The taint of unfairness
The Court of Appeal last week ruled that Haringey Council’s dismissal of Sharon Shoesmith was unlawful. Winston Brown analyses what the judgment means for local authorities and other public bodies.
The recent decision of the Court of Appeal that Haringey’s dismissal of Sharon Shoesmith was unlawful carries far reaching implications for all those holding statutory positions within the public sector such as local authorities and for those advising them.
The sad facts of the Baby P case are well known and are not repeated here. However, of significance is that immediately after the trial of those responsible for Baby P’s death the then Secretary of State Ed Balls MP ordered OFSTED to conduct a speedy Joint Area Review (or ‘JAR’) to review the role of agencies including Haringey Council and make findings and recommendations. OFSTED reported on 30 November 2008. Among other things OFSTED’s report criticised a lack of managerial oversight and control by officers and councillors within Haringey. OFSTED met with Ed Balls on the morning of 1 December 2008 to discuss their report. Mr. Balls MP held a press conference that afternoon stating that the OFSTED report was damning of management in Haringey. He confirmed that he had issued a direction replacing Ms. Shoesmith as the statutory Director of Children Services for Haringey and he added that while Haringey would alone address the employment relationship he hoped Ms. Shoesmith would not get a ‘pay off’.
Events at Haringey then precipitated. Haringey immediately suspended Ms Shoesmith. She was summarily dismissed after a disciplinary hearing on 8 December 2008 without payment in lieu of notice nor any compensation. Ms. Shoesmith’s appeal against dismissal was rejected on 12 January 2009. Haringey’s case was that the direction from the Secretary of State rendered Ms. Shoesmith’s position untenable and they had no choice but to dismiss her for ‘some other substantial reason’ (one of the potentially fair reasons for dismissal under Employment Rights Act 1996). Haringey also argued that the OFSTED report led them to find Ms. Shoesmith in breach of her duty of trust and confidence towards them as her employer.
Of interest to employment lawyers is that Ms. Shoesmith challenged her dismissal by way of judicial review of the OFSTED report, the direction of Ed Balls MP and of Haringey’s dismissal of her. She did of course lodge the usual proceedings in the employment tribunal but they are stayed pending the outcome of judicial review proceedings. The Court of Appeal has held that her dismissal was unlawful on public law grounds. This decision inevitably colours how the employment tribunal case would be decided but merits close consideration for employment and constitutional lawyers since the Court of Appeal applied public law issues to determine the lawfulness of an employment process. Let us consider the issues in turn.
Why judicial review?
Judicial review of course is a process in which the courts review decisions taken by public bodies and can strike them down if they breach well established principles of public law. For judicial review one must have sufficient standing, there must be some public element in the decision under consideration and the court must be persuaded that no adequate alternative remedy exists. The public law principles are well known to those advising on constitutional law issues and include that the public body must act reasonably (i.e. take account of relevant considerations and ignore irrelevant ones) and legality (the public body must act in accordance with any rules governing the decision in question).
On the public law element the Court of Appeal followed a line of reasoning in earlier cases (particularly Ridge v Baldwin [1964] AC 40 and Reg v East Berkshire Health Authority, ex parte Walsh [1985] QB 152) that where an office holder’s post is created by a statute decisions pertaining to the post are sufficiently ‘public’ to be reviewable by the courts. In Ms. Shoesmith’s case the Director of Children Services post exists by virtue of section 18 Children Act 2004 which obliges local authorities to appoint such a role. The Court said the statutory underpinning was the critical element. Merely working for a public body – even in a senior role – did not of itself import the necessary public law element. Of course one could argue that all posts in a local authority derive from statute since local authorities appoint staff pursuant to section 112 Local Government Act 1972 which allows them to appoint such officers as they think necessary for the discharge of their functions. However, a specific statute creating the post is it appears needed.
What of the employment tribunal remedy?
