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You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Garland, R (on the application of) v Secretary Of State For Environment Transport & Regions [2000] EWHC Admin 417 (10 November 2000) URL: http://www.bailii.org/ew/cases/EWHC/Admin/2000/417.html Cite as: [2000] EWHC Admin 417 |
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Case no: CO/4215/2000
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
ADMINISTRATIVE COURT
ROYAL COURTS OF JUSTICE
STRAND, LONDON, WC2A 2LL
Friday 10 November, 2000
MR DAVID FORSDICK (instructed by Rowe & Maw) for the District
Auditor
MISS JANE MULCAHY (instructed by Burgess Salmon) for the Applicant
TURNER J
1. On 16 July 1997 the respondent communicated his decision on the
applicant's appeal under the provisions of regulation N8 of the Local
Government Superannuation Regulations 1986. The questions which had been
referred to the Secretary of State were
a. Whether (the applicant's) pension should have been reduced by the county
council
b. What payments should be used to calculate (the applicant's) pensionable
remuneration?
The Determination was
a. that it was within the county council's powers under the regulations as
administrative authority to reduce (his) pension; and furthermore
b. that (his) pension has been correctly calculated based on (his) pensionable
remuneration.
2. The Regulations in question provide that entitlement to benefit is
to be decided by the last employing authority, in this case, the West Wiltshire
District Council (the District Council). But where there is a dispute as to
the amount of any benefit, that is to be determined by the administering
authority, in this case the Wiltshire County Council (the County Council); see
Regulations N5 and N6. On the hearing of the present application, the
Secretary of State was not represented but did submit writtenobservations. His
position was essentially one of neutrality. The effective other party to the
proceedings was the District Auditor of West Wiltshire District Council
(Richard Lott).
Application by Richard Lott to be joined as a respondent
3. Permission was granted to the applicant to apply for judicial review
of the determination by the Secretary of State on 25 November 1999. On 18 July
of this year, the District Auditor, in the person of Richard Lott issued an
application to be joined as respondent in these proceedings. It was agreed that
this procedural application would be heard at the same time as the substantive
application against the Secretary of State. In reality, it is this application
which lies at the heart of these proceedings because the District Auditor,
unlike the Secretary of State, whose stance is neutral, claims that his
position will be undoubtedly adversely affected if relief is granted to the
applicant on the substantive application. Why this should be so will become
readily apparent in the light of the history which is set out below.
4. Before reaching that stage, however, it has to be decided whether or
not the District Auditor can properly be considered a person who is "directly
affected" such that he was a person who "must be served" with the claim form;
see Order 53 rule 5(3) of the Rules of the Supreme Court. In the alternative,
the court might consider him to be "a person who should be heard"; see RSC
Order 53 rule 9. In summary, his position is that he had a claim against the
applicant arising out of the activities of the latter as chief executive of the
District Council, which he had at all material times wished to pursue in his
capacity as district auditor. If the applicant succeeds in his claim for
relief in these proceedings, the action which the District Auditor would have
taken against the applicant is now no longer open to him because the audit for
the year in question was closed in the light of the settlement referred to
below. The District Auditor contends that a settlement of all outstanding
matters between the applicant and himself was reached at a time when he was
unaware of the fact that the applicant might yet seek to re-open his challenge
to the determination of the Secretary of State of 16 July 1997.
5. Recognising the strict terms in which Order 53 rule 5(3) is
expressed, counsel for the District Auditor reminded the court of the extent of
the duties of the District Auditor. Reference was made to the observations of
Lord Denning MR in Asher v. Environment Secretary [1974] Ch 208
at p219 where he said
The district auditor holds a position of much responsibility. In some
respects he is like a company auditor. He is a watchdog to see that the
accounts are properly kept and that no one is making off with the funds. He is
not bound to be of a suspicious turn of mind ... but if anything suspicious
does turn up, it is his duty to take care to follow it up ... in other
respects, however, the duties of a district auditor go far beyond those of a
company auditor. He must see whether on the financial side the councillors and
their officers have discharged their duties according to law. ... . If he
finds councillors or the officers ... have expended money improperly or
unreasonably, or allowed it to be so expended, it is his duty to surcharge
them.
6. The question at issue on the procedural aspect of the case has no
immediate bearing on the presentation of the substantive application, since it
was not disputed that, if the District Auditor was not a person who was
"directly affected", it was for the court to determine whether or not he was a
person who "should be heard".
7. It is convenient to dispose of this point of procedure at this
stage. The applicant relied on the decision of House of Lords in R v.
Rent Officer Service ex parte Muldoon [1996] 1 WLR 1103, especially the
passage in the judgment of Lord Keith of Kinkel at p1105C-G where he said
That a person is directly affected by something connotes that he is affected
without the intervention of any intermediate agency. In the present case if
the applications for judicial review are successful the Secretary of State will
not have to pay housing benefit to the appellants either directly or through
the agency of the local authority. What will happen is that up to 95 per cent
of the amount paid by the local authority to the applicants will be paid by the
Secretary of State to the local authority after the end of the financial year.
