Where a English Local Authority (Billing Authority) has: (a) a council tax liability order ('CTLO'); or (b) a national non-domestic rates (business rates) liabilty order ('BRLO'), against an alleged taxpayer/ratepayer, can the Billing Authority, should it so wish, apply to the Magistrates Court to have the CTLO/BRLO set aside? If yes, is there a criteria for when the Magistrates Court will exercise that power of set aside?
This article will consider these questions, in respect to the two main areas of local taxation: (a) council tax; and then (b) business rates. The latter in light of the recent judgment in Total Sprint Ltd v Swale BC [2023] EWHC 2968 (Admin); [2024] 1 WLR 1687 ('Total Sprint'), a decision of Eyre J on 19.11.23.
COUNCIL TAX
The Council Tax (Administration and Enforcement) Regulations 1992/613 ('1992 Regulations'), made under Local Government Finance Act 1992 ('1992 Act'), governs, as the name suggests, the administration and enforcement of council tax. The 1992 Regulations includes provisions in respect to: (a) the definition of what a 'liability order is (Reg.30(1))[1]; (b) applications by way of complaint, to the Magistrates Court, for a council tax liability order ('CTLOs') (reg.34(1)[2]); (c) the making of CTLOs (reg.34(6))[3]; and (d) the quashing of a CTLO (Reg.36A). As to this last provision, reg.36A of the 1992 Regulations[4], this provision is entitled 'Quashing of liability orders' and reg.36A(1) and (2) provides:
'(1) Where-
(a) a magistrates' court has made a liability order pursuant to regulation 34(6), and
(b) the authority on whose application the liability order was made considers that the order should not have been made, the authority may apply to a magistrates' court to have the liability order quashed.
(2) Where, on an application by an authority in accordance with paragraph (1) above, the magistrates' court is satisfied that the liability order should not have been made, it shall quash the order.'
As will be apparent, there is express provision in the 1992 Regs, permitting a Billing Authority to apply to the Magistrates Court that made a CTLO on its earlier application, that the original CTLO be quashed. Seemingly, this will be a quashing or set aside order. The test on such an application, is whether or not the the Magistrates Court are satisfied that the CTLO should not have been made. If the Magistrates Court is so satisfied, then the Magistrates Court 'shall' (mandatory) make the quashing/set aside order.
When making a reg.36A of the 1992 Regulations application, a Billing Authority may also apply to the Magistrates Court for a CTLO against the taxpayer for a lesser amount payable. On such an application, if the Magistrates Court is satisfied that, had the original CTLO application for a liability order, been for a liability order in respect of a lesser sum payable, such an order could properly have been made, then the Magistrates Court shall make a CTLO in respect of the aggregate of (a) that lesser sum payable, and (b) any sum included in the quashed order in respect of the costs reasonably incurred by the authority in obtaining the quashed order[5].
In R. (on the application of Mohammed) v Southwark LBC [2009] EWHC 311 (Admin); [2010] RA 112 ('Mohammed v Southwark LBC'), Geraldine Andrews QC sitting as a deputy High Court Judge, in the QBD (Administrative Court) in a judicial review case, described the reg.36A process for obtaining a quashing order, as follows, at paragraph 9:
'Regulation 36A provides a mechanism for quashing a liability order made pursuant to Regulation 34 if the authority on whose application the order was made “considers that it should not have been made”. This Regulation also gives power to the magistrates' court to substitute for the quashed order a liability order in respect of a lesser sum payable, if the court is satisfied that an order in that sum could have been obtained the first time round.'
A CTLO might ought not to have been made, because
(a) the taxpayer was not liable for the council tax; and/or
(b) the quantum figure for the put on the outstanding council tax, was wrong. At paragraph 9, the deputy High Court Judge in Mohammed v Southwark LBC said:
'It follows that the statutory scheme expressly envisages that the failure by the court to issue a lawful liability order may be directly attributable to a decision by the Council to provide the court with information about the amount due that turns out to be incorrect'. Which might be a 'simple case of the [Billing Authority] mistakenly overstating the amount' when it applied for the CTLO (though this was not the situation, on the facts, in Mohammed v Southwark LBC)
A separate points, which will be apparent from the wording of reg.36A(1)(b), is that a taxpayer is not eligble to apply under reg.36A. In Mohammed v Southwark LBC, the deputy High Court Judge made this point clear, when she stated, at paragraph 9 '...the only person that can bring an application under Regulation 36A is the billing authority. The disgruntled taxpayer cannot use that route to quash a liability order.'
