Part VII

The policy, the Problems and the solutions

7.1                                      In this Part we first explain what policy considerations govern our analysis of the legal problems and the solutions. We then set out what we see as the legal difficulties, drawing on the preceding Parts, and consider how they might best be addressed. We conclude that some can be resolved or mitigated by agreed practice between local authorities and the insurance industry, and also that a Code of Practice for the conduct of local authority ad hoc inquiries would itself, by helping to promote good quality inquiries, make it less likely that such problems would arise in individual cases. We examine these two non-legislative solutions in more detail in Part VIII.

7.2                                      We also conclude in this Part that the issue of qualified privilege as a defence in defamation may require a legislative solution. We discuss possible legislative solutions in Part IX.

7.3                                      We start by setting out the underlying policies which have informed our analysis.

7.4                                      Publication, in some form, of the inquiry report is desirable to inform the complainants, their families, the local authority constituents and the public at large about what happened, to promote transparency, and to bring about changes in practice. There may be a need to hide the identities of individuals from (wide) public knowledge. There may be a duty to respect confidentiality. These two considerations will legitimately restrict what may be published in the inquiry report.

7.5                                      Publication

7.6                                      When the Society of Local Authority Chief Executives (SOLACE) issued its report on ad hoc inquiries in local government in 1978, it stated that there should be a presumption in favour of publication.[1] It said,

Following any formal inquiry, public or private, the local authority shall accept an obligation to publish a report.

If the inquiry has been public the report shall be published in full. Very exceptionally there may be additional conclusions reached in a public inquiry which are nevertheless reported privately, in which case this report would be withheld from publication.

If the inquiry is private a report, though not necessarily the full report, shall be published. We endorse the relevant Davies proposal:

When an inquiry is held in private it should submit two reports:

(i) a full confidential report to the appointing authority;

(ii) an abridged report which safeguards parties to whatever extent the Chairman and members think necessary, where professional capacity and reputation or disclosure of intimate personal circumstances are concerned.[2]

Copies of the report to be published shall be sent to interested parties before publication.

…

The obligation on local authorities to publish a report shall apply whether or not they accept it or propose to take action on it.[3]

7.7                                      We agree that this should be the presumption. With one caveat relating to the quality of the inquiry and of the report, we cannot see that there is any good reason that some version of the inquiry panel’s findings should not be made available to the public.

7.8                                      The decision whether to publish, and what to publish, should be the authority’s. It is in our view undesirable for the insurer to be able to prevent publication (and thereby avoid liability) purely on the grounds that the report is adverse to the insurer’s interests in the sense of disclosing valid grounds for claims against the local authority.

7.9                                      It is also our provisional view that if the local authority was right to instigate the inquiry, and it has been fairly conducted, then merely publishing the findings of the inquiry should not, as a matter of policy, leave the local authority, or an insurer, vulnerable to a new cause of action for defamation.

7.10                                      An inquiry report should be fair to all interested parties, which includes complainants, their families, and others who might have been similarly affected, alleged perpetrators of wrong-doing, and those with supervisory or managerial responsibility for the alleged perpetrators.

7.11                                      A fairly conducted inquiry should start with an open mind, allow witnesses to tell their full story, hear from all those people with relevant information to give and uncover all relevant documents, allow people a fair chance to respond to allegations made against them, accord evidence appropriate weight, be factually accurate, stay within its terms of reference which have been carefully and clearly defined, and reach conclusions on the evidence heard.

7.12                                      Very occasionally it might be apparent that an inquiry was not well conducted, was unfair, or that the report itself is poor, meaning that it goes beyond its terms of reference, or reaches unsustainable conclusions, or is evidently unfair in some other way. The commissioning authority might become aware of the defects of the report when it is presented to the council for its consideration, prior to any decision being taken on how to react to it. For example, when parts of the report are shown to those criticised in advance of publication, their responses might alert the authority to unfairness or unsustainability.

7.13                                      A statement in a report which is defamatory[4] should not be published unless it is believed to be true, with good grounds for the belief. Therefore, in these unusual circumstances, it might be right not to publish a report or even an abbreviated version of it, because of the potential for serious harm if unfounded criticisms of a person are put into the public domain.

7.14                                      Our provisional view is that, if an inquiry report is fair, it or an edited version of it should usually be published.

7.15                                      We now draw together the legal difficulties which have emerged from the analysis in the preceding Parts.

