1. Members will be aware that there is a fundamental difference of opinion between the Appointed Auditor and the Authority on a local authority’s powers to indemnify officers to bring libel proceedings where they have been defamed in the course of carrying out their work.

2. To recap on the position, Welsh Government issued an Order in 2006 - the Local Authorities (Indemnities for Members and Officers) Order 2006 – which provided that:

“No indemnity may be provided under this Order in relation to the making by the member or officer indemnified of any claim in relation to the alleged defamation of that member or officer but may be provided in relation to the defence by that member or officer of any allegation of defamation made against him”

but an Explanatory Note was attached to the Order which confirmed that “These powers are in addition to any existing powers that such relevant authorities may have”.

In respect of other legal powers available to local authorities s. 111 of the Local Government Act 1972 provides that

“.. a local authority shall have power to do anything (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”.

Case law (R v Bedford Borough Council ex parte Comninos :2003) had established that granting such an indemnity was capable of being conducive or incidental to an Authority’s employment function, although it should only be granted in “exceptional circumstances”. The Comninos case and Welsh Government’s 2006 Guidance on the point (rf. para. 7 below) were expressly drawn to the Executive Board’s attention.

3. The Appointed Auditor’s view of the law is set out in his Public Interest Report of the 30th January 2014 and is essentially as follows:

“..the Council has incidental powers of the type that have been recognised by the common law for many years but which are now enacted in s. 111 of the 1972 Act. It is therefore necessary in the absence of express provision to consider whether the proposed activity could fall within this incidental power”. (para. 10 PIR)

“The Council remains of the view that section 111(1) of the 1972 Act and the judgment in Comninos (R (OAO Comninos) v Bedford Borough Council (2003) EWHC 121 (Admin) provides the Council with authority to provide the indemnity. The provision of the 2006 Order on this, however, are very clear and were introduced to remove any uncertainty which existed prior to the new Orders. The Council may indemnify the Chief Executive in respect of the claim against him but they cannot indemnify him in respect of bringing a counterclaim”. (para. 14 PIR)

“The effect of the 2006 Order is that local authorities have the power to fund, or indemnify the cost of, the defence by an officer to defamation proceedings brought against him / her but no power to fund, or indemnify the cost of, the bringing of defamation proceedings. Local authorities in Wales now have the limited powers conferred by the 2006 order in relation to the granting of indemnities to members and officers and cannot seek to avoid the limitation on those powers by relying on the incidental powers conferred by section 111(1) of the 1972 Act” (para. 18 PIR).

“The 2006 Order provides a comprehensive statutory code to determine how and when indemnities may be granted by Welsh local authorities in respect of legal costs incurred by members and officers. It is my view that the 2006 Order represented an intention on the part of the Welsh Government (and Parliament before it) to regulate the granting of indemnities in respect of the bringing of defamation proceedings. It is therefore my view that the decision taken by the Executive Board was unlawful”. (para. 21 PIR).

4. In contrast, the advice given by the Head of Administration and Law to the Executive Board in January 2012 when they considered whether to grant an indemnity to the Head of Paid Service to counterclaim for defamation in the course of on-going defamation proceedings against the Authority and the Head of Paid Service as Chief Executive was that s. 111 of the Local Government Act 1972 survived the 2006 Order and was a power which could still be exercised in exceptional circumstances. This was based on Advice from a well respected public administration law QC.

5. Following consideration of the Appointed Auditor’s Public Interest Report at its EGM of the 27th February 2014 Council resolved to write to Welsh Government to request “further clarification of the effect of their Guidance on the 2006 Order which states that indemnities can be granted in accordance with other legislation not revoked by that Order”. Pending receipt of clarification of the legal position the provision in the Council’s Constitution which allows for the granting of indemnities to members and officers to bring actions for defamation stands withdrawn.

6. This clarification was received by letter dated the 6th May 2014 from the Minister for Local Government and Government Business (enclosure no. 1). As can be seen the Minister confirms that the Welsh Ministers’ view of the law is as set out in paras. 17 – 19 of Welsh Government’s 2006 Guidance “Providing Indemnities to Members and Officers of Relevant Authorities”.

7. That Guidance states that:

“Libel Action.

17. The order expressly prohibits relevant authorities from meeting the cost of members and officers taking legal action for slander or libel, either directly or through insurance. The Assembly Government does not believe that individuals should be funded at public expense to bring proceedings against a third party. To do so could stifle legitimate public debate. Nonetheless, authorities will be able to provide indemnities to individuals against the costs of defending such actions (where the action relates to their official functions).

18. The judgment in R v Bedford Borough Council ex parte Comninos (2003) indicated that authorities may already have the power in some cases to make a decision to fund libel proceedings brought by its officers and to pay the costs of such an action, by virtue of s. 111(1) of the Local Government Act 1972. Any such power is not removed by this Order.” (our underlining).

8. The Minister’s clarification letter has been shared with the Appointed Auditor who advises that “In regard to the response which you received from the Minister, I do not have any further comment to make beyond what I have already set out in my public interest report. As the Minister notes, it is not the role of Welsh Government to provide a definitive statement as to the law. From my perspective I am satisfied that the issue was resolved at the EGM in February and that no further action is required”. It is surprising that the Appointed Auditor states that it is not the role of Welsh Government to provide a definitive statement of the law when in fact Welsh Government is a law-maker. However, contrary to the Appointed Auditor’s statement in his Public Interest Report that “ the provisions of the 2006 Order ... were introduced to remove any uncertainty which existed prior to the new orders” and “It is my view that the 2006 Order represented an intention on the part of the Welsh Government (and Parliament before it) to regulate the granting of indemnities in respect of the bringing of defamation proceedings” (para. 21), the Minister’s confirmation that Welsh Government’s intention is as set out in its 2006 Guidance means that the 2006 Order was introduced as additional powers for local authorities as opposed to being an Order to remove the s. 111 (1) Local Government Act 1972 powers which already existed.

9. The Minister states in her clarification letter that she has “nothing further to add to this guidance and neither (does she) think the guidance nor secondary legislation requires any amendment or clarification”. This statement is made in the specific knowledge that this Authority has granted an indemnity in accordance with Welsh Government’s Guidance.

Roger Jones Linda Rees-Jones

Director of Resources Head of Administration & Law

& s. 151 Officer & Monitoring Officer