BUSINESS RATES
There is no equivolent statutory/statutory instrument provision to s.36A[6], in business rates law. And certainly, for a time, it was seen as unclear whether or not a Billing Authority could apply for an order, setting aside a BRLO. However, the picture has now been clarified, as least on this question, and whether the Magistrates Court can accede to such an application, by the judgment of Eyre J in Total Sprint.
Total Sprint
It is convenient to note a few of the facts from Total Sprint. In Total Sprint:
(1) Swale BC, as the relevant Billing Authority, applied by way of complaint to the Magistrates Court, for a BRLO against an alleged ratepayer Sprint Couriers (Southern) Ltd ('Couriers'), in respect to certain units on a trading estate (the 'Units') and liability periods 1.4.15 to 1.4.19 ('LPs 2015-2019');
(2) on 9.10.17 and 30.7.18, the Magistrates Court made the BRLOs against Couriers as sought (the 'Couriers BRLOs') (paragraph 4);
(3) on 9.9.19, the Billing Authority issued and sent to Couriers, demand notices for the (same) Units and for the (same) liability period LPs 2015-2019, but with zero balances (paragraph 4);
(4) on 12.9.19, the Billing Authority issued and sent demand notices to Total Sprint for the (same) Units for the (same) liability period LPs 2015-2019[7];
(5) on 13.1.20, the Billing Authority applied by way of Complaint to the Magistrates Court, for a BRLO against the alleged ratepayer Total Sprint, for the (same) Units and for the (same) liability period LPs 2015-2019. In that application, the Billing Authority did not disclose to the court the events described at (1) to (3) above (a breach of the Billing Authority's duty of candour[8]);
What the Billing Authority did not do, is between stages (3) and (4) above, was to apply to the Magistrates Court, for an order, setting aside the Couriers BRLOs. The question was, could it have done so?
At first instance in the Magistrates Court before a DJ, the Billing Authority contended that it could not have applied to the Magistrates Court (a corrollory of this is that the Magistrates Court would not have had the power to acceded to such an application, had it been made). However, the DJ disagreed. The DJ '...concluded that such an application could have been made' (Eyre J, paragraph 71), but added, that '...the law as to the scope of the magistrates' court's power to set aside liability orders was unclear.' (Eyre J, paragraph 71). A 'wrinkle' on this was that the first instance DJ's judgment had said '…The law in relation to the power to set aside NNDR liability orders is not settled...' (DJ's judgment, paragrraph 242; Eyre J paragraph 83) but had then (re)directed his analysis of where the uncertainty in the law was located, from the existence of the power itself to the scope of the power, in the Case Stated. In the Case Stated, the DJ said '...there was arguable debate in law about the scope of the Court's power to set aside those liability orders.' (DJ Case Stated, paragraph 43(g); Eyre J paragraph 84)
At the Case Stated appeal hearing, the Billing Authority changed its case. Before Eyre J on appeal, the Billing Authority accepted that 'an application could have been made and that the magistrates court did have power to set aside a liability order' (paragraph 72). However, the Billing Authority submitted that the circumstances in which the court could exercise that power were not settled (paragraph 72). 'Total Sprint said that the law was clear and that the [DJ] should have proceeded on the footing that the position was clear' (paragraph 72; see also paragraph 85)
Eyre J began his analysis, by stating:
'The nature of the power of a magistrates' court to set aside a previous order was considered by Andrew Nicol QC (as he then was) sitting as a deputy judge in R (London Borough of Newham) v Stratford Magistrates Court [2008] EWHC 125 (Admin). Having noted that there is no statutory power for a magistrates' court to do this in civil proceedings the deputy judge identified the salient parts of the authorities where the court's common law power had been considered.' (paragraph 73). Eyre J then set out paragraphs 10-12 of R (London Borough of Newham) v Stratford Magistrates Court [2008] EWHC 125 (Admin)('Newham'), wherein the deputy judge in Newham set how, in 3 cases, there is authority for the Magistrates Court having a common law power of a certain extent to set aside previous decisions in their civil jurisdiction, namely: (1) Liverpool City Council v Pleroma Distribution Ltd [2002] EWHC 2467 (Admin), [2003] RA 34; (2) R (on the application of Brighton and Hove City Council) v Brighton and Hove Justices, Michael Hamdan [2004] EWHC 1800 (Admin)('Hamdan'); and (3) R (on the application of Periasamy Mathialagan) v London Borough of Southwark [2004] EWCA Civ 1689, [2005] RA 43. Eyre J then set out that those 3 cases caused the deputy judge in Newham, to say, paragraph 13:
