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The time bombs under the Council Tax

Alan Murdie, barrister

The council tax is 22 years old in 2015. It replaced the ill-fated ‘poll tax’ that ended the premiership of Margaret Thatcher, and it marked a return to a land tax based upon 1991 valuation figures, with a strong personal element. A cornerstone of the original system was a national scheme which covered 100 per cent of the poorest citizens’ council tax liabilities; however, council tax benefit was abolished in 2013 and replaced with hundreds of differing local systems of support. Default levels have since soared.

Council tax has been going badly wrong for over a decade, as shown by the rising default rate, and the maladministration of council tax benefit long before 2013. The original intention was that the system should be simple, fair and easy to administer, and it should protect the most vulnerable. The current labyrinthine system is little more than anaemic version of the poll tax in many areas, with the liability order becoming the most frequently granted court order of any kind in England and Wales, and the only people really profiting from it are outsourced review administration companies such as Capita and bailiffs, a number of whom have become millionaires.

Enforcement is now seriously compromised by two emerging legal problems, which potentially threaten the lawfulness of council tax debt recovery. A powerful case can be made that the costs claimed by local authorities on liability order applications are unlawful and, worse still, it could be that millions of liability orders supposedly obtained by authorities do not actually exist in lawful form at all.

Can the council explain its costs, please?

The first issue arises with the question of costs claimed by local authorities at liability order proceedings. When a local authority seeks the issue of a summons under the Council Tax (Administration and Enforcement) Regulations 1992 SI 613 it typically adds a sum in costs. Originally these sums were in the region of £20 or £30. But in the last decade they have grown enormously – in London sums in excess of £100 are now being routinely claimed on every liability order.

The first issue arises with the question of costs that local authorities (LA) claim at liability order proceedings. When a LA seeks the issue of a summons under the Council Tax (Administration and Enforcement) Regulations 1992 SI 613, it typically adds a sum in costs. Originally these were in the region of £20 or £30, but in the last decade they have grown – in London, sums in excess of £100 are now routinely claimed. A February 2009 statement by Bridget Prentice, the then Justice Minister, that the cost of issuing a summons was £3.00, reinforced the suspicion that widespread – and unlawful – overcharging is taking place.

So what are “reasonable costs” and how just how are these sums determined? Certain LAs are having great difficulty in answering these questions.

An application for judicial review of the whole issue of costs before the High Court was granted on 7 October 2014. The case of R (on the application of Nicolson) v Tottenham Magistrates and Haringey London Borough Council (interested party) [2014] CO/976/2014 challenges a decision by Tottenham Magistrates to grant a liability order in respect of £125 costs in claimed costs. The case challenges how one court approached the issue of costs claimed by the London Borough of Haringey Council at a particular hearing, but it raises issues that could apply to every council across England.

The application forms part of an appeal commenced by retired vicar and anti-poverty campaigner, the Revd Paul Nicolson, who maintains the sum being claimed in costs is excessive and unlawful because Haringey Council sought identical amounts for every summons. A liability order was made against the Revd Nicolson at a hearing on 2 August 2013. He did not contest it, but objected to costs of £125 on the grounds that this figure did not reflect costs reasonably incurred by the Council, as set down in the regulations. The council provided no breakdown of the costs, and neither the magistrates’ court nor the clerk requested any rationale or explanation of the amount being sought. Nicolson submitted that the £125 was greater than the cost necessarily incurred by Haringey LBC in obtaining any order and amounted to an unlawful penalty for non-payment, not provided for in the regulations.

On 22 August 2013, Nicolson began an appeal against the decision of the magistrates’ court by way of the case stated procedure, whereby decisions on points of on law made by magistrates’ courts can be challenged in the High Court under s111 of the Magistrates’ Court Act 1980. Magistrates are asked to give their reasons in law for a decision so that the High Court can consider them. Nicolson applied to the magistrates to state on what basis in law had the court had satisfied itself that the sum of £125 reflected costs ‘reasonably incurred’. He paid a surety of £500 to pursue his appeal; however, on 20 December 2013, Tottenham magistrates issued a certificate of refusal to state a case, stating with their reasons that the court had heard general submissions from Haringey Council that those cost represented the cost of administrative time and staff expenses. Their refusal to take part in the appeal is now being challenged, and the High Court is also looking at claim of excessive costs.

