IN THE HIGH COURT OF JUSTICE

CO Ref: CO/

/2013

QUEENS BENCH DIVISION

ADMINISTRATIVE COURT

Before the Honourable Mr(s) Justice

BETWEEN:

XXXXX XXXXXX
Appellant
and
NORTH EAST LINCOLNSHIRE COUNCIL
Respondent

APPELLANTS GROUNDS OF APPEAL

(DRAFT)

1.

The issues in this appeal 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 Respondent (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 2012/13 was such that the first payment was
due 1.4.12 with remaining instalments due on the first of each subsequent month with
the final payment on 1.1.13.

5.

The taxpayer (the Appellant) met instalments in accordance with the demand notice
up to and including Augusts payment. The following instalment due 1.9.12 was missed
triggering an auto-generated reminder dated 12.9.12 warning that the account showed
85.52 overdue. 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 September 2012. If payment is not
received in accordance with this request the instalment facility will be withdrawn
and the total balance of 437.52 will become payable immediately...
The final paragraph of relevance warned that:
If payment is not received a summons will be issued without any further notice
being given to you and you will incur 70.00 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%. 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.

6.

It is not in dispute that the sum was not paid and no sum was paid. Therefore the total
balance of 437.52 (unpaid balance of the estimated amount) had become payable

immediately in accordance with Regulation 23(3) 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.
7.

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.

8.

Accordingly, the Council was entitled to seek a liability order which it did by applying
to the magistrates court for a summons on 10.10.12 and on 17.10.12, 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 Business Services 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
SUMMONS COSTS
TOTAL AMOUNT PAYABLE

437.52
70.00
507.52

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.
9.

Regulation 34 further 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)....
10.

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 had not been heard so
adding 70 court costs was pre-empting the bench awarding the amount applied for. The
power to award costs lies with the Court on hearing the complaint. Section 64 of the
Magistrates Courts Act 1980, provides so far as is relevant, as follows:
"(1) On the hearing of a complaint, a magistrates' court shall have power in its
discretion to make such order as to costs
(a) on making the order for which the complaint is made, to be paid
by the defendant to the complainant;
(b) ....
as it thinks just and reasonable...
(2)

11.

The amount of any sum ordered to be paid under subsection (1) above shall
be specified in the order, or order of dismissal.....

The Appellant paid on 17.10.12, the aggregate of the sum specified in the summons as
the sum outstanding and a sum of an amount equal to the costs reasonably incurred by
the Council in connection with the application up to the day of service of the summons.
In accordance with Regulation 34(5), if the outstanding balance and an amount equal to
reasonable costs incurred is paid or tendered to the authority, the application shall not be
proceeded with.

12.

The Councils head of income and payments was notified in writing on 17.10.12 that the
debt was settled. The payment was itemised as being 447.52 for outstanding council
tax and 10 for an amount equal to reasonable costs, including a fee of 3 payable to the
court in respect of instituting the complaint. The Appellant queried whether the Council

would pursue a liability order for a sum equal to the difference of the stated amount
payable on the summons and the amount paid.
13.

There was no response other than acknowledgement of the correspondence (17.10.12)

emailed the same day, stating as follows:
I acknowledge receipt of your e mail and attachment, which has been forwarded
to our Court Enforcement Officers to deal with

14.

The court was notified on 26.10.12 that the liability had been settled and advised that
unless the application for a liability order was withdrawn the complaint would be
defended at the hearing of 2.11.12. A summary supported several documents asserting
that 70 was an unreasonable claim for costs and proposed in the following terms:
....I trust the evidence will be sufficient that the court will question the
reasonableness of NELCs claims and require that the council provide evidence to
support the amount claimed by way of costs is no more than it reasonably
incurs...
The relevance of a government publication was brought to the courts attention (Council
tax practice note 9: Recovery and Enforcement) which emphasised under heading
liability orders that the amount claimed by way of costs in any individual case should
be no more than that reasonably incurred by the billing authority. Paragraph 3.18 of the
DoE document said, so far as relevant:
3.18.....The order will include the costs reasonably incurred by the authority in
securing the order. Whilst it is likely that authorities will have discussed a scale of
fees 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.

15.

Regulation 34 provides at paragraph 8 that the court shall, subject to an application by

the billing authority, grant an order for the costs alone, where payment of the council tax
has been made after the issue of a summons but before the liability order has been made
by the court:
(8) Where the sum payable is paid after a liability order has been applied for
under paragraph (2) but before it is made, the court shall nonetheless (if so
requested by the billing authority) make the order in respect of a sum of an amount
equal to the costs reasonably incurred by the authority in making the application.

16.

