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3 (6) (Rule 77 (2) of the Magistrates' Courts Rules 1981)

19 August 2013

Note: Representations (where made) are indented to draft content with contrasting typeface.

In the High Court of Justice Administrative Court Between Appellant and North East Lincolnshire Council Respondent

Case Stated by Justices in the County of Lincolnshire, acting in and for the Local Justice Area of Grimsby and Cleethorpes in respect of their adjudication as a Magistrates' Court sitting at Grimsby.


1. On 10 October 2012 a complaint was laid against the appellant on behalf of the respondent that for the period 1 April 2012 to 31 March 2013 at Grimsby in the County of Lincolnshire he was a person who was liable to pay the sum of 437.52, the balance of council tax he owed arising from his occupation of , , Grimsby, and application was therefore made to the court for a liability order to secure payment of that sum in accordance with regulation 34 of the Council Tax (Administration and Enforcement) Regulations 1992. 2. The court heard the complaint on 2 November 2012. The court did not hear evidence in the matter as the appellant admitted the following facts:Evidence was submitted to the court challenging both the reasonableness of costs and the apparent breach of law imposing them. Outlining briefly: In accordance with the procedure described in the Council Tax Regulations, costs imposed (before review) had been applied incrementally. They were proportioned so that 56% were incurred on issue of a summons whilst full costs were incurred only on the complaint being heard and on order of the court. The ratio of liability orders to the number of accounts summonsed meant only around 75% of householders issued a summons incurred full costs. Those settling liability before the hearing paid only an amount incurred by the council up until the summons issue. All costs are now front loaded so each householder issued a summons incurs full costs whether the complaint is heard by the court or not. The change in composition and a 23% raise overall, increased the cost of the summons by 120%. a) The appellant was liable for the amount of council tax, namely 437.52, claimed against him by the respondent for the period 1 April 2012 to 31 March 2013. b) The appellant had by the time of the court hearing paid the sum due to the respondent in respect of the outstanding council tax that was claimed by the respondent.

A letter notifying the respondent, the day payment was made, stated the importance of it being made known in advance of the hearing whether a liability order would be requested for the shortfall of the stated amount payable on the summons. The assumption conveyed to the respondent, was that no reply would mean attending the hearing was required if wishing to dispute costs. The respondent was reminded that it had been unable to determine, when previously requested, how the costs had been calculated, and so the court would have had no basis to assess the reasonableness of the claim. There was no offer of a breakdown showing how the costs were calculated. If there had been, it may have justified they exceeded the amount already paid. The respondent did not reply, so was assumed attending the hearing was required. c) The appellant was liable to pay an amount in respect of the costs of the respondent in bringing proceedings before the court d) The claim for costs in respect of the proceedings made by the respondent on the face of the summons served upon the appellant was in the sum of 70.00. e) The appellant had by the time of the hearing paid 10.00 to the respondent in respect of the costs. f) The appellant had not paid the full amount of the costs requested by the respondent and did not intend so to do so. The case had not been heard at this point so no costs had been ordered by the court. The 70.00 sum demanded was merely the standard amount requested at the hearing so if the defendant wished to contend the level, it was open to the respondent to provide a breakdown showing that it was justified. There was no offer of a breakdown. Had an agreement on the level of costs been reached it would not have been necessary for the respondent to have proceeded with the

application for a liability order. 3. The following is a short statement of the representations made to us by the parties:a) The respondent stated that the amount of the claim for costs was the same as that sought in all similar proceedings commenced by the respondent, a sum which had previously been notified to the Grimsby and Cleethorpes Magistrates' Court under cover of correspondence dated 4 March 2011 for cases arising on or after 1 April 2011. Though the council had notified the court that the costs would be increased, it could not have meant they were agreed in advance. When making an order for costs, the court must be satisfied that the sum it orders has been reasonably incurred by the council. Notifying the Court merely made it aware of the level of costs that the Council would request at the hearing. The decision therefore, as to whether costs are awarded and to the level, is always the Courts. The March 4, 2011 correspondence detailed that the increased costs charged for a Council Tax summons would apply similarly to Business Rates, despite the laws governing costs differing. It is apparent that the court, without evidence supporting the 120% hike, approved the costs and had not contested procedural errors in liability order applications for Business Rates. Unlike Council Tax, nothing in the regulations governing Business Rates provides that a defaulter may halt proceedings, if payment is made of the outstanding liability plus incurred summons costs, before the case is heard. The law states that in the case of Business Rates applications, an order for costs must be made by the court. However, North East Lincolnshire council instructs defaulters that on receiving a summons, if they pay the full amount owing including all costs before the date of the hearing no further action will be required. It appears in those circumstances, the council does not apply to the court for an order of costs; in the year 20114

