Newham Council criticised for making woman with mental illness bankrupt for council tax debts

Archived press release

Date Published: 07/10/09

The Council made a woman with mental illness bankrupt for council tax debts, without considering whether this was a suitable recovery method in the circumstances.

The London Borough of Newham made a woman with mental illness bankrupt for council tax debts, without considering whether this was a suitable recovery method in the circumstances, finds Local Government Ombudsman, Tony Redmond. In his report, issued today (7 October 2009) he says: “The Council did not, at the time, carry out any checks with its Adult Social Care team before considering bankruptcy. Had it done so it would have quickly found that [the complainant] was not a suitable case for such action.”

‘Ms Scott’ (not her real name for legal reasons) suffered from a mental illness which affected her ability to manage her finances. The Council was aware of this illness. Over a period of several years council tax debts accumulated and the Council finally made her bankrupt for these, despite being aware of her mental state. Ms Scott’s solicitor applied to the court to have the bankruptcy annulled, on the grounds that she did not owe the debt as she was entitled to an exemption, but the courts rejected this application.

The Council's policies had already been changed before the Ombudsman’s investigation started, but he decided to complete his investigation and issue a report because he felt some particular aspects of it should be brought to a wider audience. Ms Scott would not have been made bankrupt under the new policy.

One of these was that the Council exercised its discretion to award Ms Scott an exemption due to her mental health for the post-bankruptcy debts, even though she did not fully qualify for the whole period. The Ombudsman commends the Council for this action. Ms Scott was not claiming the benefits that would qualify her for the severe mental impairment exemption, but that may have been as a result of her mental illness. The Ombudsman says: “There is a danger of a vicious circle in such matters – someone has a mental illness, an application is made for an exemption on these grounds, because of the illness they do not claim state benefits, because of the lack of benefit they do not qualify for the exemption their mental state would have entitled them to, but that mental state is the reason they have not applied for the benefit.”

There was also a change in the interpretation of the Ombudsman’s jurisdiction, following legal advice.

The Ombudsman finds maladministration causing injustice. The Council has agreed to apply to the court to annul the bankruptcy. The Ombudsman says: “I commend the Council for its rapid and appropriate action.”

Report reference: 08 019 113