Home > Publications > Selected cases — Parliamentary > Selected Cases and Summaries of Completed Investigations - October 2000 to March 2001 - Case No. C.1426/00
Selected Cases and Summaries of Completed Investigations - October 2000 to March 2001
Volume 4 - 2nd REPORT - SESSION 2001-2002
Chapter 1
HM CUSTOMS AND EXCISE
1. Case No. C.1426/00
Misconceived visit by bailiff
Summary
Mr B complained that at lunchtime on a day in early September 1999, HM Customs and Excise (Customs) erroneously sent a bailiff to his restaurant. Mr B said the bailiff sought, in the hearing of customers and staff, to levy on goods in respect of a value-added tax (VAT) debt which he did not owe. Mr B also complained about the amount of the £100 consolatory payment which Customs offered him in compensation.
Customs apologised for the mistaken visit by the bailiff. The Ombudsman found that the incident had caused damage to Mr B’s reputation as a trader for a time but, on a balance of probabilities, that it had not been the main cause of the failure of a millennium event at the restaurant. Customs offered Mr B £750 compensation for distress and damage to his reputation.
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Full text
1.1 Mr B complained that at a lunchtime in September 1999, Customs erroneously sent a bailiff to his restaurant (the restaurant). He said the bailiff sought, in the hearing of customers and staff, to levy on goods in respect of a value-added tax (VAT) debt which Mr B did not owe. Mr B also complained that the £100 consolatory payment which Customs offered him in compensation was inadequate.
Customs’ response to the complaint
1.2 The Chairman said Customs apologised and accepted unreservedly that the bailiff’s visit had been a mistake but it was by no means clear that there had been any damage or loss caused to Mr B’s business as a direct result. It was not possible for Customs to offer compensation on the basis of what may or may not have happened without firm evidence of loss. To attempt to establish Mr B’s loss, Customs had carried out various checks which had not indicated any loss. These included examining Mr B’s trading pattern to establish whether there had been any marked adverse change in the restaurant’s VAT returns since the incident, but the trading pattern seemed largely unchanged. As far as Christmas and millennium bookings were concerned, records for December 1999 showed an increase in turnover of about 45%. It was impossible to say what this increase might have been in the absence of the bailiff’s visit but over the four-month period September to December 1999, there did not seem to have been the anticipated significant fall in turnover.
1.3 The Chairman added that Mr B had complained that the consolatory payment offered was inadequate. He said that payments were made in circumstances where an individual had suffered an unwarranted intrusion into his/her personal life or worry or distress as a consequence of Customs’ action. Payments ranged from £50-£250 but could exceptionally be as high as £1,000 or even more. He said that Customs had in place a management assurance programme to ensure that bailiffs carried out their duties appropriately and Customs did not believe that Mr B had suffered extreme distress or intrusion. They felt that a consolatory payment of £100 was appropriate. He said that the bailiff’s account of his visit differed from that of Mr B who claimed that during the visit the bailiff had demanded payment and, in the presence of clients (Customs’ emphasis), presented a petition for possession of goods. According to the bailiff, he was met by a female receptionist and told her that he wished to speak to a director in connection with VAT. The receptionist took him to a separate building where he spoke to Mr B and two of his staff. Mr B had been told that, according to Customs’ records, VAT was outstanding. Mr B had said that it had all been resolved with Customs’ local office. The bailiff spoke to the local office and was advised that no debt was due and that he should withdraw, which he did. Mr B also spoke to the local office and an apology was given to him. As the bailiff was leaving, Mr B had asked him to mention to the receptionist that everything had been sorted out, which he did. The bailiff had said that he recalled no customers in the reception/bar area. Customs disagreed with Mr B’s version of events and that he was caused gross distress and embarrassment. Customs had readily conceded their error and the local office had immediately sought to remedy the consequences. The Chairman fully recognised Mr B’s embarrassment and inconvenience and his genuine anxiety about the effects on his business, but was satisfied that the amount offered was fair and reasonable. He was also satisfied that the local office had learned valuable lessons.
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Later developments
1.4 I showed Mr B the Chairman’s reply and there have been subsequent exchanges of correspondence with Mr B and with Customs. I visited the restaurant and held discussions with Mr B and a member of his staff. I also visited the local office for discussions with Customs’ staff there.
1.5 Mr B said that he had worked in the village where the restaurant is located for some 15 years. He employed around 30 staff, mainly part-time. He opened the restaurant in mid-1998 and took over the VAT registration number of the business that formerly occupied the premises and which I call trader W. This had been done on the advice of his former accountant. Mr B now recognised this to have been bad advice. He had queried it at the time but had followed it in good faith and with the agreement of Customs’ local office. His difficulties had stemmed from that.
1.6 Mr B’s assistant said that a red final reminder notice had been received from Customs one day in late August 1999. She had immediately telephoned Customs’ local office who had told her to take no action. Mr B said the bailiff had arrived at about 1pm, a very bad time to arrive at a restaurant, and told the manageress that he was a bailiff. Some customers and staff had overheard their brief conversation. The manageress took the bailiff to see Mr B whose assistant had telephoned the local office immediately. A Customs officer had spoken to the bailiff who then withdrew. Mr B was concerned to maintain staff confidence in his enterprise; he had asked the bailiff to tell the manageress on his way out that the matter had been resolved. This was intended to reassure her and other staff. At the time of the bailiff’s arrival, there had been two customers in the bar area and half a dozen diners. Mr B said that all the customers and at least one staff member had probably overheard. From my visit to the restaurant I accept that was likely. Mr B said he had found the experience quite scary. It was fortunate that he had been there to rescue the situation. It had been difficult to reassure staff that their jobs were safe and their wages would be paid, while retaining the confidence of suppliers that they too would continue to be paid. Customs had faxed a letter of explanation and apology (received at 16:09 hrs that afternoon). Mr B had immediately put a copy on his staff noticeboard to try to reassure staff.
