Applications for a liability order enforcing CIL

January 10, 2025

Christopher Cant looks at the procedure for enforcing outsdanding Community Infrastructure Levy (CIL) liabilities.

There is currently an increased focus on enforcing outstanding CIL liabilities. There are probably a number of reasons for this. With the passage of time more developments may have hit problems. Covid adversely impacted some student accommodation and office developments. The sharp increase in the cost of building materials has had a real impact on budgets. Many developers still fail to appreciate that payment of the CIL liability is triggered by commencement of the development and will continue to be liable even if the development is not completed.

1. Money judgment or liability order?

Albeit that there is an outstanding CIL liability the route forward for the collecting authority is not necessarily simple and speedy. The first decision for the authority is whether to seek a money judgment from the appropriate court under regulation 106 of the Community Infrastructure Levy Regulations 2010 or to apply for a liability order under regulation 97. This has to be the first decision as once a liability order has been made it is not possible to commence proceedings to recover an outstanding amount as a debt (reg. 106(1)(c)). Conversely a liability order cannot be made in respect of an amount in relation to which recovery proceedings have been instituted under regulation 106. Why each should exclude the other is at least to me a puzzle. What it means in practice is that the collecting authority has to opt at the start to attempt to obtain a money judgment or to obtain a liability order.

A liability order is not a money judgment (reg. 97(10) but merely a declaration of the amount of the outstanding CIL and the amount of the legal costs reasonably incurred in obtaining the order. Obtaining such an order is a pre-condition to pursuing certain statutory enforcement measures. Two are not of real practical interest – distress and committal. Two are realistic options for enforcement. One is the obtaining of a charging order under regulation 103. The other is the presentation of bankruptcy and winding up petitions in respect of which the amount declared as outstanding CIL by the liability order is an indisputable debt for the purposes of bankruptcy and winding up (reg. 105). I would anticipate that a money judgment obtained under regulation 106 will also be a debt for those purposes.

2. Steps prior to application

Once the decision is made to apply for a liability order there are two points to consider. The first is to check that the most recent liability notice and demand notice are correct and up to date. Second a reminder notice must be served pursuant to regulation 96. This is a pre-condition to applying for an application order. There must be a gap of at least seven days between the service of the reminder notice and the making of an application for a liability order (reg. 97(1)).

3. Complaint

An application for a liability order must be made by way of a complaint to the appropriate magistrates court. There is no specified form for the complaint. In practice some are curt and some are akin to pleadings. It would seem sensible to set out the elements of the claim in the complaint and not just in the supporting witness statement.

More than one respondent can be the subject of a complaint and more than one amount (reg. 97(8)). This will cover cases in which there is joint liability but would seem to extend to less simple cases such as where there has been a transfer of liability after the commencement of the development or there is a phased planning permission possibly with different developers or owners assuming liability for different phases.

4. Time barred

Such an application cannot be made after the expiry of six years from the date that the amount of CIL fell due (reg. 97(3)). There is no other express time limit regarding CIL enforcement methods although that does not mean that there are no time limitations under the 1980 Limitation Act or the common law or equity. It is the making of the application which must be within the six year period rather than the making of the liability order. That six year period runs not necessarily from the date that the development commenced but from the date that the outstanding CIL fell due which if the CIL is payable by instalments may be a later date. The impact of an agreed payment timetables reached outside the provisions of the CIL regime on when the amount fell due has yet to be explored. It may not override the application of the CIL provisions.

5. Summons

Once the complaint has been made the collecting authority must wait for the court to issue a summons and authorise service of both on the respondent. These must be served at least 14 days before the hearing of the summons as no liability order can be made before the end of that 14 day period (reg. 97(9)). Care must be taken with respect to the method of service adopted if there is a possibility that the 14 day period could be infringed. It is important to consider when service will be effected using a particular method of service bearing in mind that the provisions in rule 99 of the Magistrates Court Rules 1981 on this point are in some cases different to those in regulation 126 of the 2010 Regulations.

