QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT
B e f o r e :
| THE QUEEN ON THE APPLICATION OF COMNINOS
|BEDFORD BOROUGH COUNCIL
|MR S FIELD
||(FIRST INTERESTED PARTY)
|MR M GOUGH
||(SECOND INTERESTED PARTY)
||(THIRD INTERESTED PARTY)
|MR P CARTER
||(FOURTH INTERESTED PARTY)
||(FIFTH INTERESTED PARTY)
|LOCAL SUNDAY NEWSPAPERS (NORTH) LIMITED
||(SIXTH INTERESTED PARTY)
Smith Bernal Wordwave Limited
190 Fleet Street London EC4A 2AG
Tel No: 020 7404 1400 Fax No: 020 7831 8838
(Official Shorthand Writers to the Court)
MR JAMES GOUDIE QC (instructed by Bedford Borough Council) appeared on behalf of the DEFENDANT
MR PETER OLDHAM (instructed by Peter Ruck Partners, EC4A 3JB) appeared on behalf of the SECOND INTERESTED PARTY
Friday, 24 January 2003
Crown Copyright ©
MR JUSTICE SULLIVAN:
"It is the belief of Stewart Lister that the Council should not be taking the action that it is taking as it was wrong for the Council to fund and take action on behalf of any political party."
There followed two articles in the Bedfordshire on Sunday on 28 May and 11 June 2000, both of which were highly critical of the council. The latter article included the following:
"Tory election agent Stewart Lister said 'I am relieved the council is no longer planning to spend taxpayers money on aiding and abetting a political party. If anyone was to have brought the case it should have been the Lib Dems."
"As the Committee is aware, senior officers in this Council have suffered a number of personal attacks in the local press in recent years. This was particularly evident in respect of the former Chief Executive, Laurie Gould, who, up until his retirement, suffered what seemed to be an ongoing press campaign against him.
"As the Head of the Paid Service it is my duty to advise the Council that it has a duty of care to all its employees (including its most senior managers). There is nothing in the contract of employment of any Council officer which allows for personal attacks through and by the local press when the officer is undertaking his/her duties on behalf of the Council. Indeed, council employees should be protected from personal attacks related to their work for the Council and in carrying out the policies of the Council. If there are any issues which relate to any failure or wrongdoing by a Council officer they should be dealt with through the Council's disciplinary procedure - not through the press who may wrongly influence this process."
Under "Current Issue" the report said:
"I have personally suffered regular targeting by the press on various issues which do not relate to any failure or wrongdoing on my part and these attacks are thus unjustified and totally unacceptable. The latest incident, tabled as a proposed press release by Bedfordshire on Sunday, appears to be quite clearly a serious libel, not only in respect of myself but also in respect of my legal staff. I am not prepared to accept this and thus, in consultation with Group Leaders, I have authorised legal opinion be sought from specialist defamation Counsel. Depending on the outcome, there could be appropriate legal action, the cost of which is yet to be determined but would be a charge on the Contingency Provision, further details relating to this will be tabled at the meeting."
The committee was asked to ratify the action that had been taken to date. The agenda item was accompanied by a further report containing supplementary information. That annexed a copy of both the press release and the full text of counsel's advice and said:
"Counsel advises that Members of the Executive Committee should read the full text of his advice before making a decision ... "
Under "Summary of advice from Counsel" the supplementary information continued:
"The Council does have a legal power to finance action, taken by its employees, in respect of defamatory/libellous remarks made about them in respect of their work for the Council. The relevant legal power (as advised by Counsel) is Section 111 of the Local Government Act, the relevant section being 'calculated to facilitate or conducive or incidental to the discharge of any of the Council's functions'. Counsel says that it can be stated that this action would maintain staff morale and efficiency in ensuring that they (staff) felt more secure from any attacks in the paper generated as a result of the performance by them of their duties as employees.
"The duty of care of an employer to an employee is currently evolving under case law as more and more employees are taking action against employers who fail to provide a safe and healthy environment in which they work. Counsel advises that the Council's decision whether or not to take action in this instance should be based on the employer's duty to take reasonable steps to protect the health of its employees (including protecting employees from unreasonable levels of stress). Counsel does not advise that the decision should be influenced by whether or not employees could have a legal case against the Council if it failed to act in this case. In essence, the Committee's decision, under duty of care, should be based on its position as a good employer, seeking to help protect employees from undue stress levels."
The supplementary information summarised counsel's advice as to the prospects of success and dealt with the question of costs:
"Counsel advises that costs relating to an action could amount to £100,000 (Council share being £50,000). If the employees' action wins then the Council would be able to recover up to 75% of its borne costs, whilst if the employees lost, Council would bear not only its own costs, but up to 75% of the other parties costs. Counsel mentions that if the action is successful, the Council could seek to recover any net costs (not recovered from the defendants) from any damages awarded to the employees (by prior agreement)."
