Summary: Mr X complains about the way the Council sought to recover his council tax debt. He says the Council threatened him with bankruptcy. Mr X says he now has a large loan that he struggles to repay, which means he has defaulted on his mortgage and utility bills, and means he has not been able to pay this year’s council tax. He says it has also had an impact on his physical and mental health. The Ombudsman finds the Council at fault for poor record keeping. However, the Ombudsman does not find the fault caused Mr X injustice. The Ombudsman does not uphold the rest of Mr X’s complaint.

The complaint

1. The complainant, who I refer to here as Mr X, complains about the way the Council sought to recover his council tax debt. He complains that:
1. the Council acted unreasonably when recovering his council tax debt by threatening him with bankruptcy, which forced him to get a large loan to repay the debt;
2. the Council failed to consider his circumstances;
3. he did not receive a pre-action letter the Council sent him in May 2019;
4. the Council gave him incorrect information in a statement about his council tax arrears; and,
5. the Council ignored his requests to re-send its complaint response when he did not receive it.
2. Mr X says he now has a large loan that he struggles to repay, which means he has defaulted on his mortgage and utility bills, and means he has not been able to pay this year’s council tax. He says it has also had an impact on his physical and mental health.

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The Ombudsman’s role and powers

3. We investigate complaints about ‘maladministration’ and ‘service failure’. In this statement, I have used the word fault to refer to these. We must also consider whether any fault has had an adverse impact on the person making the complaint. I refer to this as ‘injustice’. If there has been fault which has caused an injustice, we may suggest a remedy. (Local Government Act 1974, sections 26(1) and 26A(1), as amended)
4. We cannot question whether a council’s decision is right or wrong simply because the complainant disagrees with it. We must consider whether there was fault in the way the decision was reached. (Local Government Act 1974, section 34(3), as amended)
5. If we are satisfied with a council’s actions or proposed actions, we can complete our investigation and issue a decision statement. (Local Government Act 1974, section 30(1B) and 34H(i), as amended)
6. The Local Government Act 1974 sets out our powers but also imposes restrictions on what we can investigate.
7. We cannot investigate a complaint about the start of court action or what happened in court. (Local Government Act 1974, Schedule 5/5A, paragraph 1/3, as amended)
8. When a council uses bankruptcy proceedings to recover a debt, then any administrative action before service of a bankruptcy petition is within our jurisdiction. However, issues after the issue of a formal bankruptcy petition are outside of our jurisdiction. These would be matters for the court considering the application for bankruptcy.

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How I considered this complaint

9. I considered the information and documents provided by Mr X and the Council. I spoke to Mr X about his complaint. Mr X and the Council had an opportunity to comment on an earlier draft of this statement. I considered all comments received before I reached a final decision.
10. I considered the relevant legislation and regulations, set out below. I also considered the Ombudsman’s published focus report “Can’t pay? Won’t pay? Using bankruptcy for council tax debts” (2011).

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What I found

What should have happened

11. The primary legislation for council tax is the Local Government Finance Act 1992. The main secondary legislation concerned with collection and recovery is The Council Tax (Administration and Enforcement) Regulations 1992 (“the Regulations”). Councils are responsible for collecting council tax.
12. If a council tax payment is missed, a council must issue a reminder notice. If the arrears are not paid, the balance for the full year then becomes due. A council can then complain to the Magistrates Court and issue a summons. A liability order hearing is then heard in the Magistrates Court. The court can then grant a liability order.
13. Councils will charge costs for the issue of a summons and a liability order. Cases can proceed in the defendant’s absence. The court must grant an order if it is satisfied that the sum has become payable and has not been paid. Once a council has obtained a liability order it can take steps to recover the debt without any obligation to inform the debtor.
14. Councils can recover council tax debt in several different ways. They can make an attachment of earnings, meaning payments are automatically deducted from a person’s earnings. They can deduct payments from a person’s benefits. They can refer a debt to bailiffs. Councils can also come to a repayment arrangement with a debtor, but if the debtor does not make the agreed repayments, councils can seek to recover the debt in other ways.
15. In cases where all other recovery methods have failed, councils can seek to obtain a charging order (which may result in the enforced sale of the debtor’s property), a bankruptcy order, or to seek the debtor’s committal to prison. Which course of action is taken will depend upon individual circumstances, the debtor’s payment history, and the outstanding amount owed.
16. The Regulations (section 17(4)) say the date a document was issued is the date it was left with the person (if delivered by hand) or posted. For a document to be effective it must be served on a person. Summonses are served under the Regulations (section 35(2)). All other documents are served under the Local Government Act 1972 (Section 233). Both say the document may be served on a person by delivering it to them (in person), leaving it at their proper address, or sending it by post to their proper address. Proper address is taken to be the last known address. There is no need to use registered or recorded post.
17. Unless the contrary is proved, a document is deemed to have been served by post when it would be delivered in the ordinary course of post under Section 7 of the Interpretation Act 1978.