The Court of Appeal was persuaded that the employment tribunal was an insufficient alternative remedy since a finding in Ms. Shoesmith’s favour in the employment tribunal could not give her what a finding of unfairness in the High Court could do. The High Court could (and did) declare her dismissal void. An employment tribunal cannot do so even if it finds the dismissal unfair. A ‘void’ finding means in legal terms that the dismissal did not actually take place. Haringey would have to qualify any statement of the dismissal with a comment that a court later found it void and unlawful. Also, damages in the employment tribunal are capped but such caps do not apply to awards in the High Court. As such the employment tribunal was not an adequate alternative and Ms. Shoesmith could claim judicial review.
So where was the ‘unfairness’?
Ed Balls MP’s direction was declared unlawful and void as he had based it on a negative assessment of Ms. Shoesmith not only from the OFSTED report but on critical comments from Haringey officers who had met with him separately. Ms. Shoesmith had not been present and had not been given opportunity to respond to those criticisms before the direction. This failure was a breach of natural justice and accordingly unlawful.
With the door to judicial review open on the employment processes of Haringey the Court had no hesitation finding it unlawful against public law principles. There was evidence of a predetermined outcome in favour of dismissal at both disciplinary and appeal hearing stages. Predetermination will undermine a public body’s decision. It did so here. Interestingly Ms. Shoesmith had also challenged the lawfulness of Ed Balls’ direction during her internal appeal. The internal appeal panel declined to rule on that feeling it was for a court of law only. They later made clear that they accepted Mr. Balls’ direction as lawful in dismissing Ms. Shoesmith’s appeal.
All their Lordships found Haringey’s internal process unfair and thus the dismissal was struck down as void. Their Lordships reasoning should be of concern for in house lawyers advising in similar cases: two of their Lordship held that Haringey’s decision to dismiss was null and void also because the direction of the Secretary of State was now held to be unlawful. Haringey could not rely on an act later held to be unlawful. Lord Justice Burnton said Haringey’s appeal panel knew that Ms. Shoesmith was challenging the lawfulness of the Secretary of State’s direction and should therefore have given her the choice to either commence judicial review proceedings to test the point or to proceed with her internal appeal on the accepted basis that the direction was lawful. In deciding to press ahead in reliance on the Ed Balls direction the council took the risk that the decision they were relying on might later be held to be unlawful. The Master of the Rolls, Lord Neuberger also held that Haringey could not rely on the earlier direction for a number of reasons: reliance on a public act later declared invalid should more easily be done by an individual than a public body. The assumption is that the public body is expected to take steps to ensure that the act it is relying on is itself valid. Further, Haringey were on express notice that Ms. Shoesmith was challenging the lawfulness of the Secretary of State’s direction and could not later hide behind it when it was declared unlawful. There was no need for Haringey to proceed with the haste it did. Ms. Shoesmith was already suspended with a replacement in post. The Master of the Rolls agreed with Lord Justice Mackay that Haringey should have invited Ms. Shoesmith to either bring judicial review proceedings or accept the direction as lawful. There was also no prejudice to Haringey from holding the direction to be invalid. The Master of the Rolls said Haringey could have given notice under the contract of employment while reserving to itself the argument that dismissal had already been effected by the Secretary of State’s direction. (I would add here that even if Haringey had done so it would not prevent Ms. Shoesmith arguing that the dismissal was still unfair in the employment tribunal).
The Court also found that Haringey’s breach of trust and confidence ground was misplaced since trust and confidence is aimed at cases where the employer or employee has made clear an intention to no longer be bound by the terms of the contract. This was not the case here. Haringey’s concern was over Ms. Shoesmith’s performance.
What now?
In judicial review proceedings the court has a discretion whether and what remedy to grant. The court said compensation for loss of office was appropriate and has remitted the case to a lower administrative court to assess it but has stayed proceedings to allow parties to settle if possible. We know Haringey and the Secretary of State are appealing but as things stand today Ms. Shoesmith’s dismissal is null and void. She remains an employee of Haringey. Intriguingly it would appear that as the court held that the direction of the Secretary of State in 2008 was itself unlawful Ms. Shoesmith remains the statutory Director of Children Services for Haringey AND the current incumbent has not been validly appointed! (Since Haringey itself has power under Children Act 2004 and Education Act 1996 to appoint a DCS the simple solution is a report to its full council noting the invalidity of the current incumbent’s external appointment but then adopting him as the statutory appointee from the date he began in office thereby adopting the decision as Haringey’s).
