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Annual Report of the Ombudsman 2004

Chapter 3 - North Tipperary County Council - Unreasonable Use of Statutory Powers

North Tipperary County Council

Unreasonable Use of Statutory Powers

I received a complaint against North Tipperary County Council regarding the seizure and sale of private property, which belonged to a third party, from a hotel under the Local Government Act, 1941 following the non-payment of rates by the hotel proprietor.

The rates, including arrears, amounting to £13,612 were due to the Council in May 2001 from the hotel. Despite the Council’s efforts, over a long period, to recover the rates through the normal statutory procedures, the hotel failed to make any significant payments. Accordingly, the hotel was advised that the Council intended to pursue collection of the full amount through the procedures available to it under legislation. The hotel was put on notice that the Council proposed to proceed to levy the rates by distress.

As the rates were not paid by the due date, the occupier was served with a notice, under Section 59(2) of the Local Government Act, 1941, advising him that if the outstanding rates were not paid within 14 days, it was the Council’s intention to levy the amount in question under the 1941 Act. As the occupier did not respond, the Council proceeded to seize goods from the hotel on 3 July 2001. Some of the goods seized belonged to my complainant, an innocent third party, and not the hotel proprietor. These included a pool table, a pinball machine, a twin sit-down motor bike video game and two upright video games. The complainant estimated the net book value of these goods at between €5,000 and €7,000.

These goods were later sold at auction by the Council on 19 July 2001 despite the fact that the complainant had advised the Council, by phone on 18 July and, by fax on 19 July 2001, prior to the auction, that he, and not the hotel, was the legal owner of the property.

The Council informed me that the relevant legislation clearly allows for the seizure of any goods found on the premises, whether owned by the occupier or not. It also pointed out that it acted within its rights to sell any property seized from the premises and that any grievance of a third party should be taken up with the occupier of the property. Finally, the Council advised me that if it was to distinguish between property actually owned by the ratepayer and that owned by third parties, the situation would disintegrate into a practical and legal mess, rendering the whole action ineffective.

It is my understanding that Section 59 of the Local Government Act, 1941 is not widely used by local authorities, but when used, it is extremely effective in achieving collection. It is clear that the Council is empowered, if the due date for payment is not met, to levy the sum, together with costs, by the distress and sale of any goods (whether belonging to the person liable or to anyone else) found on the premises. Under the legislation, where the goods of a person, other than the defaulter, are seized on the premises of the defaulter, the true owner of the goods so seized may claim indemnity from the defaulter.

At the outset, it has to be said that the Council has the statutory powers to seize and sell goods under the relevant legislation and it followed the required statutory procedures in this case. Notwithstanding this I had a concern that the Council’s actions caused distress to a third party, who was completely innocent and simply, by chance, had his property on the premises when the Council called to impound goods. However, my main concern was that the Council, knowing the goods belonged to a third party, proceeded to sell them. I was particularly concerned about the Council’s apparent abuse of its power in relation to the complainant’s property and the Council’s failure to return the goods when advised they did not belong to the hotel proprietor.

The Council’s claim, that the complainant’s only recourse was to pursue the proprietor for his loss, was unacceptable to me. I considered that, given that the Council, with all its resources, failed to secure legitimate payment from the hotel proprietor, the likelihood of a private individual, with limited resources, being successful using this route was rather remote. However, the core issue, from my perspective, was that the Council had notice, in writing, regarding the ownership of the property, prior to the commencement of the auction and it still proceeded with the sale of the complainant’s goods.

In this regard, the Ombudsman’s Guide to Standards of Best Practice for Public Servants states, inter alia, that:

Dealing “fairly” with people means -

• accepting that rules and regulations, while important in ensuring fairness, should not be applied so rigidly or inflexibly as to create inequity;
• avoiding penalties which are out of proportion to what is necessary to ensure compliance with the rules.

I was also concerned about the use of the draconian power of seizing third party goods. These powers do not even exist in legislation relating to the powers of the Revenue Commissioners. With the exception of cases of co-ownership, the Sheriff is not normally entitled to seize property which belongs in whole or in part to persons other than the execution debtor. Where property is seized by the Sheriff and it subsequently transpires that the property was owned by a third party, the Sheriff may be liable in damages to that third party for conversion.

I did not accept the Council’s comments about rendering the whole action ineffective if the Council was to distinguish between the property of the owner and that of a third party. This view is based on the observed experience of the Revenue Sheriff. Furthermore, I felt that the manner in which the Council exercised its discretionary power in proceeding to sell the complainant’s property was an abuse of power amounting to maladministration for which redress should be offered. I advised that the level of redress was a matter for the Council, however, I indicated that that it should, at least, off-set the impact the Council’s actions had on the complainant.

The Council reviewed the case and it indicated that it was willing to pass on the full proceeds of the sale of the goods at auction, amounting to €1,637.96, to the complainant on a without prejudice basis in order to finalise the matter.

I noted that the complainant had made contact with the Council on a number of occasions by phone prior to the auction. This should have put the Council on notice that there was a potential problem and, arguably, it may not have been fair and reasonable to proceed in any event to dispose of the goods at auction when the Council was aware that the complainant was claiming ownership of the goods. I asked the Council to reconsider the level of redress it was prepared to offer. The Council finally agreed to make a payment of €5,000 to the complainant on a without prejudice basis, to provide for his financial loss. This offer was acceptable to me and to the complainant.

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