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London Borough of Tower Hamlets (19 001 731)

Category : Housing > Council house sales and leaseholders

Decision : Upheld

Decision date : 18 Nov 2020

The Ombudsman's final decision:

Summary: The Ombudsman finds the Council was at fault in its consideration of Mr B’s claim for legal fees. The Council then refused to pay a remedy previously agreed for delays in handling Mr B’s Right to Buy application. The Council has agreed the recommended remedy.

The complaint

  1. The complainant, whom I shall refer to as Mr B, complains the Council has not paid redress as promised for severe delay in its handling of his Right to Buy application. It has also stated it will not cover Mr B’s legal fees.

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The Ombudsman’s role and powers

  1. 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)
  2. 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)

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How I considered this complaint

  1. I have discussed the complaint with the complainant and considered the complaint and the copy correspondence provided by the complainant. I have made enquiries of the Council and considered the comments and documents the Council provided. Mr X and the Council had 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

  1. Mr B made a previous complaint to the Ombudsman about the way the Council handled with a Right to Buy (RTB) application. The Ombudsman found there was fault by the Council. In recognition of delays on its part, the Council later made a discretionary offer to pay redress of £6166 because Mr B had to pay rent for longer than he should have done. Mr B complained to the Ombudsman that the Council should pay more than this. But the Ombudsman did not find fault by the Council.
  2. The Ombudsman also found there was no fault in the Council’s decision not to pay for legal fees that Mr B said he had paid for making complaints to the Council and the Ombudsman. Mr B had not provided evidence of the fees charged or payment. The Ombudsman is a free service and generally it is not necessary to pay for legal assistance to make a complaint to him.
  3. However, the Council had invited Mr B to provide evidence of his costs and said it would consider this. Therefore, in June 2018 Mr B sent the Council a copy of a solicitor’s receipt for services which stated he had paid £3200 fees in November 2016. The Council thought the receipt may not be genuine and it investigated the matter. The Council was concerned, amongst other things that:
    • The firm of solicitors had ceased operating 6 months before the date of the receipt according to the Solicitors Regulatory Authority (SRA).
    • The description of the services the solicitor provided was vague with no detail.
    • The amount charged was excessive.
    • The solicitor was not registered for VAT.
    • The principal solicitor had restrictions placed on him by the SRA.
  4. In September 2018 the Council’s leasehold services department interviewed Mr B because it considered Mr B may be making a false claim for expenses. It pointed out the concerns it had about the validity of the receipt. The Council says that Mr B could not explain the discrepancies raised and accepted the Council would not reimburse the legal fees.
  5. However, Mr B says he did not accept the Council would not pay the legal fees. Instead he thought the Council could not pay due to the lack of VAT. He also says the Council officer assured him the RTB remedy already agreed was not affected by the problem with the legal fees.
  6. In December 2018 Mr B requested the Council paid the £6166 it had calculated. He complained about the Council’s delay in paying this as he had accepted it in September 2018. He asked why the Council’s offer did not include the legal fees.
  7. The Council replied in January 2019. It said that it had examined solicitor’s receipt and found there was no VAT registration and the description of the service provided was vague. The Council enquired about the solicitor with the Solicitors Regulation Authority (SRA) and found that the solicitors had voluntarily ceased trading in March 2016. When the Council interviewed Mr B, it said he admitted during the interview he did not expect the Council to reimburse the fees.
  8. The Council explained its duty to be open and transparent in financial dealings and ensure its resources were used appropriately. It said that considering the Council’s time and resources used investigating the questionable receipt, it had decided that the compensation of £6166 was no longer justified. Therefore, it withdrew its offer.
  9. Mr B complained further that the Council had unfairly withdrawn its offer to compensate him for its delays. He said he was disappointed to find out the solicitor had restrictions imposed by the SRA. He accepted the Council had a duty to account for its spending. But he said the Council should compensate him for its delays. He disagreed that he had accepted at interview that the Council would not reimburse the fees. He thought the Council could not pay due to the VAT issue. He said he had provided evidence of the work the solicitors had carried out and there was no dispute regarding this.
  10. The Council replied repeating its original response that it did not consider that it should pay the compensation of £6166 due to the time and resources spent investigating the legal expenses claim.
  11. Mr B complained to the Ombudsman that the Council acted unfairly. The Council interviewed him about the legal fees claim and he had explained he paid in cash, so did not have bank statement evidence of payment. He had not noticed there was no VAT on the invoice until the Council pointed it out. However, he had now found out that the solicitors were never registered for VAT. He had contacted the SRA, who confirmed the solicitor may not need to be registered for VAT. The SRA also said that while the solicitor had some restrictions on him, he could still practice as a solicitor. Mr B said the service the solicitors carried out for him was before the firm ceased operating. In any case he felt the Council should not punish him for a third party’s actions.
  12. The Council said it had made a goodwill and discretionary offer to pay £6166 for its delays. But Mr B had breached its goodwill by effectively making a false claim for legal fees. Therefore, it decided it should not pay the legal fee claim and it withdrew its discretionary offer to pay £6166.