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1.7 Mr B said he had made plans in August to hold special events on Christmas Day and an exclusive event with a dinner party atmosphere to celebrate the millennium (the millennium event) and had begun to advertise them. Customers had expressed interest at first but had then been reluctant to pay in advance. It was very hard to demonstrate a causal link between the bailiff’s visit and the eventual failure of the millennium event. However, Mr B believed that this was because as news of the incident had spread potential customers were cautious of committing themselves as they lacked full confidence in the stability of the business. It looked as if the restaurant was in trouble and was struggling to improve cash flow with advance bookings. The request for advance payment, essential to ensure customers’ good faith and secure supplies, had the effect of reinforcing the doubts some customers then felt. A vicious circle set in and the millennium event had to be cancelled. The menu planned for the millennium event had attracted some 60 expressions of interest, all from existing customers, but they had been slow to pay in advance. The 1998 New Year’s Eve event, charged at one-third of the price, had been viable as, to a lesser extent, had a Christmas Day 1999 event. Mr B emphasised that the restaurant had built up a regular clientele that had expressed interest in a millennium event. He considered that the only rational explanation for their unwillingness to pursue their interest was the bailiff’s visit. Trading during autumn 1999 had otherwise been sound, with no obvious impact from the bailiff’s visit. It was the special events with tickets purchased in advance that had suffered. Mr B said he remained puzzled by the apparent contradiction in Customs’ regretting his distress but then denying there had been any.
1.8 In a subsequent letter to me of 12 September 2000, Mr B added that he understood it was difficult to prove his losses, especially for a new business. However, a great deal of interest had been expressed in the Christmas and millennium events prior to the bailiff’s visit. Some other local restaurants did extremely well at the millennium. He could not think of any other reason for people not wanting to part with deposits apart from the restaurant having been visited by the bailiff and therefore appearing to be in severe financial trouble. He stressed that it had looked as if there was a cash flow problem which he was seeking to resolve by collecting advance payments. Mr B emphasised that the restaurant was situated in a small village and that many of the restaurants in the area used the same suppliers and were frequented by the same customers, “in this business it does not take long for news to travel”.
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Findings
1.9 It is common ground that the bailiff’s visit to the restaurant at lunchtime one day in early September was made in error and that his professional conduct is not in question. As soon as Customs recognised their error, they properly and promptly accepted fault and acted swiftly to issue the written apology which was faxed to Mr B later that afternoon.
1.10 Mr B accepts that he was badly advised in re-using the VAT registration of trader W. The subsequent confusion at the local office led indirectly to Customs’ failure to credit the restaurant with the VAT payments made, but I found no evidence that Mr B had not acted in good faith. The re-use of the VAT registration of trader W, along with the communications failures that occurred within the local office (paragraph 1.2), appears largely to explain, but does not excuse, Customs’ serious and persistent error.
From my visit to the restaurant, I am satisfied that some customers and staff may well have been able to overhear the brief conversation between the bailiff and the manageress. Mr B took quick action to mitigate his loss by seeking to reassure staff and suppliers, but I accept the probability that his reputation with staff, suppliers, and customers suffered for a time. I also accept that this was a particular problem for a relatively new business that was still establishing its reputation. Mr B also made a strong case, which I accept, that he suffered personal anxiety and distress.
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1.12 Mr B says that the millennium event failed as a result of the bailiff’s visit. He says that news of the visit spread among customers who were then reluctant to commit payment some weeks in advance of the event. He pointed to the success of his 1998 New Year’s Eve event and contrasted that with the failure of the millennium event. Customs do not accept this argument saying that an early September visit was too remote from the millennium eve to have had the direct effect that Mr B ascribes to it, an argument I found persuasive. I found too that the price of Mr B’s planned event was well above the normal price range for his restaurant and some three times the price charged for his successful 1998 New Year’s Eve event. There are many external factors that could affect demand for such an event, including the nature and extent of competing attractions. I have noted that not all planned millennium events met their authors’ aspirations. I do not discount the possibility that the bailiff’s visit may have had some adverse effect on demand for the millennium event for a time. However, I cannot safely conclude, on a balance of probabilities, that the bailiff’s visit was the only or even the principal cause of its failure.
1.13 I turn now to redress. The Ombudsman’s guiding principle is that, so far as it is possible, he tries to see the complainant put back into the position he would have been in had the maladministration not occurred. Customs’ initial offer of a £100 consolatory payment was intended solely to compensate Mr B for the personal anxiety and distress he suffered as a result of the bailiff’s erroneous visit. Customs subsequently increased their offer to £200. I found that, as well as suffering anxiety and distress, Mr B had suffered damage to his reputation for a time, and had to act to try and reassure his staff, customers and suppliers. In view of that Customs offered compensation and a consolatory payment in the combined sum of £750. Having regard to payments made by Customs and other departments in other cases that the Ombudsman has investigated, I regard this as fair and reasonable.
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Conclusion
1.14 Customs have apologised for the mistaken visit by the bailiff to Mr B’s restaurant. I found that the incident caused damage to Mr B’s reputation as a trader for a time but, on a balance of probabilities, I did not accept that it was the main cause of the failure of a millennium event. Customs offered Mr B a compensatory payment of £750 for the distress and damage suffered to his reputation which I regard as commensurate with payments I have seen made to other taxpayers and a satisfactory outcome to a justified complaint.
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