The Secretary of State would certainly be affected by the decision, and it may
be said that he would inevitably or necessarily be affected. But he would, in
my opinion, be only indirectly affected, by reason of the collateral obligation
to pay subsidy to the local authority.
8. Given the overall interest which the District Auditor has in
enforcing proper standards of financial administration, it is tempting to
regard him as having a direct interest sufficient to entitle him to be regarded
as a person who would be directly affected in the result of these proceedings.
It has to be remembered that if an order of judicial review is made of the
decision of the Secretary of State, there will be no immediate effect on the
District Auditor. The position is that he is now unable to take effective
proceedings under section 19 of the Act of 1982 because he has closed the
accounts for the relevant year. If the position of the two councils was to be
preserved he needed to be in a position to take proceedings under the section.
Thus, in my judgment it can be seen that he is not a person who is `directly
affected' by the making of the order.
9. Accordingly, I entertain no doubt that the District Auditor is not a
person who is "directly affected" within the meaning of the rules. He is
however, plainly, a person who "should be heard". The only practical effect of
this decision may be that if the District Auditor is unsuccessful in persuading
the court that no relief should be granted to the applicant, he will have no
right to appeal against my decision.
The history
10. The dispute has a long and, as will be seen, somewhat chequered
history. For a number of years the applicant had been chief executive of the
District Council. In about 1982, the applicant together with other officers of
the District Council had set up a limited company by the name of Computer
Systems Software Group (CSSG) under the sanction of a resolution of the Legal
Sub-Committee of the District Council. The object of the scheme was that the
District Council should market, among other administrative authorities,
computer software programmes which would be of benefit to those authorities.
Under the scheme as devised and operated by the applicant and two other
officers (Perkins and Archer) bonus payments, in addition to their salaries,
were made which were derived from the proceeds of the trading by CSSG. It was
the position adopted, and since maintained, by the District Auditor that the
bonus payments were "contrary to law" within the meaning of section 19(1) of
the Local Government Finance Act 1982.
11. On 30 June 1989, the applicant retired. The District Council
approved a pension which was based on his remuneration calculated, in addition
to his salary, on the basis of five quarters worth of bonus payments received
from CSSG. The District Auditor called into question the legality of CSSG. On
21 August 1990, the County Council which, under the Regulations, has the
responsibility for administering the superannuation fund of the District
Council, determined that CSSG had had no authority to authorise any payments
to officers of the District Council in addition to their salaries and that, as
the result, there was no pension entitlement arising from those payments. That
letter went on to deal with other matters that were in dispute between the
District Council and the applicant. One of these was that the applicant had
retained a car from his employment to which he was not lawfully entitled. The
consequence was that as the result of these decisions, the County Council
determined that the applicant's future pension payments were to be reduced. A
calculation of the applicant's future entitlements was appended to the
letter.
12. A number of disputes arose between the applicant and the District
Council. There was much correspondence between the District Council, the County
Council and the applicant's solicitors relating to these matters which are,
however, of little relevance to the issues which arise on the hearing of the
present application. In a long letter dated 27 January 1994, the applicant's
solicitors dealt with those matters which were materially in dispute. In
section 2.2.1 of the letter they wrote
On this basis Mr Garland will wish to see, as part of the compromise, that the
County Council accepts that the bonus payments should have been included in his
pensionable remuneration for the purpose of the necessary calculation.
At paragraph 2.3 they added
In summary ... for the purposes of these discussions, Mr Garland is prepared to
concede that the value of his car benefit was incorrectly calculated and that
his pensionable remuneration should have been calculated based on four quarters
bonus payments only in the final year of his employment. He is not prepared to
concede, however, that the bonus payments should be taken out of account in
calculating his pensionable remuneration nor that he was not entitled to the
"added years".
2.4 We will leave it to the County Council to produce precise figures
implementing any of the above. We would, however, want such figures to be
incorporated in any formal settlement document with the County Council.
* * * *
6.1 Mr Garland will require that any settlement carried out on the basis
that it is in full and final settlement of all or any claim which either or
both of the District Council or the County Council may have against him in
respect of matters arising from his employment by the District Council.
13. It is apparent that the County Council communicated with the
District Auditor on the question of the acceptability of the proposed
settlement to him. The District Auditor replied (25 March)
So long as the District Council acts in accordance with legal advice, it is
unlikely that I would wish to challenge the terms of the proposed settlement.
However, I would not accept the legality of any arrangement which involved the
inclusion of five quarters' bonus payments in calculating salaries for pension
purposes. Subject to considering the terms of the legal advice to the District
Council, I would contemplate not challenging a settlement which incorporated
the inclusion of the final year's bonus payments in the calculation.
