Council and watchdog in standoff over lawfulness of libel claim indemnity

A local authority and a finance watchdog are at loggerheads over whether certain expenditure – including the grant of an indemnity to the chief executive to bring a libel counter-claim – was unlawful.

In a report Anthony Barrett, Assistant Auditor General at the Wales Audit Office, questioned two items of Carmarthenshire Council’s expenditure:

  • £16,353 in remuneration paid to the chief executive, Mark James, in lieu of employer pension contributions; and
  • £23,217 of expenditure incurred in granting an indemnity to James to bring a libel counter-claim against a claimant, Jacqui Thompson of the Carmarthenshire Planning blog.

Barrett said: “The audit cannot be formally concluded and an audit certificate issued until further enquiries regarding the lawfulness of transactions mentioned above and enquiries arising from matters raised by members of the public have been formally completed.”

In a statement Carmarthenshire said it was continuing its discussions with the WAO.

The local authority said: “We have sought independent legal advice from a leading QC on both issues and remain firmly of the view that we have followed the correct course of action.”

On the issue of the indemnity, Carmarthenshire pointed out that it had consulted the WAO prior to its decision being taken in January 2012 “and that it has taken almost two years for these concerns to have been expressed”.

The statement added: “We have discussed the matter with them on several occasions and in August of 2012 they indicated, in response to questions from a third party, that they agreed that the council had the legal powers to grant the indemnity. It is disappointing that they have now expressed a different view so late in the day, and too late for the council to act upon it.

“Our own independent legal advice still confirms our view that the council was fully entitled to grant the indemnity, and the outcome of the court case and the comments of the judge in that case further reinforce our opinion that we acted properly. The council has a duty of care to protect its employees from unfair harassment and libel and the court judgement reinforced that opinion.”

The council confirmed that James was not the author of the report to councillors on the issue of the indemnity, “and did not participate or offer any advice during the process”.

The statement continued: “As a result of the order for costs and damages awarded by the judge in the case we fully expect to recover our costs and that there will ultimately be no cost to the council.”

In March this year the blogger, Thompson, lost her libel claim against the council and James and was ordered to pay £25,000 in damages after the counter-claim against her succeeded.

According to an entry on Thompson’s website earlier this month, she has been given permission to appeal on one ground relating to the chief executive’s counterclaim.

She said her legal team had filed a request with the Court of Appeal for an oral hearing at which she would renew her application for permission on other grounds relating both to her claim and the counterclaim.

On the separate issue of the payment in lieu of employer’s pensions contributions, Carmarthenshire argued that this had not incurred any additional cost to the council or the local taxpayer.

“Instead of paying into the employee’s pension scheme we have agreed simply to make a payment directly to them of an equivalent amount, and it is then for them to make their own arrangements as they see fit,” the council said.

The local authority blamed changes in tax rules for creating a situation where it was difficult for people earning above a certain level to remain in the occupational pension scheme.

“We believe there are numerous other employers including local authorities, universities and housing associations who have adopted the same practice,” Carmarthenshire said.

“The decision was made having obtained expert advice from independent consultants. We have also sought independent legal advice, and we do not agree that the council does not have the power to adopt this practice”

It added: “This policy could apply to any member of staff so affected and is not restricted to or designed for any individual member of staff. We would also confirm that the chief executive was not present in the meeting in which this decision was reached and did not offer any advice to the councillors making the decision.”