North East Lincolnshire Council Finance Department Civic Offices Knoll Street Cleethorpes North East Lincolnshire DN35 8LN

14/07/14

Dear Sir/Madam

Re: Council tax Ref: 550xxxxxxx 15 March 2014 Formal Complaint

This letter supplements my 15 March 2014 complaint.

North East Lincolnshire Council erred in law when on the 2.11.12 an application for a Liability Order was made in the Magistrates court. This was in clear breach of Regulation 34 of the Council Tax (Administration and Enforcement) Regulations 1992 (the Regulations) which provides that if, after the summons has been issued, an amount is paid, equal to the unpaid balance and an amount in respect of the costs incurred, then the authority must accept the payment and stop 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)....

Further to my 15 March 2014 complaint detailing why the overall expenditure claimed was unrealistic, the councils calculations also provide evidence that in my particular circumstances the expenditure (70) it was claiming could not have been incurred.

It is clear from the calculations (see ANNEXES A and B) that inappropriate expenditure has been incorporated into the standard summons costs. For example, 260k+ in respect of 2012/13, of which a share is incurred by all account holders receiving summonses, regardless of whether applications are made in those cases for liability orders or there was need to correspond with the council. Therefore, apart from my own case, many others (particularly those settling in accordance with the summons) have legitimate grounds to dispute that this element (260k+ at the very least) could not have conceivably been incurred by the council in respect of their summonses and could be no lawful basis for imposing that sum. The law states as aforementioned, that the authority may claim only costs in connection with the application up to the time of the payment or tender.

In any event, the council is misconceived by thinking that it would be open to legal challenge ONLY if its costs were to exceed the overall (accounted) expenditure. Firstly, as a true account for overall costs, the sums are very questionable. Secondly, they misrepresent without any doubt, the ratio between the summons costs to the overall expenditure. NELC accounts for there being all but a negligible amount of expenditure attributable to instituting the summons. This is at odds with paragraph 4 of Chiltern District Councils 16 March 2010 Cabinet report into Court costs in respect of unpaid Council Tax and non domestic rates which states as far as is relevant the following:

"4. ...... 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.

The net effect of this misrepresentation is that the law has been breached. As aforementioned, the law states at 34(5)(b) of the regulations that the authority (with regards the summons) is only entitled to costs in connection with the application up to the time of the payment or tender. By virtue of the fact that any payment or tender would have occurred before the application for a liability order (at Court) there has evidently been a deliberate distortion of the figures to enable a greater generation of costs income by moving expenditure incurred in respect of applying for a liability order, and front loading it to costs in respect of instituting the summons.

Im sure NELC is aware its not the only local authority to have front loaded costs as a way of increasing costs revenue and/or to deter late payment. Newham Borough council had no regard for the law when making a decision to change the composition of its overall 95 court costs from charging 20 summons and 75 liability order to ramping up the summons by 225% to 65 whilst reducing its liability order accordingly to 30.

Without any apparent regard for the regulations, the Finance Officer openly admitted in the 27th May 2010 report reviewing these charges that the move aimed to influence behaviour:

The financial implication of this is to retain the overall charge for enforcement of

council tax payment at 95.00 but to front load the costs so that a higher charge affects the customer at the summons stage. It is anticipated that this would deter tax payers from defaulting at this stage but rather resolve nonpayment earlier and thereby improve the councils cash flow.

Plainly Newham Borough Council view the manipulation of court costs to be a useful instrument to be taken advantage of; evidently mistaking them as fees for which it probably has a fees policy detailing how they may be exploited, for example, by raising them with a view to influencing behaviour, targeting certain groups or meeting particular objectives.

I doubt, in the case of NELC, nothing demonstrates this more than its cabinet report (6.4.01), reviewing ways of improving cashflow and potentially increasing income through recovery costs, particularly at paragraph 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.

It is noted that North East Lincolnshire Councils 17 February 2014 Cabinet report Review of Council Tax court costs refers throughout the document to fees. It also misleadingly states the following (emphasis added):

regulations allow the council to levy an additional fee which is equal to the amount of costs reasonably incurred in connection with the application.

This misleads the reader because the regulations DO NOT allow for costs incurred in connection with the application, unconditionally; this would leave the law open for exploitation. What in fact the regulations do allow is for costs reasonably incurred by the council in obtaining the liability order (referred to also as making the application); see 34(7) and 34(8) of the regulations (emphasis added):

(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.