"'I conclude from those three cases that although the Court of Appeal has expressed some doubts as to the matter, I should proceed on the three criteria set out by Stanley Burnton J in the Brighton and Hove Justices case: namely that before an order made by a Magistrates' Court in its civil jurisdiction can be set aside, there must be, first, a genuine and arguable dispute as to the Defendant's liability to the order in question; second, that the order must be made as a result of a substantial procedural error, defect or mishap; and third, the application to the Justices for the order to be set aside is made promptly after a Defendant learns that it has been made or has notice that an order may have been made.'
To which Eyre J in Total Sprint added, at paragraph 75 'I respectfully agree with that analysis and it was not suggested before me that it was incorrect', but then added:
(1) '...however, that the three criteria identified by Stanley Burnton J were formulated in the context of an application by a defendant seeking the setting aside of an order against that defendant.' [bold added]
(2) showed how that 3 criteria test did not fit, and indeed, were not satisfied, by the Billing Authority's putative set aside application in Total Sprint. Eyre J said, at paragraph 76:
'Here there is no suggestion that there was any procedural error in the steps leading up to the making of the Couriers Liability Orders nor is it said that there was a mistake at the time the orders were made. The [Billing Authority's] position is that further information has caused it to come to a different conclusion as to who was the rateable occupier but that the orders were properly sought and properly made in light of the information it had and in light of the failure by [Couriers] to discharge its evidential burden on the question of rateable occupation.'
Eyre J then said, at paragraphs 77 and 78:
'I agree with the [Billing Authority] and the District Judge that the position is open to debate at least in some respects. It is clear that the magistrates' court does have a common law power to set aside its own orders. However, whether the power will be exercised in any particular case is less clearcut. In that regard it is to be noted that Stanley Burnton J's three criteria were said to be matters which were necessary "in general"; that they were expressed as preconditions required for the power to be exercisable but not such as necessarily to require it to be exercised when they were present; and that the power was said to be "an exceptional one to be exercised cautiously". It is also relevant that the circumstances here are very different from those which were considered in the earlier cases.
'In practice a consensual application by the [Billing Authority] and the liquidators of [Couriers] would have been likely to have resulted in the setting aside of the Couriers Liability Orders but that was far from being a foregone conclusion. In particular there would have been scope for question as to whether the magistrates' court had power to set aside an order in the absence of mistake, procedural error, or a similar consideration.'
Later, Eyre J added:
(1) 'The [Billing Authority] could have applied to set aside the Couriers Liability Orders...the District Judge was right to say that the scope of the power to set aside an earlier order was unclear.' (in other words, the existence of the power is not in question but that there is scope for debate as to the precise circumstances in which the power would be exercised)
(2) Answer the questions posed for the opinion of the High Court, as follows:
Question: '(2) Was I correct to conclude that the [Billing Authority] could have applied to the Magistrates' Court to have the [Couiers Liabiilty Orders] made against [Couriers] ... set aside before applying for the summons against [Total Sprint]?'
Answer: '2 Yes: the Council could have applied for the Couriers Liability Orders to be set aside.' (paragraph 123(2))
This resolved the position to some extent but does leave some matters outstanding (as discussed in the summary below).
