Where a Local Authority (Billing Authority) in England has applied by way of complaint (the 'Complaint'), to the Magistrates Court, for a national non-domestic rates (Business Rates) liabilty order ('BRLO') against an (alleged) ratepayer, and the ratepayer (a) concedes that he is liable (or is found so); and (b) the Business Rates have not been paid, does the Magistrates Court have a discretion whether or not to impose the BRLO? in particular, because of the ratepayer's personal circumstances, including solvency?

This article will consider this issue, in light of:

(a) Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 1989, reg.12(5); and

(b) Bibby v Coventry City Council [2016] EWHC 2554 (Admin); [2017] RVR 4 ('Bibby'), in the Divisional Court[1](Nicola Davies J and William Davis J) on 20.7.16; William Davis J giving the only substantive judgment (Nichola Davies J simply agreeing).

Those short on time should jump straight to the 'summary' section at the end.

Statutory Instrument Provision

The main statute for Business Rates is the Local Government Finance Act 1988 ('1988 Act'). Under the 1988 Act, the Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 1989 ('1989 Regs') were made. As the Divisional Court in Bibby stated, 'The Magistrates' Court jurisdiction' is 'governed by the Non-domestic Rating (Collection and Enforcement) (Local List) Regulations 1989' (paragraph 6)

Within the 1989 Regs, there is reg.12, which is entitled 'Application for liability order' and it provides (so far as material):

'(1) Subject to paragraph (3), if an amount which has fallen due under regulation 8(2) in consequence of such a failure as is mentioned in sub-paragraph (a) of that provision is wholly or partly unpaid, or (in a case where a reminder notice is required under regulation 11 ) the amount stated in the reminder notice is wholly or partly unpaid at the expiry of the period of 7 days beginning with the day on which the notice was served, 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.

(3) ...no application may be instituted in respect of a sum after the period of 6 years beginning with the day on which it became due under Part II.

(4) ...

(5) The court shall make the order if it is satisfied that the sum has become payable by the defendant and has not been paid.

(6) An order made pursuant to paragraph (5) 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.

(7) ...  [bold added]

For the purposes of this article, the key provision is reg.12(5), that is: 'The court shall make the order if it is satisfied that the sum has become payable by the defendant and has not been paid.'

Bibby - the facts

In Bibby, a property owner as landlord, and a company ('Cannon'), as tenant, on 4.12.07, entered into a 5 year lease of an industrial unit (paragraph 1). Cannon's director, B, agreed to stand as surety for Cannon. Subsequently, Cannon became insolvent (paragraph 3) and was dissolved. Following litigation, B was ordered to enter into a lease with the landlord for the residue of the lease term (paragraph 3). The result was that B was (involuntarily, so to speak) the tenant to an industrial unit, for the residue of the lease, namely, for the period 19.5.11 to 3.12.12 (c.18 months) (the 'Liability Period'). The upshot was that:

(a) '[B] for that period was the occupier for the purpose of liability for non-domestic rates.' (paragraph 3), but

(b) 'Those rates, at least in very large part, were not paid.' (paragraph 3), it appearing that,

(c) '...[B] was suffering considerable financial pressure at the time. He may have even have been insolvent.' (paragraph 3)

The Business Rates being unpaid, the relevant Billing Authority applied by way of complaint, to the Magistrates Court, for a BRLO against B in relation to the Liability Period. In the usual way, a summons was issued, with a first hearing listed on 8.4.15. At that 8.4.15 hearing, the Magistrates Court made the BRLO against B in respect to the unpaid Business Rates for the industrial unit and Liabilty Period.

B appealed by way of Case Stated.

Bibby - Divisional Court

In the Divisional Court, during the course of the appeal hearing, a number of things happened:

(a) '...[B] accepted that he was liable to pay those non-domestic rates.' (paragraph 7); and

(b) '...he accepted that the rates as demanded had not been paid' (paragraph 7).

But, B presented, in essence, two core submissions plus a submission related to the Human Rights Act 1998 (paragraph 12), in furtherance of his appeal. All of which were rejected by the Divisional Court. Those 3 submissions were:

(a) First core submission: The ratepayer must be given an opportunity to explain why it is he has not been able to pay the sum for which he is liable

B contended that reg.12(2) of the 1989 Regs requires that the ratepayer be given '...an opportunity to explain why it is he has not been able to pay the sum for which he is liable' (paragraph 13).

The submission ran as follows (as summarised at paragraphs 12 and 13 of Bibby):

'...whatever paragraph 5 of regulation 12 of the 1989 regulations may say, the Magistrates' Court jurisdiction was and is governed by subparagraph (2). That paragraph indicates that the process of making an application for a liability order involves the making of a complaint to a Justice of the Peace. It involves the request of an issue of a summons to the relevant person, in this case [B] (and this is what [B] says is crucial):

“…to appear before the court to show why he has not paid the sum which is outstanding.”

