England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT

		Royal Courts of Justice Strand London WC2A 2LL
		5th November 2008

1. THE DEPUTY JUDGE: This is an appeal by way of Case Stated by District Judge Morgan sitting in Telford Magistrates Court on 22nd May 2007. The District Judge decided on the application of Telford and Wrekin Borough Council, the respondent to this appeal, to make a liability order in respect of non-payment of national non-domestic rates for the period 9th January 2006 to 31st March 2006, arising out of the occupation by the appellants, JJB Sports Plc, of a new leisure centre at the Forge Retail Park, Telford.
2. The relevant demand notice was served later than was practicable. The issue before me is whether that means that the appellant escapes liability for the rates altogether, for the relevant period. I should add that there was a demand for a later year, which arose at the same time, in respect of which no issue now arises.
3. The facts are set out with commendable clarity and brevity in the case stated. The District Judge found as follows, observing that the matters to which he referred were in large part common ground:

"1. An information was preferred by the Respondent [the local authority] against the Appellant seeking a liability order in respect of the non-payment of National Non-Domestic Rates ('NNDR') for the period 09.01.2006 to 31.03.2006 arising out of the occupation of a leisure and health centre at... the Forge Retail Park...

2. The premises were a new building completed in December 2005, entered into the Rating List as from 14.12.2005 and occupied by the Respondent on 09.01.2006.

3. On 10.03.2005 the Respondent issued a demand for NNDR to the Appellant in the form of a 'multi-bill' (i.e. one sheet of paper covering NNDR liability for more tha[n] one year). The multi-bill covered the Appellant's occupation of the premises from 09.01.2006 to the end of the rating year and for the following rating year i.e. 01.04.2006-31.03.2007. It was in the sum of £230,914.90.

4. When such demand was unpaid, the Respondent laid an information and issued a summons in respect of it.

5. Regulation 4 [of the] Non Domestic Rating (Collection and Enforcement)(Local Lists) Regulations 1989 ('the Regulations') provides that different demand notices shall be served for different chargeable years.

6. By fax dated 02.06.2006 the Appellant contended that the demand was unenforceable due to its non-compliance with Reg. 4 of the Regulations. On 05.06.2006 the Respondent withdrew the summons and issued two separate demands in the correct format.

7. The Appellant the[n] contended that the Respondent had failed to comply with Reg. 5 of the Regulations, which provides that demands should be issued 'as soon as practicable...' And that it was entitled not to pay the demands. By the time of the hearing this issue was limited to the demand for NNDR for the first period of the Appellant's occupation i.e. from 09.01.2006 to 31.03.2006.

8. The issues before me were thus:

(a) Whether the demand for NNDR for the period 09.01.2006 to 31/03/2006 complied with Reg. 5 of the Regulations.

(b) If it did not, then whether the Appellant is nonetheless liable to pay the same."

The District Judge then set out the names of the witnesses from whom he had heard oral evidence, referred to the submissions from counsel and the statutes and Regulations. He continued:

"10.I decided that the demand for NNDR for the period 09.01.2006 to 31.03.2006 did not comply with Reg. 5 of the Regulations. The demand was issued on 05.06.2006 but could have been issued on 10.04.2006 (some 56 days later earlier) when the Respondent issued the multi-bill. I noted that the Respondent had for many years regarded its own multi-bill demands as unlawful but that it nonetheless issued some 400 each year and had, unless challenged, sued on them without informing either the rate-payer [or] the court of the fact that the demands were defective. I categorised the Respondent's conduct as showing contempt for Parliament's rules and regulations and an abuse of the court process. I consider that it was disgraceful.

11. I held that nonetheless the Respondent was liable to pay the NNDR for the period 09.01.2006 to 31.03.2006. I determined that the Appellant had not suffered prejudice (none was advanced) and that whilst Parliament intended Reg. 5 to be complied with, it did not inten[d] that failure to comply mean[t] that the demand was totally invalid.

12. For these reasons I made the liability order sought by the Respondent."

The District Judge referred to his detailed reasoning as set out in a longer, written decision, which he attached to the stated case.