In March 1997, the District Auditor issued a notice against the applicant to
show cause, under the provisions of section 20 of the Act of 1982, in respect
of the acquisition of a Mercedes car from the District Council as part of his
retirement package.
14. The next occurrence of note was that the appeal to the Secretary of
State was re-instated. It is this determination of that appeal which forms the
basis of the present application. It is unquestionable that there are aspects
of the determination which do not measure up to appropriate standards of
rationality. Thus in paragraph 10 of the determination the Secretary of State
wrote
(He) has taken the view that there is some doubt as to whether the District
Council should have reached the decision it made at the time.
[It will be recalled that the limit of the District Council's consideration
was as to entitlement]. In paragraph 13 of the determination the
Secretary of State wrote
... It is not disputed that the District Council was entitled to make bonus
payments. But in deciding the amount of the remuneration to be used in the
final year for the purposes of Regulation E22, regard must be had to the period
such payments relate to (sic). The view is taken that only four out of the
five payments can be attributed to the final year.
[It will be recalled that the limit of the County Council's consideration was
as to the amount of the pension calculation.] Then, as has already been
seen, the Secretary of State determined that the County Council did have power
to reduce the pension, but concluded that it had been correctly exercised and
the correct calculation had been made.
15. Some two months later, the applicant wrote to the Secretary of
State indicating not only his dissatisfaction with the determination, but also
reciting, as was the fact, that Messrs Archer and Perkins had commenced
proceedings for judicial review to challenge the decision which had been made
in their cases. The applicant stated that due to illness, the precise nature
of which it is unnecessary to identify, he would be unable to pursue his own
application for judicial review "in parallel with the other two officers". He
invited the Secretary of State to agree to be bound, so far as he was concerned
with any decision reached in respect of those others. Parenthetically, it
should be noted that at the very time that the applicant was putting forward
his illness as a reason why he could not contemplate undergoing the stress of
proceedings for judicial review, he was, through his solicitors conducting
negotiations for the settlement of the issue relating to the car. This also
involved giving instructions in relation to all other matters in dispute
between the parties; as to the details of this see below. The Secretary of
State declined the request stating that he had no power which would enable him
to accede to it.
16. There then followed settlement in the proceedings between the
applicant and the District Council. This was what all parties aptly described
as a `drop hands' settlement under which both parties dropped all claims
against the other, save that nothing in the order was to prejudice the
applicant's appeal to the Secretary of State. On 28 October 1998 there was
settlement of the dispute in relation to the applicant's car. The settlement
was the culmination of another protracted sequence of correspondence passing
between the District Auditor and the applicant's solicitors. Since this
settlement is close to, if not at the centre of the current matter, it is
necessary to refer to it in some detail.
17. The background may, however, be summarised as follows. On behalf
of the applicant's family, his solicitors wrote offering to settle the car
dispute for a sum of money; 23 December 1997. An increased offer was made in
the same way in February of the following year. In both these letters, the
solicitors wrote on the basis that if there was to be a settlement, it should
"finally bring to a close all and every aspect of this unfortunate saga".
Solicitors acting on behalf of the District Auditor wrote (14 May 1998) to say
that the District Council was prepared to accept the higher offer in respect of
the car. They added an important paragraph
On behalf of the District Auditor who issued a note of the provisional findings
and views, I am authorised to say that, subject to receipt by the Council of
the sum ... , he is of the view that he does not have any duty to perform under
section 20 of the Local Government Finance Act 1982 and that he does not intend
to proceed further. This will be confirmed in open correspondence which will
also state that the District Auditor does (not) intend to take any further
audit action against Mr Garland under section 19 and/or 20 of the 1982 Act in
respect of matters which were the subject of his predecessor's ... three public
interest reports. The present District Auditor does, however, reserve his
position in relation to the calculation of Mr Garland's pension entitlement if
this remains the subject of an appeal to the Secretary of State.
So far as material, the applicant's solicitors replied (28 May)
It is our understanding that Mr Garland's appeal to the Secretary of State was
disposed of by a letter dated 16 July 1997 received from the Department of the
Environment Transport and the Regions. We do not understand, therefore, why
the District Auditor considers he needs to reserve his position in relation to
the calculation of Mr Garland's pension entitlement. Please will you
explain?
The District Auditor's solicitor requested sight of the letter from the
Secretary of State of 16 July 1997. On 23 June, the solicitors wrote
On the basis that there was (and will be) no appeal against the decision of the
Secretary of State ... the District Auditor does not intend to take audit
action in respect of Mr Garland's pension.
There was then a telephone conversation between the solicitors which was
recorded by the District Auditor's solicitors as follows
Garland will not take further action re pension. There will be no appeal. ...
