estimated from the Councils breakdown (and number of summonses issued in 2013/14) that at least 42% of taxpayers against whom complaint was made were

summonsed without costs applied2. Put in context, at least 25 was added to the standard sum for the remaining debtors, which is conservatively estimated because no element of bad debt has been factored in to account for unrecoverable costs in those cases where they were applied.

80. The calculation confirms that the average cost per summons is determined by dividing its gross recoverable expenditure by an estimated number of summonses requested where costs are applied. The recorded number of summons issued (17,197) was significantly higher than the estimated number of summons requested where costs were applied (10,000) used in the Council's 2013/14 calculation. The relevant part of the Councils breakdown is presented as follows:

Gross Recoverable costs 597,160

Estimated number of summons requested in 2013/14,

where costs applied 10,000

Cost per summons 59.72

Cost rounded to nearest 60

81. Clearly if the true number of summons issued (17,197) was substituted for the 10,000 figure above, the cost per summons, based on the Councils method of calculating the sum (disregarding other questionable expenditure), would return a sum of 34.72.

82. The disparity between the number of summonses issued and the figure used has almost certainly arisen from the effects of the Welfare Reform Act 2012 (Annex G). However, even before the Acts introduction in April 2013 (albeit to a lesser degree), the average cost included expenditure attributable to instituting the complaint, which in a percentage of cases could not be recovered from the person summonsed. That element of expenditure was therefore subsidised by those from whom payment was obtained.

2 The dividing figure used in the Council's 2013/14 calculation was 10,000, but the figure submitted to the

Chartered Institute of Public Finance and Accountancy (CIPFA) relating to the number of summonses issued in 2013/14 was 17,197.

c) Subsidising administration cost for customer contact

83. The calculation would be impermissible because it includes a disproportionate amount of staff time attributable to customer contact under the budget category, Council Tax. This expenditure arises from dealing with queries/calls etc. as a consequence of issuing summonses. A second category, Debt Recovery, also includes a disproportionate amount of staff time that accounts for expenditure in negotiating, setting up and monitoring payment arrangements etc. The vast majority of this expenditure will not have been incurred by the Council in a proportion of cases, for example where the application does not proceed (by virtue of payment or tender) or where it does proceed it does simply without staff contact.

84. The gross recoverable costs under the Council Tax budget is 191,730. Based on the Councils computing method, this adds 18 to the cost per summons, though an element of this would arguably be legitimate only in cases where the debtor had taken up resources by engaging staff in matters connected with the summons, as this is the basis upon which the expenditure is justified.

85. The breakdown explicitly sets out that its recoverable costs (after deducting 50% for routine billing activity from the Council Tax budget) is in the ratio of calls arising from summonses to calls arising from reminders that do not result in a summons. The final recoverable costs for those proceeding to summons is a sum estimated as 50% (191,730) with the other half attributed to what the Council categorises as those paying on time.

86. None of the expenditure could have lawfully been incurred by the Council in respect of the Defendants summons simply because the assumptions on which the calculation was based were that each person against whom complaint is made would take up resources by engaging with staff in one way or another in matters connected with the summons.

87. Gross recoverable costs under the Debt Recovery budget are 327.480 and add 31 to the cost per summons. A 3 fixed cost is budgeted for in this category and payable on making complaint to the justices for each application. This element is therefore justly claimed in respect of every summons issued, if it was lawful and reasonable to apply, which in the Defendants case it wasnt and can not have been considered reasonably incurred by the Council.

88. Where accounts are settled on receipt of the summons, none of the other expenditure could have been incurred by the Council in respect of those summonses because there would be no outstanding liability. No resources would therefore be called upon to negotiate, re-schedule or monitor any payment plan and the whole element of costs relevant to the Debt Recovery budget, except 3 court application fee would be impermissible.

89. In broader terms, the majority, if not all (see below paras 99-102) of the costs appear questionable even in those cases where resources are required to re-schedule and set up payment plans etc.

90. Additional to the statutory Regulations instalment scheme, regulation 21(5) provides for an agreement to be made between the billing authority and the liable person either before or after the annual bill is issued. In such cases, a debtor may, if the agreement is kept, avoid incurring summons costs. However, this is enabled by, and at the cost of the Council re-scheduling and monitoring the plan which must exceed any that would have been incurred from simply allowing the pre-set parameters in its council tax processing system trigger the appropriate action uninterrupted by recovery staff.