There is no provision in regulation 34(8) for the court to make the order in respect of
costs, where in addition to the sum payable, an element of costs is paid. Paragraph 8
provides that the court, if requested by the billing authority, shall make the order in
respect of costs, in circumstances where only the sum payable is paid to the authority.

17.

The sum payable is defined as the outstanding liability (excluding costs). Regulation
34(7) confirms this as it describes the sum as one distinct part of an aggregate amount of
which costs reasonably incurred is the other. Regulation 34 provides at paragraph 7 as
follows:
(7) An order made pursuant to paragraph (6) shall be made in respect of an
amount equal to the aggregate of
(a) the sum payable, and
(b) a sum of an amount equal to the costs reasonably incurred by the applicant
in obtaining the order.

18.

The appeal is concerned in circumstances where a reasonable sum of costs had also been
paid, therefore the relevant provision under which costs were appropriate were those
described under regulation 34(5) not 34(8). Nonetheless, the Council proceeded with the
application and applied for costs under regulation 34(8) which the bench ordered in the
sum of the standard 70 sought by the Council.

19.

Costs under regulation 34(5) are raised in respect of instituting the application prior to
any hearing and paid without an order if settled along with the sum payable before the
hearing. Whereas under regulation 34(8) the court grants an order on the application
being made, so include costs of bringing proceedings before the court. However, a 70
standard sum is imposed whether in respect of regulation 34(5) or 34(8), despite costs of
instituting the application being in respect only of part of the total incurred. Individual
costs raised under regulation 34(5) derive from the Councils aggregate, split between
however many defendants appear on the complaint list, which in 2011/12 averaged 970
for each of the 12 applications made that year.

20.

The process is controlled automatically in accordance with parameters set in the Council
Tax software package. The system compiles particulars of all account holders requiring
issue of a summons. The complaint list is generated from the individual entries
contained in the database (including the amount outstanding and costs to be applied for

at the hearing) and delivered to the court where reviewed by a legal adviser who issues
the summonses.
21.

As a budgetary measure (see below paras 39-47), the Council proposed increasing
overall costs and changing the composition so all costs, including those for making the
application, would be imposed in respect of instituting the complaint. Approximately
one quarter of account holders who are summonsed settle in full before the hearing, so
front loading costs would largely account for the forecasted additional 188,000 each
year it would generate.

22.

A case to argue that the total costs should not be incurred in respect of instituting the
application is made in the Regulations as amended and applying to Welsh billing
authorities.

23.

A legislative provision for capping costs is set out in the Council Tax and NonDomestic Rating (Amendment) (Wales) Regulations 2011. Though not applying in
England, where there is no cap, they nevertheless amend the Regulations governing
England and Wales. Rather than the cap itself which applies only in Wales, attention
here is on the references made to paragraphs (7)(b) and (8) to regulation 34. Regulation
3 of the 2011 Welsh amendment provides so far as is relevant, as follows, (emphasis
added):
3. (1) The Council Tax (Administration and Enforcement) Regulations 1992 are
amended as follows.
(2) In regulation 34 (application for liability order)
(a) in paragraph (7)(b), after the order insert (which costs, including those
of instituting the application under paragraph (2), are not to exceed the
prescribed amount of 70);
(b) in paragraph (8), after the application insert (which costs, including
those of instituting the application under paragraph (2), are not to exceed
the prescribed amount of 70);
Clearly, cases proceeding to court and incurring costs under paragraph (7)(b) or (8) can
include those of instituting the application. It cannot mean conversely that cases which
are instituted but not prosecuted can include costs of making the application and
obtaining the order. It is explicit in its references that those cases for which liability is
settled prior to a hearing will only incur costs of instituting the application. Parliament

must have intended that the regulations were formulated so as to provide a person issued
a summons the opportunity to reduce the otherwise higher costs by settling liability
before the hearing date.
24.

The Explanatory Memorandum to the 2011 Welsh amendment, prepared by the Welsh
Assembly Government further reinforces the assertion that the law provides court costs
at two stages. The Memorandum provides so far as is relevant, as follows (emphasis
added):
4.2. When council tax payers...fail to make their payments as scheduled in their
demand notices, they will receive reminder notices, second reminder notices and
final notices. Should they still fail to pay the amount outstanding or come to an
agreement with the local authority, a summons may be issued for their appearance
at the Magistrates Court. The issue of a summons adds a cost to the debtors
account.
4.3. If the debtor is unable to pay the balance in full prior to the court hearing date
they are required to attend court. The Council will request that the Magistrates
Court grant a liability order for the debt in question. This procedure will incur a
further cost for the debtor.
4.4. The Council Tax (Administration and Enforcement) Regulations
1992...provide that the costs added to the debtors account at these two stages
should cover the costs that are reasonably incurred by the authority. However, the
amount that is charged varies considerably between local authorities in Wales so
taxpayers in some authority areas may pay up to twice as much as those in other
areas.
The opportunity arises for the billing authority to apply appropriate costs firstly in
respect of instituting the summons and secondly where the complaint has proceeded to
court where the appropriate costs include additional expenditure in prosecuting the case.