6. Witness statement

The important document to get right is the accompanying witness statement. My preference is for longer rather than shorter witness statements so as to seek to meet points that may be raised by a respondent without the need for further witness statements and adjournments. It is the key document. The areas to be covered will include:

(i) the planning history starting with the first relevant planning permission. It is important to consider this before launching the application so as to ensure that the focus of the application is correct. For example, if there is a section 73 permission which has been implemented and is the current development being carried out then the focus needs to be on the outstanding CIL liability arising from that development and not that authorised by the parent permission. The latter may still be material from a CIL perspective if prior to the implementation of the section 73 permission unpaid late payment interest accrued or a late payment surcharge was imposed.

(ii) the relevant charging schedule for the area.

(iii) the amount of CIL liability arising from the development and the manner in which the amount was calculated.

(iv) the issue of the first liability notice and proof of service and the most recent liability notice if there is more than one issued.

(v) respondent’s liability established either by receipt of assumption of liability notice or ownership of development site if reliance is being placed on regulation 33 (default liability).

(vi) the commencement of the development established either by receipt of commencement notice or evidence of the start of a material operation on the site.

(vii) the issue of a demand notice and proof of service.

(viii) if late payment interest is being claimed then showing the relevant history of the Bank of England base rate and the manner in which the late payment interest has been calculated.

(ix) if any later payment surcharges have been imposed and remain unpaid then an explanation is needed for the imposition and the amount of the surcharges. Any demand notice imposing a surcharge will be required.

(x) if there has been a payment agreement which the respondent has failed to perform then the agreement and failure to comply needs to be briefly referred to.

(xi) the issue of liability reminder notice and proof of service.

(xii) the complaint and proof of service.

(xiii) relevant communications with the respondent or anyone acting on behalf of the respondent particularly if these contain an admission of liability.

Arguably all that is required to establish entitlement to a liability order are the three notices – current liability notice, current demand notice and the liability reminder notice. If the period has expired in which the liability notice and the demand notice can be challenged then such notices are final and conclusive (Court of Appeal in R (oao Braithwaite) v East Suffolk Council [2022] EWCA Civ 1716). However, convincing the magistrates that the outstanding CIL amount has always been the correct amount is probably the preferable route.

7. Scope of hearing

This last point also raises the question as to the scope of the hearing before the magistrates. There are at least three separate issues which can arise at the hearing. First, can the respondent raise an issue with regard to the calculation of the CIL liability which under the CIL regime should have been raised at an earlier stage? An obvious example is a claim for a deduction particularly a KR(i) deduction (GIA of retained part of an in-use building) which had not been raised by requesting a review under regulation 113 and if unsuccessful then appealing under regulation 114. There are a surprising high numbers of cases in which a developer/owner fails to claim a deduction at the correct time. There is no uniform practice as to how late claims are dealt with by authorities. Some will consider the claim on its merits and if accepted issue a revised liability notice under regulation 65(4) and (5) whilst others will reject the claim on the ground of lateness. Does the magistrates hearing provide one last opportunity for the respondent to pursue the claim?

Arguably not because of the Court of Appeal decision in Braithwaite mentioned above. As against that the magistrates must be “satisfied that the amount has become payable by the defendant and has not been paid” (reg. 97(5)). Further the focus in the Braithwaite decision was wholly on challenges by judicial review. However, in certain circumstances it is possible for an individual to raise a point of public law by way of a defence in proceedings brought by an authority which could have been earlier challenged by way of judicial review (Wandsworth LBC v Winder [1985] AC 461). This raises the question whether the wording of the CIL regime is clear enough to deny a respondent‘s right to defend a claim brought by a public body (para. 53 Lewison J in Bunny v Burns Anderson plc [2007] EWHC 1240 (Ch) and Pawlowski v Dunnington 1999 WL 250041). The exclusion may be by necessary implication as well as express wording (para. 44 Beadle v Commissioners for HM Revenue and Customs [2019] UKUT 0101 (TCC)).

Failure to make a statutory request for a review will save in exceptional circumstances prevent the pursuit of a challenge by judicial review (Swift J. at para. 44 R (oao Oval Estates (St Peter's) Ltd v Bath & North East Somerset Council [2020] EWHC 457 (Admin)). If that is the case for judicial review proceedings then should it not also be the case with regulation 97 hearings before the magistrates?

The wider CIL issue of the position arising from claims to a deduction when the developer/owner has failed to request a review or to appeal following a review has yet to be fully explored in a decision. In consequence whether it can be pursued in a regulation 97 hearing is uncertain but the Braithwaite decision is a very real barrier.