(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.

The potential for incurring costs are far greater once the liability order has been granted. For example, in respect of maintaining payment agreements, setting up attachment of earnings/benefits, related recovery correspondence and phone calls etc., which may be considered to be in connection with the application. However, the law makes no provision for this expenditure to be recovered by the council.

Secondly where the Cabinet report misrepresents the regulations, re; ...costs reasonably incurred in connection with the application, this is a distortion of 34(5)(b) of the Regulations which states in its entirety the following (emphasis added):

"(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,

In full context with 34(5) of the Regulations, the expenditure it refers to does not include all expenditure restricted to obtaining the liability order. This is limited further to costs incurred in connection with instituting the summons where the debtor elects to pay (or makes a proposal to pay) the outstanding debt before the application is heard, under which circumstances the authority must accept the payment, or proposal to pay, and the application not proceeded with.

This is especially relevant to the way NELC applies its costs, which have all (since April 2011) been front loaded to the summons. The law only allows under this provision (reg. 34(5)) costs to include expenditure incurred in instituting the summons. There is therefore no mistaking that the law makes no provision for the authority to re-charge its entire Council Tax recovery budget to defendants costs in respect of instituting the summons. Neither does the law provide for the authority to re-charge its entire budget for what it also terms providing the service to defendants costs in respect of obtaining the liability order.

Going back to my particular case, where it has been stated that NONE of the Gross Recoverable costs in relation to the Council Tax category (260k ANNEX A) could have lawfully been incurred by the council in respect of my summons. The reason for this is simply because the sum was based on Council Tax activity levels, but more specifically the man hours deemed attributable to dealing with enquiries which were estimated from the number of calls arising from issue of each summons being at least twice as many as for reminders.

My summons was received on 17.10.12 and the outstanding balance settled that same day, therefore NELC had, within the 70 standard costs, included inappropriate and unlawful expenditure to mine and whoever elses that settled accounts similarly. If the impact recovery had on the Councils budget was properly evaluated, it would have perversely been deemed impacting positively because a lump sum payment was made (benefiting the councils finances sooner) which ordinarily would have been paid in instalments.

It is clear from North East Lincolnshire Councils 17 February 2014 Cabinet report Review of Council Tax court costs that there is other expenditure (in respect of waived costs) that is added to the costs of debtors who pay them.

Under subheading, BACKGROUND AND ISSUES, the report states as far as is relevant the following:

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

The effects of this are clearly visible in the way the 2013/14 calculation has been produced (see ANNEX B). Two different figures have been used in the calculation in respect of the number of summonses issued. The first higher figure, 13,600 being the estimated number of summonses, has been used to establish the Council Tax Activity Levels. The second figure adjusted downwards by 26.5% to 10,000 is used in the part of the calculation to establish the unit or individual costs from the overall expenditure. The higher and lower figures used in this way have influenced the calculation so that the maximum individual costs is returned.

As the Cabinet report indicates because of arrangements deemed favourable to the council the difference between the 13,600 and the 10,000 figures is attributable to costs being waived. However, it is clear that the accounts for which this 26.5% relate have at least had summonses, if not Liability Orders made against them. The upshot being that costs relating to 3,600 accounts (not having costs applied) have been incorporated into the standard costs of those who pay them.

To reiterate the concerns (complaint 15 March) with regards costs attributable to Monitoring & Control, it is not seen how any element of the 143,215 (see ANNEX A) could have been lawfully incurred by the council in respect of my individual summons. Full payment was made the same day the summons was served, so there was plainly no agreement with respect to payment arrangements to Monitor or Control.

However, more importantly on this point of law; even if a payment arrangement had been agreed, it would have been made as a consequence of a proposal. In terms of 34(5) of the Regulations such a proposition would constitute a tender for which the authority must accept and the application not be proceeded with.

For the avoidance of doubt, the law does not exclusively require payment to ensure that the authority abandons the application; the authority is equally obliged not to proceed if payment is tendered. If parliament had not intended an offer to constitute a payment agreement, then it must be questioned why the regulations provide a distinction between paid and tendered. It therefore goes that the associated costs, even for those who agree payment arrangements, can not incur any element of expenditure which is attributable to controlling or monitoring those plans. The relevant part is regulation 34(5)(b), which provides as follows (emphasis added):

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

It is of no relevance whether maintaining an arrangement is deemed by the authority to be in connection with the application. Any costs attributable to this would be incurred after payment was tendered, and as the law states, costs are allowable only up until this point.

