Watchdog tells council to withdraw libel indemnity given to chief exec

The Appointed Auditor for a local authority in Wales has maintained his stance that the council’s decision to grant its chief executive an indemnity to bring a libel counterclaim was unlawful.

Anthony Barrett, the Assistant Auditor General for Wales, also issued a separate report in the public interest which found that Carmarthenshire County Council had acted ‘contrary to law’ by making a decision that allowed senior officers to opt out of the Local Government Pension Scheme (LGPS) to avoid potential tax liabilities.

The officers were paid a ‘supplement’, equivalent to their pension contributions, to enable them to make their own arrangements for retirement.

Barrett had questioned both items of expenditure at Carmarthenshire in September last year. The council said at the time that it had sought independent legal advice on both issues and was “firmly of the view” that it had followed the correct course of action.

In his latest report on the libel indemnity, the Appointed Auditor said he had concluded that the decision taken by Carmarthenshire’s Executive Board in relation to the libel indemnity was unlawful because:

• In view of the specific publications in Articles 6(3) of the Local Authorities (Indemnities for Members and Officers) (Wales) 2006 Order, the council was not authorised by statute to grant an indemnity in respect of bringing a claim or counterclaim for defamation. “The council may not rely on section 111 of the Local Government Act 1972 (the 1972 Act) to avoid that limitation on it powers.”
• There were failings in governance arrangements and processes adopted by the council.

The Appointed Auditor revealed that Carmarthenshire had paid out more than £26,000 in external legal costs since 2012 under the decision to indemnify the chief executive, Mark James.

James brought the counterclaim after he was sued – along with the local authority – by blogger Jacqui Thompson.

In March 2012 Mr Justice Tugendhat rejected Mrs Thompson’s claim in its entirety. He also ordered her to pay the chief executive £25,000 in damages after the counterclaim was successful.

In December 2012 the Court of Appeal refused Ms Thompson permission to appeal. The blogger did have one finding in Mr Justice Tugendhat’s ruling on which she already had permission to appeal.

The Appointed Auditor said he had shared his legal advice on the lawfulness of the decision to grant an indemnity with Carmarthenshire.

“I have received submissions from the council, which does not accept that the decision to grant the indemnity to the chief executive is unlawful,” he acknowledged. “These submissions sought to justify the decision taken but they have not altered my view on the lawfulness of the said decision.”

Barrett concluded that the council should rescind the decision and withdraw the indemnity.

In his report on senior officers’ pay and pensions the Appointed Auditor claimed that the council had acted unlawfully on a number of grounds.

He said Carmarthenshire did not have the power to remunerate staff to mitigate the effect of pensions legislation, and that in making the decision, relevant considerations were not taken into account (in breach of the principles set out in the Wednesbury case).

Barrett also argued that: the council had failed to have due regard to the public sector equality duty; the decision amounted to indirect discrimination; and a senior officer who had a disqualifying personal and pecuniary interest in the decision, participated in the decision making process.

Carmarthenshire has rescinded its decision to offer a pay supplement in lieu of pension contributions. It will make no further payments to the chief executive from January 2014.

The Executive Board at Carmarthenshire did not agree that the decision was intrinsically unlawful, the report said, but has accepted that there may have been shortcomings in the procedures adopted.

Barrett said: “Carmarthenshire Council has acted unlawfully on two fundamental issues, both of which the public need to be fully aware of. The authority has taken decisions and used taxpayers’ money in areas that they do not have the legal powers to do so.

“I welcome the fact that the council has rescinded its decision over the pensions issue, it now needs to do the same in relation to the libel indemnity granted to the chief executive. It is also of vital importance that the council addresses procedural weaknesses in its decision making, as highlighted in my two reports today, so that it exercises its discretion and authority properly on such important matters.”

In a statement Carmarthenshire said: “The Wales Audit Office reports have been received and will be carefully considered by the council in due course. It would not be appropriate to comment further until such time.”