"Mr Field and Mr Gough both hold statutory positions in the Council (Head of Paid Service and Monitoring Officer respectively) and both officers, naturally, consider that their integrity and reputation are essential in order to undertake their duties. Both officers consider that the recent press release/articles undermine their positions and Mr Gough has written to the Chief Executive enquiring as to what action the Council is going to take, under the duty of care, in respect of this situation."
Under the heading "Decisions for the Committee relating to future action" a number of questions were posed:
"(a) Do Members, in principle, support the policy that the Council should take action to protect Council officers from personal attacks through the press/media under the duty of care whilst properly carrying out their duties for the council?
"(b) If so, given the advice of Counsel (regarding the powers to act, the likely costs and also the estimated chance of winning a legal action) and also taking into account the other relevant factors outlined above, are the Council prepared to authorise the financing of legal action to be taken by officers to protect themselves from defamatory statements made by the press and others?
"(c) If so, the Committee is requested to authorise that the costs of preparing the relevant actions be financed from the Contingency Provision and that a further report is tabled at the meeting on 21 June 2000 on the proposed actions to be taken on the basis that:
"(i) employees agree that, at each stage, the Executive Committee be kept informed of the situation;
"(ii) employees agree that, where the Council is paying the costs, no individual action by themselves relating to the proceedings can be taken without the approval of the Executive Committee;
"(iii) employees agree that if the legal action(s) are successful any unrecovered costs by the Council can be recovered from any damages paid to the employees."
"My view with regard to s111 is more optimistic. The courts have held that actions which are for the maintenance of general good industrial relations are within the ambit of this provision: see for example R v GLC ex parte Westminster CC 27.12.84 and R v Eden DC ex parte Moffatt 24.11.88. Most recently the case of R v DPP ex parte Duckenfield  2 All ER 873 DC decided that a Police Authority (governed by s111 of the 1972 Act) was able to fund police officers who wished to take judicial review proceedings against the Attorney General, on the basis that this could reasonably be considered to be ancillary to the maintenance of an efficient and effective police force ...
"In my view the proposed funding by the Council of the Employee's actions would almost certainly be found by a Court (if the matter were ever challenged) to be
"'calculated to facilitate or conducive or incidental to the discharge of any of [the Council's] functions'
"in that it would maintain staff morale and efficiency in ensuring that they felt more secure from attacks in the Paper generated as a result of the performance by them of their duties as Employees. Accordingly, I think the Council can fund the proposed actions, although whether it wishes to do so is as a separate issue."
"I am of the view that the Council has the power to fund the proposed actions and that it would be reasonable for it to do so. I do not consider that it is obliged to do so and I do not think the decision should be taken on the basis that there is any realistic prospect of the Employees (as matters stand today) being able to sue for damages if such funding is not provided."
"(2) That the policy of the Council taking action to protect Council Officers from personal attacks through the press/media under the duty of care whilst properly carrying out their duties for the Council be approved.
"(3) That in the light of Counsel's advice and taking account of other factors outlined in the report now submitted, the Council financing of legal action to be taken by Officers to protect themselves from defamatory statements made by the press and others hereby be authorised.
"(4) That the cost of preparing the relevant actions being financed from the Contingency Provision be authorised and that a further report be tabled at the next meeting of the Committee on the proposed actions to be taken on the basis that:
"(i) employees agree that, at each stage, this Committee be kept informed of the situation;
"(ii) employees agree that, where the Council is paying the costs, no individual action by themselves relating to the proceedings can be taken without the approval of the Executive Committee; and
"(iii) employees agree that if the legal action(s) is/are successful, any unrecovered costs incurred by the Council can be recovered from any damages paid to the employees."
" ... pursuant to section 111 of the Local Government Act 1972 the Council being satisfied that the proposed funding of the Employees Defamation Action is calculated to facilitate or be conducive or incidental to the discharge of the Council's functions in relation to the Employees in that it would maintain staff morale and efficiency in ensuring that they felt more secure from attacks in the Press generated as a result of the performance by them of their duties as Employees."
Clause 3.1 of the agreement provided that:
"The Council and the Employees agree that the Council will finance the Employees Defamation Action against the Bedfordshire on Sunday newspaper (in its appropriate legal entity) and Stewart Lister."
The terms of the agreement included clause 3.2.1, under which:
"The Employees agree that the Council will have full Conduct of the Defamation Action which will be in the name of the Employees and for this purpose the Employees hereby assign their rights as litigants to the Council."