It is also worth noting that the regulations have no provision for recovering the cost of maintaining

payment arrangements. The authority has only one further opportunity to request costs once the

summons has been issued. That is at the court hearing where the application is made for liability order where the law provides only costs reasonably incurred by the council in obtaining the order.

Man hours attributed to maintaining payment arrangements would be incurred after this point so would be categorically unlawful if accounted for as any element of court costs.

Also bear in mind it would be unlawful, if subsequent to a payment proposal being agreed, the authority (even if waiving costs) still applied for a liability order, for example to protect its interest. The regulations provide no discretion for the authority as they clearly state that once the amount has been paid or tendered, the application shall not be proceeded with.

Although in a Cabinet report Review of Council Tax court costs published 17.2.14 it states that it is not practical to calculate the level of costs incurred in each individual case, it is nevertheless obliged to do so for those individual cases against whom the council proceed, who exercise their legal right to challenge them.

It was categorically the case that these costs were challenged on 17.10.12 (see letter, ANNEX C). The Council acknowledged receipt of the letter the same day and advised it had been forwarded to its Court Enforcement Officers to deal with. The council made no further contact in relation to the issues and the application made in the Magistrates Court on 2.11.12 where the bench granted a liability order in respect of the costs which the billing authority claimed were incurred.

The contents of this letter spell out why North East Lincolnshire Council had no lawful basis to proceed with the application. Once payment had been made in full including costs in accordance with 34(5) of the Regulations the authority had clearly an obligation to accept payment and stop proceedings there and then, or else respond to the letter and provide evidence to support its costs.

However, had it provided the same or similar calculation as subsequently it produced (see ANNEX A), it would have revealed expenditure additional to that which the law provides was included in the 70 summons costs.

There is therefore no doubt that steps taken to obtain the liability order have been unlawful; so please arrange that this liability order be quashed by applying to the Magistrates court under 5(2) of the Regulations to have all trace of this order deleted from the record.

You may be aware that since NELC obtained an order to enforce payment (2.11.12) of the 60 sum I have attempted to appeal this on a point of law in the high court. The Magistrates court has obstructed the process and in so doing breached the respective procedure rules which led to a judicial review claim being necessary which then led to being stonewalled and lied to by the Justices Clerk for Humber & South Yorkshire local justice area. NELC may consider itself off the

hook by virtue of the fact that the case is subject to an appeal. If so, the twenty months so far of lies and obstruction from Her Majesties Court and Tribunals Service tends to validly argue against that course of action being one reasonably expected to take.

It is obvious from events that have unfolded over the last twenty months that the Justice system is a sham. The Magistrates courts far too cosy relationship with local authorities not only allows

councils rake in millions of pounds a year of unlawful revenue, but provides a substantial amount out of the racket itself, to subsidise other budgets within the department of the Ministry of Justice. Why else would the Magistrates court or the council for that matter (who cash in on the MoJs corruption) want to deny a higher court the opportunity of reviewing a point of law that quite obviously is in question? The obvious reason being because a potential ruling might impact on the millions of pounds each year councils see as revenue; perhaps meaning billions of pounds would be due back to Council Taxpayers in refunds. This signifies that DCLG and Ministry of Justice are not fulfilling their perceived roles, rather functioning primarily as tax collectors.

It would be understood by any reasonable person that the MoJs primary concern, when first alerted to an extortion racket of this magnitude would be to remedy it under its own initiative; not waiting for it to be challenged in the Administrative court. Instead, it relies on the possibility being far too remote because of the inordinate amount of time it would take an appellant wishing to challenge it in the High Court and threat to him of a costs order. However it seems the MoJ has a contingency plan for when this does happen; evidently when the risk is taken, it initially obstructs and inconveniences the applicant in the hope they give up. Or, if over a protracted period that fails, it blatantly resorts to ignoring all communications, effectively stopping proceedings in its tracks.

The desired outcome of this complaint

This is another opportunity for NELC to deal with the formal complaint submitted 15 March 2014. Though it refused then on the grounds that the employee nominated to investigate was suitable (in conflict with my opinion), NELC provided no arguments of substance to support its decision. On the other hand, I went out of my way to provide comprehensive evidence as to why the person nominated would be wholly inappropriate. Nothing has changed with regards my view that nothing would be achieved by having the nominated employee investigate the complaint.