Summary
Overall, Total Sprint confirms and makes clear that:
(1) a Billing Authority can apply to the Magistrates Court, for an order setting aside a BRLO made in its favour;
(2) the Magistrates Court has a common law power to accede to that Billing Authority set aside application;
As to the scope of the power, that is, in what circumstances can it be exercised and in what circumstances can it not be exercised, this was rather left open. But Eyre J was able to:
(a) identify that 'whether the power will be exercised in any particular case is less clearcut' (paragraph 77); and
(b) note that '...Stanley Burnton J's three criteria were said to be matters which were necessary "in general"' (paragraph 77). This is important as it reaffirms that there will be circumstances when the Stanley Burnton J's three criteria (from Hamdan) will not apply. Eactly when Stanley Burnton J's three criteria will not apply, was not addressed.
(c) note that '...the power was said to be "an exceptional one to be exercised cautiously"' (paragraph 77)
In those circumstances where Stanley Burnton J's three criteria from Hamdan do not apply, Eyre J did not provide an alternative test/formulation, to be applied. Nor any more general guidance, which would assist a Magistrates Court, when faced with whether to exercise its power to set aside a BRLO, on a Billing Authority application. This was left 'at large'/unresolved, for future caselaw to develop.
SIMON HILL © 2024*
BARRISTER
33 BEDFORD ROW
NOTICE: This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole, or the Copyright holder. No attempt has been made to provide an exhaustive review/account of the law in this area. *Copyright is owned by Barrister Search Limited.
[1] Reg.32 of the Council Tax (Administration and Enforcement) Regulations 1992/613 is entitled 'Interpretation and application of Part VI' and reg.32(1) provides (so far as presently relevant):
'(1) In this Part-
...
“liability order” means an order under regulation 34 or regulation 36A(5)'
[2] Reg.34 of the Council Tax (Administration and Enforcement) Regulations 1992/613 is entitled 'Application for liability order' and reg.34(1)-(2) provide:
(1) If an amount which has fallen due under [paragraph (3) or (4) of regulation 23 (including those paragraphs as applied as mentioned in regulation 28A(2))] 1 is wholly or partly unpaid, or (in a case where a final notice is required under regulation 33) the amount stated in the final notice is wholly or partly unpaid at the expiry of the period of 7 days beginning with the day on which the notice was issued, the billing authority may, in accordance with paragraph (2), apply to a magistrates' court for an order against the person by whom it is payable.
(2) The application is to be instituted by making complaint to a justice of the peace, and requesting the issue of a summons directed to that person to appear before the court to show why he has not paid the sum which is outstanding.'
In R. (on the application of Mohammed) v Southwark LBC [2009] EWHC 311 (Admin); [2010] RA 112 ('Mohammed) v Southwark LBC'), Geraldine Andrews QC sitting as a deputy High Court Judge, in the QBD (Administrative Court) in a judicial review case, described the council tax enforcement system, in summary, at paragraph 8:
'Regulation 32 of the Council Tax (Administration and Enforcement) Regulations 1992 defines a “liability order” as “an order under regulation 34 or regulation 36A(5) ”. Regulation 34 essentially provides that if an amount has fallen due under certain provisions in Part V of the Regulations to which I shall refer in detail later in this Judgment, and remains unpaid in whole or in part, then the billing authority may apply to a magistrates' court for an order against the person by whom it is payable. The billing authority institutes the application by making complaint to a justice of the peace and requesting the issue of a summons directed to that person to show cause why he has not paid the outstanding sum. The court shall make the order if it is satisfied that the sum has become payable by the defendant and has not been paid. It is therefore envisaged that the magistrates' court will rely upon on the information provided to it by the billing authority, unless the taxpayer is able to demonstrate that it is inaccurate. Once a liability order has been made, it authorises the Council to engage bailiffs to distrain upon the taxpayer's goods.'
Later in Mohammed v Southwark LBC, the deputy High Court Judge went gave a further, more detailed description of how council tax liability arises.