4. The question he certified for the opinion of the High Court was whether the respondent, the local authority, is entitled to enforce a demand for NNDR that was not served as soon as practicable, as required by Regulation 5, being some 56 days later, and when the reason for such a delay was that the respondent chose first to serve a demand that it knew did not comply with such Regulations.
5. With that introduction of the facts found by the District Judge, I turn to the statutory scheme. National non-domestic rates are levied under the Local Government Finance Act 1988. Part III, headed "Non-domestic rating", contains, so far as relevant, section 43, referring to liability in respect of occupied hereditaments. This case concerns liability under section 43(1); other liabilities apply to other ratepayers in other circumstances.
6. Section 69 of the same Act gives effect to Schedule 9, headed "Non-Domestic Rating: Administration", which contains some comparatively detailed provisions empowering the Secretary of State to make regulations. Paragraph 1 of the Schedule empowers the Secretary of State to make regulations containing such provision as he sees fit in relation to the collection and recovery of amounts persons are liable to pay under, inter alia, section 43.
7. Paragraph 2(2) of Schedule 9 provides that regulations made under this schedule may include provision as follows:

"(e) that the payee [here the rating authority] must serve a notice or notices on the ratepayer stating the amount payable or its estimated amount and what payment or payments he is required to make (by way of instalment or otherwise),

(f) that no payment on account of the amount payable need be made unless a notice requires it,

(g) that a notice must be in a prescribed form,

(ga) that a notice must contain prescribed matters,

(gb) that a notice must not contain other prescribed matters,

(gc) that where a notice is invalid because it does not comply with regulations under paragraph (g) or (ga) above, and the circumstance[s] are such as may be prescribed, a requirement contained in the notice by virtue of regulations under paragraph (e) or (f) above shall nevertheless have effect as if the notice were valid..."

8. The relevant Regulations made under Schedule 9 are (as amended) the Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 1989, SI 1989/1058 ("the Collection Regulations"). They provide in "Part II: Billing", Regulation 3(1), that a demand notice in Part II of the Regulations means the notice required to be served by Regulation 4(1). Regulation 4 provides:

"The requirement for demand notices

(1) For each chargeable financial year a billing authority shall, in accordance with regulations 5 to 7, serve a notice in writing on every person who is a ratepayer of the authority in relation to the year.

(2) Different demand notices shall be served for different chargeable financial years.

(3) A demand notice shall be served with respect to the amount payable for every hereditament as regards which a person is a ratepayer of the authority, though a single notice may relate to the amount payable with respect to more than one such hereditament."

9. Regulation 5(1) provides:

"Service of demand notices

(1) Subject to paragraph (2), a demand notice shall be served on or as soon as practicable after-

(a) except in a case falling within sub-paragraph (b), 1st April in the relevant year, or

(b) if the conditions mentioned in section 43(1)... of the Act are not fulfilled in respect of that day as regards the ratepayer and the hereditament concerned, the first day after that day in respect of which such conditions are fulfilled as regards them."

Regulation 7(6) provides:

"No payment in respect of the amount payable by a ratepayer in relation to a hereditament for any chargeable financial year... need be made unless a notice served under this Part requires it."

10. Part III of the Regulations contains provisions for enforcement by the making of a liability order by a Magistrates' Court. No point is taken in this case as to the further procedural requirements necessary in such a case.
11. The Council Tax and Non-Domestic Rating (Demand Notices) (England) Regulations 2003, SI 2003/2613 make detailed provision as to the content of demand notices (see Regulation 3 and Schedule 1) and provide by Regulation 4, here echoing the enabling provision in Schedule 9 of the 1988 Act, to which I have already referred, that:

4. - (2) Where -

(a) a rate demand notice is invalid because it does not comply with sub-paragraph (a) of paragraph (3) of regulation 3, or as the case may be, sub-paragraph (b) or (c) of that paragraph;

(b) the failure to comply was due to a mistake; and

(c) the amounts required to be paid under the notice were demanded in accordance with Part 2 of the Collection Regulations;

The requirement to pay those amounts shall apply as if the notice were valid.