...that that can only mean, on any reading of the plain English, that he needs to be given an opportunity to explain why it is he has not been able to pay the sum for which he is liable.'

While labelled the first core submission, William Davis J described it as '...his first and crucial argument. It is that from which all his other arguments flow.' (paragraph 13)

In rebuttal, the Billing Authority submitted, at paragraphs 14 and 15, that:

'“Regulation 12 is concerned simply as a gateway to enforcement. It is not there to engage in any discussion as to means, or any other issue in relation to ability to pay. It is there in essence simply in order to allow the person concerned to indicate, if such be the case, that he has not been served with the demand or that he does not, as a matter of fact, occupy the property in relation to which the demand was issued. Once it is established that he is the person with the relevant interest in the property, and it has been established that he has not paid the relevant rates, the respondent says that is an end of it.”

That is what regulation 12 means.'

To bolster the Billing Authority's submission:

'Reliance is placed on a line of authority, in particular, a decision of this court by Burnett J (as he then was) in Secerno Ltd v Oxford Magistrates' Court [2011] EWHC 1009 (Admin). At paragraph 15 Burnett J (as he then was) said this:

“Regulation 12 of the 1989 Regulations deals with liability orders. Such orders are made by Magistrates' Courts. If a liability order is not satisfied a series of further steps to enforce payment (distress, imprisonment etc) is available. Regulation 12(5) is in these terms: [the judgment sets out regulation 12(5)] It is clear that the Magistrates' Court has no discretion in the making of a liability order. If it is satisfied that (a) the sum has become payable and (b) has not been paid then the order must be made. There is no dispute that the sums in question had not been paid by these claimants and so the question was whether the sums had become payable.”

It is argued by the respondent that that is the proper approach to regulation 12. Issues of ability to pay and other such matters will come to be considered at the enforcement process, where our attention has been pointed in particular at regulation 16. At the enforcement process the court will consider whether lack of payment has been due to wilful refusal or culpable neglect when assessing the nature of any enforcement to be imposed.' (paragraph 14) [bold added]

On this (first core) submission, the Divisional Court preferred the Billing Authority's submission. William Davis J said, at paragraph 16:

'We accept the argument of the [Billing Authority]. We concede that the language of regulation 12(2), taken in isolation and without considering the whole structure of liability orders might be taken to mean that, at the stage of the making of the liability order, extraneous issues in relation to ability to pay and other such matters shall be considered. That is wrong. Either someone is liable to pay non-domestic rates because of their position or status or they are not. In those circumstances, magistrates do no more than enquire whether the person concerned is by reason of his or her status liable to pay and, if so, whether they have paid.' [bold added]

(b) Second core submission: [B] was not, in fact, given an opportunity by the Magistrates Court, to explain why it is he has not been able to pay the sum for which he is liable

B contended that, at his hearing on 8.4.15, '...he had no opportunity given to him by the magistrates to explain his position once he had accepted the core issues in relation to liability.' (paragraph 17)

This issue was dealt with swiftly, given William Davis J's judgment that once it was established that a person was liable to pay Business Rates, and had not paid them, the Magistrates Court were compelled to impose the BRLO. There was no separate, interposing, discretionary stage in the Complaint procedure (within which, factors such as ability to pay, could be considered). On this submissions, William Davis J said, at paragraph 17:

'Since anything further that he could have said would have made absolutely no difference at all to the making of the liability order, it must follow that the magistrates were wholly entitled to take the view that they did and take the action that they did; namely to prevent [the ratepayer] from making further submissions on an issue which had no relevance to the matter they were considering.'

Case Stated Questions

The result of the above, is that the Divisional Court answered questions posed in the Case Stated, as follows, at paragraph 19:

Q1: 'once satisfied that the respondent was liable for the non domestic rates do we have jurisdiction to consider exceptional facts?'

A1: 'The answer to that question, for all the reasons I have given is “no”.'

Q2: 'was our legal adviser wrong to advise us not to consider the means of the respondent when the regulations state that we must make the liability order and that it must be for the full amount owing and costs?'

A2: 'Again, for reasons I have stated I am satisfied that the answer to that question is “no”'

(c) Human Rights Act 1998

The third of the Case Stated questions was:

Q3: 'does the Human Rights Act 1998 have any application in this case?'

A3: William Davis J gave a longer answer to this, distilling the points made, into one about receiving a fair hearing, and another about Article 1 of Protocol 1, and proportionality when someone is insolvent. At paragraph 19 to 23, he said:

'..The Human Rights Act will have application to actions carried out by the Magistrates' Court and indeed [the Billing Authority] Both are public authorities. Both owed duties under the Human Rights Act.

The question would perhaps better have been put as to whether in this case either the respondent [Billing Authority] or the Magistrates' Court or both acted in a manner incompatible with any of the [ratepayer's] Convention rights.

