Summary: we consider there was fault by the Council when it sought to recover business rates from Mrs A. Part of the debt was too old for the Council to threaten recovery action. Mrs A says this caused her distress. The Council has agreed the remedy we proposed.

The complaint

1. The complainant, whom I shall refer to Mrs A, complains the Council incorrectly pursued recovery of business rates for two properties, for which she is not liable. She says the Council failed to take into account that she is vulnerable, threatening enforcement action.

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The Ombudsman’s role and powers

2. 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)
3. 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).
4. Mrs A complained that the Council did not properly serve the Treasury Solicitor’s notice disclaiming the lease for X Road in 2015. This complaint is late. We cannot investigate late complaints unless we decide there are good reasons. Late complaints are when someone takes more than 12 months to complain to us about something a council has done. (Local Government Act 1974, sections 26B and 34D, as amended). I do not consider there are good reasons to investigate this issue. Mrs A was aware of the liability by 2016 because she referred to it then and claimed Small Business Rates relief.
5. Mrs A complains the Council did not properly serve summonses for X Road in 2015 and 2016. 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). The service of the summons is the commencement of proceedings.
6. However, I will investigate matters from September 2018, as Mrs A raised her complaints to the Council and the Ombudsman in 2019.

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How I considered this complaint

7. I have discussed the complaint with Mrs A, and considered the complaint and the correspondence provided by the complainant. I have made enquiries of the Council and considered the comments and documents it provided. Mrs A and the Council now have an opportunity to comment on my draft decision. I have considered their comments before making a final decision.

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What I found

8. Mrs A previously owned two commercial properties, X Road and Y Street. The Council decided she was liable for business rates for both properties.

Business rates for Y Street

9. The Council obtained liability orders against Mrs A for business rates for Y Street for business rates from 2012 onwards. The Council pursued recovery using an enforcement agent. Mrs A disputed the liability orders in 2014, and the court decided to set aside the orders.
10. However, in 2015 the Council started bankruptcy proceedings serving a statutory demand and a bankruptcy petition. Mrs A’s solicitor disputed this as it said the liability orders had been set aside in 2014. Therefore, it had no legal right to use bankruptcy proceedings. I have seen a copy of a letter showing the Council accepted this. The Council told Mrs A in 2016 that it would seek dismissal of the bankruptcy petition. It is not clear what the Council did in the following two years regarding the business rates.
11. On 19 September 2018 the Council wrote to Mrs A about business rates of £32,300 for Y Street, stating it was a final demand. This covered the period from 2012 to 2015. The Council said that if Mrs A did not pay or arrange to pay within 7 days, it would consider taking recovery action such as using enforcement agents, or starting committal to prison or bankruptcy proceedings.
12. Mrs A complained to the Council that it had withdrawn its bankruptcy proceedings against her more than two years earlier and the matter was settled.
13. The Council replied on 25 September saying it had reviewed the account and saw “the notes regarding the bankruptcy petition being dismissed and the liability orders being withdrawn, however as you are liable for this charge the debt remains outstanding.” In its response to my enquiries the Council said it withdrew the liability orders on 25 September 2018 and sent copy bills the same day asking her to arrange payment to clear the £31,600 outstanding balance.
14. Mrs A replied that the liability orders had been withdrawn because she had challenged the liability in 2014. She could not understand why the Council said she was liable.
15. In October 2018, the Council replied that while it accepted the bankruptcy proceedings and liability orders were withdrawn, Mrs A was still liable for the charge unless she could provide evidence confirming she was not liable.
16. As Mrs A did not make any payments the Council sent reminders and then in May 2019, a summons for the business rates years 2013/14 and 2014/15. The Council obtained liability orders in court and passed the account to its enforcement agent. The agent sent a notice to Mrs A stating it would take enforcement action. It appears the Council had already accepted it could not seek to recover 2012/13 because the liability arose more than 6 years earlier, and therefore the debt was “statute barred”, or unenforceable due to delay by the creditor. However, the Council should have recognised that the 2013/14 business rates year was also statute barred.
17. Mrs A complained on 24 June that the liability orders had been withdrawn for Y Street. The Council had agreed in its email in September 2018 the orders had been withdrawn. She said she had depression, and the Council was aware of this.
18. In its response to my enquiries the Council told me that on 24 June 2019, it recalled the account from the enforcement agent and submitted it for write off.
19. The Council replied to Mrs A’s complaint of 24 June on 8 July 2019. It repeated that the Council had noted the liability orders were withdrawn but it said that she still remained liable. The total amount was over £31,000 and it said Mrs A should make an arrangement to pay or it would take further action. The Council’s response did not appear to have recognised that:
• it had started the billing and recovery process again in 2018,
• it could not pursue recovery action regarding 2012/13 and 2013/14 as these years were statute barred,
• it had recalled the debt from its enforcement agent and passed it for write off,
• Mrs A said that she suffered from depression so the Council should have considered if she was vulnerable.
20. Mrs A complained again in July 2019. She said the Council did not understand the sequence of events or legal issues regarding the liability orders being withdrawn, and confused the issues regarding her two properties. She asked the Council to respond through its complaints procedure.
21. The Council acknowledged Mrs A’s complaint and said it would respond by 8 August 2019. However, it did not respond as it should have done. In its response to my enquiries, the Council accepts that this was poor complaint handling.