(3) Where a requirement to pay an amount under an invalid notice subsists by virtue of paragraph (1) or (2), the billing authority shall as soon as practicable after the mistake is discovered issue to the liable person or ratepayer concerned a statement of the matters which were not contained in the notice and which should have been so contained."

12. The reference in Regulation 4(2) to the detailed subparagraphs of Regulation 3 is a reference to the detailed matters which must be contained in the demand notice.
13. Accordingly, the structure of this statutory scheme is that demand notices must be served by the relevant authority separately for each year. They can relate to more than one hereditament, but what have been conveniently described in this case as "multi-bills", that is to say one bill demanding payment of the liability relating to more than one financial year, are not within the Regulations. The notices must contain prescribed details and if, by mistake, they do not, but the relevant amounts have nonetheless been demanded under Part II of the Collection Regulations, the validity of the notice is preserved by Regulation 4 of the 2003 Regulations, subject to the billing authority providing any permitted information as soon as practicable.
14. In-built into this scheme is the obligation on the part of the billing authority to serve the demand notices as soon as practicable. That obligation, expressed in mandatory terms by use of the world "shall", is to be found in Regulation 5(1) of the Collection Regulations.
15. There is no doubt that this obligation was breached because, as the District Judge found, the authority was following the practice of issuing multi-bill demands which it knew to be unlawful. Once challenged, as it was by the appellants on 2nd June 2006, the authority immediately and inevitably backed down and issued demand notices which complied, save as to time of service, with the Regulations.
16. I record that the circumstance in which the authority found itself appears to have been brought about by its use, over a very prolonged period, of software which would not permit them, without what they regarded as unacceptable expense, to issue demand notices in correct form.
17. The District Judge held that the appellant was nonetheless liable to pay the rates for the disputed period. No prejudice was alleged by the appellants and inevitably none was found by the District Judge to have existed. As he set out in the Case, his view was that, while Parliament had intended Regulation 5(1) to be complied with, Parliament did not intend that failure to comply with the stipulations as to time meant that the demand was totally invalid.
18. On behalf of the appellant, it is submitted today that Regulation 4 creates a duty, emphasised by the mandatory term "shall". The duty is not only to serve the demand notice, Regulation 4(1), but to serve it in accordance with Regulation 5. The provisions of the 2003 Regulations, which I have mentioned, show that a notice may be invalid for want of form and Parliament has made express provision, where Parliament intended to preserve the right to levy the rates, in circumstances where the demand notice was not, by mistake, in the proper form.
19. The respondent authority supports the decision of the District Judge, essentially for the reasons he gave, making some fairly obvious points about the effect on public finance.
20. The modern starting point for consideration of what result should follow from a failure to comply with an obligation expressed in mandatory terms, but without any expression of what result should follow from a failure to comply with it, is the decision in the House of Lords in R v Soneji and Another [2006] 1 AC 340. That case concerned provisions of the Criminal Justice Act 1988 (as amended), dealing with the proceeds of crime. I do not need to address the particular difficulty which arose in that case. At 349A Lord Steyn said this:

"14 A recurrent theme in the drafting of statutes is that Parliament casts its commands in imperative form without expressly spelling out the consequences of a failure to comply. It has been the source of a great deal of litigation. In the course of the last 130 years a distinction evolved between mandatory and directory requirements. The view was taken that where the requirement is mandatory, a failure to comply with it invalidates the act in question. Where it is merely directory, a failure to comply does not invalidate what follows. There were refinements. For example, a distinction was made between two types of directory requirements, namely (1) requirements of a purely regulatory character where a failure to comply would never invalidate the act, and (2) requirements where a failure to comply would not invalidate an act provided that there was substantial compliance. A brief review of the earlier case law is to be found in Wang v Comr of Inland Revenue [1994] 1 WLR 1286, 1294d - 1295h.

