LGO calls on council to pay £25k after man with mental health problems bankrupted

The Local Government Ombudsman has recommended that a local authority pay £25,000 to a man with mental health problems who the council had bankrupted.

Torbay Council took proceedings against the debtor (‘Mr Castle’) over a council tax debt of £2,248. He complained to the LGO that the local authority had failed to have proper regard to his personal circumstances, including his mental health.

In her report the LGO, Dr Jane Martin, acknowledged that Torbay had had difficulties engaging with Mr Castle. It was known that he did not open his post, which was left to accumulate over a long period.

None of the council’s officers visited Mr Castle at his home. However, the LGO said a bailiff had noted warning signs that might reasonably have alerted the council to the possibility that the debtor was unwell.

The Ombudsman said she accepted that Torbay had a duty to its taxpayers to try to recover money owed to it. Dr Martin also recognised that, having obtained liability orders and having tried to collect its debts through the use of bailiffs, the council was “short of options” as to how it could collect the money it was due.

But she added: “It is clearly not the case that bankruptcy should never be contemplated, but the consequences bankruptcy can impose upon a debtor are severe and in selecting options for recovery the impact on the individual debtor should be taken into account.”

The LGO said that in making decisions about debt recovery, she expected that council officers should make reasonable efforts to contact the debtor in person.

Dr Martin concluded that the council had not followed due process in making Mr Castle bankrupt. First, she found that the council had failed to document its decision making in respect of the recovery action by way of bankruptcy.

“I expect that decisions about debt recovery should be recorded with evidence that the decision maker is satisfied that the debtor can adequately defend themselves against the council’s actions,” the LGO said, adding that Mr Castle’s payment history alone was not grounds for Torbay to conclude he was able to do so on this occasion. “Once the process server reported that he had doubts about Mr Castle’s health, the council should have conducted a review of the case file in light of that information and that review should have been documented.”

The LGO also concluded that the council failed to reconsider its decision to pursue bankruptcy when information came to light that Mr Castle might be considered suicidal.

Dr Martin decided that had Torbay’s failings not occurred, the council would not have continued with the bankruptcy proceedings and Mr Castle would not have incurred £24,000 in costs associated with that action.

The LGO recommended that Torbay issue a formal apology to Mr Castle and pay him £25,000 in order to put him in the position he would have been in had no maladministration occurred.