Admissions of liability[5]

7.16                                      Our provisional view is that the risks of making an admission of liability, in contravention of the insurance contract, could pose a real problem for authorities because the insurer may be entitled to avoid an insurance contract where an admission of liability is made without the insurer’s consent.

7.17                                      This may occur where a member or official of a council makes a public statement admitting liability, with the authorisation of the council but without the insurer’s consent. It may also occur where a council responds to an inquiry report by publishing it. It is not sufficiently clear what kind of act by the council will amount to an admission of liability, especially in relation to its response to an inquiry report.

7.18                                      We provisionally consider that the problem could also arise at an earlier stage in the process for local authorities, namely when deciding what evidence may be given to the inquiry. While the inquiry is taking evidence there is the possibility that a member or an official or other employee, with knowledge of the facts will make an admission of fact to the inquiry, from which liability may follow. If the authority anticipates that the inquiry, even though held in private, will produce a report which is likely to be published, it may be inclined not to make full disclosure to the inquiry panel on the grounds that it fears making an admission of liability, and thereby being in breach of its insurance contract. Part of the difficulty arises because the admission of some facts might amount to an admission of liability.

7.19                                      We would expect the local authority to remain covered by its insurers where the claim is brought on the basis of vicarious liability for its employees, even where relevant admissions were made to the inquiry by the employees, because that is what the insurance is for. However, whether this is in fact the case will depend in part on the construction of the insurance contract and in part on the approach of the insurers.

7.20                                      Admissions of liability by those with authority to make them are a different matter: it seems to us reasonable for the insurer to stipulate in the contract that such admissions should not be made without their consent. It will therefore be especially important to the authority that those officers who might be thought, by virtue of their position, to have sufficient standing to speak for the authority, do not make admissions without the insurer’s consent.

7.21                                      As regards admissions in a published report, our provisional view is that, where the authority has considered the inquiry report and has no grounds to doubt its findings, and it is in the public interest that the report be made public, the authority ought to be able to release it without fear of loss of cover. Insurers have told us it is not their general practice to seek to prevent the publication of reports purely on the grounds that they contain statements or conclusions which might give rise to legal liabilities, and in that sense be contrary to the insurers’ interests. To do otherwise would negate the whole purpose of the insurance which is to provide cover against the risk of unforeseen liability.

7.22                                      However, insurers often conduct their own investigations into the validity of complaints against authorities, and if they conclude that there are no grounds for admitting liability, they may be inclined to see a report which reaches or implies a contrary conclusion as adverse to their interests. They might then seek to rely on the express term in the insurance contract which prevents the authority admitting liability without the insurer’s consent.

7.23                                      We noted at paragraph 3.24 above that an insurer does not have a wholly unfettered discretion as to the circumstances in which it may refuse consent to an admission of liability being made. Its decision must be reasonable in the “Wednesbury” sense, in that the insurer should “form a genuine view as to the appropriateness of settlement or compromise without taking into account considerations extraneous to the subject-matter of the reinsurance”.[6] It may be a problem for the claimant or potential claimant if the insurer’s consent is unreasonably withheld, because it may be harder to pursue a justified claim. It may be a problem for the authority if the insurer’s consent is unreasonably withheld because its freedom to respond to the complaint, and to address the matter openly and transparently, is curtailed. Moreover, there may be a problem for the local authority if the insurer reasonably withholds consent, on the ground that there will be an admission of liability, because again the local authority will be inhibited from addressing the matter openly.

7.24                                      It may well be that insurers’ normal practice is to settle claims at the earliest stage where liability is clear, rather than defending a claim at all costs, but this may not be the practice across the board. For example, while insurers do not, we understand, now adopt a hostile attitude to claims arising out of alleged abuse of children in care, this may not always have been the case when the issue of child abuse was less frequently identified than it is today. It is possible that they might adopt such an attitude to other kinds of claims, particularly newly-emerging issues.

7.25                                      The problems may be summarised as follows:

7.26                                      Is it the experience of consultees that, even though liability may be inferred from an admission of fact, witnesses to local authority non-statutory inquiries are free to give all relevant facts to an inquiry (subject to requirements of confidentiality)?

7.27                                      Is it the experience of consultees that publication of an inquiry report, whether internal or independent, is treated in practice as amounting to acceptance of any findings of fact and conclusions reached in that report, and thus to an admission of liability?