"I considered it in the interests of the Taxpayer to ensure the efficient running of the Council and facilitate the future recruitment of senior management."
Recognising that this was an unusual decision, Mr Harris, the council's then Director of Finances and Resources and its Statutory Chief Financial Officer, sent the claimant copies of all the papers tabled at the meeting on 7 June and, together with Mr Field, met with the claimant and a Mr Williams of his firm, Deloitte and Touche, on 9 June to discuss this (and other) matters. The libel proceedings were served on the fifth and sixth interested parties on 9 October 2000.
"to scrutinise the merits of the employees' case, before the Borough is possibly beset with paying a very hefty balance of uninsured costs, understood to be estimated at £400k if the matter proceeds to trial."
Having obtained confirmation from Mr Harris as to the council's arrangements for obtaining legal advice, the claimant replied to Councillor Hare on 12 November saying that he was satisfied, from the information provided by the council, that the necessary processes were in place for ensuring that it received independent legal advice on the issue relating to the employees' legal action. The letter stated that the claimant had subsequently received a copy of counsel's opinion, obtained by the council, which supported his view. He did not, therefore, intend to take any further action.
" ... make provision for or in connection with conferring power on relevant authorities ... to provide indemnities to some or all of their members and officers."
Dr Whitehead said that the issue of indemnities was to be further discussed within government and with the Local Government Association, that a draft order would be prepared, and that local authorities and other interested stakeholders would be invited to respond to a forthcoming consultation paper. Although making it clear that nothing was "set in stone", he said that the government was:
" ... minded to propose to prohibit authorities from indemnifying members or officers for the cost of taking legal action for slander or libel. We are content that authorities should be able to provide indemnities to individuals against the costs of defending such actions, but we do not believe that individuals should be funded at public expense to bring proceedings against a third party. That would risk, among other things, an increase in litigation, and it could stifle legitimate public debate."
(1) There was no power for a local authority to support a defamation action brought by an officer of the authority.
(2) In taking its decision on 7 June 2000, the defendant had taken account of irrelevant matters; alternatively, failed to consider relevant factors.
(3) Its decision was, in any event, irrational in the Wednesbury sense.
In the light of the evidence filed by the defendant in response to the claim, the claimant did not pursue grounds (2) and (3), relevancy and irrationality. At a very late stage, an application was made to amend the claim to add a contention that, on its true construction, the agreement dated 22 June 2000 did not give the officers an indemnity in respect of any liability for the costs of the fifth and sixth interested parties. After some discussion and on reflection, Mr Faulks withdrew that application, thus leaving two issues for consideration:
(1) Did the defendant have power to grant an indemnity to the three officers in respect of the costs of their libel proceedings?
(2) Should the court refuse to grant any relief to the claimant on the basis that there was undue delay in making the application for judicial review and, if relief was now to be granted (after huge costs had been incurred in the libel proceedings) it would cause substantial hardship to the three officers concerned? See section 31(6) of the 1981 Act.
Submissions and conclusions
"From my perspective as the Audit Commission's appointed auditor to Bedford Borough Council, there have been two key issues uppermost in my mind throughout my consideration of the Council's actions in connection with the libel case. I will deal with these in turn.
"First and foremost, the Council's officers had sought Counsel's opinion on whether the Council had the legal power to provide the financial support for the libel action before it put forward any options to members. On this basis, I decided that I would not seek my own legal advice at that stage. I would have done so if the Council had not sought independent legal advice or if I had reasons to doubt the legal advice received based upon my own legal knowledge or past experience. Moreover, it is not my role to challenge the legality of every substantive decision on the part of the Council. The Audit Commission's Code of Audit Practice is absolutely clear on this point. My role is to ensure that the Council has adequate arrangements in place to ensure that it has the legal powers to engage in transactions which could have significant financial implications. On this occasion, the Council had not simply relied on its internal legal advisers but sought, received and considered an independent legal opinion on this specific matter. I was therefore content with the position at that stage.
"Secondly, the decision to provide the support was a democratic one, with members being provided with a full transcript of the Counsel's opinion on which to make their judgment."
Having referred to the correspondence with Councillor Hare and to the complaints made by electors following Gray J's judgment, the claimant says this:
"At that stage I decided that it would now be appropriate to obtain my own legal opinion on whether the Council had the legal power to support the libel action in view of the [electors' complaints], the heightened public interest in this matter and the fact that it was clear to me that there was a distinct likelihood of formal questions and objections to the Council's accounts for 2001/02."
The claimant's witness statement emphasises the degree of public concern about the case and refers to the adjournment debate in the House of Commons.