But before quoting it, it would be helpful to set out a few facts from the case. In Mohammed v Southwark LBC, the taxpayer has been made bankrupt on 25.11.05. On 18.8.06, a CTLO was made against the taxpayer for £1243.47, made up of:
(a) £297.35 for liability period 25.11.05 to 31.3.06 (4 months + 6 days) (first period);
(b) £881.02 for liability period 1.4.06 to 31.3.07 (12 months) (second period); and
(c) £65 costs.
The question arose as to what council tax liability fell within the definition of 'bankruptcy debt' for the purposes of s.382 of the Insolvency Act 1986.
At paragraphs 14 to 16, the deputy High Court Judge said:
'A “bankruptcy debt” is defined by s.382(1) of the Insolvency Act , so far as is material, as follows:
a. Any debt or liability to which [the bankrupt] is subject at the commencement of the bankruptcy ;
b. Any debt or liability to which he may become subject after the commencement of the bankruptcy (including after his discharge from bankruptcy) by reason of any obligation incurred before the commencement of the bankruptcy …
“Liability” is defined by sections 382 (3) and (4) :
3. For the purpose of references in this Group of Parts to a debt or liability, it is immaterial whether the debt or liability is present or future, whether it is certain or contingent or whether its amount is fixed or liquidated, or is capable of being ascertained by fixed rules …
4. In this Group of Parts, except in so far as the context otherwise requires, “liability” means … a liability to pay money or money's worth, including any liability under an enactment …
15. These provisions are echoed by Rule 12.3(1) of the Insolvency Rules 1986 (SI 1986/1925) which provides that all claims by creditors are provable as debts against the bankrupt whether they are present or future, certain or contingent.
16. The liability to pay council tax is a liability under an enactment and therefore any liability on the part of the bankrupt to pay council tax falling within either subsections (a) or (b) of section 382(1) of the Insolvency Act would be a bankruptcy debt.'
At paragraph 17, the deputy High Court Judge noted:
'It was common ground that any arrears of council tax in respect of the period of occupancy up to and including 25th November 2005 would qualify as a bankruptcy debt. However, [the taxpayer/bankrupt] contended that his liability to pay council tax for the whole period from the commencement of his bankruptcy until his discharge from bankruptcy a year later was a “contingent liability”.
The deputy High Court Judge then considered R (Steele) v Birmingham City Council [2007] 1 All ER 73 ('Steele') and another case. This is noted because Steele has since been overruled by Nortel GmbH (also known as Bloom v Pensions Regulator [2014] A.C. 209; [2013] 3 WLR 504, see in particular Lord Sumption, at 136. This is noted here because, although the reasoning about 'contingent liability' is not relevant to the deputy High Court Judge's description of the Council Tax system, she follows the wrongly decided Steele.
At paragraph 23, the deputy High Court Judge said 'The key question in the present case...is whether at the time of the bankruptcy (25.11.05) [the taxpayer/bankrupt] was under a legal obligation to pay council tax in respect of his future occupancy of the premises to which it related....The answer, in my judgment, is that he was under such an obligation in respect of the first period (as conceded by the Council) but not the second.' To get to this answer, the deputy High Court Judge surveyed how/when a person becomes liable for council tax, running through many of the most important provisions.
At paragraph 24 to 35, the deputy High Court Judge in Mohammed v Southwark LBC said:
'[Counsel for the Billing Authority] drew my attention to the relevant provisions of the Local Government Finance Act 1992. Section 1(1) deals with council tax in respect of dwellings. It provides that
“As regards the financial year beginning in 1993 and subsequent financial years, each billing authority shall, in accordance with this Part, levy and collect a tax, to be called council tax, which shall be payable in respect of dwellings situated in its area”
For these purposes the “financial year” runs from 1st April to 31st March.
25. Section 2 (1) provides that “ liability to pay council tax shall be determined on a daily basis .”
25. Section 6 defines the persons who are liable to pay council tax. It provides that
(1) The person who is liable to pay council tax in respect of any chargeable dwelling and any day is the person who falls within the first paragraph of subsection (2) below to apply…
(2) A person falls within this subsection in relation to any chargeable dwelling and any day if, on that day –
a. He is a resident of the dwelling and has a freehold interest in the whole or any part of it
b. He is such a resident and has a leasehold interest in the whole or any part of the dwelling which is not inferior to another such interest held by another such resident… (emphasis added).