Lessons for statutory officers and advisors
Local authorities are required to appoint a certain number of statutory officers namely Head of Paid Service (section 4 Local Government and Housing Act 1989), an officer in charge of its financial affairs (section 151 Local Government Act 1972), Monitoring Officer (section 4 Local Government and Housing Act 1989), Director of Adult Social Services (section 6 Local Authority Social Services Act 1970) and an officer responsible for scrutiny functions (section 31 Local Democracy, Economic Development and Construction Act 2009 adding a new section 21 ZA Local Government Act 2000). Following the Shoesmith case employment decisions pertaining to these office holders are also public law decisions reviewable by the courts. The local authority would need to ensure it is adhering to principles of public law as well as the terms of the employment contract and its HR procedures if for example it sought to remove or dismiss a statutory officer. As an example a failure to follow the internal disciplinary procedures and the constitutional provisions governing the dismissal of any statutory officer may not only breach the ACAS Code of Practice but could also be held to be a ground of procedural impropriety rendering dismissal unfair in public law terms. For the in house employment lawyer the caution is not to just focus on the usual employment law considerations but to have regard to the wider public law criteria such as natural justice or Wednesbury unreasonableness. It would be negligent to not so advise. Corporate law expertise is likely to be called upon in such cases.
Also, if the public body receives a ‘direction’ or other external pressure to remove a statutory officer the body should consider if the direction is itself lawful. It might wish to give the officer an opportunity to challenge the lawfulness of the direction or for the officer to accept it as validly made.
What of the employment proceedings?
One would normally think it is now unlikely that the parties would return to the employment tribunal to air the unfair dismissal. For one thing adverse publicity would be again revived in the media. Further, both courts which presided on Ms. Shoesmith’s judicial review were very critical of Haringey’s internal processes leading to her dismissal. While both courts were at pains to say their comments should not be read as a comment on the unfair dismissal claim under the Employment Rights Act 1996 in the employment tribunal there is no doubt that such high level judicial opprobrium make a finding of unfair dismissal most likely. Even if Haringey win their judicial review appeal to the Supreme Court the criticisms remain on record and would be ammunition against them in the employment tribunal forum.
Further, the Court of Appeal found that the ‘trust and confidence’ ground was misplaced and since two of their Lordships found that Haringey cannot rely on Ed Balls’ direction to justify dismissal (for some other substantial reason) then this ground is probably undermined before the tribunal. Haringey can argue that the Court of Appeal hearing a judicial review appeal is not the expert forum for employment law issues but the judicial criticisms still carry weight with the tribunal. The best course for Haringey if the Court of Appeal decision is upheld will be to settle. That will not be a small sum. It is reported that Ms. Shoesmith was dismissed from a £133,000 a year job in 2008. So to date she has three years' lost salary. By the time of any Supreme Court decision those losses would have grown. If she then revives the tribunal proceedings more compensation awards may follow. But this is Haringey and arguably the public remains sensitive and outraged at the thought that Haringey would (willingly) pay Ms. Shoesmith anything following Baby P’s death. As such I would not be surprised if Haringey and the Secretary of State prefer to fight even the tribunal case to the end and be ordered rather than volunteer to pay any compensation.
Compromise?
Employment lawyers are used to advising employers to settle disputes perhaps under a compromise agreement to avoid undue expense and time. There would have been a public outcry if Haringey was seen to have willingly paid anything out. It was thus inevitable perhaps that dismissal without notice and the subsequent legal history would follow. Nevertheless, in cases where things go ‘pear shaped’ with a sitting statutory officer a compromise and a dignified exit remains the best and cheapest solution. One can only hope that there is not such a media frenzy as to inhibit sensible decision making.
Winston Brown was formerly Deputy Monitoring Officer and Legal Partner for Barking and Dagenham Council. He is now a solicitor based in private practice advising public as well as private sector bodies on public law and employment issues.