91. Additional administration costs incurred by the Council due to the interruption of the automated process cannot lawfully be included in the recoverable costs from which the average summons is computed because the extra recovery work caused is unrelated to those cases that result in a summons. Neither can the cost be recovered from customers, for whom the re-scheduled payments are made3, because the measure is taken to prevent (or instead of) taking recovery action.

3 The law cannot have been enacted with the intention of giving billing authorities powers to increase costs in

respect of one debtor from whom collection is easy in order to subsidise another's costs whose payment is more difficult to obtain. Neither would the same be intended to entirely fund those defendants costs who simply dont pay them, perhaps because theyre waived for example.

The disparity can be no better illustrated than comparing two account holders, who after being served summonses, respond differently as follows. One having contacted the billing authority enters into a payment arrangement and by doing so has his costs waived; the other simply settles his liability, including payment of the standard costs, in accordance with the demand.

The individual who escapes paying all costs has clearly caused the authority the majority of extra work in respect of dealing with the enquiry, setting up a payment plan and the ongoing monitoring of that account. On the other hand, the individual who straightforwardly settles the debt without causing this work is left standing the losses that arise from staff negotiating favourable terms for the authority that see the defendants costs waived.

92. This expenditure must therefore be absorbed by the Council in a way consistent with other administrative functions processing benefit claims for example. The line of reasoning that follows removes any ambiguity that the Regulations might allow for this administration cost to be subsidised by those against whom complaint is made to the Magistrates court:

in order for a billing authority to recharge costs to the debtor, it is required first to make complaint to the Magistrates court; but

where applications to the court are not made (by virtue of flexible payment plans being arranged), potential rechargeable administrative costs in those cases are rendered unrecoverable from those for whom the concessions are made

expenditure can therefore only be met by inflating the standard sum or alternatively having the cost borne by the taxpayer; however

where complaint is made, the amount claimed must not exceed what is reasonably incurred by the authority in an individual case. Clearly no expenditure attributable to assisting the debtor avoid recovery is incurred by the Council which is referable to those debtors summonsed because none of those for whom concessions are made are proceeded against;

to that end, it would have to be treated as an unavoidable cost in administering council tax as it would be unlawful to have this element of expenditure subsidised by inflating the standard costs.

93. Notwithstanding that there is no legislative provision to recover this cost, the sheer size of the estimated recoverable component, indicates that it must be funding far more resource intensive functions than merely an automated process, upon which instituting the summons relies. Engaging with customers for example, would far outweigh the demand on resources and it likely that even expenditure in respect of work done after securing the order is included, as almost a third of a million pounds annually is accounted for.

94. Even before the Welfare Reform changes the Council has implied through various documents, reports etc., that its standard costs include subsidy for bad debt and/or for administration expenditure attributable to assisting the debtor avoid recovery. In a budget consultation in 2010 (Annex H, particularly 6) the Council stated that the number of summons issued has reduced over the last 2 financial years due the work that is being done to make more flexible arrangements with debtors at an early stage.

95. On 29.11.12, the Grimsby Telegraph published an article informing readers how council tax arrears are recovered. At the final notice stage it stated the council gives the opportunity to bring the account up to date and continue with instalments if the customer agrees to a direct debit

96. The Council has a Debt Management Strategy which provides more insight into how the subsidy element of court costs is increased to fund the Councils campaign to secure a greater take-up of account holders who pay by direct debit. Paragraphs 10.7 & 10.8 state so far as is relevant as follows:

10.7 When recovery action has commenced payment arrangements will only be entered into when the debt is secured by a liability order or the debtor agrees to make payment by direct debit......

......................

10.8 In exceptional circumstances special payment arrangements may be made by authorised staff prior to a liability order being obtained and without the debtor agreeing to pay by direct debit.

97. This raises two issues; one that expenditure is incurred by the Council for work attributed to customer contact in setting up payment arrangements, for example, where payment is agreed by direct debit, and as a consequence, no order is obtained nor court costs incurred by the debtor. The other concerns the Councils application for an order to protect its interest where circumstances are not exceptional, and where no agreement is made to pay by direct debit (thus costs are incurred by the debtor).