25.

In April 2011, after notifying the Magistrates Court of its decision to increase and front
load court costs, the Council implemented the standard 70 sum. All account holders
summonsed from then on routinely incurred the revised fee, even taxpayers who before
the review only incurred part costs; i.e., those, who under regulation 34(5), settled in full
before the hearing. All costs in respect of making the application and obtaining the order
are now incurred by all taxpayers summonsed regardless of their cases going ahead.

26.

It is evident that the Council merely informed the Magistrates' Court of the standard sum
it had decided it would impose as costs and provided no evidence as to how they were
arrived at, and what costs they represented. The Councils letter to the Deputy Justices
Clerk, dated 4.3.11 details the matter, so far as is relevant, as follows:
I am writing to advise you that North East Lincolnshire Council has taken the
decision to increase the court costs which it charges to tax payers for the non
payment of Council Tax and National Non Domestic Rates.
The costs to be charged for a summons for Council Tax and National Non
Domestic Rates will be 70.00. There will be no additional costs for the liability
order. The increase will take effect from 1st April 2011.....

27.

Before the review, costs had in some respects been applied in line with the Regulations.
The Council imposed a set amount of 32 under regulation 34(5), whereas if the case
progressed to a hearing, a costs order would be made by the court in the sum of 57
(32 + 25) under either regulation 34(7) or if in respect of costs only, regulation 34(8).
Therefore, only part costs equal to 56% of the total costs ordered on the complaint being
heard were deemed to be incurred in respect of instituting the complaint.

28.

The following charts the changes that the summons and liability order costs have
undergone over a period commencing 1998/99 through to 2013/14.

29.

1998/99 Summons 0.00

Liability Order 40

2004/05 Summons 30
Liability Order 25

2000/01 Summons 10
Liability Order 32.50

2006/07 Summons 32
Liability Order 25

2001/02 Summons 10
Liability Order 35

2011/12 Summons 70
Liability Order 0.00

2002/03 Summons 15
Liability Order 35

2013/14 Summons 60
Liability Order 0.00

Remarkably in 1998/99 there were no summons costs, suggesting that the Council
deemed the expenditure incurred in respect of that stage to be so insignificant that only
debtors against whom liability orders were obtained had costs added. After that the costs
appear arbitrarily split between the summons and liability order. The tendency to
proportion costs in favour of the summons is evident with weight shifting over time to

the more frequently incurred charge. In 2001/02 it was deemed only 22 per cent was
incurred in respect of instituting the complaint (summons) whilst the following year this
had risen to 30 per cent, and in 2006/07 considered to account for over a half of the total
costs of securing the liability order. Asserting that it incurs the entire costs in respect of
the summons enables the Council to obtain maximum revenue.

30.

There must be an accounting for why costs, once weighted in respect of the court
hearing and having only a fifth attributed to instituting the complaint are all now
incurred at that stage. A regime change in administration is unlikely to have contributed
as regulations relevant to the application have gone unchanged over the period. The fee
payable per entry on the complaint list to the Magistrates Court accounts for a small
change in composition. This was increased by 2.30 in 2006/07 from 0.70 to 3 under
the provision of the Magistrates' Courts Fees Order 2005, which came into force on
10/01/06 and would account for the summons costs rising by 2 in that year. The fee in
respect of instituting the complaint has undergone no further changes to the level by any
subsequent amendments to the Court Fees Order.

Costs set at levels for improper purposes

31.

The Regulations do not provide for the Council to impose costs for anything other than
covering reasonably incurred expenditure. There are however, costs reviews, publicly
available setting out how the Council has historically manipulated costs in order to
generate income to meet a number of different objectives.

Encouraging behaviour (deterrent / penalty)

32.

Comparing council tax costs with those similarly imposed for Business Ratepayers
allows for a clearer picture of how manipulating the level and/or composition has
enabled doing so to act as a penalty as well as generating additional income.
Council Tax / Business Rates costs raised per summons and liability order:

Council Tax

33.

