Wolverhampton City Council (06B16600)

Local taxation                               Maladministration causing injustice

31 March 2008

The complaint

Mr P was in dispute with the Council over the extent of his council tax arrears. He argued that he owed £750, but the Council maintained that he owed £1,105. Although Mr P was on a low income he was not in receipt of council tax benefit which, if awarded, could have helped reduce the arrears. He complained to the Ombudsman at the actions of the Council in making him bankrupt for the council tax arrears. By the end of the bankruptcy proceedings Mr P faced costs of some £38,000.

The Ombudsman’s view

The Ombudsman did not criticise the Council for not paying Mr P council tax benefit. This had arisen through Mr P’s failure to co-operate with the claims process.

The Ombudsman accepted the right of the Council to collect council tax arrears and the limited options available to it in Mr P’s circumstances. He noted in particular that the Council was not able to apply to the Department for Work and Pensions for a deduction from Mr P’s incapacity benefit to repay arrears, as that benefit did not allow such a method of recovery. He noted also that the Council had used bailiffs to try and collect the debt from Mr P, without success.

However, despite all of the above, the Ombudsman did not consider the Council followed due process in making Mr P bankrupt. He found that the Council:

• gave Mr P inadequate warning of the consequences of bankruptcy before commencing proceedings, in breach of its usual practice; and
• failed to consider properly the alternative of seeking a charging order against Mr P’s home.

The Ombudsman considered that, on the balance of probabilities, had such failings not occurred, Mr P would have made an offer of repayment to the council before legal proceedings began. He said:

“The Council cannot, it seems to me, turn a blind eye to the consequences to the debtor of any recovery option it pursues. … The dire and punitive consequences of bankruptcy, involving a multiplication of the original debt many times over and frequently incurring the loss of the debtor’s home, must be a factor to be taken into account in deciding that the ‘last resort’ is indeed appropriate. I have seen no evidence that this relevant consideration was taken into account.” 

The outcome

In order to put Mr P in the position that he would have been in had no maladministration occurred, the Ombudsman considered Mr P’s bankruptcy should be annulled and that the Council should pay for this by arrangement with the trustee in his bankruptcy.

However, the Ombudsman considered that it would not be right for Mr P to avoid liability for his debt. So the recommendation was made conditional: the Council should not make any payment leading to annulment of the bankruptcy until Mr P had first entered into a binding arrangement with the Council to repay £1,105 of the costs and to clear that debt as soon as reasonably practicable (repayment might be secured by way of a charge on his property).

In addition, the Ombudsman recommended the Council to review its collection policy and procedures for local tax arrears in the light of this report, in order to avoid a repeat of the maladministration found in this case.

Date Updated: 13/01/09