98. Inflating the standard sum for the purpose of subsidising bad debt has been asserted already to be unlawful. However, there is also an exploitative element linked to the offer of having court costs withdrawn as bargaining power to persuade taxpayers to sign up to the Council's preferred payment method. This goes beyond just subsidising bad debt as it exploits those against whom costs are applied by inflating summons costs to directly fund the Councils campaign to secure a greater take-up of direct debit the success of which depends entirely on the volume of costs that are waived.

99. Where the Council allows for an arrangement to be entered into, conditioned upon obtaining a liability order to protect its interests, those debtors are liable for costs so theoretically that expenditure is recovered from those driving the level of activity. It is however contested, even under these circumstances, that the law makes no provision for

its recovery. In that case, no cost referable to the Regulations, whether attributable to bad debt or subsidising arrangements before recovery has begun, will be recoverable.

100. As a simple matter of statutory construction, it is evident that the Regulations do not condition that a liability order may be applied for where there has been tendered to the authority the aggregate of the two sums described in parts (a) and (b) of sub-paragraph 34(5), as follows (emphasis added):


(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,


101. Considering the relevant provisions of the Regulations in the context of a payment arrangement being agreed once recovery action had commenced, it is a reasonable understanding that the re-scheduling is made as a consequence of a formal offer or proposal. It is also a reasonable understanding of the terminology used in regulation 34(5) that a tender is used in the context of a formal offer, in response to which the authority must accept and the application not be proceeded with.

102. In that case, it would not simply mean there was no longer a lawful avenue to proceed further and request a liability order, but also that the cost attributable to the work involved in making the arrangement could not lawfully be included in the costs claimed. Expenditure may only be recharged that has been incurred by the authority up to the time of the tender and clearly resources called upon by engaging staff in the matter would occur after the payment was tendered.

103. It follows therefore that the associated costs, even in cases were payment plans are re-scheduled (pre or post enforcement commencing), can not include any element of expenditure which is attributable to controlling or monitoring those plans as this activity must logically follow reschedulement. Gross recoverable costs under the Control & Monitoring budget are 109,380 and add around 10 to the cost per summons and

would, if referring to rescheduled payment plans (in whole or in part) be unrecoverable in the appropriate proportion.

104. If the recoverable amount under the Control & Monitoring category budgets for checking account details before instituting recovery, then that would be wholly unjustifiable because there are no demonstrable checks. All papers served on the defendant in connection with the application are generated as a consequence of settings in the council tax software. Parameters are agreed in advance by the relevant manager and set in its Council Tax processing system relating to the number of days behind and the monetary value etc., and summonses issued on this basis.

105. If any doubt arises that the Council does not totally rely on the automated procedure and there may possibly be staff double checking the bulk court applications, then this can be disproved beyond all reasonable doubt. It is provable that the Defendant has (on this occasion, and previously), where all payments have been up to date, been subjected to recovery by the Council due to a deficiency in its Council Tax processing system which would have been highlighted if a manual check into payments made on the account had been carried out prior to instituting the complaint (Annex J).

106. In explaining how the recovery action had wrongly been instituted it is helpful if some background is provide into the payment system relied upon by the Council to automatically allocate payments when the council is owed money for past years as well as the current year.

107. The Councils software has built in allocation rules to ensure, so far as is practical in an automated system, that the law with respect to specified payments is met. Case law from 1814 (Peters v Anderson (1814) 5 Taunt 596) still relevant, held that "A person who is indebted to another on two several accounts, may, on paying him money, ascribe it to which account he pleases...and his election may either be expressed....or may be inferred from the circumstances of the transaction.

108. In respect of payment allocation for different years accounts, processing systems rely on transactions matching exactly the instalment amount set for the relevant year in the

softwares parameters. Inevitably payments for various reasons will not always be made in the exact manner that the system requires to function correctly, so the system can not

be claimed to provide a fail safe solution to ensuring the law is complied with.

109. If a payment is made which doesn't exactly match an instalment amount, where a taxpayer has more than one account with an outstanding balance, then the system automatically allocates payment to the oldest debt. If payment was intended for the current years liability then potentially that account will go unpaid and may lead to instalment withdrawal, demand for the whole balance immediately and ultimately being charged court costs.

