EXEMPT REPORT IN PURSUANT OF PARAGRAPHS 16 OF PART 4 OF SCHEDULE 12(A) TO THE LOCAL GOVERNMENT ACT 1972, AS AMENDED BY THE LOCAL GOVERNMENT (ACCESS TO INFORMATION) (VARIATION) (WALES) ORDER 2007 AS IT RELATES TO INFORMATION IN RESPECT OF WHICH A CLAIM TO LEGAL PRIVILEGE COULD BE MAINTAINED IN LEGAL PROCEEDINGS.

AGENDA ITEM NO.

EXECUTIVE BOARD

23/01/12

THE GRANTING OF AN INDEMNITY TO THE HEAD OF PAID SERVICE

RECOMMENDATIONS / KEY DECISIONS REQUIRED:

That consideration be given to granting an indemnity to the Head of Paid Service in legal proceedings before the High Court

REASONS:

    (1) If an indemnity is not granted the Head of Paid Service would be personally liable for legal costs associated with those court proceedings

    (2) The Authority owes its employees a duty of care and an indemnity to the Head of Paid Service in the circumstances of this case is proportionate and reasonable.

Scrutiny Committee recommendations / comments:

Not applicable

Exec Board Decision Required YES

Council Decision Required NO

Directorate

Name of Head of Service:

Linda Rees Jones

Report Author

Linda Rees Jones

Chief Executives

Designations:

Acting Head of Administration & Law

Acting Head of Administration & Law

Tel Nos.

01267 224012

E Mail Addresses:

EXECUTIVE SUMMARY

EXECUTIVE BOARD 23/01/12

THE GRANTING OF AN INDEMNITY TO THE HEAD OF PAID SERVICE

1. A local resident has issued defamation proceedings against (1) the Head of Paid Service and (2) the Authority in relation to comments made in an open letter sent by the Head of Paid Service on the Authority’s behalf to a website (in response to an invitation to do so), and subsequently copied to all members. Any costs associated with the Authority and the Head of Paid Service defending those proceedings will be met (subject to any policy excess) by the Authority’s insurers.

2. The Head of Paid Service, in turn, considers that he himself has been defamed by the local resident in various statements made about him in her internet blog. In view of the potential damage to his integrity and reputation he wishes, in conjunction with defending the proceedings brought by the local resident, to issue a counterclaim in respect of those defamatory statements and seeks an indemnity from the Authority in relation to the costs associated with his bringing such an action.

3. The Authority’s insurance policy does not extend to counterclaims / the bringing of defamation proceedings so the Board needs to consider whether it will use its own powers to indemnify him. Counsel advises that because the Authority and the Head of Paid Service are having to defend defamation proceedings, the costs of the Head of Service bringing his own defamation proceedings will not greatly increase the overall cost. However, it has to be said that in the event of that action being unsuccessful the Defendant’s costs would have to be met.

4. The Local Authorities (Indemnities for Members and Officers) (Wales) (Order) 2006 only authorises the granting of indemnities in relation to the defending a claim for defamation (which as mentioned in 1 above is covered by an insurance policy) and an indemnity cannot be granted under the terms of the 2010 Order for the issue of a counterclaim.

5. However, Section 111 of the Local Government Act 1972 allows Authorities to do “anything (whether or not involving expenditure …… ) which is calculated to facilitate or is conducive or incidental to the discharge of any of its functions’.

6. In the case of R v Bedford Borough Council , Ex Parte Comninos (2003) the High Court held that s. 111 in principle enables an Authority to indemnify an officer to bring defamation proceedings.

7. Although the 2006 Order does not extend to indemnifying the bringing of defamation proceedings Welsh Government Guidance issued in conjunction with the 2006 Order states that any powers to grant an indemnity under the 1972 Act (ie. the s. 111 power) are not removed by the 2006 Order.

8. The Authority sought advice from Leading Counsel in 2008 on the s. 111 power and he confirmed that the giving of an indemnity for an officer to bring defamation proceedings was potentially reasonable and lawful under s. 111, although he advised that it should only be exercised in “exceptional circumstances”. Accordingly, the power to indemnify officers in the bringing of defamation proceedings ostensibly exists.

9. Determination of applications for such an indemnity is an executive function.

10. The granting of an indemnity essentially means that the libel proceedings would be paid for from public funds and any decision to grant an indemnity to the Head of Paid Service to bring these proceedings are susceptible to challenge by means of Judicial Review. Indeed, the Comninos case involved a challenge brought by District Audit to Bedford Borough Council’s decision to indemnify its Head of Paid Service, the Borough Solicitor / Monitoring Officer and a Barrister in the Legal Department in the bringing of defamation proceedings. District Audit’s application for Judicial Review in the Comninos case was dismissed on the facts of that particular case.

11. Officers are consulting with the Wales Audit Office and seeking their view on whether they have any concerns about the granting of an indemnity under s. 111 in this case.