. (Applicant's solicitor) will confirm the position in without prejudice
correspondence and we will submit draft letter for consideration.
This conversation was followed by the applicant's solicitors letter of 30 June
which indicated no dissent from the telephone understanding of the District
Auditor's solicitor. On 28 October, the Solicitors for the District Auditor
wrote the letter which concluded the settlement on the basis which had been
discussed in the preceding correspondence.
18. As appears from a letter from the Treasury Solicitor, dated 10 June
1999, he consented to an order quashing the determinations in the cases of the
other two officers. However, the Treasury Solicitor said that it would be
necessary for the applicant to bring proceedings in his own name and indicated
that had the application been made in time, he would also have consented on
behalf of the Secretary of State to the determination being quashed. It was
also said that, in the special circumstances of the case, no point would be
taken about time since, as the result of what had occurred (a reference to the
applicant's illness), the applicant had "been placed at a serious disadvantage
in comparison with his two former colleagues". In due course the County
Council indicated that it "saw no reason why it should intervene (in the
present proceedings for judicial review) in a case which the DETR acknowledges
is very similar".
19. The applicant's solicitors wrote to the County Council on 5 August
1999, referring to the successful application made by Messrs Perkins and
Archer, and continued
Mr Garland has recently completed a course of (treatment). He now hopes to be
sufficiently well to pursue his claim and has corresponded with the Treasury
Solicitor. ... the Treasury Solicitor indicates that he would not oppose the
making of a decision in similar terms to Mr Archer and Mr Perkins in respect of
Mr Garland. However, he indicates that you are not willing to review the
situation in the absence of a court order. ...
Please confirm:-
(i) what you would require before acting on the Secretary of State's
decision;
(ii) what other steps you think might "absolve you ... from the consequences of
departing from [your] current interpretation of the [Secretary of State's]
decision";
(iii) whether, if you require judicial review or other proceedings to be
issued, you will meet our client's costs;
(iv) whether, if judicial review proceedings are issued, you intend to
intervene.
You will appreciate the need for Mr Garland to issue any required proceedings
as soon as possible to prevent further delay.
20. A possible inference from the phraseology of this letter is that
throughout the period from the date of the determination by the Secretary of
State (16 July 1997) up to that date, it had been the applicant's intention to
challenge it, in the same manner as his two former colleagues had done. It is
evident that neither the applicant nor his solicitors had not only provided no
information which would negative such an inference, on the contrary the
indications were all the other way.
21. The response of the County Council was to the effect that it would
not co-operate with the applicant in the manner that he, or his solicitors, had
hoped that it would. Moreover, the County Council, informed both the District
Council and the District Auditor of its decision. It is to be noted that it
was to be another four months before the present application for judicial
review was launched. Solicitors for the District Auditor wrote to the Treasury
Solicitor expressing concern that they had not been kept informed about the
applicant's intentions with regard to a challenge to the determination by the
Secretary of State and inviting him to oppose the application for judicial
review. The Treasury Solicitor eventually responded by letter dated 23 May
2000 to the applicant's solicitor and copied to the District Auditor's
solicitors. So far as material, that letter was in the following terms:
My clients take the view that it is unfortunate that the evidence in support of
your client's application did not give a fuller picture of the settlement which
had been reached with the District Auditor. The Secretary of State is unable
to resolve the question ... whether there was an agreement between your client
and the District Auditor which might operate to prevent these proceedings, but
it would have been better had the issue been before the court at the permission
stage. The Secretary of State takes the view that this further material should
now be made available to the court, but provided that that is done the point
would be for the District Auditor to take. ... .
Subject to the court receiving further evidence, and assuming that there are no
further significant developments or revelations, the Secretary of State does
not intend to play any part in the hearing, but I confirm .... that the
Secretary of State does not seek to rely on the detriment to good
administration as provided for in section 31(6) of the Supreme Court Act
1981.
The statutory context
22. The following sections of the 1982 Act are relevant to these
proceedings.
15(3) The auditor shall consider whether, in the public interest, he should
make a report on any matter coming to his notice in the course of his audit in
order that it may be considered by the body concerned or brought to the
attention of the public, and shall consider whether the public interest
requires any such matter to be made the subject of an immediate report rather
than to be made at the conclusion of an audit.
* * * * * *
19(1) Where it appears to the auditor carrying out an audit of any accounts
under this part of the Act ... that any item of account is contrary to law he
may apply to the court for a declaration that the item is contrary to law
except where it is sanctioned by the Secretary of State.
(2) On an application under this section the court may make or refuse to make
the declaration asked for, and where the court makes a declaration, then,
subject to sub-section (3) below, it may also -
(a) order that any person responsible for incurring or authorising any
expenditure declared unlawful shall repay it in whole or in part to the body in
question ...