Business Rates

Summons

Liability Order

Summons

Liability Order

2000/01

10

32.50

10

32.50

2001/02

10

35

30

35

2002/03

15

35

30

35

2004/05

30

25

45

25

2006/07

32

25

47

25

2011/12

70

70

A review in 2001/02 disclosed that if the Council were to follow the trend of other
billing authorities by charging more in respect of Non-Domestic Rates than for Council
Tax, the extra cost would encourage prompt payment. It was forecast that charging three
times more for what had been identical costs would also improve cash flow with the
overall effects of the review potentially generating additional income of 38k per
annum. A report of the Director of Finance to the Cabinet Committee (Review of
Recovery Costs 6 April 2001), details at paragraphs 4, 5 and 6, the relevant matter, as
follows:
"4. The proposal would be to increase by 2.50 to 35, the amount charged for a
Liability Order for Council Tax debts. However, with regard to Non-Domestic
Rates, the Summons cost would rise from 10 to 30 in addition to the 2.50
extra for a Liability Order.
5. The decision to charge more in respect of Non-Domestic Rates is one which
other local authorities are taking in increasing numbers. (There are two in this
region currently, Bradford and Sheffield.) The reasoning behind this is that it is
believed that some businesses deliberately delay payment of Rates as the
penalty for late payment is so small in comparison to the amount that might be
owed. The extra cost is seen as a way of encouraging prompt payment.
6. If the proposal is accepted, then based on the number of Summonses issued
and Liability Orders obtained in the current year, an extra 38,000 of
additional cost income would be generated bringing the total to approximately
390,000.

34.

The cost of issuing a summons should only take into account the administration
involved and not a deterrent element, as there is nothing in the legislation to support

an increase in costs on this basis. Whether it was an effective measure to improve cash
flow was immaterial because regulations make no provision that a penalty may be
imposed. The law only provides for the Council to claim costs which have been
reasonably incurred.

Resolve issues caused by IT system failures

35.

The 2002/03 increase was detailed in a report to the Cabinet Committee identifying
ways of funding additional resources to ensure the backlog of work that had arisen due
to changes in the IT system were addressed. Recommendations were that the Council
Tax summons cost be increased by 50% with immediate effect. The forecasted
additional revenue would easily produce the 30k per annum that had been costed to pay
for additional staff. The Director of Finances report (Revenues and Benefits Service
Staffing Issues 8 November 2002), details the relevant matter, as follows:

SUMMARY

The report identifies ways of funding additional

resources to ensure the backlog of work that has
arisen due to changes in the IT system are
addressed.

RECOMMENDATIONS:
That Cabinet consider the following recommendations:
.....

that the Council Tax establishment is increased by two members

of staff.

that the Council Tax summons cost be increased from 10 to 15

with immediate effect.

........
14.

As far as Council Tax administration is concerned it is suggested

that, as an interim measure pending the full review of the
establishment as agreed within the Best Value Review process, two
additional staff be employed. These additional staff will not only
assist in the clearing of the backlog of work but also in maintaining
the day to day work at an acceptable level in order to improve the
current level of recovery being achieved. The additional costs of
these staff can be met by an increase in the level of summons costs
from 10 to 15. This increase would produce additional income in
excess of 30,000.

36.

The Council seems to have used liability order applications as an instrument to

manipulate income generated by the authority for purposes other than meeting costs
incurred exclusively for the work attributable to instituting the complaint. The report
implied that the Council could rely on at least 6,000 residents being caught per annum
with a Summons thus raising in excess of the additional 30,000 required to fund two
extra staff to clear the backlog of work caused by IT complications.

37.

Aside from inappropriately increasing costs to fund additional staff to clear the backlog,
the figure upon which the calculation was based misrepresented the average and if based
on a typical number of summons served each year would have required only half the
increase to fund two proposed members of staff. The number summonsed based on the
subsequent three years average was 12,277 not 6,000 meaning the increase had the
potential to fund in excess of four staff which was more than twice the proposed
resources.
Council Tax costs raised per summons, number and total raised

38.

Costs

No of Summonses

Summons costs raised

2001/02

10

11,465

114,650

2002/03

15

6,140

92,100

2003/04

15

10,632

159,480

2004/05

30

13,995

419,850

2005/06

30

12,205

366,150

There is no recorded information to justify the summons costs doubling to 30 in

2004/05, but to put it into context, the 260,370 raised additional to the previous year
would be sufficient to fund an additional seventeen staff members, based on the
previous employment costing.
Budget savings / alternative to charging for non statutory services

39.

The public and interested groups were invited to participate in a budget consultation
exercise during November 2010 prior to the presentation to Cabinet of the 2011/12 draft
budget and medium term financial plan for the period 2011-2015. The process included
an interactive budget simulator on the councils website where respondents could move

sliders to adjust funding up or down and/or tick boxes to select the options according to
their preference for where savings could be made.
40.