12. In deciding whether to grant an indemnity, the Board will need to consider the following matters:

    (a) An Authority cannot itself bring defamation proceedings and the Board will need to satisfy itself that indemnifying the Head of Service in the bringing of proceedings is necessary to protect his own personal integrity and reputation as opposed to the integrity and reputation of the Authority.

    (b) An indemnity should only be granted “in exceptional circumstances”. The Board must therefore consider whether the circumstances in this particular case are “exceptional”. There is no definition of “exceptional” and it will very much turn on its facts.

    (c) The Authority owes a duty of care towards its employees. The Judge in the Comninos case said that “it is difficult to see why giving an officer an indemnity in respect of defamation proceedings brought by him is incapable, as a matter of principle, of being conducive or incidental to a local authority’s employment function”.

    (d) As regards proportionality, the Board is not being asked to indemnify a junior member of staff in the bringing of defamation proceedings, but its most senior officer. Integrity and reputation are essential in order for him to command respect, be able to lead and undertake his duties.

    (e) The counterclaim is to be kept within sensible and proportionate bounds and will focus only on allegations which have been particularly serious or concerning to the Head of Paid Service and which are demonstrably false.

    (f) Specialist libel Counsel advises that the comments chosen are “seriously defamatory” of the Head of Paid Service.

    (g) At the time the ‘Comninos’ case was decided, alternative forms of funding for defamation litigants were not available. This is no longer the case and it might be possible for the Head of Paid Service to retain legal representation on a Conditional Fee Arrangement”. However, the Head of Paid Service’s proposed defamation action is a counterclaim to defamation proceedings brought against him and the Authority and it therefore seems sensible, consistent and more cost efficient to retain the same legal representation, especially as Counsel has advised that the cost of the counterclaim in that context will not greatly increase the overall costs.

    (h) The merits of the particular counterclaim, including the chances of not just obtaining judgement, but also of actually recovering any legal costs and damages if successful. Counsel has indicated that there are two actionable grounds upon which a counterclaim would be based. It is unclear whether the other party has the financial means to meet any order for damages and/or costs that may be made.

    (i) The Head of Paid Service has confirmed that he is not motivated by a wish to benefit financially and that accordingly should his action be successful any damages awarded to him will be paid over to the Authority and will not be kept by him.

(Should normally be contained within one page)

DETAILED REPORT ATTACHED ?

NO

(Delete as applicable)

IMPLICATIONS

I confirm that other than those implications which have been agreed with the appropriate Directors / Heads of Service and are referred to in detail below, there are no other implications associated with this report :

Signed: Head of Administration & Law

Policy, Crime & Disorder and Equalities

Legal

Finance

ICT

Risk Management Issues

Staffing Implications

Physical Assets

NONE

(Delete as applicable)

YES

(Delete as applicable)

YES

(Delete as applicable)

NONE

(Delete as applicable)

NONE

(Delete as applicable)

NONE

(Delete as applicable)

NONE

(Delete as applicable)

             

1. Legal

Section 111 of the Local Government Act 1972 potentially allows an indemnity to be granted in relation to the bringing of defamation proceedings by an officer. However any decision to grant the requested indemnity can be legally challenged by way of judicial review.

Although the exemption under paragraph 16 of part 4 of Schedule 12 (A) to the Local Government Act 1972 as amended is an absolute exemption it is still necessary to consider whether it is in the public interest to engage that exemption. The nature of the legal proceedings and the extent to which disclosure of the legal advice contained in it would assist the other party to the litigation and undermine the position of the Council and the Head of Paid Service in the proceedings should be weighed against the public interest in disclosing the information upon which a decision to spend public money is based. On balance it is considered that the public interest rests in favour of maintaining the exemption and ensuring the provision of legal advice within the same degree of confidentiality as enjoyed by the other party to the proceedings.

    2. Finance

The granting of an indemnity will leave the council liable to potentially meet not only the legal costs of the Head of Paid Service in relation to the counterclaim, but also those of the other party to the proceedings should the counterclaim fail.

It is impossible to estimate what those costs could ultimately be, but in the event the counterclaim fails, there is a risk that the total costs related to the counterclaim could be in the region of 100K.

CONSULTATIONS

I confirm that the appropriate consultations have taken in place and the outcomes are as detailed below

Signed: Head of Administration and Law

(Please specify the outcomes of consultations undertaken where they arise against the following headings)

1. Scrutiny Committee

Not applicable

2.Local Member(s)

Not applicable

3.Community / Town Council

Not applicable

4.Relevant Partners

Not applicable

5.Staff Side Representatives and other Organisations

Not applicable

Section 100D Local Government Act, 1972 – Access to Information

List of Background Papers used in the preparation of this report:

THESE ARE DETAILED BELOW

Title of Document

File Ref No.

Locations that the papers are available for public inspection

Counsel’s advice

LS0421/3

County Hall

To be completed

To be completed

To be completed (Delete as applicable)

To be completed

To be completed

To be completed (Delete as applicable)