The second issue regarding the scope of such a hearing is whether claims collateral to the CIL liability can be introduced as a defence. Disputes can arise during the planning process as is illustrated by the number of references to complaints in statutory appeals. Damages claims for substantial amounts may be put forward by a respondent. However. there should be no scope for reliance on such a counter-claims by a respondent in the regulation 97 hearing. The function of the magistrates in such a hearing is limited to declaring the amount of the outstanding CIL liability. No counter-claim will affect that. Once that amount has been determined the magistrates are duty bound to make the declaration. No jurisdiction is conferred to go outside that remit.

Thirdly, an issue which is likely to arise in many such hearings is whether the magistrates can become involved in the timetable for payment. This would come naturally as it is the type of issue that often comes before magistrates in debt cases. However, it is not within the scope of a regulation 97 hearing. The duty of the magistrates is to determine the amount of the outstanding CIL liability and the costs incurred in obtaining the liability order but not to deal with other issues arising in respect of enforcement. The CIL regime provides for the CIL liability to be paid by instalments in certain specified circumstances but otherwise confers no ability to defer or vary payment. Changes in the viability of the development or the personal circumstances of the developer/owner do not affect the amount of the CIL liability or the obligation to pay it. This is in contrast to the position with section 106 planning obligations which in certain circumstances can be varied.

The overall conclusion is that the scope of a regulation 97 hearing is limited to determining the amount of the outstanding CIL liability and all other issues as regards enforcement are a matter between the authority and the developer/owner.

8. Hearing

The magistrates court hearing a summons must consist of at least two magistrates (reg. 102). Alternatively, a District Judge may hear the summons (section 26 Courts Act 2003). The task of the magistrates is not made easier by the apparent absence of the CIL regime from their resources. As yet the CIL regime does not merit a mention in Stones Justices. In consequence it is necessary to make provision for the supply to the Court of a copy of the CIL regime or material parts if it is possible for such a selection to be made by agreement between the parties’ legal representatives.

If the respondent does not appear at the hearing of the summons the magistrates may proceed in the absence of the respondent (section 55(1) Magistrates Court Act 1980) but may not issue a warrant for the arrest of the respondent (reg. 97(4)).

9. Liability order

As mentioned above the magistrates are obliged to make an order once they are satisfied that there is an amount of outstanding CIL. The order is in effect a declaration and is not a money judgment (reg. 97(10)) with all the consequences that would flow from that. In addition the magistrates must add to the amount of the outstanding CIL an amount equal to the costs reasonably incurred by the authority in obtaining the liability order (reg. 97(6)(b)).

In the event that the outstanding CIL amount is paid in full before the hearing the collecting authority may still request that a liability order is made in respect of the authority’s costs reasonably incurred in making the application (reg. 97(7)).

10. Costs

As stated immediately above if successful the authority’s reasonable costs are added to the amount specified in the liability order. If on the other hand the authority fails to obtain a liability order will the respondent be entitled to a costs order against the authority?

In licensing cases it had been the general principle that no costs order against an authority could be made on appeal to the magistrates against a decision of a licensing authority even if the appeal is successful (Bradford Metropolitan District Council v Booth [2000] 164 JP 485).

However, that principle has been subjected to careful consideration by the Supreme Court in Competition and Markets Authority v Flynn Pharma Limited [2022] UKSC 14 and unanimously rejected (para. 97). Instead it was held that “where a public body is unsuccessful in proceedings, an important factor that a court or tribunal exercising an apparently unfettered discretion should take into account is the risk that there will be a chilling effect on the conduct of the public body, if costs order are routinely made against it in those kinds of proceedings, even where the body has acted reasonably in bringing or defending the application.”

Will adverse costs orders in unsuccessful applications for a liability order have a chilling effect on a collecting authority and deter it from pursuing outstanding CIL? In determining this it will be borne in mind that such applications are a form of tax collection with the receipts received by the authority applied by it on infrastructure. It is clearly arguable that there is a difference in character between licensing and other supervisory functions on the one hand and enforcement of CIL on the other. It is yet another interesting CIL point awaiting a decision.

11. Local land charge

It is probably sensible to add a reference to the liability order in the local land charge entry relating to CIL in relation to the development.

Christopher Cant is a barrister at The Barrister Group.