26. Thus a resident of the property is liable to pay council tax in respect of each day of his residence, and the liability accrues daily, which means that someone who moves house in the course of a financial year will be entitled to a rebate starting from the first day on which he became a non-resident. On the basis of those provisions, [the taxpayer/bankrupt] would not have been liable to pay council tax on 25th November 2005 for the period of his occupation of the premises on 26th, 27th or 28th November.
27. However, local councils do not collect council tax on a daily basis or (generally) in arrears. They issue demands at the beginning of the financial year for which the tax will fall due, and claim payment on account, based upon an assessment of how much tax the resident will be liable to pay, on the assumption that he will remain in residence for the whole of the financial year. Individuals will usually pay sums on account of their council tax liability by instalments, although they may be allowed to make payment of the whole assessed amount in one lump sum. Whatever form the payment takes, the taxpayer inevitably pays the bulk of the tax in advance and on account of a liability that is expected to accrue in future. That explains why the Council was able to seek a liability order in respect of the whole of the financial year 2005-2006 in June 2005, and why it sought a liability order in August 2006 which included sums in respect of the period from August 2006 to 31st March 2007. A liability order can only be sought in respect of sums which are already payable and remain unpaid in whole or in part.
28. The Council Tax (Administration and Enforcement) Regulations 1992 , which set out the regime under which liability orders are obtained, also deal with the billing of council tax. Under Part V of the Regulations, the Council must serve a demand notice on every liable person for the financial year to which the notice relates. The demand notice requires the making of payments on account of the Council's estimate of the “chargeable amount”, which is defined as the amount which the person is or will be liable to pay (for that financial year). There is an express assumption for these purposes that the person to whom the notice is addressed will be liable to pay the council tax on every day after the issue of the notice.
29. The Regulations provide for payment of the estimated amount by instalments, and for the service of reminder notices if the instalments are not paid on time. Regulation 23(3) provides:
“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.”
Regulation 23(4) provides:
“If after making a payment in accordance with a reminder notice which is the second such notice as regards the relevant year , the liable person fails to pay any subsequent instalment as regards that year on or before the day on which it falls due, the unpaid balance of the estimated amount shall become payable by him on the day following the day of the failure”. (Emphasis added)
30. Regulation 33 applies to a sum which has become payable to a billing authority under Part V and which has not been paid. It provides that before a billing authority applies for a liability order it shall serve on the person against whom it is to be made a final notice setting out every amount in respect of which the authority is to make the application. A final notice may be served in respect of an amount at any time after it has become due. However, a final notice need not be served on someone who has already been served with a reminder notice under Regulation 23 in respect of the amount claimed.
31. A liability order under Regulation 34(1) can only be sought in relation to an amount which has fallen due under Regulation 23(3) or (4) and which is wholly or partly unpaid, or an amount stated in a final notice under regulation 33 which is wholly or partly unpaid at the end of a period of 7 days beginning with the day on which the final notice is issued.
32. It follows from the Regulations that if a resident to whom a demand for a payment on account of council tax is properly addressed fails to pay an instalment on time, or fails to respond quickly enough to a reminder notice, or a final notice, he may become liable to pay the whole balance of the estimated amount of tax for that financial year within a short period, normally 7 days. The Council will then be entitled to seek a liability order against him for that amount if it is wholly or partly unpaid. That is what appears to have happened in the present case, and that is why the Council was right to concede that the £297.35 in respect of the financial year 2005-2006 was a bankruptcy debt, even though on the face of the Summons it appeared to relate to a period after [the taxpayer/bankrupt] was adjudged bankrupt.
33. The liability that the Council was seeking to enforce was an existing liability under the Council Tax Regulations to pay a sum on account of [the taxpayer/bankrupt's] (future) liability to pay council tax. The liability to pay council tax for the rest of the financial year after 25th November 2005 was contingent upon [the taxpayer/bankrupt] continuing to occupy the premises each day until the end of that financial year (as the Regulations assumed he would). However, the liability to make a payment on account of council tax under the Regulations arises before any liability to pay the council tax itself arises under s.2 of the Local Government Finance Act. On any view, therefore, as at 25th November 2005 [the taxpayer/bankrupt] was already under a legal obligation to make a payment to the Council of the full £297.35 in respect of the financial year ending on 31st March 2006.