Article 6 of the Convention provides for the right to a fair trial in any criminal or civil proceedings. This court could engage in a discussion as to whether these proceedings were a determination of [the ratepayer's] civil rights and obligations. Such a discussion is unnecessary, in my view, for the disposal of this case. In this case the [ratepayer] did, as a matter of fact, have a fair hearing. On the issues that the magistrates had to consider he was heard. His answers meant that the magistrates were driven to a particular course. A fair hearing does not require any court to listen to irrelevancies.

There is a further argument put, if I may respectfully say so somewhat tentatively, in the [ratepayer's] written grounds. He argues that a demand for more than £40,000 from someone who is insolvent is not proportionate. There is a breach of Article 1 of the Protocol 1. He asked us to consider the fact that as an alternative to payment prison was, to use the vernacular, on the cards.

This Magistrates' Court was simply considering the making of a liability order. No more, no less. Proportionality simply at that stage did not enter the arena. Therefore whilst the bald answer to the third question is “yes”, in my view, the magistrates in this case had to do no more than exercise proper fairness in the circumstances of the case, which they did.'

Historic Authorities

Those interested in this area, might be interested to read of some older authorities:

(1) R v Handsley (1881) 7 QBD 398, wherein an order was mandamus was made against Justices, who issued a distress warrant for unpaid poor-rate in favour of overseers (equivolent to the Billing Authority), but directed their clerk to keep it in his possession for 3 months and not to cause the goods of the ratepayer be taken in execution until expiration of that time. The delay was so directed, because the ratepayer's wife had said to the justices, that: (a) her husband was unable to pay owing to his being ill and out of work;  but (b) she would be able to pay the rate within a month.

Field J said:

'The Rule must be absolute . The justices upon due application for a distress warrant are bound to grant it and place it at the disposition of the overseers. They themselves have nothing to do but to act ministerially as a kind of sheriff in the execution of the process. The case of Beg. v. Middlesex (1), referred to by my Brother Huddleston, seems to me a direct authority against the course taken by the justices. I think they had no jurisdiction to interpose any delay in the execution of the warrant.'

Huddleston B said:

'I also have no doubt that the mandamus must go. There can be no doubt that the justices act ministerially and not judicially. It is most important that these warrants should be put in force without delay, otherwise the ratepayers in default would remove their goods and go out of the parish, and thereby throw a heavier burden upon those who have not neglected their liabilities.'

(2) Hackney LBC v Izdebski [1988] R.V.R. 144 - Hardship is not a relevant factor in the payment of rates. The hardship of the ratepayer is not relevant when considering whether to issue a distress warrant.

Linked Irrelevant Consideration

A linked issue is whether the Magistrates Court can take into account that the inability to pay is caused by the wrongful denial of benefits. The answer again is that, these matters are legally irrelevant before the Magistrates Court, as there is no discretionary stage in the legal process, wherein, inabilty to pay - and the reasons for inability to pay (like the wrongful denial of benefits), can be taken into account by the Magistrates Court. In the analogous situation in Council Tax, in a case called R (on the application of Williams) v Pontefract Magistrates’ Court [2002] EWHC 1265 (Admin); [2002] RVR 259 ('Williams'), Ouseley J held that the Magistrates Court[2]:

(a) cannot take into account, when deciding whether to impose a liability order, that the inability to pay was caused by the wrongful denial of benefits (in Williams, council tax benefit); and further,

(b) would not treat someone unfairly, by not allowing evidence/submissions on this fact (that the benefits were wrongfully denied, and this was the cause of the inability to pay), to be made to them. Such evidence/submissions being irrelevant to the matters the Magistrates Court actually had to decide. In other words, a party in Magistrates Court has to show that the evidence/submissions they propose to raise before the Magistrates Court, are relevant to a decision the Magistrates Court has to make. Otherwise, the Magistrates Court can properly refuse to hear that evidence / those submissions.

Summary

Where, under reg.12(5) of the 1989 Regs, the Magistrates Court is satisfied that (a) the sum has become payable by the defendant/alleged ratepayer; and (b) has not been paid, the Magistrates Court must make a BRLO against the defendant/ratepayer. The 1989 Regs do not provide for an additional stage, between: (i) (a) and (b) being satisfied, and (ii) the imposition of the BRLO. In other words, there is no second stage, in particular, a discretionary stage, between (i) and (ii), wherein the Magistrates Court can (or must) consider issues/factors, such as the defendant/ratepayer's ability to pay and/or the defendant/ratepayer's solvency. Given there is no such stage in the Complaint procedure, it is therefore pointless for the Magistrates Court to hear submissions on such issues/factors, before imposing the BRLO. Such submissions would have no relevance to the matters the Magistrates Court are considering.

Issues of ability to pay and other such matters will, if at all, come to be considered at the enforcement process - the stage after the BRLO is made. For instance, if enforcement under reg.16 of the 1989 Regs is commenced, the court will consider whether lack of payment in satisfaction of the BRLO, has been due to wilful refusal or culpable neglect, or some other reason, when assessing whether to enforce under reg.16 of the 1989 Regs.

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