England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
ADMINISTRATIVE COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		18th February 2004

Mr Justice Lightman:

INTRODUCTION

1. This is an appeal by way of case stated by the appellant Regentford Limited ("Regentford") from the decision of the 20^th January 2003 ("the Decision") of the Thanet Justices ("the Justices") to make on the application of the respondent Thanet District Council ("the Council") liability orders against Regentford for payment of outstanding council tax in respect of two properties, 22 Surrey Road, Margate and 22-24 Ethelbert Road, Margate ("the Properties").
2. The question posed by the Justices for the Opinion of this court is whether the Justices were wrong in law or in excess of jurisdiction in making the liability orders "as the application included amounts due on the 22^nd February 1996 which is in excess of six years before the application for a liability". If and to the extent that the application in fact did include amounts due on the 22^nd February 1996, the Justices were wrong in law and in excess of jurisdiction. The Justices in the case stated held that it did so include such amounts. The real issue before me is whether they were correct in so holding, and in particular whether sums claimed as council tax in respect of the year 1.4.96 to 31.3.97 became due on the 22^nd February 1996 when the council tax was set or on the 2^nd October 2002 when a demand was made for their payment. The case stated requires amendment to raise this question rather than the question in fact raised. The answer to this question turns on the construction of the Local Government Finance Act 1992 ("the Act") and the Council Tax (Administration and Enforcement) Regulations 1992 ("the Regulations") which have not yet been the subject of judicial consideration.
3. References in this judgment to chapters and sections are to chapters and sections of the Act.

STATUTORY SCHEME

4. Chapter I is headed "Main Provisions". Section 1 of the Act provides that each billing authority (and the Council is such a billing authority) shall each financial year levy and collect council tax payable in respect of dwellings (defined in section 4 as domestic hereditaments) situated within its area. Section 2 provides that liability to pay council tax shall be determined on a daily basis. Section 4 provides that council tax is payable in respect of any dwelling which is not exempt. Section 5 provides that different amounts of council tax are payable in respect of dwellings in different valuation bands. Section 6 provides in a descending order of priority a list of persons liable to pay council tax in respect of a dwelling. At the top of the list is the resident freehold owner, followed by the resident leasehold owner holding a term of 6 months or more, followed by certain specified other residents, followed at the bottom of the list by non-resident freehold or leasehold owners. Section 8 and the Council Tax (Liability for Owners) Regulations 1992 together provide that the owner of property in multiple occupation may have primary liability for council tax, displacing the order in section 6. Section 16 provides for an appeal to a valuation tribunal by any person aggrieved by a decision that he is liable to pay council tax in respect of a dwelling (e.g. as owner of a property in multiple occupation).
5. Chapter 3 is headed "Setting of Council Tax". Section 30 provides for the setting each financial year of the amounts of council tax for each different category of dwelling. The amount set for each category does not set the amount for each person liable, for any person liable may be entitled to varying degrees of exemption and discount. Section 33 provides how the billing authority shall calculate the amount of its council tax. Section 36 provides for the calculation of council tax for the different valuation bands.
6. Schedule 2 provides for the collection of council tax. It empowers the Secretary of State to make regulations which may make provision: (a) that the authority must serve a notice or notices on the person liable to pay council tax stating the chargeable or estimated amount and what payment he is required to make; and (b) that no payment on account of the chargeable amount need be made unless a notice requires it (see paragraph 4(a) and (b)).
7. Schedule 4 provides for enforcement. Paragraph 1 provides that the Secretary of State may make regulations for the recovery of any sum which has become payable to the billing authority and unpaid. Paragraph 3 provides that the regulations may provide that the authority may apply to a magistrates court for a liability order against the person by whom the sum is payable, and the court shall make the order if it is satisfied that the sum has become payable by the person concerned and has not been paid. Paragraph 4 provides that the regulations may include provision prescribing steps to be taken before an application may be made and that no application may be made after a prescribed period has expired.
8. The Regulations were made pursuant to the provisions of the Act to which I have referred. Part V of the Regulations is headed "Billing". It commences with an interpretation regulation, namely regulation 17. Regulation 17(3) defines "chargeable amount" as meaning the amount the liable person is or will be liable to pay.
9. Regulation 18 requires a billing authority each financial year to serve a demand notice on every liable person in accordance with regulations 19 to 21. Regulation 19 provides that the demand notice is to be served on or as soon as practicable after the date the billing authority first sets an amount of council tax for the relevant year for the category of dwellings which include the chargeable dwelling to which the notice relates. Regulation 20(1) reads as follows:

"(1) If the demand notice is issued before or during the relevant year, the notice shall require the making of payments on account of [the billing authority's estimate of the chargeable amount.]"