20(1) Where it appears to the auditor ... -
(a)
(b) that a loss has been incurred or deficiency caused by the wilful misconduct
of any person,
he shall certify that the sum ... is due from that person and ... both he and
the body in question may recover that sum for the benefit of that body ... .
The case for the District Auditor
23. It was the case which the District Auditor wished to run in regard
to the bonus payments which the applicant had received as the result of the
activities of CSSG was that they were an "item of account" which had been made
or entered "contrary to law" and, therefore, that they could not properly be
taken into account when fixing the level of the applicant's pension. It was
his case that he intended to seek to recover payment of bonuses which had been
made and seek a declaration that they, and any future such payments, were or
would indeed be contrary to law. It would follow that if he were successful in
that respect, no question of lawful pensionable remuneration based on those
payments could have arisen. Because of the terms of the correspondence leading
up to, and the terms of the settlement itself, he had not sought to challenge
the lawfulness of the bonus payments. On the assumption that the determination
imperfectly expressed as it undoubtedly was, of the Secretary of State,
remained undisturbed, then, the applicant would not have been awarded a pension
enhanced by bonus payments. Relying upon the correspondence and the
settlement, the District Auditor certified the accounts for the District
Council in the relevant year. Those accounts cannot now be re-opened. His
contention was, therefore, that the applicant should not be granted the relief
which he seeks in these proceedings, notwithstanding that Messrs Perkins and
Archer had been successful in their challenge in circumstances which were of
striking but not total similarity.
24. It is part of the case for the District Auditor that the
applicant's position with regard to the payment of bonuses and the pension was
not to be equated with that of his two former colleagues. This is because of
the position which he occupied while employed by the District Council in that
he was the person who instigated the unlawful payments from which he had
benefited, whereas the others had merely been the recipients of such
payments.
25. At the hearing of the oral application for permission to bring
these proceedings against the Secretary of State, the District Auditor had not
been notified. He later made application to be added as a respondent. I have
already determined that he should not be made a respondent but is,
nevertheless, a "person who should be heard".
The applicant's case
26. Examination of the decision reveals it to be a flawed document
because the Secretary of State had not provided intelligible reasons. In
giving reasons which were on their face inconsistent with the provisions of the
Regulations the Respondent acted irrationally. The Secretary of State has not
only not sought to defend the decision as and in the terms in which it was
made, but has also submitted to judicial review of the decisions which he made
in the similar cases of Perkins and Archer. On the hearing of the present
application it was never in issue between the applicant and the District
Auditor that the decision was vulnerable to being quashed on these grounds.
The question is whether the matters relied upon by the District Auditor should
deny the applicant the relief to which he was otherwise plainly entitled.
27. It was contended that `the applicant has had to wait a considerable
period before being able to bring his claim for judicial review'; see skeleton
¶ 13. The point which was being made here was that the applicant was
unable to proceed with his judicial review claim because of the illness from
which he had been suffering. The respondent does not contest this, the
District Auditor does not accept that this is a full explanation. It is
possible to anticipate my decision on this point by saying that I do not
consider that it is necessary to decide whether this is a full or proper reason
for the delay, since it is not determinative of the result of these
proceedings.
28. It was submitted that both the applicant and his solicitor had
considered that the focus of the settlement reached between the District
Auditor and himself had related to the car, accordingly, contrary to the
submission of the District Auditor, there had been no misrepresentation about
the applicant's position in regard to his pension when the application for
permission in respect of the Secretary of State's determination was made. The
letter from the District Auditor's solicitors of 28 October 1998 (see above
paragraph 16) had been no more than a statement of intention on behalf of the
District Auditor which was incapable of being a contractual promise. Again, it
is possible to anticipate my decision because I do not consider that it is
necessary to determine whether or not there was misrepresentation or simple
ineptitude on the part of the applicant's advisers in not referring to the
settlement when making the original application for permission. At its most
favourable to the applicant and his solicitors, the non-disclosure of the
settlement is indicative of a narrow and rather na?ve understanding of the
effect of the negotiations which led up to the eventual settlement. In
particular the contents of the letter of 23 June 1998 from the District
Auditor's solicitors to the applicant's solicitors do not lie easily with the
contention which was advanced.
29. It was submitted that, in accordance with principle, although there
is no general power for an administrative decision which has been validly made
to be revisited by the decision maker, there is power to review or to revoke a
decision which is on its face invalid. Reference was made to Wade and
Forsyth Administrative Law 8th Edn p235, in support of the
proposition that the Secretary of State could have revised his original and
invalid decision. This may well be a correct view. Since, however, nothing in
the present application turns on the correctness or otherwise of this view, it
is unnecessary to give it further consideration. The court is not concerned
with the question whether or not the decision of the Secretary of State to
refuse to revise his original incorrect decision was itself correct, but with
the sole question whether, had this application been made timeously and other
considerations apart, it would have granted the applicant the relief he seeks.
