Summary: Mr C complained on behalf of a retail business that a review undertaken by the Council, following an earlier Ombudsman investigation, had wrongly upheld a decision that a branch of the business was not entitled to a Retail, Hospitality and Leisure grant. While we had concerns about the Council’s review decision, justifying a finding of fault, we did not find this would have led to a different outcome. So, we found there could be no injustice in the refusal of the grant on review.

The complaint

1. Mr C complains on behalf of a retail business. He complains the Council did not award a branch operated by the business a Retail, Hospitality and Leisure (RHL) grant under a scheme set up by Government in March 2020 to help retail businesses cope with the impact of COVID-19. In February 2022 we completed an investigation into a complaint from Mr C about this matter after the Council agreed to review its decision. This second complaint is about that review decision. Mr C says the Council has not taken proper account of evidence the branch began trading in February 2020; instead putting too much weight on social media posts which suggested an opening date in June 2020.
2. Mr C says as a result the business missed out on a source of financial support, needed because of the impact of the pandemic.

Back to top

The Ombudsman’s role and powers

3. We investigate complaints of injustice caused by ‘maladministration’ and ‘service failure’. I have used the word ‘fault’ to refer to these. 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)
4. 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)
5. We may decide not to continue with an investigation if we decide any fault has not caused injustice to the person who complained. (Local Government Act 1974, section 24A(6))
6. This complaint involves events that occurred during the COVID-19 pandemic. The Government introduced a range of new and frequently updated rules and guidance during this time. We can consider whether the Council followed the relevant legislation, guidance and our published “Good Administrative Practice during the response to COVID-19”.
7. 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)

Back to top

How I considered this complaint

8. Before issuing this decision statement I considered:

• Mr C’s written complaint to the Ombudsman and any supporting information he provided, including that gathered in a telephone conversation with him;
• the Council’s decision reviewing the business entitlement to a Retail, Hopsitality and Leisure grant made in March 2022;
• information gathered during the investigation of Mr C’s earlier complaint;
• relevant law and government guidance as referred to in the text below.

9. Mr C and the Council also had an opportunity to comment on two draft versions of this decision statement. I took account of any comments they made before finalising this decision statement.

Back to top

What I found

Grant schemes to support businesses impacted by COVID-19

10. In March 2020, in response to the COVID-19 pandemic, the government created two grant schemes for small businesses, administered by local authorities. One of these was the Retail, Hospitality and Leisure (RHL) grant scheme. The scheme closed in September 2020.
11. To be eligible to receive a RHL grant the business had to be first eligible for the Expanded Retail Discount (ERD) scheme for business rates “had that scheme been in force” on 11 March 2020. Eligible businesses with a rateable value of between £15,000 and £51,000 would receive a grant of £25,000. The business Mr C represents operates in a sector that qualified for the ERD scheme.
12. Government guidance said the grant was payable to the ratepayer. It considered what the Council should do if advised of changes to the rating list which is a list of all rateable property and land maintained by the Valuation Office Agency (VOA). The guidance said:

• Any changes to the rating list (…) after 11 March 2020 including changes which have been backdated to this date should be ignored for the purposes of eligibility.
• Local authorities are not required to adjust, pay or recover grants where the rating list is subsequently amended retrospectively to 11 March 2020.
• In cases where it was factually clear to the Local Authority on 11 March 2020 that the rating list was inaccurate on that date, Local Authorities may withhold the grant and/or award the grant based on their view of who would have been entitled to the grant had the list been accurate.
• This is entirely at the discretion of the Local Authority and only intended to prevent manifest errors”. (see Grant Funding Schemes – Small Business Grant Fund and Retail, Hospitality & Leisure Grant Fund Guidance –paragraphs 40 to 43).

13. Government guidance said grants could not be paid to businesses which on 11 March 2020 were in liquidation or dissolved.

Relevant background

14. The business Mr C represents operates around 40 branches across London, under a single trading name. The business is structured in such a way that a separate limited company operates each branch. Each company then has a relationship with another limited company that has overarching responsibility for the business. For ease, in this statement I will call the limited company associated with the branch ‘Company A’ and that with overarching responsibility for the business, ‘Company B’.
15. In August 2021 Company A filed accounts to say it was a dormant company for the year ending 30 November 2020. Companies House describes a dormant company as one that has carried out no significant transactions during the financial year. In August 2022 Company A filed further dormant accounts for the year ending 30 November 2021.
16. During our investigation of Mr C’s first complaint, we established the following:

• The branch of the business at the crux of this complaint trades from a retail unit in the Council’s area. Company A entered a lease for the unit on 14 February 2020; guaranteed by Company B. The unit was newly built, forming part of a mixed use residential and retail development.
• The Council had no trace of being told the unit had become occupied before May 2020. At that point it was not on the rating list and the address/postcode were not visible on the software used by the Council business rates service. It was at this time the business asked for a RHL grant for the unit under its trading name.
• In July 2020, in response to various representations including from other retail businesses in the same development, the Council agreed that it would use its discretion to pay RHL grants to those retail businesses in the new development where it was satisfied they had begun trading on or before 11 March 2020. This was so long as the individual retail units were added to the rating list by September 2020.
• By August 2020 the business had given the Council information including a copy of its lease; an invoice showing the pouring of a concrete floor at the unit on 15 February; a film recording of the same and customer receipts from 29 February to 6 March 2020 – the Council said at the time the receipts ‘confirmed’ the business had begun trading from 29 February 2020. It made the business liable for rates from that date.
• But shortly after this time a Council employee noted the business had put up a social media post which described the branch ‘opening’ in June 2020. The Managing Director of Company B (who I will call Mr D) said the post was to advertise the shop re-opening.
• That in September 2020 Mr C provided the Council with more information comprising utility bills from 18 March 2020; a bill from a ‘temporary power supplier’ which covered the period 15 February to 18 March 2020; a bank statement for the dates 11-12 March 2020 (he identified which payments originated from the branch in question); a copy of the insurance schedule for the shop and receipts for the period 7 March to 23 March. When it had considered this evidence, the Council told Mr C it was “satisfied [the company] was trading from the property during March 2020”
• In February 2021 the Council had then refused the business a grant. It cited various reasons including social media posts which led it to no longer be satisfied the business was trading in March 2020.

17. In our findings on Mr C’s first complaint, we said:

• the Council had not generally provided sound reasons for refusing the business a grant. It had raised various arguments which either contradicted its earlier approach towards agreeing to consider using its discretion to pay the business a grant or else it had introducing irrelevant considerations.
• However, we did not consider we could dismiss the Council’s concern around the social media post. We said we accepted this was relevant evidence for the Council to take account of. But we criticised the Council for apparently looking at it in isolation. Its decision to refuse the grant had not shown the Council also took account of any evidence provided which pointed towards the business trading from 29 February. This included the various receipts, bank transactions, utility bills and so on; as well supporting explanations given by Mr C for how payments were processed and so on.
• This caused the business an injustice as uncertainty. As it was unclear if a closer scrutiny of that evidence would have led the Council to take a different decision on grant eligibility.

18. The Council accepted these findings and following our recommendations it agreed that it would review its decision to refuse the business a RHL grant. It agreed its review decision would take account of our findings and consider all relevant evidence about whether the business occupied the shop and was open for sales on 11 March 2020. The Council agreed it would pay the business an amount equivalent to the grant it refused (£25,000), if satisfied the business occupied the shop and was open for sales on 11 March 2020.

The review decision

19. The Council decided that on balance it did not consider the evidence showed the business was trading on 11 March 2020.
20. The Council noted the receipts provided by Mr C were headed as coming from a branch on the road where the shop trades. However, it noted the address on the receipts was recorded differently to how it appears on the Council’s records. It said the receipts were the only evidence that “could be considered supporting evidence” to show the business was open to members of the public on 11 March.
21. The Council rejected other evidence provided. It said a bank statement provided by Mr C did not clearly identify payments into Company B’s account as coming from the specific branch. While an invoice for a temporary power supply and an insurance policy did not show the business traded to the public on 11 March.
22. The Council also noted Companies House recorded Company A as dormant.
23. In addition, the Council said it had identified several social media posts or omissions that it considered relevant in addition to that identified in its original decision which was later taken down. These were:

• a social media account run by a third party which promoted businesses in the new development had referred to the branch ‘opening’ on 16 June 2020;
• that a later post on the same site dated 18 June had a picture of the branch and commented it was its “first day open”;
• that on 21 June 2020 Mr D had put on his social media account that he had been “able to open” the shop. In the post Mr D wished “fellow retailers good luck in your openings”;
• that the third party social media account on 15 March had referred to other shops in the development being open or opening soon – but not this one;
• that the business’ own social media account had said on 28 February that the branch would be “coming soon”;
• that on 25 and 26 March 2020 the business social media account had listed 18 branches as opening temporarily for customers to collect items. The branch was not listed among those.

24. In response Mr C said the business employed a third party to manage its social media account and as a result, this would not always be accurate. He said references to the shop ‘opening’ in June 2020 were references to it ‘re-opening’ following the easing of COVID-19 restrictions on non-essential retail. Mr C says that while the branch had opened before such restrictions were imposed in March 2020 it had not had time to establish itself to the point where it was doing significant amounts of trade. So, for marketing purposes it made sense to refer to the shop as ‘opening’ in the hope this would generate more trade.
25. Mr C said because of the relatively small volume of trade, it was not necessary for the business to advertise collection arrangements for items on 25-26 March. That only around half the branches had advertised collections this way as the smaller branches had fewer items awaiting collection and could make bespoke arrangements with customers; telephoning them to arrange collection.