An introductory explained that the council must save 29.7 million over the next four
years. This was the headline figure displayed on the Simulator and the sum after which
selection of the various money saving options would reduce correspondingly. The
question whether the consultation was conducted properly (in a fair way for example) is
not the focus; but rather that the level of court costs and the manner in which they were
applied should never have been open for public consultation. The costs incurred by the
Council in respect of issuing a summons had either increased by 120% or they hadnt
and therefore not appropriate that the public were asked for its opinion. To determine
the level of expenditure on the strength of a ballot is a concept alien to normal
accounting practices and incompatible with legislative provisions which restrict costs in
respect of instituting the summons to the authoritys reasonably incurred costs.

41.

The Council forecasted that it could raise an additional 0.752 million in costs income
over the relevant four year period by increasing the overall court costs and front loading
all the charge in respect of instituting the complaint. This was the preferred measure
over alternative proposals to introduce a charge for replacement bins or garden waste
collections in a sub category of the overall possible ways it could save or increase
income to meet its 29.7 million target.

42.

The information made available to potential respondents did not go far beyond setting
out the current arrangement for applying costs and the proposed changes. Statistics were
provided relating to the number of summonses issued in 2009/10 and a comparison with
other billing authorities with respect to the level etc. Other than that it was suggested
there would be a likely increase in complaints as a consequence of increasing the costs
and may affect people who already have financial difficulties.

43.

The Council therefore justified its proposed increase based on the level other authorities
charged rather than on administrative costs that could be proved were additional. The
cost of issuing a summons only takes into account the court fee and the administration
involved so the amount recharged to the defendant may not be manipulated to balance
budgets in a way fees and charges might. Neither is it justified to match other
councils levels as there is nothing in legislation to support an increase in either case.

44.

Even if costings were provided and respondents told that charges would be front loaded
they still lacked knowledge to make properly informed decisions on whether the
proposals were lawful unless they had legal background to interpret the Regulations.
That also goes for council members who agreed the proposal on account of the publics
preference to increase the costs.

45.

The outcome of the consultation is recorded in a budget report dated 14.2.11 with the
matter relevant to the appeal under the heading Income Generation documented at
paragraph 1.52, so far as is relevant, as follows:
In relation to proposed areas for charging to be introduced [out of 242
respondents], 81 per cent favoured increased charges for summonses compared to
57 per cent who supported charging for replacement bins or garden waste
collections. Only 15 per cent were not in favour of any charges being introduced.
In a later email (26.5.11) it was further confirmed by the Council that the consultation
influenced its decision to make the proposed changes in the following statement:
The decision to increase the summons charge and make no subsequent charge for
a liability order was agreed by members following public consultation in relation
to the budget proposals.

46.

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.
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.

47.

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

48.

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)

49.

The provision of a budgeted income stream has presented a means for the Council to
influence its financial position. That is evident with Revenues & Benefits exceeding its
summons income target, leaving a 125k surplus, for example to off-set overspending in
other areas or transfer to reserves. The system is clearly open to abuse with income
targets unquestionably creating a perverse incentive to summons.

50.

Costs were set at a level such that a significant surplus was achievable, which in
2004/05 amounted to 125k. The Council had therefore raised revenue for an improper
purpose, namely to prop up other budgets, and in doing so acted unlawfully.

Impact on costs income Welfare reforms

51.

Costs have only ever increased, suggesting that measures have never been taken that
would improve efficiency and reduce incurred expenditure. This seems unlikely given
the increasing trend for authorities to share resources, outsource services and exploit the
latest technology. It would suggest too that volumes of bulk applications have remained
constant. For example, if volumes increased significantly, it would be reasonable to
expect lower costs due to economies of scale. The standard costs sought, that is, each
defendants share of the total, would require adjusting to ensure no profit was made.
However, costs raised by the Council increased by 67% in respect of figures obtained in
2013 compared with the same period in 2012. No adjustment was made to the standard
costs sought, and the court continued to award costs which were applied for.

52.

Changes to the benefit system are the likely cause for the significant increase in
numbers unable to meet council tax payments. Claimants, who before the reforms where
exempt from paying any council tax, had to pay 8.5% of their liability in the year
subsequent to the introduction because of reduced funding1. Incomes for these people
must therefore have fallen below levels which the government once deemed was a
minimum amount needed to live on frugally. Whatever is behind the soaring numbers,
costs raised have escalated as the Council has opted to seek court orders to enforce
payment in those cases.

53.

In anticipation of there being an increase in summonses issued from when the benefit
reforms were implemented, data was obtained for the purpose of monitoring this. Costs
raised for the months May to August in 2012 (before the reforms) was 333,480, whilst
for the same months subsequent to the reforms the figure increased by around 67% to
556,220.

54.