VII. A new perspective

15 In London & Clydeside Estates Ltd v Aberdeen District Council [1980] 1 WLR 182, 189E-190C Lord Hailsham of St Marylebone LC put forward a different legal analysis:

'When Parliament lays down a statutory requirement for the exercise of legal authority it expects its authority to be obeyed down to the minutest detail. But what the courts have to decide in a particular case is the legal consequence of non-compliance on the rights of the subject viewed in the light of a concrete state of facts and a continuing chain of events. It may be that what the courts are faced with is not so much a stark choice of alternatives but a spectrum of possibilities in which one compartment or description fades gradually into another. At one end of this spectrum there may be cases in which a fundamental obligation may have been so outrageously and flagrantly ignored or defied that the subject may safely ignore what has been done and treat it as having no legal consequences upon himself. In such a case if the defaulting authority seeks to rely on its action it may be that the subject is entitled to use the defect in procedure simply as a shield or defence without having taken any positive action of his own. At the other end of the spectrum the defect in procedure may be so nugatory or trivial that the authority can safely proceed without remedial action, confident that, if the subject is so misguided as to rely on the fault, the courts will decline to listen to his complaint. But in a very great number of cases, it may be in a majority of them, it may be necessary for a subject, in order to safeguard himself, to go to the court for declaration of his rights, the grant of which may well be discretionary, and by the like token it may be wise for an authority (as it certainly would have been here) to do everything in its power to remedy the fault in its procedure so as not to deprive the subject of his due or themselves of their power to act. In such cases, though language like "mandatory," "directory," "void," "voidable," "nullity," and so forth may be helpful in argument, it may be misleading in effect if relied on to show that the courts, in deciding the consequences of a defect in the exercise of power, are necessarily bound to fit the facts of a particular case and a developing chain of events into rigid legal categories or to stretch or cramp them on a bed of Procrustes invented by lawyers for the purposes of convenient exposition. As I have said, the case does not really arise here, since we are in the presence of total non-compliance with a requirement which I have held to be mandatory. Nevertheless I do not wish to be understood in the field of administrative law and in the domain where the courts apply a supervisory jurisdiction over the acts of subordinate authority purporting to exercise statutory powers, to encourage the use of rigid legal classifications. The jurisdiction is inherently discretionary and the court is frequently in the presence of differences of degree which merge almost imperceptibly into differences of kind.'

This was an important and influential dictum. It led to the adoption of a more flexible approach of focusing intensely on the consequences of non-compliance, and posing the question, taking into account those consequences, whether Parliament intended the outcome to be total invalidity. In framing the question in this way it is necessary to have regard to the fact that Parliament ex hypothesi did not consider the point of the ultimate outcome. Inevitably one must be considering objectively what intention should be imputed to Parliament."

21. Lords Brown of Eaton-under-Heywood and Carswell expressly agreed with Lord Steyn's speech in Soneji, Lord Rodger impliedly did so and Lord Cullen of Whitekirk delivered a speech to similar, though briefer, effect.
22. In my judgment, and subject to observations which I shall make shortly on the other authorities, that approach of focussing intently on the consequence of non-compliance, and posing the question, taking into account those consequences, whether Parliament intended the outcome to be total invalidity, should inform and govern the analysis in this case.
23. In the light of that guidance of the highest authority, I consider that the other authorities cited to me, while of interest as showing how the thinking of the courts has developed, can scarcely be regarded as determinative of the question before me. I can, accordingly, mention them briefly.
24. In factual terms, the nearest of the authorities which have been cited to me to the present case is the decision of Mr David Pannick QC (sitting as a Deputy High Court Judge) in Encon Insulation Limited v Nottingham City Council [1999] RA 382. The issue before the Deputy Judge was whether a demand notice, under the 1989 Regulations with which we are concerned, had been served as soon as practicable. The facts were different and nothing in this case turns on the decision in that one. However, at the end of his judgment Mr Pannick said this:

"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 paragraph 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 Regulation 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 Regulation 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."