30. It was contended that there was an element of administrative
unfairness arising from the fact that the County Council had refused to treat
the applicant in the same way as Messrs Perkins and Archer after they had
successfully obtained judicial review of the Secretary of State's
determination. It was contended that their cases were in all relevant respects
identical to that of the applicant. The submission was that in accordance with
the principle that all people in a similar position should be treated
similarly, the applicant should not be denied the relief which the others
(Perkins and Archer) had obtained; see R v. Hertfordshire County
Council ex parte Cheung (transcript 26 March 1986). At p7 of the
transcript Sir John Donaldson MR said
I wholly accept the proposition that if a test case is in progress in the
public law court, others who are in a similar position to the parties should
not be expected themselves to begin proceedings in order to protect their
positions. I say this for two reasons. First it would strain the resources of
the public law court to breaking point. Second, and perhaps more important, it
is a cardinal principle of good public administration that all persons who are
in a similar position shall be treated similarly. Accordingly, it could be
assumed that the result of one test case would be applied to them by the
authorities concerned without the need for proceedings and that, if this did
not in the event occur, the court would regard this as a complete justification
for a late application for judicial review.
In the present case, it was submitted that since the Secretary of State had
consented to the applications made on behalf of the other two, in circumstances
which were indistinguishable for those of this applicant, then the court should
grant the relief sought.
31. It was accepted that in deciding whether or not to grant relief,
the court could take into account the extent to which strangers to the decision
who have acted in the belief that that decision is valid should be considered.
But in this case it was submitted that the District Auditor had not acted in
the belief that the decision of the Secretary of State was in fact valid. The
argument was to the effect that the District Auditor would not face any adverse
consequences if the Secretary of State made a correct determination in favour
of the applicant since he had raised no objection to that course when the
County Council accepted, in the cases of Archer and Perkins that it "was then
able lawfully to pay additional pension to" them in accordance with the re-made
decision and "the District Auditor agreed this also"; see letter from the
County Council to the applicant's solicitors 25 August 1999. So, it was
submitted that, the District Auditor had not acted on the basis that the
decision, which is the subject of challenge, had been validly been made. It
was then contended that, in truth, no settlement had been reached between the
applicant and the District Auditor. The basis of this contention was an
apparent reservation referred to in the course of a telephone conversation
between the solicitors for the applicant and the District Auditor respectively.
It went no further than this that on the District Auditor's behalf it had been
said
There could theoretically be circumstances in which brand new information would
cause the District Auditor to reinvestigate the matter but this appeared
unlikely and could never be ruled out entirely.
32. Moreover, the District Auditor's letter in which he agreed not to
pursue the matter further in respect of the car was a statement of mere
intention and not one which gave rise to a contractual term. Then it was said
that if the decision of the Secretary of State was a nullity, and could not
therefore form any part of a bargain which bound the applicant in any way.
What I apprehend that this contention was intended to convey was that given
that the Secretary of State did not seek to defend his decision, there were
reasons of public policy why, if there were otherwise a valid agreement, it
should not be enforced. No authority was, however cited in support of this
proposition.
33. Finally, it was submitted that the position of the District Auditor
in seeking to prevent the applicant from obtaining the pension to which he
claims to be entitled, the applicant would be deprived of property contrary to
the first protocol of the European Convention on Human Rights and if the court
did not give him the relief to which he was entitled it would not be acting
conformably with its obligations under the Convention. The first protocol
provides that
Every natural or legal person is entitled to the peaceful enjoyment of his
possessions. No one shall be deprived of his possessions except in the public
interest and subject to the conditions provided by law and by the general
principles of international law.
[Such] provisions shall not, however, in any way impair the right of the State
to enforce such laws as it deems necessary to control the use of property in
accordance with the general interest or to secure the payment of taxes or other
contributions or penalties.
34. Since, it was submitted that the right to a pension was a right to
property, if the applicant were to be refused relief to which he would have
been entitled, as would be the case if the Secretary of State re-made his
decision in appropriate form, then the applicant would be unlawfully deprived
of his right to the same pension as had been awarded to Archer and Perkins. It
was not in the public interest that the applicant, who was in the same position
as his two colleagues, should not be treated in the same way. It followed that
it was in the public interest that the Secretary of State should re-make his
decision in a lawful way.
35. With regard to the final way in which the applicant framed his
case, it was submitted on behalf of the District Auditor that to be valid the
applicant had to prove that he should be entitled to take advantage of the
representation made by him, or on his behalf, which would have the effect of
enabling him to enforce a right which he would not otherwise have enjoyed.
That was clearly not in the public interest. It was an attempt to avoid facing
up to the problem which confronted the applicant under section 19 of the Act of
1982. It was submitted that if the applicant were permitted to succeed on this
ground it would mean that he would be entitled to go behind a freely made
compromise. That was something that would plainly be detrimental to the public
interest. In reality, the applicant's submissions if correct would mean that
the High Court would not be able to do justice through a controlled exercise of
discretion in cases in which the ECHR could be prayed in aid. Such could not
be the true effect of the incorporation of the Convention.