Local Authorities can apply for costs which they have reasonably incurred to bring the
matter to court, rather than a sum being fixed in law. The procedure, for example, at
both Leeds and Grimsby Magistrates Courts is that the local authority writes to the
court with the proposed reasonable charges and these charges are considered by the
Justices Clerk and the Judicial Leadership and Management Group. If the charges were
considered unreasonable for the work carried out then the Justices Clerk would express
that opinion and would also advise the Magistrates hearing the cases accordingly. The
amount of costs awarded is at the discretion of the Justices.

55.

The number of householders receiving council tax summons has substantially increased
since changes to the benefit system took effect in April 2013. Additional costs raised
due to this could not have been considered so inconsequential by the parties involved
that they deemed no preventative measures were necessary to mitigate the risk of
exceeding incurred expenditure.

56.

To ensure a surplus is not available to fund other expenditure, e.g. Council Tax
administration, the noticeably higher application volumes since the removal of council

Councils were incentivised on the first year of the scheme with extra funding to limit this amount to 8.5%.
Initially councils were keen to take up the offer but funding was available for the first year only so there was no
incentive to limit payments after that. North East Lincolnshire Council was one of those councils that initially
limited payments to 8.5%. It has since increased this so that claimants who were previously exempt now have to
pay 25% of their liability.

tax benefit need to be met with the standard sum of costs substituted with a lower
amount. This follows the basic principle that the Councils incurred expenditure must be
divided between a greater number of defendants. To do as billing authorities have, i.e.,
continue having Magistrates rubber stamp the same costs must have elevated income
generated to levels exceeding expenditure.
57.

It is on this principle (and evidence they are mindful of economies of scale) that some
billing authorities justify charging higher levels of costs for Non Domestic Rates cases
than for Council Tax. Far fewer summonses are issued for Non Domestic Rates which is
the rationale for why billing authorities that do make a distinction justify a higher
charge. Reigate & Banstead Borough Councils costs have been consistently higher for
Non Domestic Rates than Council Tax and in justifying the difference offers the
following explanation:
....the basic differences are that there are two separate teams dealing with the
issuing of Council Tax and Non Domestic Rates summonses. As there are fewer
Non Domestic Rates summonses the cost per summons is greater than Council
Tax.

58.

Once satisfied that the substantial increase in court applications were linked to the
welfare reforms, it was open for the Council to inform the Magistrates Court that it had
experienced a change in the number of summonses it was dealing with that required a
reduction of the standard costs. However, in light of the Councils negligence in
notifying the court, it was nevertheless the courts duty, on receiving the rising volume
of complaints (and costs), to inquire further to ensure sums claimed were lawful and enmasse applications were not exploited for profit. Economies of scale and their effect on
pro rata costs would be the most obvious area to raise concerns, which if appropriately
addressed would have required a reduction in the standard costs (see above para 57).

59.

It is well established that a decision whether to issue a summons pursuant to information

laid involves the exercise of a judicial function, and is not merely administrative: see R v
Brentford Justices ex parte Catlin [1975] QB 455. Lord Chief Justice, Lord Widgery, in
giving judgment, held that:
....before a summons or warrant is issued the information must be laid before a
magistrate and he must go through the judicial exercise of deciding whether a
summons or warrant ought to be issued or not. If a magistrate authorises the issue
of a summons without having applied his mind to the information then he is guilty
of dereliction of duty....

60.

Concerns about magistrates failing in their legal duty were brought to the fore in a
national news article: see Shes at the door: Britains first 1m bailiff 2. More broadly,
the Council obtained (over a five year period) a total 3,528 liability orders for initial
debt of 50 or less despite being the Councils policy to only pass accounts for
enforcement where the debt owed was above 50. This, along with summonses
containing incorrect and out of date information issued on 3,361 accounts for a single
hearing suggests a serious failure to follow due process. Moreover, these anomalies
make it difficult to accept that from the 1.13 million annually (2011/12 Revenues
budget), 100k+ is a credible figure for the expenditure incurred by the Council in
respect of monitoring liability order applications.

Evidence materialising of significant relevance whilst appeal held in abeyance

61.

The Magistrates court has prevented these proceedings (as of December 2015) from
reaching conclusion for over three years and as a consequence new evidence has
materialised of significant relevance in the meantime. Since instituting these
proceedings, 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 [Ex1] appeared on the Councils website,
based on activity in 2012/13 informing the standard costs charged during 2013/14.

62.

The Council had before giving this undertaking provided a general description of
expenditure that accounted for its annual Revenues budget which had been disclosed as
1.1 million (2011/12). This sum represented the limit up to which it considered its
costs income would be lawful and presumably formed the basis upon which it was
satisfied a breakdown was unnecessary. This idea is underpinned; 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. Its website which provides information relating to council tax recovery,
states with relevance to its standard summons costs, as follows:
This figure is determined based on comparisons with the fees charged by
neighbouring Councils and the national average. A check is made to ensure that
the monies raised from applying costs are not greater than the actual cost of the
service

Sunday Times 13 November 2011 Debt collection on behalf of councils is booming as people are chased for as little
as 1p.A freedom of information request to North East Lincolnshire council revealed it issued 1,387 court orders for
debts of less than 25 between 2006 and 2011 including 82 for less than 10 and three for just one penny..