25. The case before Mr Pannick involved Regulation 5(1)(a), that is to say liability on a rolling, year-to-year basis and a trigger date of 1st April, whereas this case arises in respect of Regulation 5(1)(b), where certain conditions as to liability became fulfilled on a particular date. Nothing turns upon that technical distinction.
26. Mr Pannick's decision proceeded on the basis of an assumption by those involved in it, in effect a concession by the billing authority, that once it was found that the demand notice had not been served as soon as practicable so as to comply with Regulation 5(1)(a), no liability order could be made. No argument was addressed to the Deputy Judge on that point.
27. The decision in Encon was further considered by Lightman J in Regentford Limited v Thanet District Council [2004] EWHC 246 (Admin). In that case, which concerned council tax rather NNDR, the learned Judge distinguished Mr Pannick's approach in Encon on the wording of the Regulations. He relied on the difference in the words used in the relevant regulation in that case. The words were "is to be" in contrast to the use in Regulation 5(1) of the words "shall be". To my mind the difference is, with respect to Lightman J, rather slight. I might add that His Lordship appears accidentally to have misquoted the words of the Regulation which was actually in issue in Encon, stating that it said "must be" rather than "shall be". Slight or not, in that case Lightman J held that a breach of the statutory duty by the billing authority to serve the notice as soon as practicable does not operate in all cases as a windfall to the person otherwise liable, but the breach precludes a claim to payment and a duty to pay only where the breach has occasioned, as his Lordship put it in paragraph 21 of the judgment, "some procedural or substantive prejudice".
28. I should also mention Petch v Gurney [1994] STC 689, a decision of the Court of Appeal. That case concerned the time limit for commencing an appeal by way of Case Stated in tax proceedings in the High Court. It was governed by the Taxes Management Act 1970, section 56(4). Millett LJ analysed the position by reference to the traditional dichotomy, at any rate before Soneji, of directory or mandatory provisions, saying:

"The question whether strict compliance with a statutory requirement is necessary has arisen again and again in the cases. The question is not whether the requirement should be complied with; of course it should: the question is what consequences should attend a failure to comply. The difficulty arises from the common practice of the legislature of stating that something 'shall' be done (which means that it 'must' be done) without stating what are to be the consequences if it is not done. The Court has dealt with the problem by devising a distinction between those requirements which are said to be 'mandatory' (or 'imperative' or 'obligatory') and those which are said to be merely 'directory' (a curious use of the word which in this context is taken as equivalent to 'permissive'). Where the requirement is mandatory, it must be strictly complied with; failure to comply invalidates everything that follows. Where it is merely directory, it should still be complied with, and there may be sanctions for disobedience; but failure to comply does not invalidate what follows."

29. A little later in his judgment His Lordship went on:

"The taxpayer's argument, therefore, comes to this: that the requirement that the Case Stated be transmitted to the High Court is mandatory; but the requirement that this be done within thirty days is not.

This is not an easy proposition to accept. Where statute requires an act to be done in a particular manner, it may be possible to regard the requirement that the act be done as mandatory but the requirement that it be done in a particular manner as merely directory. In such a case the statutory requirement can be treated as substantially complied with if the act is done in a manner which is not less satisfactory having regard to the purpose of the legislature in imposing the requirement. But that is not the case with a stipulation as to time. If the only time limit which is prescribed is not obligatory, there is no time limit at all. Doing an act late is not the equivalent of doing it in time...

This probably cannot be laid down as a universal rule, but in my judgment it must be the normal one. Unless the Court is given a power to extend the time, or some other and final mandatory time limit can be spelled out of the statute, a time limit cannot be relaxed without being dispensed with altogether; and it cannot be dispensed with altogether unless the substantive requirement itself can be dispensed with."

He then goes on to deal with the particular provision in question.