12, statistics reveal out of 932 business ratepayers summonsed, 33% of those incurred 70 costs where no liability order had been granted. b) The level of costs sought by the respondent did not exceed the prescribed amount described in regulation 34(8) of the Council Tax (Administration and Enforcement) Regulations 1992. It is unclear whether a prescribed amount refers to a set figure in regulation 34(8). If so, none is specified only costs reasonably incurred. An accurate transcript of the hearing is essential to verify that regulation 34(8) was in fact referred to by the respondent. This is crucial to the appeal because one question in law focuses on the composition of costs in this area. Costs would have been awarded in accordance with Regulation 34(8) had the outstanding liability alone (no costs element) been paid after the order was applied for but before it was made. The appeal is concerned in circumstances where a reasonable sum of costs had also been paid. Regulation 34(8) was not relevant; the council took the option to pursue a liability order after liability had been settled including payment for reasonable costs. The council proceeded without providing a breakdown to show how its costs exceeded the amount tendered. As no sum is prescribed in the council tax regulations, nor had costs been ordered by the court, the onus (as they were disputed) was on the authority to justify that its standard sum had been incurred as opposed to the amount already paid. In the circumstances, the relevant costs in dispute were those described in Regulation 34(5) an indeterminate sum in respect of incurred costs to issue a summons. This has relevance to the point in law questioned which raises the matter that all costs are now front loaded, meaning in terms of law, costs described at 34(7) in respect of obtaining the order, are incurred where only an amount has been incurred in connection with issuing the summons; those which are described at 34(5).

c) The level of costs sought by the respondent in the proceedings was within the range of costs sought by other local authorities in similar proceedings for unpaid council tax

The respondent had not supplied the Magistrates Court with a breakdown of the 120% increase in summons costs, neither did it hold a breakdown for the calculation of the 70 fee. It was based on comparisons with neighbouring authorities, then compared against national averages, and checked to ensure that the monies raised from costs would not be greater than the cost of the service. Comparing with another authority would be appropriate only if applications were made under exactly the same circumstances and if the authority in comparison had produced a breakdown showing precisely how theyd been calculated. Monies raised from costs must not be greater than those incurred in connection with the application; not as stated, checked to ensure that they would not be greater than the cost of the service. A 1992 publication by the DoE, (the Council tax practice note 9: Recovery and Enforcement), stated under liability orders, that 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. This was reiterated recently in a publication by the Department of Communities and Local Government on good practice in the collection of Council Tax arrears: 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 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.

d) 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.

There was no calculation. A 1992 publication by the DoE, (the Council tax practice note 9: Recovery and Enforcement), stated under liability orders, that 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. This was reiterated recently in a publication by the Department of Communities and Local Government on good practice in the collection of Council Tax arrears: 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 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.

e) The appellant referred to correspondence he had had with the respondent in which he asserted that the level of costs claimed by the council was a means of raising additional revenue from the respondent.

f) The appellant referred to the respondent's 2011 budget and financial plan in which a majority was stated to be in favour of increased charges for summonses rather than charging for other council services such as replacement bins or garden waste collections. The increase was to meet budget requirements and involved consulting the views of residents, businesses and scrutiny [panel] on areas from which they favoured boosting revenue.

The decision then to increase summons costs was not because incurred costs had risen but geared to preferences of the respondents to the consultation. The increase was a budgetary measure as proposals being put to a vote testifies. Costs, according to law must be reasonably incurred. The decision to increase them on the strength of a ballot suggests it was done simply to generate income rather than a measure to compensate for additional incurred costs. Statement made by Respondent: 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. 4. It was contended by the appellant that:Costs reviews were undertaken for purposes other than to reflect the level of expenditure incurred in court applications. Cabinet documents revealed that increases were used as an instrument to generate income and/or to encourage behaviour. ooOoo A review in 2001 disclosed that if the respondent were to follow the trend of other councils by charging more in respect of Business Rates than for Council Tax (three times), the extra cost would encourage prompt payment. Intended to improve cash flow for the authority, the overall benefit from the review would potentially generate additional extra income of 38k per annum. ooOoo The following year a cabinet document identified 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 costed to pay for additional staff. ooOoo Historical changes in the composition of the summons and liability order costs, highlights that these have been determined arbitrarily. The gradual shift in weight from the liability order cost to the summons is more likely to have been manipulated to encourage behaviour and/or to maximise revenue from shifting the greater cost into a bracket where the majority of debtors fall. Several costs reviews have revealed since 2000-01 that the composition has changed progressively from 78% of the total being attributed to the liability order, to the present, where all cost has been front loaded to the summons. If the same ratio of liability order to summons costs from 2000-01 still applied, the overall cost would be split so the present 70 summons costs would only be 15. a) The level of costs requested by the respondent in the proceedings was disproportionate to and not commensurate with the true cost of bringing the proceedings before the court in that it was much higher than the actual cost. The respondent described the 120% increase in summons costs as a saving that can be made in the cost of the delivery of the service. It was found that the service did not relate to the cost of issuing summonses but the costs reasonably incurred for Council Tax collection and recovery. The law doesnt provide for the inclusion of costs that relate to general council tax administration. b) The reason the respondent sought such a high level of costs in the proceedings was as a means for the respondent to raise additional revenue for the respondent.