What happened

18. Mr X failed to pay his council tax over several years. This led to a significant debt. The Council was unable to make an attachment of Mr X’s earnings because he was not employed. It also could not deduct payments from Mr X’s benefits because he did not claim any. Bailiffs were unable to collect the debt, and the Council could not agree a repayment arrangement with Mr X.
19. In May 2019, the Council sent Mr X a letter saying it would take bankruptcy action against him unless he paid the debt in full or proposed an agreeable way to repay the debt by early June.
20. In August, the Council served Mr X with a statutory demand for the debt.
21. Between August and September, Mr X made repayments which covered most of the debt, but not the legal costs.
22. In November, the Council served Mr X a bankruptcy petition.
23. Mr X complained to the Council. He said the Council acted unreasonably when it decided to take bankruptcy action against him. He said he was reliant on friends and family for financial support, and had borrowed the money to repay the council tax debt to avoid bankruptcy.
24. In December, the Council’s solicitors told Mr X that he had paid the principal debt in full, but had not paid the legal costs which totalled several thousands of pounds.
25. Also in December, the Council sent Mr X its stage one complaint response. It said it had a duty to collect council tax, and had given Mr X ample opportunity to repay the debt. It said he had defaulted every time. The Council said it was satisfied it had followed the correct procedures and policies when dealing with his arrears.
26. A few days later, Mr X told the Council he had not received its complaint response. The Council emailed Mr X a copy of its complaint response that same day.
27. At the end of December, Mr X told the Council he still had not received its complaint response. The Council replied the same day saying he would get a further response.
28. In January 2020, the bankruptcy hearing was dismissed.
29. In February, the Council sent Mr X its stage one response again. Mr X asked that his complaint be progressed to stage two of the complaints procedure.
30. In its stage two complaint response, the Council explained why it was entitled to take bankruptcy action, given Mr X’s failure to pay his council tax debt. The Council referred to the Ombudsman’s focus report (see paragraph ten), which sets out what the Ombudsman expects to see when councils consider taking bankruptcy action against debtors.
31. The Council recognised that its debt recovery policy did not say exactly how officers should consider factors such as individual circumstances, payment history, and the outstanding amount, when deciding the most appropriate recovery method.
32. The Council said it did not record how it concluded its ‘balancing exercise’ (consideration of the factors listed above) when it decided to pursue bankruptcy against Mr X. It said it could not, therefore, see what consideration it gave to his circumstances at that time. The Council also recognised that its policy did not have any guidelines on how officers should carry out a balancing exercise.
33. The Council reviewed the factors in Mr X’s case: that the debt was over £5000, he was not working or claiming benefits, and he had made no payment towards the debt before the Council decided to proceed with bankruptcy. It said it was satisfied that bankruptcy was the most viable option to pursue his debt.
34. However, the Council recognised it was at fault for poor record keeping. It also said there was a failure to exactly outline how officers should take such action in its policy. The Council said it would review its debt recovery policy so it was in line with the Ombudsman’s guidance.