34. The position in respect of the next financial year, from 1st April 2006 to 31st March 2007, was different. As at 25th November 2005, [the taxpayer/bankrupt] had no accrued liability to pay the council tax itself, as that liability arose day by day under the Local Government Finance Act. Nor did he have any obligation to make a payment to the Council under the Regulations on account of that liability, because on the 25th November 2005, the Council had not yet carried out its estimates or issued any demand notice for any “chargeable amount” in respect of the financial year 2006-2007. [the taxpayer/bankrupt] was no more under a “contingent liability” to pay the council tax for the next financial year, or any part of it, than he was under a “contingent liability” on 25th November 2005 to pay the next quarter's gas or electricity or telephone bill. Applying the approach set out by the Court of Appeal in Steele there was no underlying legal obligation, at the date of the inception of the bankruptcy, to pay council tax for any period of residence in the premises on or after 1st April 2006.
35. By the time the Council sought the liability order in August 2006, a fresh liability to pay the whole of the estimated council tax for the financial year 2006-2007 had arisen under the Regulations, presumably because the instalments in respect of that year's assessed council tax were not paid as and when they fell due. The £881.02 was not a “bankruptcy debt” as there was no liability (present or future, actual or contingent) to pay it or any part of it on 25th November 2005.'
[3] Reg.34 of the Council Tax (Administration and Enforcement) Regulations 1992/613 is entitled 'Application for liability order' and reg.34(1) provides (so far as presently relevant):
'The court shall make the order if it is satisfied that the sum has become payable by the defendant and has not been paid.'
[4] The statutory basis for reg.36A Council Tax (Administration and Enforcement) Regulations 1992/613 is as follows:
(1) Section 82 of the Local Government Act 2003, as from 18.11.03, inserted into Local Government Finance Act 1992 ('1992 Act'), paragraph 12A in Schedule 4;
(2) Paragraph 12A to Schedule 4 to the 1992 Act is entitled 'Quashing of liability orders' and empowers the Secretary of State to make regulations in respect to billing authorities applying for orders, quashing (setting aside) council tax liability orders ('CTLOs'). Paragraph 12A provides:
'Regulations under paragraph 1(1) above may provide-
(a) that, where on an application by the authority concerned a magistrates' court is satisfied that a liability order should not have been made, it shall quash the order;
(b) that, where on an application to a magistrates' court for the quashing of a liability order, the court is satisfied that, had the original application been for a liability order in respect of a lesser sum payable, such an order could properly have been made, it shall substitute a liability order in respect of the aggregate of—
(i) that lesser sum, and
(ii) any sum included in the quashed order in respect of the costs incurred in obtaining it.'
(3) Under paragraph 1 to Schedule 4 of the 1992 Act (amongst other statutory provisions), the Council Tax (Administration and Enforcement) Regulations 1992/613 were made. The Preamble to Council Tax (Administration and Enforcement) Regulations 1992/613 provides:
'The Secretary of State for the Environment, as respects England, and the Secretary of State for Wales, as respects Wales, in exercise of the powers conferred on them by sections 16(3) and 113(1) and (2) of, and paragraphs 1(1), 2(2), (3), (4)(a) to (c) and (5), 3 to 11, 13(1)(a) and (3), 16 and 18 of Schedule 2, paragraphs 1 and 6 of Schedule 3 and paragraphs 1 to 15, and 17 to 19 of Schedule 4 to, the Local Government Finance Act 1992, and of all other powers enabling them in that behalf, hereby make the following Regulations' [bold added]
(4) The Explanatory Notes to Paragraph 12A explains the background to paragraph 12A. The Explanatory Notes to Local Government Act 2003 state, under the heading 'Section 82: Quashing of Liability Orders':
'187. When a taxpayer falls behind with their council tax, billing authorities have to apply to the magistrates' court for a liability order before they can seek to use various powers to recover the debt. There are relatively few defences against the making of a liability order - these include the Local Government Act 2003 fact that an amount has not properly been demanded or that the amount has been paid. Unless a defence is accepted by the court, the order will be granted. In practice very few are refused.