36. If or to the extent that the applicant sought to rely on the
assertion that he had a legitimate expectation that he would succeed in the
application for judicial review so that he would be awarded his pension on the
basis that it was to be enhanced by the bonus addition this can be shown to be
wrong. The District Auditor had always indicated an intention to go by way of
section 19. The only reason that he did not keep that option open was that he
had been assured, or it had been represented to him, that nothing would be done
to seek to disturb the, admittedly, unlawful or invalid decision of the
Secretary of State. The point made by The District Auditor was that the
applicant could never have had a legitimate expectation of being awarded
a pension based on the inclusion of bonus payments in the pension calculation.
Additionally, the fact that after the settlement was effected the District
Auditor had closed the accounts meant that he was no longer in a position to
take action under section 19. On this analysis, what the applicant had lost
was the chance, amounting it must be said to a near certainty, that he would
have succeeded on his appeal to the Secretary of State against the prospect
that the District Auditor would not have done what throughout he had said that
he would do, namely proceed by way of section 19.
37. In response to a question from the court, it was submitted that
absent bad faith on the part of the District Auditor, there was no requirement
that the court should evaluate the prospects which the District Auditor might
have had if he had gone by that route. Insofar as there was any evidence on
the topic, there is the fact that both District Council and County Council had
accepted the conclusions set out in the original report. The District Auditor
was entitled to seek relief from the court in the event that there was anything
which he considered was unlawful or improper. In Hazell v.
Hammersmith and Fulham LBC and Others [1990] 2 QB 697 at p768 Sir
Stephen Brown P said
Section 19(1) of the Local Government Finance Act 1982 re-enacts section 16(1)
of the Local Government Act 1972. That section differed in its, effect from
its predecessor section (section 228(1) of the Local Government Act 1933) but
the expression "contrary to law" may be traced back to at least section 247(7)
of the Public Health Act 1875. The decided cases since that date have clearly
illustrated grounds upon which the items of account may be held to be contrary
to law. Such a conclusion may be reached where the items of account relate to
payments which were not authorised by duty of the authority, or were contrary
to the duty of the authority, or were beyond the powers of the authority, or
were made in the exercise of discretion vitiated by misdirection, consideration
of irrelevant matters, failure to consider relevant matters or gross
unreasonableness: ... In short, the auditor is entitled to seek relief if he
can show that an item of account is for any reason unlawful or improper.
38. By reference to the report in question, it was submitted that the
applicant had already received payments totalling some £122,000
(£82,000 as bonus payments and £40,000 by way of pension payments) to
which he was not properly entitled. By accepting the settlement based on the
Mercedes, the applicant was no longer at risk of having to repay any part of
the sum of £122,000, but the applicant surrendered his right to challenge
the computation of his pension on the basis set out in the letter from the
County Council of 21 August 1990.
39. In reply, the applicant reiterated the submission that it would be
unjust to him if he were not accorded the same rights as Archer and Perkins on
the footing that his position was in all material respects in the same position
as theirs. A new argument was raised on the meaning of the phrase "except where
it is sanctioned by the Secretary of State" as it appears in section 19(1) of
the Act. It was submitted on the applicant's behalf that if an item were to be
sanctioned under this section, the District Auditor would have to treat
payments so authorised as having been legally made; see R v. Grain,
ex parte Wandsworth Guardians [1927] 2 KB 205. In that case, there had
been a prior sanction by the relevant Minister in respect of gratuities paid to
a local authority officer. Although they might have been illegally made
without the sanction, the effect of the sanction was not to give the local
authority "power to turn an illegal payment into a legal one, but only
conferred a power to remit"; see p213 of the report in that case. It was
submitted that inferentially, by the decision letter the Secretary of State who
had been apprised of the dispute between the applicant and the District
Auditor, had sanctioned the payments to which the District Auditor was raising
exception. That being the case, so it was submitted, the District Auditor
could not now raise objection to the application and the claim for relief.
40. This may be thought to have been a surprising submission. The
issue before the Secretary of State had been whether or not the applicant's
pension entitlement had been correctly calculated in accordance with Regulation
E22 and Schedule 1 of the 1986 Regulations. The Secretary of State had not
been asked to provide any sanction in respect of the pension on the basis that
it had been incorrectly calculated. The grounds of appeal made no reference to
the matter of sanction and the impugned decision letter did not purport to make
any finding or record any decision on that matter.