Business rates for X Road

22. The Council made Mrs A liable for business rates for X Road in 2015. It sent a bill and reminder but Mrs A did not pay. It sent a summons in July 2015 adding costs of £175. The Council obtained a liability order. Mrs A says she did not receive the summons or liability order. The Council later sent the account to its enforcement agent, but Mrs A did not pay.
23. The Council also sent a bill regarding 2016/17. In April 2016 Mrs A applied for Small Business Rates relief, but the Council refused. As Mrs A did not pay, the Council sent a summons. The Council obtained a liability order in June 2016. It sent the account to its enforcement agents. They returned the account in February 2017 as Mrs A did not pay. In March 2017 the Council reviewed the accounts and agreed to apply Small Business Rates relief. This reduced the amount outstanding to approximately £2400, including the summons costs of £350. However, Mrs A did not make payment or an arrangement.
24. In October 2018 the Council wrote to Mrs A regarding the business rates arrears of £2400 for X Road. It gave a breakdown of the account.
25. Mrs A replied she thought the tenants were liable because the lease continued until 2017. She asked if the Treasury Solicitor had issued a notice “disclaiming the lease”. This notice confirms the Crown has renounced its claim to the assets of a dissolved company, including, as in this case a commercial lease. This meant that Mrs A, as the freeholder of the property, could be deemed liable for business rates from the date the Solicitor stated.
26. The Council replied that the Treasury Solicitor had disclaimed the lease in April 2015. Therefore, it had made Mrs A liable for business rates from April 2015.
27. Mrs A made an arrangement to pay the arrears for X Road over seven months. She made five payments. However, in April 2019 she wrote to the Council to question the summons costs of £350. She said that the court had set aside liability orders for the property had been. She thought the lease had continued until 2017 and she did not know the Council had obtained liability orders. She asked for a copy of the notice of disclaimer.
28. The Council replied that it obtained two liability orders in 2015 and 2016 and this was after the lease had been disclaimed by the Treasury. It sent a copy of the notice of disclaimer. In May 2019 the Council passed the account to its enforcement agent.
29. In June 2019 Mrs A complained the Council had no legal authority to pursue business rates for X Road because she had not received the notice of disclaimer or the summonses. She stated that she was depressed.
30. The Council responded in July 2019. It stated that it had explained why Mrs A was liable . It said it would take recovery action if she did not pay or make an arrangement. It did not respond regarding Mrs A's point that she was depressed.
31. Mrs A complained in July 2019 about the liability for X Road as part of her complaint in paragraph 22. But as noted above, the Council did not reply.
32. In January 2020 the enforcement agent passed the account back to the Council as it had failed to collect the outstanding arrears of £685. The Council wrote to Mrs A and warned that it could take committal action, requiring her to attend court, if she did not pay or arrange to pay. This could lead to imprisonment.

Analysis

33. In its response to my enquiries the Council has confirmed that it has written off the full business rates debt for Y Street as the majority is now statute barred, the liability having arisen over 6 years ago. I consider the Council was at fault because it did not recognise this until 9 months after it reissued bills in September 2018. It should not have sought a liability order for 2013/14 or passed this part of the account to its enforcement agents.
34. The Council told Mrs A it would refer the arrears of over £31,000 to its enforcement agent and said it could seek recovery via bankruptcy or committal proceedings. But it appears that the Council could take recovery action regarding only one year, 2014/15. Therefore, this was fault by the Council. I consider this caused injustice as Mrs A was distressed by the Council’s threats of enforcement action for a higher amount when part of it was not recoverable. She was also put to time and trouble because the Council should have considered her complaints properly at an earlier stage.
35. The Council did not apparently advise Mrs A that it was considering, and then decided to write off the arrears for Y Street, and its response of 8 July 2019 stated it would continue to seek recovery. This was fault.
36. The Council failed to respond to Mrs A’s stage two complaint of July 2019. This was fault.
37. I find the Council also failed to consider whether Mrs A was vulnerable in accordance with its policy on vulnerability. Mrs A stated she was depressed in June 2018, but the Council did not respond and continued to pursue recovery, or threaten enforcement action for both accounts. Mrs A also pointed out that she had advised the Council previously about her illness in 2014, so it was aware. The Council accepts it received this information in 2014 but did not note it on Mrs A’s accounts. While I cannot say whether the Council would have changed how it sought to recover rates that were due if it had considered Mrs A’s evidence of her illness, I find the continued lack of response caused her frustration and anxiety.
38. I have considered the Council’s action regarding recovery of rates for X Road. Mrs A was aware of the arrears from at least 2016 but did not make an arrangement to pay until October 2018. I have not found fault regarding the Council’s actions to seek recovery of this account until July 2019 when it failed to note Mrs A said she was depressed, it then also failed to respond to her stage two complaint.
39. I note the Council said it would take committal proceedings in January 2020 regarding X Road, when the enforcement agent returned the account. It appears the Council had not considered her vulnerability and it would likely not have been proportionate for the Council to commence committal proceeding for the arrears of £685 for X Road. Therefore, the Council should not have sent a notice warning of potential committal proceedings. I consider this was fault causing injustice because Mrs A was distressed by the continued threats of recovery action.

Agreed action

40. I recommended that within 6 weeks of my decision the Council:
• Apologises to Mrs A for the faults I have identified
• Pays Mrs A £150 to acknowledge the distress caused and her time and trouble.
• Reminds officers to note information received regarding potential vulnerability and to consider it before taking recovery action.
41. The Council has agreed to my recommendations.

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Final decision

42. I found fault by the Council and recommended remedies which it has agreed. I have completed my investigation and closed the complaint

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Investigator's decision on behalf of the Ombudsman