Regulation 34(5) of the enforcement regulations envisage a LA recover costs ‘reasonably incurred’ for issuing a summons, and, alternatively, those costs ‘reasonably’ incurred in issuing a summons and having to obtain a liability order if one becomes necessary. It is evident, then, that the costs that entail a liability order hearing and those which do not where the debtor pays up on being summonsed must be calculated and claimed separately. Haringey Council, however, appears to charge a blanket £125 for all applications for liability orders. Nicolson is claiming that “the Haringey costs amount to an excessive and disproportionate penalty, rather than a genuine and rational contribution to costs, and as such are unlawful.”

The roots of this problem lie in the council tax legislation, together with the fact that rules for costs in magistrates’ courts in civil cases are none too clear. Many magistrates’ courts and councils have presumed that there is no discretion as to costs when the matter reaches the court. Magistrates have misread the relevant enforcement regulation that requires the court to be satisfied that the sum has become payable and not been paid, and have assumed they have no discretion on costs. It is clear that Regulation 34 envisages that justices have to be satisfied both on the question of the sum in tax outstanding and the reasonable nature of the costs. In order to determine if costs are reasonable, the basis on which they have been calculated must be clear – a figure cannot simply be plucked out of the air.

The courts are meant to protect the citizen from arbitrary or summary demands in the area of taxation. There is much authority in revenue law that sums claimed in taxes revenue must be precisely stated and authorised by Parliament.

At the the heart of this matter is a constitutional principle which I drew attention to in the Council Tax Handbook (10th edition, 2014) where I cited R v (on the Application of Curzon Berkley Ltd) v Bliss (V0)[2001] All ER (D) 214: “There is a strong constitutional convention which maintains an exclusive Parliamentary control over the levying and the expenditure of public money. In particular, it is well established that nothing less than clear, express and unambigous language is effective to levy a tax.” Great precision is needed in Parliamentary language to enable a statute to provide a basis for extracting money from the citizen.

Such “Parliamentary control” seems to have broken down in the enforcement of local taxes, with LAs concocting different amounts and claiming them as reasonable on supposed statutory authority. Thus, all liability orders claiming excessive costs may contain a potentially invalid sum, including those which have reached the bailiffs. Anyone summonsed for council tax default is entitled to object to the amount being claimed in costs; they should ask for a breakdown of the figures and ask how they were calculated.

If Councils are applying for costs, they should to be able to explain what the charges are for and how they are reached. The High Court’s grant of leave indicates that the matter is genuinely arguable, and some courts have already granted adjournments on liability order applications until it is determined.

Where’s the Liability Order Form A ?

However, there is potentially an even bigger time bomb ticking under council tax enforcement concerning liability orders themselves. They are not being recorded in the prescribed form and do not exist in writing.

Though millions of such orders have been issued, very few councils and courts seem to have issued them as required in Schedule 2 to the Council Tax (Administration and Enforcement) Regulations 1992 SI 613. The Court of Appeal remarked on this over 10 years ago in R (on the application of Mathialagan) v Southwark London Borough Council and Another [2004] EWCA Civ 1689)

How many liability orders stamped and sealed by a magistrates’ court have you actually seen? When bailiffs call claiming to hold a liability order, can they produce it – stamped and sealed by the court or signed by a magistrate? Many thousands – probably millions – of such orders have never been properly written down. So when an authority is put to strict proof – for example, in bankruptcy hearing – how does it prove the existence of the liability order?

The relevant form in which a liability order is meant to be laid down is in Schedule 2 of the Council Tax (Administration and Enforcement) Regulations 1992 SI 613 and is ‘Form A – Liability Order in respect of council tax’, which has to be signed by a justice of the peace or a court clerk with the defendant’s name, address and date. Many courts have failed to issue the orders as required. If they have never been written down properly, how can their existence be established?

The full legal implications of this monumental failure to properly record liability orders have yet to be considered, but the consequences are serious. European jurisprudence would suggest laws and judgments have to be certain and if they are never written down, how can the liability order be proved or produced? The sheaves of liability orders that local authorities and bailiffs claim to hold cannot be produced – so how do we know that they were ever made or that the debt (and those supposed costs) really exist. Unfortunately, many magistrates courts do not appear to have kept proper records either…

Test this for yourself the next time you have a LA or bailiff who claims to have a liability order for council tax against a client. “Where’s the Schedule 2 Form A, then?” you may ask.

The response will certainly be interesting. Frankly, with no prescribed record having been made, there is currently more evidence for sightings of flying saucers to be found in Government records than there is for the existence of thousands numbers of council tax liability orders supposedly being claimed by local authorities up and down the land.

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The time bombs under the Council Tax