110. During the period in which the court has unreasonably protracted proceedings in the Defendants High Court appeal, the Defendants liability has included an additional sum subject to court proceedings which appears on the bill as a separate balance from the current liability. Complexities have caused the Councils system to misallocate payments to the additional sum on three occasions because parameters have triggered payment to reduce the previous years liability. In respect of the first misallocation, recovery was halted before a summons was served because the Local Government Ombudsman intervened. For the subsequent mistakes (including this occasions), recovery did proceed further and resulted in a summons being served on both occasions.

111. Checks would have verified that payment was made in full and that the balance against which payment was allocated incorrectly, related to court costs that were in any event suspended until the outcome of the proceedings. The absence of manual checks is an obvious concern as is the unreliable way payment allocation relies on exact sums matching set parameters; however, these are secondary to the matters in the Defendants present case. It is not the issue that there are no manual checks, rather, there can be no justifiable expenditure attributable to debt recovery officers monitoring accounts in respect of checks that are not carried out.

d) Administration cost of enforcing the order after it is obtained

112. The judgment in Nicolson v Tottenham Magistrates goes a step further than clarifying the position regarding recharging expenditure for obtaining the liability order in respect of the costs which are applied in connection with serving the summons (the second question of law on which opinion was sought in the Defendants High Court appeal). Paragraph 35 of the judgment states as follows (emphasis added):

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.

113. At around 0.3m, the Debt Recovery budget which adds 31 to each summons has been shown to be disproportionate for processes that are largely automated. The most feasible explanation would be that expenditure in respect of work done after securing the order is included. Administrative work at this stage does not seem to lend itself to automation and is much more likely to be performed manually considering the type of activities which are undertaken. This would give credence to Chiltern Councils claim (see above paragraph 65) that the work to secure payment once having obtained the liability order is one of the stages from which most costs arise.

114. To put the additional recovery expenditure incurred into context, staff engage in activities ranging from notifying the debtor of possible further action to applying to the court for commitment to prison. Information must be obtained about the debtors circumstances in order to assess whether accounts are more suitable for attachments of earnings, deduction from benefits or referral to bailiffs. Where those measures fail to obtain payment then staff might engage in further recovery work, for example applying to the court for charging orders or instigating bankruptcy. Similarly to pre court action arrangements, terms of mutually acceptable payment plans might simply be agreed, albeit still requiring resources to correspond with debtors, re-schedule instalments and then monitor accounts until settled. For all stages, staff must be available for dealing with queries whether by telephone or written correspondence.

115. It is therefore believed, that on the balance of probabilities (regardless of the Regulations not making provision), these costs are recharged to the debtor in a bid to minimise the financial burden on the taxpayer in general, which would appear to be the ends for which disregarding the law is justified.

Unreasonable steps taken to enforce costs

116. A three stage test is set out in Nicolson v Tottenham Magistrates (34) to establish whether the costs order made by magistrates was lawful. For a proper judicial decision to be made it is established that the Magistrates must be satisfied: (i) that the local authority has actually incurred those costs; (ii) that the costs in question were incurred in obtaining the liability order; and (iii) that it was reasonable for the local authority to incur them. The judgment considers (51) whether the costs claimed have been

"reasonably" incurred, after it is established to the satisfaction of the court that the costs were incurred and properly referable to the enforcement process. It offers the below examples to clarify the kind of challenge that it might be the courts duty to consider (emphasis added):

.....there may be individual cases in which it would be open to the respondent to argue that the costs were not reasonably incurred, for example, if it was not reasonable for the local authority to take steps to enforce payment, or if the costs which were incurred were excessive e.g. if the local authority sent a QC along to argue a simple point of law in the Magistrates' Court.

117. In the Defendants case, there is little to convince Magistrates that the Council was reasonable in its actions, particularly in view of the process relied on to institute the complaint being entirely automated and the Defendants case required no call on resources to correspond on matters relating to the alleged debt. It is contended therefore that the Councils motivation to proceed was punitive and/or to generate additional revenue. It is well established that costs are not to be awarded as a penalty and should not exceed the proper costs incurred: see R v Highgate Justices ex parte Petrou [1954] 1 ALL ER 406.

Costs set at levels for improper purposes

118. Evidence has been discovered confirming that the Council has historically manipulated costs in order to generate income to meet a number of different objectives.

Encouraging behaviour (deterrent / penalty)

119. It is documented in relation to a review of costs in 2001/02 that prompt payment of Business Rates could be encouraged as well as generating additional income by charging in those cases (which had before the review been identical) three times the cost of a Council Tax summons (Annex I 2-4).