7.28                                      Is it the experience of consultees that inquiry reports are ever withheld from publication for fear that statements in them will amount to admissions of liability?

7.29                                      Is it the experience of consultees that consent to an admission of liability is ever withheld by an insurer in circumstances where the local authority would have wanted to make that admission? If so, we should be interested to know the circumstances.

Waiver of rights[7]

7.30                                      Waiver of the right of confidence in a document or communication may entitle the insurer to avoid the contract because waiver without the insurer’s consent would be a breach of an express term of the contract, and therefore an authority must not waive a right which it has to confidentiality in a communication without the permission of the insurer. This is important because loss of confidentiality may bring in its wake loss of legal professional privilege.

7.31                                      If privileged material is referred to in a public document, privilege in that document will have been waived. Privilege might also have been waived in collateral documents and other parts of the same document if disclosure was partial but misleading. A local authority must be alert to the danger of waiving privilege, as waiver of privilege without the insurer’s consent will put the authority in breach of the insurance contract.

7.32                                      We wish to know whether there is a problem in practice for local authorities in determining what documents may be disclosed to an inquiry without breach of this term of the insurance contract, or in waiving these rights inadvertently and thus losing insurance cover.

7.33                                      We concluded in Part V that the duty to claim public interest immunity is not a right that can be waived by the authority, and therefore not a matter which can lead to a breach of the condition in the contract of insurance which prohibits waiver of rights without consent. The authority will, however, want to keep documents confidential where public interest immunity will or may apply. A question is, therefore, included in relation to public interest immunity.

7.34                                      In consultees’ experience, does the fear of waiving the right to confidentiality which may be claimed by the authority lead to the withholding of documents (and other evidence) from local authority ad hoc inquiries?

7.35                                      Does the fear of waiving legal professional privilege lead to the withholding of documents (and other evidence) from local authority ad hoc inquiries?

7.36                                      Does the fear of disclosing a document which might be subject to public immunity privilege lead to the withholding of documents (and other evidence) from local authority ad hoc inquiries?

7.37                                      In the experience of consultees, has insurance cover ever been lost through waiver of rights to confidentiality, legal professional privilege or through disclosure of a document subject to public interest immunity?

Defamation[8]

7.38                                      We concluded in Part VI that it is difficult for a local authority to know how widely it may disclose a report and claim qualified privilege: the law is currently just not clear enough on this point. This will have important consequences for the public image of local authorities and may lead to a doubly chilling effect if local authorities are loath to publish any report for fear of actions in defamation, not only to avoid legal action in itself, but also for fear of invalidating the authority’s insurance cover. Our questions for consultees are aimed at finding out the extent of the problem in practice.

7.39                                      In consultees’ experience, are inquiry reports ever withheld from publication because of defamatory statements in them? If this has occurred, was it because of fear of an action in defamation, or because of the risk of invalidating the insurance cover, or both?

7.40                                      Equally importantly, if the local authority knew that any report was unlikely to receive the publicity it wished to give to its findings, it may be reluctant to undertake the inquiry in the first place. This could mean that facts which ought to be established might not be; steps which could be taken to make improvements might not be; it could also lead to allegations of cover-ups by the public and frustration on the part of the council.

7.41                                      A further problem follows from the vicarious liability of a local authority for the acts of its employees. For example, if a director of social services criticised council staff in public before an inquiry had concluded, and without authorisation by the council, that criticism could amount to actionable defamation, and the council could be vicariously liable.[9]

7.42                                      Thus, from the point of view of the insurers and of the authorities, there are two main concerns in relation to defamation: (1) avoiding precipitating an action for defamation, especially one which will be hard to defend, and (2) the impact on the insurance contract.

7.43                                      In relation to the first point, as regards the risk of an action in defamation, if an authority is confident that its reports could attract qualified privilege at common law if the point were litigated, then the courts might expect the authority to be robust, whatever the insurer might say. The court might take a similar line to that in relation to the provision of information to the Department of Health about an employee found to be unsuitable to work with children. Lord Woolf MR said,

We recognise that there may be a few timid spirits who will be deterred from doing their duty if it is not clear that they cannot be sued for defamation. However, we find it difficult to accept that a local authority under the statutory duties to which the authority are subject would be deterred from providing the appropriate information to the service by the threat of litigation. We say this despite the straightened circumstances of local authorities. [10]

7.44                                      We accept that the fact that it may have to defend itself in the courts should not, in itself, inhibit a local authority, but the degree of uncertainty about the availability of the common law defence of qualified privilege seems to us likely to promote an overly cautious approach. We identify this issue as requiring legislative reform, and we set out the possibilities in Part IX.