188. However, it can emerge after the order has been made that a mistake has occurred, for example, the taxpayer may later find receipts proving that he had paid. In such cases, no action should be taken under the liability order. However, some taxpayers view the liability order as an unwarranted stain on their character and demand that the liability order be deleted from the record. At present, this can only be achieved on application to a higher court. The cost involved is unwarranted where there is no dispute about the facts.
189. Section 82 (which inserts into Schedule 4 to the LGFA 1992 a new paragraph 12A) allows the Secretary of State (in Wales the NAW) to make regulations giving magistrates' courts powers to quash a liability order if the court is satisfied that the liability order should not have been made. This only applies where the local authority has applied to have the liability order quashed. It does not give council taxpayers a right to require magistrates' courts to reconsider all liability orders made.
190. New paragraph 12A(b) enables regulations to be made permitting the magistrates' courts to substitute a liability order for a lower amount where it considers that a liability order could properly have been made had it been made for that lower amount (which would include a sum for the costs incurred in obtaining the original order).'
[5] Reg.34(3) to (5) of the Council Tax (Administration and Enforcement) Regulations 1992/613 provide:
'(3) Where an authority makes an application under paragraph (1) for a liability order (“the original order”) to be quashed, and a lesser amount than the amount for which the original order was made has fallen due under paragraph (3) or (4) of regulation 23 (including those paragraphs as applied as mentioned in regulation 28A(2)) and is wholly or partly unpaid or (in a case where a final notice is required under regulation 33) the amount stated in the final notice is wholly or partly unpaid at the expiry of the period of seven days beginning with the day on which the notice was issued, the billing authority may also apply to the magistrates' court for an order against the person by whom the lesser amount was payable.
(4) Paragraphs (2) to (5) of regulation 34 shall apply to applications under paragraph (3) above.
(5) Where, having quashed a liability order in accordance with paragraph (2) above, the magistrates' court is satisfied that, had the original application for the liability order been for a liability order in respect of a lesser sum payable, such an order could properly have been made, it shall make a liability order in respect of the aggregate of–
(a) that lesser sum payable, and
(b) any sum included in the quashed order in respect of the costs reasonably incurred by the authority in obtaining the quashed order.'
Reg.34(2) to (5) of the Council Tax (Administration and Enforcement) Regulations 1992/613 provides:
'(2) The application is to be instituted by making complaint to a justice of the peace, and requesting the issue of a summons directed to that person to appear before the court to show why he has not paid the sum which is outstanding.
(3) Section 127(1) of the Magistrates' Courts Act 1980 does not apply to such an application; but no application may be instituted in respect of a sum after the period of six years beginning with the day on which it became due under Part V.
(4) A warrant shall not be issued under section 55(2) of the Magistrates' Courts Act 1980 in any proceedings under this regulation.
(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] In Total Sprint Ltd v Swale BC [2023] EWHC 2968 (Admin); [2024] 1 WLR 1687, Eyre J said that 'The nature of the power of a magistrates' court to set aside a previous order was considered...' (paragraph 73) in R (London Borough of Newham) v Stratford Magistrates Court [2008] EWHC 125 (Admin), a decision of Andrew Nicol QC (as he then was) sitting as a deputy judge. Eyre J recorded that the deputy judge had '...noted that there is no statutory power for a magistrates' court to do this in civil proceedings...' (paragraph 73
[7] Later revised to 16.4.15 (but this is immaterial for present purposes)
[8] Another issue in Total Sprint Ltd v Swale BC [2023] EWHC 2968 (Admin); [2024] 1 WLR 1687 was whether the Billing Authority had complied with its duty of candour to the Magistrates Court when it had applied by way of complaint to the Magistrates Court, and, importantly, requested the Magistrates Court issue a summons against the alleged ratepayer.