My findings

26. The Ombudsman looks at the processes an organisation has followed in making a decision. If we consider it followed those processes correctly, we cannot question whether the decision was right or wrong, regardless of how much a complainant disagrees with the decision the organisation made. Following a proper process in this context means the Council needed to have made a decision only taking relevant information into account and not taking anything irrelevant into account. It is also one where the Council has clearly and coherently given its reasons for its decision.
27. In this instance the Council’s decision focused on whether the branch traded from the new-build premises and was open to the public on 11 March 2020. The Council had previously indicated that it would use its discretion to pay the business a RHL grant if satisfied that was the case.
28. Government guidance gave no detailed advice to councils as to the burden of proof required to decide if a business traded, or was open to the public, on 11 March 2020. For retail businesses, we expect the Council would want to see evidence of customer transactions such as receipts or bank statements. Also, some evidence of use of premises such as utility bills. But we will not criticise a council for also considering secondary sources of evidence such as social media accounts where they add factual information.
29. I have three concerns about the approach the Council took during its review of Mr C’s case.

• First, I note the Council gave no weight to certain evidence provided by Mr C including details of the temporary power supply to the business; insurance details and banking records. While none of this evidence could be conclusive of trading – a trading business would have a power supply and appropriate insurance. So, this evidence potentially supported the branch being open and trading on 11 March, although was not definitive. Meanwhile the bank statement showed payment to Company B via a mobile payment device. It did not show the payments taken by the device originated from the branch at the crux of the complaint. But if this branch was newly opened and using a different method for receiving payments this evidence may also have supported Mr C’s account. So, I question if it was correct to say this evidence should have carried no weight at all
• Second, the Council said the receipts provided by Mr C ‘could’ be evidence of trading, but it did not say why they were not considered evidence of trading. I noted they were produced electronically. They were detailed. Each had a unique reference number. Each provided a customer name. Each provided both a drop-off and collection time for items left with the business as well as a description of the item and the cost of the service. Also, each receipt had the branch address on the heading. This did not appear in the same format as the branch address on the Council rating records, but there was no significant discrepancy between the two. The receipts were also numerous. I did not see those provided to cover the period 29 February to 6 March 2020, but there were many for the period from 7 March onward.
• Third, in its consideration of social media posts, the Council put emphasis on the third party account dedicated to businesses in the new build development. This showed no record the branch opened in February 2020 and contained references to the business ‘opening’ in June 2020 that contradicted Mr C’s account. These posts were not irrelevant. But it is not clear the Council took account that these messages coincided with the lifting of restrictions in England covering non-essential retail businesses (16 June 2020). Mr D’s message referred to many business “openings” around the same time. This could have been a reference to businesses re-opening in the context of the time. It was also apparent the posts made on 25-26 March did not cover all the branches in the business; with only around half of all branch locations mentioned in those.

30. These concerns suggest the Council had again not taken proper account of evidence in its review decision which justify a finding of fault. I consider had the Council taken proper account of the evidence contained in customer receipts, it could have tipped the balance decisively towards the view the business was trading and open to the public on 11 March 2020.
31. However, there is a further complication in this case, which concerns the business structure. In considering any injustice that arises from the Council’s fault we must consider this. Because the Council argues this would have prevented it paying a RHL grant in any event.
32. The Council’s argument relies on Company A being ‘the ratepayer’. It is the trading entity named on the shop lease. I see no reason to think the Council has arrived at this judgment with fault and note the lease agreement for the unit identifies Company A as liable to pay rates (not Company B which acts as guarantor of the lease). I understand Company B has been paying business rates for the unit (and I assume other liabilities). But that does not make it ‘the ratepayer’.
33. But the Council notes Company A remained dormant during the events covered by this complaint. Further, it provides evidence to show that during this investigation it has made enquiries with the Department for Business, Enterprise and Industry (BEIS), which was responsible for administering the grant schemes to ask if it could have paid a grant to a dormant company. BEIS told the Council that grants should not be paid to dormant companies. The Council also questions how, on a practical level, it could it pay a grant to a dormant company, as it presumably has no bank account.
34. I note BEIS did not give this advice during the lifespan of the RHL scheme. It made clear that councils could not pay grants to dissolved or liquidated companies, but these are not the same as dormant companies. A company is a legal entity and once dissolved or liquidated it no longer exists. Whereas a dormant company remains a ‘live’ legal entity.
35. However, by definition, it is one that does no significant trading. Consequently, I consider there is logic to the BEIS advice. Because for the Council to have paid a RHL grant to Company A would have meant it entered a significant financial transaction with a dormant company. But for a company to be dormant it cannot enter significant financial transactions.
36. Therefore, I have no reason to think BEIS would have provided different advice to the Council had it asked the question about paying a RHL grant to a dormant company during summer 2020. And because I consider there is no fault in the advice, it follows there would be no fault in the Council following it. Consequently, I consider that in summer 2020 the Council would have used its discretion to refuse the business a RHL grant.
37. It is unfortunate that greater attention to the trading status of Company A was not given in summer 2020 nor during our investigation of Mr C’s first complaint. But that does not mean we can ignore the complications created by the business using a dormant company in the way it has. So, while I continue to have concerns over how the Council weighed evidence relevant to whether the branch was trading on 11 March 2020, I cannot find this would have resulted in a different outcome of the review decision. In which case there can be no injustice that arises from its decision to refuse the grant on review.

Back to top

Final decision

38. For reasons set out above I do not uphold this complaint finding that any fault by the Council did not cause injustice to Mr C’s business. I have therefore completed my investigation.

Back to top

Investigator's decision on behalf of the Ombudsman