41. Ever since the late 1880's it has been recognised that while there
may have been an illegality in certain circumstances, it would not be
appropriate to visit the consequences of that illegality on the councillors or
officers of the local authority concerned. Accordingly the power of sanction
has long existed. The principles upon which it may be exercised are
conveniently set out in the Encyclopaedia of Local Government Law (2000)
and are to the following effect:
The power of sanction is intended to be used in those cases where the
expenditure is incurred bona fide but in ignorance of the strict letter of the
law, or inadvertently without the observance of requisite formalities, or under
such circumstances as make it fair and equitable that the expenditure should
not be disallowed by the auditor ... We do not regard the Act as intended to
supply the want of legislative or other authority for particular expenditure or
classes of expenditure, and as justifying us in giving prospective sanction to
recurring expenses.
See Annual Report of the Local Government Board 1887-88. The current position
is contained within a Departmental Note dated 25 July 1997. Under cover of a
letter of the same date which states
As required by statute, each application for sanction applications is to be
decided on its merits, having regard to any policies on sanction applications
which the Government has adopted, and to the circumstances of the individual
case concerned. In her written answer, the Minister made it clear that it is
the Government's policy to continue the approach previously followed, namely,
that the power to sanction should not be used too widely.
Paragraph 7 of the Guidance is as follows:
Since the introduction of the sanctioning power in 1887, there has been a
consistent set of principles guiding its use. The Annual Report 1887-88 said -
[as set out above]
This remains the Secretary of State's policy today. Each application
(emphasis added) for sanction is decided on its merits having regard to the
principles in this Note. It is the Secretary of State's policy that the power
to sanction should not be exercised too widely.
42. Procedurally and substantively, it would thus be at odds with the
stated policy of the Government that sanction should be granted without either
application being made or recognition that that was what was being applied for.
The Note itself lays down the procedure for making applications which have to
be made to a separate division within the Department of the Environment
Transport and the Regions. As no such application has been made, this
argument, in my judgment, is wholly misconceived.
Discussion and result
43. The position, as I find it to be, is as follows. At all material
times it was the opinion of the District Auditor that the payments made, and
proposed to be made, to all three officers were illegal. Although the District
Auditor for purposes of his argument was initially prepared to treat all three
equally on examination the position of the applicant was significantly
different from that of the other two. He was the initiator of the scheme and
probably its architect. There was never any indication that once the District
Auditor had written his report and communicated it to the local authorities
concerned he gave any indication that he had changed his mind. The reasons
advanced for not proceeding by way of section 19(1) are, in my judgment
entirely valid. The facts in the present case are far removed from those in
Cheung (above). It was not only wise, but also proper, for him to delay
litigating the issues which he wished to raise until after disposal of both
criminal and civil proceedings against the applicant.
44. In my judgment, the District Auditor was misled, by the contents of
the letters sent to him by the applicant's solicitors, into believing that the
question of the applicant's appeal to the Secretary of State was no longer
live. It is unnecessary for me to decide whether those letters were written
either by the solicitors, or at the applicant's suggestion, in bad faith,
although it might be difficult to resist the conclusion that they were. The
coincidental nature of the timing of the conclusion of the settlement, for such
I am satisfied that it was, and the re-opening of the question in relation of
challenge to the decision letter is an unhappy one. With the knowledge, or
belief, that that issue was no longer live, the District Auditor was entitled
to decide whether in the exercise of his discretion he would pursue the
applicant for the return of the pension payments already made, and to be made,
if the appeal to the Secretary of State were to be properly determined or that
he should close the accounts for the relevant year. It is only in the light of
the existing challenge that the issue relating to past and future payments
re-surfaced for his consideration. I can see no basis upon which it would be
equitable as between the applicant and the District Auditor for the former to
be entitled to succeed on his appeal and for the District Auditor not to be
entitled to pursue the applicant under section 19. As, by reason of the
settlement, it is no longer possible for the District Auditor to take action to
challenge the propriety of basis of the pension calculation, it would be unjust
for the court to exercise its discretion in the applicant's favour and grant
him the relief which he seeks.
45. The applicant had never established the right (to a pension in a
particular amount) which he claims. It was, as he was well aware, always in
issue between the District Auditor and himself whether any part of the bonus
payments was capable of ranking for pension or not. When he agreed to settle
on the basis that he did, he effectively surrendered the right which he now
asserts under the first protocol to the ECHR; see paragraph 33 above.
46. A further ground for refusing to grant relief is the applicant's
delay in challenging the decision letter in judicial review. The fact is that,
despite his illness he could perfectly well have joined with Archer and Perkins
in their challenge. The circumstances of their challenge and that of the
applicant was, on the basis of his submissions to this court, identical with
theirs except as to the figures. But as important, is the fact that while that
challenge was being mounted, the applicant was apparently not so ill as not to
be able to provide his solicitors with all the information and decisions which
were required in connection with settlement of the dispute over the Mercedes
car.
46. In the result the relief which the applicant seeks by this
application must be refused.