If the council refuse to allocate another employee, which I suspect, I will therefore consider escalating the complaint to the Local Government Ombudsman (LGO). As no doubt you will already know from one or a number of NELCs Effective Complaints Handling courses delivered

by LGO staff, that by virtue of section 26(6)(c) of the Local Government Act 1974, the LGO shall not investigate matters where proceedings in any court of law are available to the person aggrieved.

On the face of it this would appear to be the case, re the High Court application, however the LGO have discretion in circumstances where it would not be reasonable to expect the person aggrieved to resort to such remedy. The clause is provided within section 26(6) of the 1974 Act as follows:

Provided that a Local Commissioner may conduct an investigation notwithstanding the existence of such a right or remedy if satisfied that in the particular circumstances it is not reasonable to expect the person aggrieved to resort or have resorted to it

The LGO would have no reasonable cause to refuse investigating the complaint on these grounds. Moreover it would have no credibility should it investigate and its decision fall in favour of NELC given that the councils calculations provide indisputable evidence that inappropriate and unlawful expenditure was incorporated into the 70 summons.

Regardless of whether the council agrees to allocate another employee to deal with the complaint, I expect that a response is given regarding the authority requesting the liability order be quashed.

Failing NELC agreeing to apply to the court to quash the order, there is the matter of the outstanding 60 sum and how it is going to obtain payment with available enforcement powers given by the liability order. It has no way of making an attachment to wages (I receive none), neither can it make an attachment to benefits (I receive none). The sum is far below the amount which would allow the council to instigate bankruptcy or apply to the court for a charging order. There is only therefore two realistic options remaining, one of which being to apply to the court for commitment to prison, which would fail to obtain payment. Besides, the council would embarrassingly have to apply to the same court which negligently granted the liability order in the first place. Its second option available would be to instruct its bailiff contractor to attempt levying distress. The problem envisioned with that is Humberside Police would be immediately alerted who are more than aware of Rossendales track record for defrauding householders with fees and charges in connection with council tax enforcement.

Yours sincerely

ANNEX A

Summons Costs 2012/13

A0191

Council

Tax

A0187

Debt

Recovery

A0184

Control &

Monitoring Total

Gross Collection and Recovery expenditure 869,463 647,578 716,076 2,233,117

The gross cost of Council Tax team includes

expenditure of 84,000 related to set-up

arrangements (mainly software costs) for the

LCTSS. This spending was funded by a CLG

grant so has been excluded.

84,000

84,000

The net cost of the debt recovery team is

recharged across other teams. This has been

reversed to avoid duplication.

40,000

40,000

Enforcement Costs - 59,309 was paid to

HMCS for fees (50% is estimated to be

attributable to enforcement) and 25,148 was

paid in debt recovery costs (all enforcement)

54,800

54,800

Enforcement Costs - staff and overheads

124,483

124,483

Collection costs for taxpayers who pay before

summons issued (see calculation tab)

484,551

484,551

Estimate of Control and monitoring time on

non council tax summons activity (80%)

572,861

572,861

Debt recovery costs for NDR/Housing

Benefit/Sundry debtors (30%)

140,488

140,488

Gross Recoverable costs (including liability

orders)

260,912

327,806

143,215

731,933

30% 51% 20% 33%

Further work to liability order (estimate at 5%

of Gross Recoverable costs)

36,597

Gross Recoverable costs 695,337

Number of summons requested in 2012/13 9,396

2012/13 Cost per summons 74.00

Council Tax activity levels

Collection

costs non

summons

Collection

cost

summons

Gross cost of Council Tax section

869,463

Less grant funded expenditure - 84,000

Less recharge from debt recovery - 40,000

Adjusted gross cost

745,463

30% of activity on routine billing activity

223,639

223,639

-

70% of activity on reminders/final bills/queries

521,824

260,912

260,912

484,551

260,912

No of reminders/final (from 12/13 data sheet)

33,100

No of council tax summons (from data sheet)

9,396

No of reminders not resulting in summons

23,704 56%

No. of calls arising from issue of each summons is at least twice as many as for reminders, therefore

Weighted number of summons

18,792 44%

Adjusted total

42,496

ESTIMATE THAT NON ROUTINE BILLING ACTIVITY IS SPLIT 50/50 BETWEEN THOSE PAYING

ON TIME AND THOSE PROCEEDING TO SUMMONS

ANNEX B

Summons cost calculation (2013/14)