10. Regulations 20(1)-(4), 21(7) and 22 make provision for demands for payment on account of council tax before and during the relevant year on the basis of estimates of the chargeable amount. Regulation 22 provides that no payment on account of the chargeable amount need be made unless a notice is served under Part V demanding it. Regulation 24 provides for adjustment where the chargeable amount proves to be greater or lesser than the estimate. Regulation 20(5) provides that, if the demand is issued after the end of the relevant year, it shall require payment of the chargeable amount.
11. Regulation 21 makes provision for payment by instalments and Regulation 23 lays down a regime applicable specifically and only to cases of default in payments of instalments.
12. Regulation 31 provides for final adjustments of the amounts stated in demands.
13. Regulation 32 provides that Regulations 33-53 shall apply for the recovery of a sum which has become payable to a billing authority under Part V of the Regulations. Regulation 33 requires as a preliminary to obtaining a liability order (save in case of default in payment of instalments in respect of which a separate regime is laid down in Regulation 23) that a final notice should be served and that a final notice may be served in respect of an amount "after it has become due". Regulation 34(3) provides that no application may be made for a liability order in respect of a sum after the period of six years beginning with the day on which it became due under Part V of the Regulations. Regulation 34(6) provides that the court shall make the liability order if it is satisfied that the sum has become payable by the defendant and has not been paid.

FACTS

14. Regentford has at all material times been the registered proprietor of the freehold title to the Properties. The Statement of Case sets out the relevant facts:

"1. On 20.1.03 the Respondent made applications under Reg. 34 Council Tax (Administration and Enforcement) Regulations 1992 (the 'said regulations') for liability Orders as follows:

…

22 Surrey Road, Margate

Period – 1.4.96 to 31.3.97 £367.88

Period – 1.4.97 to 31.3. 98 £324.72

Period – 1.4.98 to 31.3.99 £356.96

Period – 1.4.99 to 31.3.00 £386.18

Period – 1.4.00 to 31.3.01 £418.35

Period – 1.4.01 to 31.3.02 £444.24

Period – 1.4.02 to 31.3.03 £490.37

22-24 Ethelbert Road, Margate

Period – 1.4.96 to 31.3.97 £438.52

Period – 1.4.97 to 31.3. 98 £396.88

Period – 1.4.98 to 31.3.99 £436.28

Period – 1.4.99 to 31.3.00 £472.00

Period – 1.4.00 to 31.3.01 £511.32

Period – 1.4.01 to 31.3.02 £542.96

Period – 1.4.02 to 31.3.03 £599.34

These figures include costs.

The Appellants did not attend the hearing and the court made liability Orders as requested in respect of the above premises for the amounts shown.

2. The question of law on which the opinion of the High Court is sought is:

Whether the Justices were wrong in law or in excess of jurisdiction in making liability orders in respect of 22-24 Ethelbert Road, Margate and 22 Surrey Road, Margate as the application included amounts due on 22.2.96 [the date on which the Council set the amount of council tax for the year 1.4.96 to 31.3.97] which is in excess of six years before the application for a liability order.

3. We agree that we were wrong in law and acted in excess of jurisdiction ….

The Respondent contends that the amounts did not become due under Part V of the Council Tax (Administration and Enforcement) Regulations 1992 until demand notices were served on 2.10.02.

However, Reg. 19 of the said regulations clearly states the demand notice is to be served on or as soon as practicable after the day the billing authority first sets an amount of council tax for the relevant year (Reg. 17 of the said regulations provide that the relevant year is the financial year to which the notice relates)."