Analysis

Threat of bankruptcy

35. Mr X complains that the Council acted unreasonably when recovering his council tax debt by threatening him with bankruptcy, which forced him to get a large loan to repay the debt (part a of the complaint).
36. Councils are entitled to take bankruptcy action against debtors as a last resort to recover council tax debts. In this case, the Council had exhausted all other options, so it was entitled to decide to take bankruptcy action against Mr X.
37. However, the Ombudsman expects councils to record decisions about pursuing bankruptcy and retain records about its decision, together with information considered by the decision-maker.
38. In this case, I have seen no such records. So, I am not able to see how the Council made its decision to pursue bankruptcy action against Mr X. This is fault. In its stage two response, the Council acknowledged that it was unclear how it had decided to take bankruptcy action. The Council recognised it was at fault for poor record-keeping.
39. I have considered Mr X’s circumstances, his payment history, and the outstanding amount at the time the decision was taken to pursue bankruptcy. I cannot say the outcome (to decide to pursue bankruptcy) would have been any different had it not been for the fault (poor record-keeping). For this reason, I do not consider that the fault caused Mr X injustice.
40. The Council recognised that its policy was not in line with the guidance in the Ombudsman’s focus report, and has since taken action to update its debt recovery policy. This is evidence of good practice.
41. I do not find that the Council’s actions in pursuing bankruptcy forced Mr X to get a large loan. This was his choice.

Considering Mr X’s circumstances

42. Mr X complains that the Council failed to consider his circumstances (part b of the complaint). He says the Council should have considered that he may be vulnerable because of his physical and mental health. He says he first told the Council about his health after he was served in August 2019.
43. As I have said above, the Council is at fault for failing to record how it made its decision to pursue bankruptcy against Mr X. There is no record of the Council’s balancing exercise so I cannot see what consideration it gave to Mr X’s circumstances. I have found the Council at fault for this.
44. However, Mr X did not tell the Council about his physical or mental health until after the decision had been made to pursue bankruptcy against him. For this reason, I cannot say the outcome would have been any different but for the fault (see paragraph 39). The Council could not have taken this information into account because it did not know until after the decision had been made. I therefore do not consider that the fault caused Mr X injustice.

The Council’s pre-action letter

45. Mr X complains that he did not receive a pre-action letter the Council sent him in May 2019 (part c of the complaint).
46. As I have said in paragraphs 16 and 17, a document can be served on a person by sending it by post to their proper address. A document is deemed to have been served by post when it would be delivered in the ordinary course of post.
47. I find that the Council sent the letter as it should have. It was sent to Mr X’s proper address. The fact that Mr X did not receive the letter is not evidence of fault by the Council. The Council did what it should have done. For this reason, I do not find the Council at fault.

Incorrect information

48. Mr X complains that the Council gave him incorrect information in a statement about his council tax arrears (part d of the complaint). He says the Council gave him a statement of his arrears which included information about liability orders and court costs. He says the statement shows that a liability order was granted in June 2019. He disputes that a liability order was granted on this occasion.
49. The Council issued a summons on 1 May for Mr X to attend court for a liability order hearing. This resulted in the Council applying costs to Mr X’s account. The statement Mr X refers to was generated on 2 May.
50. Mr X called the Council on 15 May and made a payment. On 23 May, the Council decided to withdraw the summons. On 1 August, the Council issued an updated statement to reflect the withdrawn summons.
51. I find that the Council did not give Mr X incorrect information. The information the Council gave Mr X was correct at the time it was issued. For this reason, I do not find the Council at fault.

Ignoring Mr X’s requests to re-send a complaint response

52. Mr X complains that the Council ignored his requests to re-send its complaint response when he did not receive it (part e of the complaint).
53. I find that the Council re-sent Mr X its stage one response in December 2019, on the same day he told the Council he had not received it. The Council emailed the response to Mr X’s correct email address.
54. I cannot say why Mr X did not receive that email from the Council. It is not the Council’s fault. What is clear, however, is that the Council acted on Mr X’s request immediately. For this reason, I do not find the Council at fault.

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Final decision

55. I have completed my investigation. I find the Council at fault for parts a and b of the complaint. However, I do not find the fault caused Mr X injustice.
56. I do not uphold parts c, d, or e of the complaint. This is because there is no fault.

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Investigator's decision on behalf of the Ombudsman