30. I do not doubt that in the jurisdictional context in which Petch was decided, which raised the question whether a would-be appellant in tax proceedings had succeeded in clothing the High Court with jurisdiction to hear the appeal at all, the decision would be the same today with the benefit of the decision of the House of Lords in Soneji. I do not, however, consider that the observations of Millett LJ which I have quoted provide a guide of general application since Soneji. Indeed, at the date on which His Lordship's observations were made, Millett LJ himself said that they could probably not be laid down as a universal rule.
31. I turn to consider the time limit in the present case under the Regulations. It is not a fixed time. To that extent, it may immediately be contrasted with the time limit in Petch v Gurney and many other time limits. It is governed by considerations of practicability. The ratepayer himself will not know, and will in the ordinary case have no means of finding out, what those considerations of practicability are. He will not know the internal workings of the rating authority, its manpower, its funding or its organisation.
32. It would, in my judgment, be highly unsatisfactory for the citizen's liability to pay a tax, or not to pay it, to depend on the administrative details of the organisation of the rating authority in circumstances where the citizen himself cannot find out what the position is.
33. Mr Hamlin for the appellant in this case has sought to persuade me that seriousness of the breach in this case, as it was characterised by the District Judge, could allow the court to take a serious view. A demand served equally late, but for a less egregious reason, might not, he submits, have disentitled the authority from collecting the rates. I reject this approach. The authority here is seeking to rely on a late notice; it is not seeking to rely on the earlier notices, which were wholly defective.
34. The District Judge described reliance on those notices as having been disgraceful, but that description cannot fairly be attached to the notices on which the authority seeks now to rely.
35. Very importantly, particularly, in my judgment, in the light of Soneji, there is no prejudice alleged or found. The appellant knew, on receipt of the original but defective notices, the amount of money which was being demanded. It is true that the appellant could not check the amount in respect of the period with which we are now concerned, because certain calculation information was missing from the document and that was a breach of the Regulations, but insofar as it is appropriate to look at the later 2003 Regulations at all, they indicate that it was not Parliament's intention that absence of information by itself should allow a ratepayer to escape liability, at any rate in circumstances where the absence of information was due to a mistake.
36. I emphasise that this is a case where the appellant claimed and suffered no prejudice from late service of the notice. In a case where there is prejudice, the position may be different. Like Walker J in Hardy and Sefton Metropolitan Borough Council [2006] EWHC (Admin) 1928, I am prepared to assume, without in any way deciding, that a Magistrates' Court which is invited to make a liability order may be entitled to refuse to make such an order in a case where there has been a serious breach of the mandatory provisions of the Collection Regulations which has caused prejudice to the ratepayer.
37. It may also be possible to envisage a case where the decision of a rating authority to proceed with enforcement may, in the light of its own breaches of the Regulations, and consequent prejudice to the ratepayer, be so unfair as to call for the intervention of the court on judicial review.
38. I merely recognise the possibility that such cases may arise. This case, however, is not one of them.
39. Accordingly, in my judgment, the authority was not prevented by reason of serving the demand notice 56 days late from proceeding to seek a liability order enforcing payment of the relevant sum of £41,477.40. In my judgment the District Judge was entitled and right to make the liability order and I dismiss the appeal.
40. I answer the question posed by the District Judge at the conclusion of the Case Stated in the affirmative.
41. MR READINGS: If it pleases your Lordship, I apply for costs.
42. THE DEPUTY JUDGE: Yes.
43. MR READINGS: Do you have a schedule of costs?
44. THE DEPUTY JUDGE: Yes, I have seen that.
45. MR READINGS: The total is £5,000-odd. The amount is remarkably modest. I do not know what my learned friend's attitude is.
46. MR HAMLIN: Certainly the hourly rate is modest. The only comment we make that really calls for something of an explanation is why, in a case of this nature -- this is the very first line of the schedule -- attendance on clients is 6 hours in circumstances where one would have expected all that is required is, "Shall we go ahead and resist this?" Answer "yes". The rest, no comment.
47. MR READINGS: I am told there were a lot of internal meetings.
48. MR HAMLIN: Well, there is no need for them and we should not pay for them. My Lord, other than that, the £330, we are quite content with the bill.
49. THE DEPUTY JUDGE: I award costs in favour of the local authority in the full amount claimed, that is to say £5,213.
50. MR READINGS: I am obliged.
51. MR HAMLIN: My Lord, we both looked at the White Book and it seems, since the Bowman reforms, only the Court of Appeal can give permission, should my clients wish to seek it.
52. THE DEPUTY JUDGE: Because it is a second appeal?
53. MR HAMLIN: Because it is a second appeal.
54. THE DEPUTY JUDGE: Thank you both very much indeed.
55. MR HAMLIN: We are obliged to your Lordship for sitting late to deal with the matter.