The Information Commissioner records in para 14 of Decision Notice (ref:

FS50400874) relating to a Freedom of Information request made to the Council to
obtain a breakdown for the calculation of the 70 summons costs:
....NELC says it does 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....NELC says the figure of 70 was 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.
In paragraph 6 of the same Decision Notice 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 [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.
63.

The soundness of this approach would as a starting point have to rely on all its costs
which make up its Revenues budget being permissible with reference to the Regulations
which they are not. Expenditure is attributed to activities including, but not limited to
processing attachments of earnings, responding to complaints, liaising with bailiffs,
monitoring payment arrangements etc. All theses costs, along with others not listed (see
below para 108), relate to actions carried out after the liability order has been obtained
and can therefore not be described as the Regulations provide an amount equal to the
costs reasonably incurred by the applicant in obtaining the order.

64.

However, the costs breakdown, which has since these proceedings been policy to
produce, does not assist the Councils defence; instead it provides evidence that
expenditure additional to that which the law provides was included in the 70 summons
costs.
Policy to review court costs and produce annual breakdown

65.

The breakdown 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.
66.

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.
This matter has been considered recently in judicial review proceedings. Whilst the
present case has been ongoing, another with significant relevance to matters raised here
has been determined. 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.

67.

It was 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.

68.

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, (see Consent OrderAnnex A, 128)

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

69.

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 16 March 2010 Cabinet report into Court costs which would reinforce
justification for the court to require evidence. The essential point being made in the
report 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.

70.

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 (see above paras 28-29).

b) Subsidising bad debt arising from waived or unrecoverable costs

71.

The calculation would have to be dismissed similarly because it could not be established
whether the standard costs included a subsidy for bad debt. It is clear from subsequent
breakdowns relating to 2013/14 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.
72.

The impact this has on the individual standard cost can be appreciated by comparing
the estimate of summonses in the calculation with the figure submitted to the Chartered
Institute of Public Finance and Accountancy (CIPFA) relating to the number of Council
Tax summonses issued3. It is indicated 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 applied. The CIPFA figure was 17,197 and
the dividing figure used in the Council's 2013/14 calculation was 10,000. From this it is
seen that the defendants actually paying the costs are paying an inflated sum to subsidise
the costs of those others having them waived.

73.

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.

74.

The calculation confirms that the average cost per summons is determined by dividing
its gross recoverable expenditure by an estimated number of summons 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
Estimated number of summons requested in 2013/14,
where costs applied
Cost per summons

Cost rounded to nearest

597,160
10,000

59.72

60

A substantial number of householders summonsed were not included in the estimated number of applications,
therefore artificially inflating the individual standard cost

75.

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.

76.

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 (see above paras 5160). 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.

c) Subsidising administration cost for customer contact

77.

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.

78.

The gross recoverable costs under the Council Tax budget is 260,912. Based on the
Councils computing method, this adds 25 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.

79.

The breakdown explicitly sets out that its recoverable costs (after deducting 30% 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%
(260,912) with the other half attributed to what the Council categorises as those
paying on time.

80.

None of the expenditure could have lawfully been incurred by the Council in respect of
the Appellants 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.

81.

Gross recoverable costs under the Debt Recovery budget are 327,806 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 and so in the present case can have been
considered reasonably incurred by the Council.

82.

With the account having been settled on receipt of the summons, none of the other
expenditure could have been incurred by the Council in respect of the Appellants
summons because there was no outstanding liability. No resources were therefore 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.

83.

In broader terms, the majority, if not all (see below paras 93-96) of the costs appear
questionable even in those cases where resources are required to re-schedule and set up
payment plans etc.

84.

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.

85.

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 made (see Consent Order-Annex A, 101),
because the measure is taken to prevent (or instead of) taking recovery action.

86.

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:

87.

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.

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.

88.

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 (see Consent Order-Annex A, 120-131) particularly
125 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.
89.

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.

90.

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:

91.

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.

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).

92.

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.

93.

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.
94.

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):

(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.

95.

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.

96.

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.

97.

It follows therefore that the associated costs, even in cases were payment plans are rescheduled (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 143,215 and add 14 to the cost per summons and would, if
referring to rescheduled payment plans (in whole or in part) be unrecoverable in the
appropriate proportion.
98.

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.

99.

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 Appellant has, 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.