Analysis

  1. The Council has given conflicting information in its complaint responses and replies to our requests for information regarding its reasons for deciding that Mr B’s legal fees claim was false.
  2. In its first response to my enquiries the Council said that its reasons were:
    • The invoice is dated some months after the law firm was closed down by the Legal Regulator [SRA].
    • The date of the invoice is the same date the invoice was paid.
    • There is no VAT.
    • When the Council spoke to the SRA it advised the company ceased trading on 31 March 2016.
    • Even if Mr B was an innocent party he submitted the invoice for payment.
    • £3,200 in fees appeared excessive.
  3. I questioned the Council’s reasons for its decision as some did not appear valid. The Council agrees that the lack VAT registration was not a reason it took into account as it previously stated. The Council also stated that the fact that the principal solicitor had some restrictions placed on him was not the substantive reason for its decision.
  4. The Council stated that the firm had been closed down by the SRA, but this is incorrect, it had ceased trading. It also appears that there is evidence of an invoice as well as a receipt and they are not the same date as the Council states.
  5. The Council now states the main reason for its view that Mr B’s claim was invalid or potentially fraudulent was that the receipt provided was from a firm that had ceased operations more than 6 months before the date of the invoice. It also considered that the fees were excessive and said Mr B had not provided any evidence of the claimed work carried out.
  6. The Council also said it had spent time and resources investigating the alleged false receipt and therefore it would not pay the agreed remedy of £6166 for the RTB delays. I asked the Council for details and costs of that investigation but it has not provided details, aside from a copy of an investigation report.

My comments on the Council’s decision making on the alleged false claim

  1. As I have indicated above the Council has changed the reasons it relied on earlier and now refers to two main reasons:
    • The solicitor’s firm had ceased operating
    • Excessive charge and vague description of services on the invoice/receipt.
  2. With regard to the firm ceasing operation it does not appear the Council has properly considered Mr B’s point that the services the firm provided were before the firm closed. The solicitor’s letters were sent before the firm closed in March 2016. The firm would still have an expectation of payment for these services despite ceasing operations 6 months earlier. I recommend the Council reconsiders this point.
  3. With regard to the excessive charge and vague description, Mr B says he provided the Council with evidence of the complaint letters the solicitor wrote to the Ombudsman in January and March 2016 which he says gave rise to the fees, in addition to telephone calls the solicitor made. The Council was aware of this complaint, but in its response to me said Mr B provided no evidence of the work. It does not appear the Council properly considered this point. I recommend the Council reconsiders this.
  4. I consider that the Council’s offer to pay redress for the RTB delays is a different matter to the alleged false legal fees claim. The Council made this offer following a previous Ombudsman decision where we found the Council was at fault. I do not consider the Council should use the alleged false claim as basis to withdraw the offer it previously made. The Council has referred to spending much time investigating the matter but has not provided sufficient evidence of this. The only information it gave was regarding the RTB delay calculation and an investigation report. In any case it is the Council’s duty to investigate apparent fraud.

Agreed action

  1. Within 6 weeks of my decision I recommended that the Council:
    • Pays the redress of £6166 that it agreed due to its RTB delays.
    • Reconsiders its decision on the legal fees claim. If the Council decides it should not pay, it should write to Mr B and clearly explain the reasons why.

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Final decision

  1. The Council has agreed to the recommendations I made. I have completed my investigation and closed the complaint.

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Investigator's decision on behalf of the Ombudsman

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