"Auditors do not act as a substitute for the audited body's own responsibility for putting in place proper arrangements to ensure that public business is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for, and used economically, efficiently and effectively."
Paragraph 39 of the Code emphasises the importance of the arrangements put in place by the audited body:
"Auditors should consider whether the audited body has put in place adequate arrangements to ensure the legality of transactions that might have significant financial consequences. Auditors should meet this responsibility by reviewing and, where appropriate, examining evidence that is relevant to these arrangements."
Similar advice is contained in paragraphs 11 to 13 of the Commission's "Statement of Responsibilities of Auditors and Audited Bodies". In the light of this advice, it was submitted that it was reasonable for the claimant not to question the independent legal advice received by the council until considerable public disquiet had manifested itself after the libel judgment.
"In carrying out this responsibility, auditors should take reasonable steps to inform themselves of:
"(a) transactions that are unusual or of questionable legality and which might have significant financial consequences;
On any basis, the executive committee's decision on 7 June 2000 was an "unusual transaction ... which might have significant financial consequences", whether or not it was of "questionable legality". The decision was specifically drawn to the claimant's attention because of its unusual nature. Thus the claimant had an opportunity well before the libel proceedings were commenced, if he was in any doubt about this most unusual transaction to raise that doubt with the council. On his own evidence, he did not do so, even on the most informal basis.
"Without prejudice to any powers exercisable apart from this section but subject to the provisions of this Act and any other enactment passed before or after this Act, a local authority shall have power to do any thing (whether or not involving the expenditure borrowing or lending of money or the acquisition or disposal of any property or rights) which is calculated to facilitate or is conducive or incidental to the discharge of any of their functions."
Section 112(1) provides:
"Without prejudice to section 111 above but subject to the provisions of this Act, a local authority shall appoint such officers as they think necessary for the proper discharge by the authority of such of their or another authority's functions as fall to be discharged by them."
Section 111(2) provides:
"An officer appointed under subsection (1) above shall hold office on such reasonable terms and conditions, including conditions as to renumeration, as the authority appointing him think fit." (my emphasis)
It is not in dispute that such terms and conditions may be contained in the officer's initial contract of employment or they may subsequently be incorporated, whether by formal amendment of the contract of employment or otherwise. Furthermore, the claimant either expressly accepts, or does not dispute the following propositions:
(1) The appointment of staff is a function of a local authority, see section 112(1) of the 1972 Act.
(2) Maintaining an efficient administration and the preservation of good relations with employees are themselves functions of a local authority, see R v Broadland District Council, ex parte Lashley  LGR 708 QBD and  LGR 264 Court of Appeal.
(3) There may be circumstances in which it is lawful under section 111(1) for some form of indemnity to be granted to an employee, see Burgoine v Waltham Forest London Borough Council  95 LGR 520.
(4) Such an indemnity may be granted in relation to the costs of litigation. It may be justified under section 111(1) as being incidental to the engagement of officers, the preservation of good relations with them, and maintaining an efficient administration, where the proceedings are "defensive in nature", see R v DPP, ex parte Duckenfield  1 WLR 55, and R v Westminster City Council, ex parte UMPO  LGR 611.
(5) Provided the proceedings are "defensive in nature", it makes no difference whether the officer is a claimant or a defendant, see Duckenfield where the officers were claimants in judicial review proceedings against the DPP who had refused to exercise his statutory power to take over and discontinue private prosecutions against them.
"There are, however, features of a local authority which may be regarded as distinguishing it from other types of corporation, whether trading or non-trading. The most important of these features is that it is a governmental body. Further, it is a democratically elected body, the electoral process nowadays being conducted almost exclusively on party political lines. It is of the highest public importance that a democratically elected governmental body, or indeed any governmental body, should be open to uninhibited public criticism. The threat of a civil action for defamation must inevitably have an inhibiting effect on freedom of speech."
Having reviewed a number of authorities and referred to "the chilling effect" of the threat of libel proceedings, Lord Keith said on page 549:
"I regard it as right for this House to lay down that not only is there no public interest favouring the right of organs of government, whether central or local, to sue for libel, but that it is contrary to the public interest that they should have it. It is contrary to the public interest because to admit such actions would place an undesirable fetter on freedom of speech."
At page 551 he referred to the fact that the publication of defamatory matter concerning a local authority was likely to reflect also on individual councillors or officers and said that:
"the prospect of actions for libel at their instance also afforded some protection to the local authority."
Mr Faulks submitted that if local authorities were permitted to fund libel proceedings brought by officers, this important rule of public policy could be easily circumvented. Since a council can act only through a human agency, virtually any statement which is defamatory of a council will also be defamatory of one of its members or officers.