A0191/

A1549

Council

Tax

A0187/

A1551

Debt

Recovery

A0184

Control

&

Monitoring Total

Gross Collection and Recovery expenditure

798,700

673,000

546,900

2,018,600

-

Less recharges between cost centres that

results in duplication of cost

31,782 -

31,782

Estimated enforcement costs budget codes

LL103 13,600 summons multiplied by 3

40,800

40,800

Enforcement Costs - staff and overheads (see

debt recovery salaries tab)

164,372

164,372

Collection costs for taxpayers who pay before

summons issued (see calculation tab)

575,189

575,189

Estimate of Control and monitoring time on

non council tax summons activity (80%)

437,520

437,520

Debt recovery costs for NDR/Housing

Benefit/Sundry debtors (30%)

140,348

140,348

Gross Recoverable costs (including liability

orders)

191,730

327,480

109,380

628,589

24% 49% 20% 31%

Further work to liability order (estimate at 5%

of Gross Recoverable costs)

31,429

Gross Recoverable costs

597,160

Estimated number of summons requested in 2013/14, where costs applied 10,000

Cost per summons 59.72

Cost rounded to nearest 60

Council Tax activity levels

Collection

costs non

summons

Collection

cost

summons

Gross cost of Council Tax section

798,700

Less recharge from debt recovery - 31,782

Adjusted gross cost 766,918

50% of activity on routine billing activity

383,459

383,459

-

50% of activity on reminders/final bills/queries

383,459

191,730

191,730

575,189

191,730

Estimated no of reminders/final for 2013/14

39,176

Estimated no of council tax summons

13,600

No of reminders not resulting in summons

25,576 48%

No. of calls arising from issue of each summons is at least twice as many as for reminders, therfore

Weighted number of summons

27,200 52%

Adjusted total

52,776

ESTIMATE THAT NON ROUTINE BILLING ACTIVITY IS SPLIT 50/50 BETWEEN

THOSE PAYING ON TIME AND THOSE PROCEEDING TO SUMMONS

ANNEX C

North East Lincolnshire Council Finance Department Civic Offices Knoll Street Cleethorpes North East Lincolnshire DN35 8LN

Ref: NG/CTR/12912

17 October 2012

Dear Ms Robinson

Re: Council Tax Reminder, Summons and Recovery Account 550xxxxxxx

I have today paid 437.52 into North East Lincolnshire councils bank account. This is the sum

outstanding on my 2012-13 council tax liability, settled well before the statutory instalment

arrangement dictates.

An additional 10 has been paid to cover summons costs. 3 to cover Magistrates court fees and

the remainder is NELCs costs. However, I consider 7 to be an over generous amount to cover

those incurred by the council given they are mass produced documents.

I believe the authority must apply for an award of costs at each court hearing. I therefore expect

any surplus credited to my account upon the Bench awarding the council less than 10 cost.

It is important you let me know in advance of the hearing whether or not the council will be

requesting a liability order for the 60 shortfall of the stated amount payable on its summons.

The document I received today states on it a 70 summons cost payable.

I believe NELC have a policy of only progressing accounts to enforcement for amounts over 50.

The position here is unclear if this relates to the liability order stage or any preceding it. However,

the amount according to NELC is 60 and so will assume no response from the council will mean

Im required to attend the hearing if I wish to dispute costs.

A request made under the Freedom of Information Act gave North East Lincolnshire Council an

opportunity to supply a breakdown of costs attributable to its recovery operations. It was unable

to do this, only a fraction of the questions were reluctantly answered and only after attempting to

circumvent the request by improperly citing exemptions under the Act.

It seems from the response that North East Lincolnshire Council has breached regulations 34(5)(b)

of the Council Tax (Administration and Enforcement) Regulations 1992 which state that these

costs need to have been reasonably incurred by the authority.

The inability demonstrated by North East Lincolnshire Council to determine these costs, is proof

enough that the Magistrates' court will have had no basis to assess the reasonableness of the

authority's claims.

It is therefore inconceivable that North East Lincolnshire Council, or the Magistrates' court for that

matter, can lawfully state on the summons document that a predetermined 70 costs has been

reasonably incurred.

For your reference, the Council tax practice note number 9 states on page 8:

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.

Regarding my concerns on this matter, I intend to put it to the Magistrates court that in light of

the evidence, they do insist that the amount claimed in costs per individual, is no more than that

reasonably incurred by the authority.

Yours sincerely