5. It was contended by the respondent that:a) The level of costs sought in the proceedings was an amount that had previously been advised by the respondent to the court that would be sought by the respondent in each case in proceedings to recover unpaid council tax. This amount had been claimed in all cases before the court since that notification. b) The sum requested was not a means to raise additional revenue for the respondent but a reflection of the broad average costs of bringing any individual case for unpaid council tax before the court. 6. We were not referred to any case authority. Regina v Brentford Justices ex parte Catlin [1975] QB 455 was referred to in an item of evidence disputing the level of expenditure attributed to monitoring and control. It was argued that over a five year period, a total 3,528 Liability Orders had been issued for initial debt of 50 or less despite being policy for the council to pass accounts to enforcement for amounts over 50. This along with summonses containing incorrect and out of date information issued on 3,361 accounts for a hearing of 2 June 2011 pointed to neither the Magistrates court nor more crucially the local authority incurring costs in respect of monitoring liability order applications. ...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... 7. We were of the following opinion:a) We recognise that in all cases where costs are claimed we always have a discretion as to whether to order them, and if so, in what sum. Although the appellant admitted the matter of complaint and costs would therefore normally follow the event, the fact that the respondent asked for the normal amount of amount of costs in this case did not prevent us from reducing the amount or refusing to make an order for costs at all.

b) The respondent, as with other council tax billing authorities, has taken a broad approach to the question of requests for costs and has sought a similar amount in this case as with all others in the in the same court list. In normal circumstances this is appropriate, although we accept we must look at each case individually. This means that the respondent could in principle have sought a greater amount of costs in an individual case where more costs were incurred, subject to any limitations set by regulations, had it chosen to do so. Costs, when considered in a broad sense, include an amount to cover Council Tax collection and recovery. The law doesnt provide for costs income to fund the running of council tax departments, only to cover expenditure in connection with the application. As this would be seen as inappropriate profit, it would be expected that the element relating to general administration would be discounted. The challenge was not to the costs incurred by the council in obtaining the order, but specifically the amount it incurred up to payment being made. With that in mind, any logical deviation to the standard sum would be a lesser amount. c) The amount of costs requested in all cases before us for nonpayment of council tax was a sum advised to the court in writing by the respondent well over a year before the current proceedings against the appellant were commenced, and the court in other such proceedings in the intervening period has considered that level of costs to be appropriate by making orders in favour of the respondent in that sum. That fact of course did not prevent us from considering the level of costs requested in the proceedings against the appellant. Costs should vary in line with application numbers. Higher volumes, in theory should lower costs as the councils incurred expenditure must be divided between a greater number. With typically fewer applications than for Council Tax, this is the logic behind councils charging higher levels to Business Ratepayers. It follows if the court was mindful of factors influencing costs, the amount awarded would need adjusting downwards where numbers on the complaint list exceeded

certain levels. Overlooking the bulk nature of the process gives councils the opportunity to significantly profit from costs. Numbers of householders receiving council tax summonses has substantially increased since changes were introduced to the benefit system. It has been reported that one City Council has issued double the number of summonses compared with last year. If due diligence was given to determining costs, it would be evident with lower amounts awarded since the reforms. d) The respondent had to pay a court fee in respect of every application for a liability order as well as cover the other administrative and legal costs of bringing the proceedings, and we therefore considered 70.00 was an amount reasonably incurred by the respondent in making the application before the court and obtaining the liability order. The court fee paid in respect of each application, according to the Magistrates Courts fee schedule is 3. It is understood when challenging the reasonableness of costs the individual case must be considered. However, it would be unrepresentative to assess costs as if the application was made independently from other complaints. Summonses are processed in bulk (not individually) in line with parameters set in the systems software. Having met required criteria, recovery is triggered with evidently no manual filtering carried out to avoid unnecessary cases being sent for recovery. With human involvement at a minimum and through economies of scale, the bulk applications pose the risk of councils being awarded costs far exceeding expenditure. Figures obtained show that in respect of a single bulk application, North East Lincolnshire council issued summonses to 2,602 households with costs valued of over 182k. Typically, bulk applications are made monthly. e) On the basis of the information presented to us by both the appellant and the respondent, the contention that the amount claimed by the respondent was in the nature of general revenue raising by the respondent 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. f) This case had no features to distinguish it significantly from other cases in our list to suggest to us that a different level of costs should be considered in this case. g) 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.

8. We ordered that 60.00 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 by the respondent.


9. The question for the opinion of the High Court is:Were we entitled in the circumstances of this case to order payment of the full amount of the costs requested by the respondent and make the liability order which followed as a consequence thereof?

. Dated the 22 day of July 2013

Mr Mr


Justices' Clerk for and on behalf of the Justices adjudicating.