100. 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.
101. 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.
102. 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.
103. 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.
104. During the period in which the defendant court has unreasonably protracted
proceedings, the Appellants 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, recovery did proceed further and resulted in a summons
being served on both occasions.

105. 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 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

106. 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 is sought). 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.
107. 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 para 69) that the work to secure payment once having obtained the liability
order is one of the stages from which most costs arise.
108. 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.
109. It is therefore believed, that on the balance of probabilities (regardless of the
Regulations), 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.

CONCLUSION

110. The Magistrates had no information before them with which to reach a proper judicial
determination of whether the costs claimed represented costs reasonably incurred by the
Council to obtain the liability order. The ruling in Nicolson v Tottenham Magistrates is
unambiguous that the decision to grant an order for costs in those circumstances is
unlawful. It is therefore inconceivable what line of defence could be mounted against an
appeal asserting that the order for costs had been unlawful in the present case.
111. It follows with the Councils inability to provide relevant information to support the
costs claimed to obtain a liability order, it would be unable to verify that the costs
claimed were properly referable to the enforcement process. That is to say it would be
unable to verify that the sum, which it claims identically to obtain the order, represents
exclusively the expenditure incurred by the Council in connection with instituting the
complaint.

112. It is nevertheless contested that enforcement should have never proceeded to the stage
where the Council applied for a liability order as to do so once an amount has been paid
or tendered would be in breach of the law which states that the authority shall accept
the amount and the application shall not be proceeded with. However, the fact that the
Council did proceed does not render the appeal invalid as the Magistrates actions and
the Councils approach to supporting its costs raises matters of general public
importance.

Case for impermissible costs

113. It is established that the Council sets its standard costs at a level to ensure that no cost of
recovery is borne by the taxpayer in priority to complying with the Regulations that
restrict the amount that can be recharged in costs to the court application. It is therefore
contended that an element of the standard 70 costs can not be compliant with the
Regulations, based as they are on the premise that any expenditure considered
attributable to recovery and enforcement activity (however tenuously linked) is
recoverable by recharging it to the defendants through costs claimed in an application
for a Liability Order.

114. The breakdown of costs which the Council has undertaken to keep under review
provides evidence that in the circumstances relating to this case the vast majority of
expenditure it claimed was not incurred so contended that the Magistrates granted costs
in a sum outside that which the law provides. Moreover it is contended that under any
circumstances where the Council makes use of the court (whether to obtain an order, or
merely institute the process) the costs detailed in its breakdown are not properly
referable to regulation 34 of the Regulations.
115. There is nothing in the calculation that could remotely satisfy the court that the
expenditure attributed to its standard costs was referable to the court application at the
prescribed time, neither in the Appellants individual case nor as an average of those
against whom complaint was made. The spreadsheet is however indicative of a
breakdown of the Councils expenditure for council tax enforcement and recovery
which would incorporate impermissible costs. The application, for which the Council
may claim costs, simply involves a process to obtain the courts permission to enforce
payment and nothing more. There is no vehicle through which a billing authority may
lawfully recharge expenditure it incurs to the defendant beyond that process.
116. The law further restricts costs with the provision for incrementally applying them, first
in a sum for making complaint and the further amount (if required) on making the
application. Singly applying standard costs in respect of making complaint would be
lawful only if the authority were to forfeit the element of expenditure it incurs
subsequently in respect of the court application.
117. The amount claimed by way of costs in any individual case must be no more than that
reasonably incurred by the billing authority. Therefore, if the Council wanted to take
advantage of streamlining the administration process by applying a standard sum in all
cases, in order for it to be done lawfully, it would need to forfeit each element of
expenditure it incurs that is not common to every application (the majority accounted for
in its breakdown).
118. Put another way, a standard sum could not exceed that incurred by the Council in a case
where the least expenditure is attributed, which would in practice relate to a taxpayer
settling his outstanding debt on receipt of a summons without contacting the Council on
any issue. Deriving a figure therefore from the Gross Recoverable costs which is split
between an estimated number of summons, is not referable to the Regulation; less so if

the number of summons is reduced to factor in an estimate for those

withdrawn, waived and those in respect of unrecoverable costs.
119. The least cost case is the only basis on which to determine a standard sum if the aim is
to eliminate the administrative burden of calculating the costs in each case, whilst at the
same time complying with the Regulations which require that the costs be no more than
that incurred by the authority in any individual case.
120. If the costs were applied in accordance with the Regulations, the consequences would be
that the majority of Council Tax (260,912), Debt Recovery (327,806) and the
Control & Monitoring costs (143,215) would not be permissible in respect of recharging expenditure for instituting the complaint. The Council has itself provided the
relevant evidence to satisfy the court that the Council's claim is not reasonable in the
Regulations context and should therefore seek to award lower costs accordingly.