Summary: Ms B, with the support of a representative from a personal insolvency practice, complains the Council continued to collect debts that were subject to an individual voluntary arrangement, and it pressurised her to agree to a repayment plan. The Ombudsman cannot consider this complaint because it is a matter for the court.

The complaint

1. Ms B, with the support of a representative from a personal insolvency practice, complains the Council continued to collect debts that were subject to an individual voluntary arrangement, and it pressurised her to agree to a repayment plan.
2. Ms B says she had to pay the same debt twice and this caused her financial difficulties. The Council disputes this.

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The Ombudsman’s role and powers

3. The law says we cannot normally investigate a complaint when someone could take the matter to court. However, we may decide to investigate if we consider it would be unreasonable to expect the person to go to court. (Local Government Act 1974, section 26(6)(c), as amended)

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How I considered this complaint

4. I considered:
• Ms B’s complaint and the information she provided;
• documents supplied by the Council;
• relevant legislation and guidelines;
• the Council’s policies and procedures; and
• the Council’s comments on a draft decision. No comments were received from Ms B or her representative.

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What I found

What happened

5. On 13 October 2017 Ms B agreed an individual voluntary arrangement (IVA) with her creditors. This was arranged by a personal insolvency practice.
6. The IVA was to include all her debts accrued up to that date and bind her unsecured creditors. The terms of the IVA agreement state, “the proposal is intended to be a composition in full and final settlement of my debts” and, “as long as I meet my obligations under the arrangement and the Supervisors issue a certificate of completion, no creditor may pursue me for a debt bound under the arrangement.”
7. However, Ms B’s IVA did not include an entry for the debt outstanding to the Council. As a result, the Council was not notified of Ms B’s IVA.
8. On 13 October and 19 December 2017, the Council invoiced Ms B for housing benefit overpayments it says arose because she failed to tell the Council of a change in her wages.
9. The Council arranged to recover the debt from Ms B through a direct earnings attachment (DEA).
10. Ms B, with the support of the personal insolvency practice, told the Council these debts were included in the IVA. The terms of the IVA state, “this voluntary arrangement will be binding on any creditor whose claim has been omitted from it, but who would have been entitled to vote if they had been notified of the creditors meeting called to approve it.”
11. The Council agreed the debt invoiced for on the 13 October 2017 was bound by the IVA. However, the Council disputed the debt it invoiced for on 19 December 2017 was, because it sent this invoice after the IVA was agreed.
12. In February 2018, Ms B’s IVA was amended to incorporate the debt Ms B owed to the Council. Ms B and the personal insolvency practice told the Council her IVA now included all Ms B’s housing benefit overpayments.
13. In April 2018, the personal insolvency practice asked the Council to stop pursing Ms B’s housing benefit overpayment outside the IVA; the Council was still taking payments through the DEA to pay the second invoice.
14. In September 2018, Ms B agreed to have a direct repayment plan to pay her housing benefit overpayment rather than a DEA. Ms B says she only agreed to this because of the financial impact of the DEA.
15. In January 2019, Ms B made a complaint to the Ombudsman.
16. In August 2019, the personal insolvency practice told the Ombudsman, “we’re making a formal complaint regarding the actions of Portsmouth City Council…the council has removed the DEA that was in place however refuses to refund the funds taken from the client after the IVA appointment.”.

Analysis

17. The question of whether the overpayments in the second invoice are included in the IVA raises complex legal questions about when the debts accrued, particular because of the manner and point at which they were discovered. These are matters for the court.
18. When Ms B complained to the Ombudsman, the DEA had been replaced by a repayment plan. Ms B could apply to the court to rescind the agreement and/or to recover the sums already paid.
19. In conclusion, the Ombudsman does not have the jurisdiction to investigate Ms B’s complaint about the Council, as Ms B can:
• apply to the Court to rescind her repayment agreement with Council, as she claims to have entered the agreement under duress; or
• request her IVA supervisor applies to the Court for directions on whether any housing benefit overpaid by the Council before Ms B’s IVA should be included within it.

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Final decision

20. The Ombudsman will not investigate this complaint because Ms B can take the matter to court.

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Investigator's decision on behalf of the Ombudsman