To what extent does the new Pre-Action Protocol apply to the enforcement of council tax liabilities?

Posted by Sophia Farmer on
On 1 October 2017 a new Pre-Action Protocol for Debt claims ("PAP") comes into force.  We therefore expect to see councils taking steps in the forthcoming months to significantly overhaul their current debt recovery processes to ensure compliance with the PAP.

The purpose of pre-action protocols generally is to outline the steps to be taken by parties prior to issuing proceedings. Previously, there was no specific protocol for debt recovery proceedings. Instead, parties were expected to comply with the general provisions contained in the Practice Direction for Pre-Action Conduct 2009.

The new PAP lays out an amended procedure for claiming debts from individuals. This includes: (i) providing the debtor with additional information regarding the debt; and (ii) encouraging the creditor to accept payment in instalments based on an assessment of the debtor's finances.

It is anticipated that the PAP will significantly slow down the rate at which council tax is recovered, especially the more problematic cases.

What effect does the PAP have on pre-action conduct?

Below is an overview of the steps which the council will now have to take before issuing proceedings:

 In essence, the council (also referred to as the creditor here) must now comply with the following steps before issuing court proceedings:

  • The debtor has 30 days to respond to the Letter Before Action (previously 14 days).
  • The creditor cannot commence proceedings until, the earliest, 30 days from receipt of the completed Reply Form.
  • If the debtor indicates that they are seeking debt advice, the creditor must allow the debtor a reasonable period for the advice to be obtained.
  • Where a debtor indicates in the Reply Form that they require time to pay, the creditor should try to reach agreement with the debtor for the debt to be paid by instalments, based on the debtor’s income and expenditure (using the Financial Statement form to determine affordability).
  • If the debtor provides a partially completed Reply Form, the creditor should attempt to contact the debtor to discuss the Reply Form and obtain any further information needed to understand the debtor’s position.
  • In any event, where the debtor has responded to the Letter Before Action but agreement has not been reached, the creditor should give the debtor at least 14 days’ notice of their intention to start proceedings.

To what extent does the PAP apply to the enforcement of council tax liabilities?

The relevant rules concerning the enforcement of outstanding council tax are primarily contained within Schedule 4 of the Local Government Finance Act 1992 (the "LGFA 1992") and the Council Tax (Administration and Enforcement) Regulations 1992 (the "Regulations").

The PAP is intended to apply to all proceedings which are subject to the Civil Procedure Rules 1998 (the "CPR"). By application of s.1 of the Civil Procedure Act 1997, the CPR governs the practice and procedure to be followed in the civil courts.

Despite the civil nature of the proceedings, the CPR is not directly applicable to claims under the LGFA 1992 and the Regulations, such claims being commenced in the Magistrates Courts instead. Further, the PAP doesn't technically apply in the context of Liability Orders obtained pursuant to the Regulations, where no Letter Before Action is required.

Notwithstanding the above, the PAP will be relevant to any bankruptcy proceedings issued by councils against debtors after obtaining a Liability Order. In particular, rule 12.1(1) Insolvency Rules 2016 provides: “The provisions of the CPR (including any related Practice Directions) apply for the purposes of proceedings under Parts 1 to 11 of the Act with any necessary modifications, except so far as disapplied by or inconsistent with these Rules."

Further, rule 12.41 Insolvency Rules 2016 provides that CPR Parts 44(b) and 47(c) shall apply to insolvency proceedings. Accordingly, the Court in any bankruptcy proceedings issued by councils will have regard to the conduct of the parties both before and during the proceedings (44.3(4)(a) & (5)) including the compliance with any Pre-action Protocols (i.e. the PAP).

The council should also pay particular attention to the Local Government Ombudsman's ("LGO's") guidance which requires councils to ensure that they have a suitable debt recovery policy in place.

To what extent should council's ensure compliance with the PAP?

We are of the view that it is good practice for the council to comply with the PAP, and it will assist the council by ensuring that it has acted reasonably and proportionately when recovering council tax. If the council fails to comply with the PAP there is a risk of possible criticism and/or adverse costs orders in any bankruptcy proceeding.

Should you have any questions regarding the PAP, or for specific advice on how to amend your organisations internal debt recovery processes the Business Support and Insolvency Team at Blake Morgan LLP have extensive experience of dealing with recovery cases and offer a fully funded bankruptcy service to City Councils and local authorities. If you'd like to discuss a specific issue or case please contact Paul Caldicott or Sophia Farmer. 

About the Authors

Sophia specialises in all aspects of insolvencies and recoveries within our Business Support and Insolvency team.

Sophia Farmer
Email Sophia
029 2068 6184

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Paul is a specialist corporate restructuring and insolvency Solicitor in our Business Support & Insolvency team based in Cardiff.

Paul Caldicott
Email Paul
029 2068 6181

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