120. It is well established that costs should be awarded as compensation, not as punishment. In R v Highgate Justices ex parte Petrou [1954] 1 ALL ER 406 it was held that costs should not exceed the proper costs incurred and should not be a penalty. In that case the Appellant owned premises which were let to another party for use as a club. The other party was charged with offences relating to the supply of alcohol and the appellant was joined to show cause why the club should not be struck off the register. The justices convicted and fined the other party and ordered him to pay 20 guineas of the

prosecution costs of 21 guineas and also ordered the Appellant to pay 100 costs. On a motion for an order of certiorari it was held that since the other party had already been ordered to pay all but one guinea of the prosecution costs, the order against the appellant was a penalty in the guise of costs.

121. It is clear from the Councils 2001/02 review that the decision by authorities to set the level of costs disproportionately high was made on the basis that the level of costs (the penalty) might be considered so small in comparison to the amount owed in Business Rates.

Resolve issues caused by IT system failures

122. A Cabinet report in 2002/03 identified ways of funding additional resources to ensure a backlog of work that had arisen due to changes in the IT system were addressed (Annex I 5-8). The summons costs were increased by 50% in order to raise additional revenue to meet funding to pay for additional staff.

123. In 2013 the High Court ruled against Barnet Borough Council budgeting for a surplus of income from residential parking schemes to be used to meet other transport expenditure. In Attfield v the London Borough of Barnet [2013] EWHC 2089 (Admin), it was held that a local authority must not attempt to raise revenue where there is no clear statutory

power to do so. In the Defendants case, the statutory power expressly limits costs that may be claimed to the expenditure incurred by the Council in connection with instituting the complaint.

124. The decision to increase summons costs did not arise because of an increase in the cost of instituting the complaint, rather for the clear intention of funding additional resources to overcome the backlog of work that had arisen in the administration of Council Tax, Business Rates and Housing Benefit due to delays in implementing a new IT system. The Council had therefore acted for an improper purpose namely to raise revenue as it clearly intended to use the surplus to defray other administration expenditure and reduce the need to meet the cost, by for example increasing council tax, using reserves or cutting down on waste. This purpose was not authorised under the Regulations and therefore the decision was unlawful.

Budget savings and alternative to charging for non statutory services

125. The Council forecasted that it could raise an additional 0.752 million in costs income over a four year period by increasing the overall court costs and front loading all the charge in respect of instituting the complaint (Annex I 9-17). This was proposed as one of a number of possible ways it could save or increase income to meet its 29.7 million target set out in the Councils 2011/12 draft budget and medium term financial plan for the period 2011-2015. Increasing summons costs was the preferred measure in response to public consultation over alternative proposals to introduce a charge for replacement bins or garden waste collections.

126. Clearly increasing costs in order to plug a gap in its finances had no legal basis, just like there was no statutory power to set them disproportionately high for the purposes of offsetting expenditure for waste services. The public were able to influence the level of court costs, and probably elected the increase to avoid paying additional for services (Annex H). The Council had acted for an improper purpose by increasing summons costs on account of the majority of respondents preferring to raise additional money this way over introducing charges for waste services.

127. It was wrong in law to increase costs based on criteria other than by reference to an increase in the Councils incurred expenditure. Though indicative of the Council functioning democratically, the publics preference was not, in the context of the law, a relevant factor to be considered. The statutory power which provides for reasonably incurred costs, by definition, renders the determining of them by a democratic process unlawful.

Set targets for court costs income

128. The Council has a budgeted income stream for court costs which is evident from published reports showing outturn variances for this income. A report of the Audit Committee (Final Accounts 2004/05) compares the outturn with the budget to show major variations. A surplus of 0.125 million to its summons costs income target is recorded at Appendix 2 of the report of 28.7.05 (page 15) as follows (emphasis added):

Finance Restructure resulted in vacancy savings (597K), additional benefit subsidy income arising from changes in subsidy rules and grant received on benefits overpayments (1,004K) Revenues and Benefits also exceeded their income target in respect of Council Tax and NNDR summons income (125K) and housing benefit overpayments (116K)

129. The provision of a budgeted income stream has presented a means for the Council to influenc

Documents

Defendants Grounds of Appeal - Redact