7.45                                      In relation to the second point, our provisional view is that the risk of avoiding the insurance contract can be resolved by agreement between the insurer and the local authority. An agreed statement of principles might state that insurance cover will continue if the authority carefully and conscientiously assesses the quality of a report and the public interest in knowing of it before deciding to make it available to the public. This will be so even if it subsequently loses a court action for defamation. Publication would not be unfairly impeded.

7.46                                      Similarly, it could be agreed between the local authority and the insurer that if the authority takes all reasonably practicable steps to advise its officers not to make statements which could lead to an action in defamation without proper consideration and authorisation by the council, then it will have been acting prudently.[11]

Solutions

7.47                                      Our provisional view is that, with the exception of the one issue of qualified privilege in defamation, all the problems we have identified would best be tackled in two non-legislative ways: by an agreement between the local authorities and their insurers, and by a Code of Practice. As was stated in the Waterhouse Report: “The contractual issues that arise are less suitable for legislation because insurers cannot be compelled to underwrite liabilities and will make their own assessments of risk when they do agree to provide cover.” The Report continued, “It is highly desirable, however, that there should be an agreed code of practice to guide local authorities in their response to situations of the kind that arose in Clwyd.”[12]

An agreement between local authorities and insurers

7.48                                      With regard to an agreement between authorities and insurers, we have to consider whether a set of ground rules can be established, which will in practice bind both local authorities and insurers, as to how these possible points of conflict between them will be addressed. Our provisional view is that, in the light of the problems we have identified, such an agreement should cover:

·       how the authority is to respond to an inquiry report and what procedures it should adopt;[13]

·       statements to the public made on behalf of the authority;

·       statements made without the authorisation of the authority;

·       the consequence for the insurance contract of inadvertent waiver of a right to confidentiality or legal professional privilege;

·       the impact on the insurance contract of potential actions in defamation.

7.49                                      In Part VIII we examine the steps taken so far by the ABI and the LGA to address these kinds of issues, and suggest how they could be taken further.[14]

A Code of Practice

7.50                                      The second strand to the solutions should, in our provisional view, be a Code of Practice for the conduct of local authority ad hoc inquiries. We see this as a distinct, and important, component of the solutions to the problems identified in the Waterhouse Report and in this consultation paper. A Code of Practice would guide those involved in the setting up of and the running of a local authority non-statutory inquiry, and promote best practice. The agreement we have outlined in paragraph 7.52 above would, by contrast, be a matter of regulating practice between local authorities and their insurers. The two would be connected in that if an inquiry were conducted in accordance with any guidance in a Code of Practice, the kinds of problems we have outlined would be less likely to arise in the first place.[15]

7.51                                      A Code of Practice would also be relevant to the possible legislative solution to the defamation issue which we outline in Part IX.[16]

7.52                                      The fairness of the inquiry and report are key. The complaint which gives rise to the inquiry ought to be properly and fairly investigated for the benefit not only of the complainant, and his or her family, but also in the wider public interest.

7.53                                      As we have said above,[17] we think publication of the resulting inquiry report is desirable as an important aspect of the public interest. While any solution needs to allow for the possibility that publication might not be appropriate where the inquiry or report are unfair, non-publication should be a rare occurrence. On the other hand, no solution should make it such that an authority, with or without the agreement of its insurer, could easily suppress a report on the ostensible grounds that the inquiry was unfair or the report defamatory when the reality was that the report was accurate but the authority did not wish to publicise it. This eventuality can best be avoided by securing a high quality inquiry and report in the first place.

7.54                                      We therefore consider what principles might govern a Code of Practice for local authority ad hoc inquiries, and what matters it might cover at paragraphs 8.00 below.

7.55                                      Our provisional view is that, without some clarification or change in the law, authorities and insurers can only avoid the risk of publishing, being sued, and finding that the defence of qualified privilege is not applicable, by a very cautious approach, which is not in the public interest, and legislative reform in relation to qualified privilege is therefore desirable. Do consultees agree?

7.56                                      Do consultees agree that the other legal difficulties are best addressed by (1) a binding agreement between local authorities and their insurers, and (2) by development of a Code of Practice for the conduct of local authority ad hoc inquiries?