LEGAL ISSUES

I. Date that Council Tax became due

15. The issue between the parties is as to the date when Regentford became duty bound to pay the council tax for the year 1.4.96 to 31.3.97. Mr Fairbank for Regentford has submitted that the duty arose as soon as the Council exercised its power under section 30 to set an amount of council tax and the amount of council tax of each category of dwelling. Accordingly there was a debt due from Regentford in on the 22^nd February 1996 when that year's council tax was set for the Properties. The legislation throughout speaks of a liability for council tax arising from that date and Regulation 19 requires service of a demand notice as soon as practicable thereafter. On the other hand Mr Mould for the Council has submitted the whole scheme of the legislation is to draw a distinction between liability to council tax in the sense of exposure to a possible duty to pay council tax and an actual duty to pay council tax, and that the potential liability can only be triggered into an actual duty to pay by service of a demand for payment.
16. In my judgment Mr Mould is correct. The liability to pay council tax requires for its transformation into a duty to pay a demand by the billing authority. This is reflected in Regulation 18(1) (made pursuant to Schedule 2 paragraph 2(4)(a) of the Act) which requires a billing authority in each financial year to serve demand notices on every liable person in accordance with Regulations 19 to 21. Regulation 22 in no way detracts from this general proposition. It merely spells out that no payment on account of the chargeable amount need be made unless a demand notice is served under Regulation 20(1) requiring such a payment on account. The service of the demand notices make the amount of the liability demanded a sum which is due and payable, the necessary preclude to a final notice under Regulation 33(2) and the commencement of the 6 year limitation period under Regulation 34(3).
17. There is an analogy between liability for council tax and the liability (in the ordinary case) of a guarantor who is at all times exposed to a potential duty to discharge the guaranteed obligation, but a duty which is only triggered when a demand is made of him and the limitation period commences at that date.
18. I therefore hold that duty to pay council tax only arose on the 2^nd October 2002 when the demand was served and accordingly the full six years' council tax was due when the liability orders were made. In these circumstances the Justices had power to make them and that they are valid and enforceable. The case stated should be amended to reflect the real question to which this is the answer.

II. Non-compliance with Regulation 18(1) and 19

19. Regulations 18 and 19 lay down on billing authorities each financial year an obligation to serve a demand notice on every person liable "on or as soon as practicable after the day the billing authority first sets an amount of council tax for the relevant year for the category of dwellings which includes the chargeable dwelling to which the notice relates". This statutory duty is imposed at least in substantial part for the protection of those from whom the billing authority may seek payment of the council tax. The notice is required to enable the recipient to know that a claim may be made for payment and accordingly to take immediate steps to prepare and assemble any necessary evidence to establish that there is no duty to pay (e.g. to prove that the property was or was not in multiple occupation or that someone else was in residence) and to arrange his finances to make payment.
20. Regulation 5(1) of the Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 1989 SI No 1058 provided that a demand notice must be served "on or so soon as practicable … after the 1^st April in the relevant year". In Encon Insulation Ltd v. Nottingham City Council [1999] RA 382 Mr David Pannick QC (sitting as a High Court Judge) held that a default by the council in taking the practicable steps available to them precluded any recovery. In the last two paragraphs of his judgment he said:

"I am therefore satisfied that the magistrates failed to ask themselves the right question whether there were practicable steps which the billing authority could and should have taken at an earlier stage than November 1997 to locate the relevant premises. I am also satisfied that had the magistrates asked themselves the right question, the only answer to which they could reasonably have come was to find that there had been a breach of para 5(1) (a) of the regulations and so a liability order could not lawfully be made.

I should mention that the magistrates noted that they did not need to decide whether the requirement imposed by reg 5 (1) was mandatory. Counsel for the billing authority has not advanced any argument seeking to limit the consequences of there being a breach of reg 5 (1). That does not surprise me. Regulation 5 (1) contains a balance between the interests of the ratepayers and the practicalities of administration. Parliament must have intended that if the billing authority has not complied with the requirement it would be wrong in principle for the ratepayer to have an obligation thereafter to pay."

21. The language of Regulation 19 is not as strong as that of the regulation under consideration in that case. The words used are "is to be" rather than "must be". As it seems to me this language admits of the construction that a breach of this statutory duty by a billing authority does not operate in all cases as a windfall to the person liable, but precludes a claim to payment and a duty to pay only when the breach has occasioned some procedural or substantive prejudice.
22. Regentford claim that the Council failed to serve the demand notice as soon as practicable, and that the delay in this case has occasioned prejudice in the sense that the records and information to establish that the Properties were not in multiple occupation and that others were resident at the relevant time are no longer available. There might well have been force in those submissions if Regentford had attended the hearing before the Justices and presented them. But it allowed the proceedings to go by default. They had the opportunity to have their day in court but did not avail themselves of it.
23. In the circumstances I must and do refuse the application by Regentford to remit the case to the Justices for re-determination to enable this new defence to be raised: see LCC v. Farren [1956] 1 WLR 1297.

CONCLUSION

24. I accordingly answer the amended question in the case stated that the council tax became due when demanded on the 2^nd October 2002 (and not before) and that accordingly the Justices had jurisdiction to make the liability orders.