Judge rejects misfeasance in public office claim against council and employee

A High Court judge has dismissed a claim for damages for misfeasance in public office brought against a council and one of its employees, a senior street works engineer.

In Perma-Soil UK Ltd v Williams & Anor [2016] EWHC 1087 (QB) the claimant company manufactured and supplied a soil stabiliser called Perma-soil. This is a powder mixed with other materials for highways surfacing, and is seen as environmentally friendly.

From 1996 onwards, Keith Williams, the street works engineer employed by Flintshire, and his manager had informally approved Perma-soil for use by the council. From that point any utility undertakers and contractors who wanted to use soil stabilisers in the area were required to use Perma-soil.

The claimant company’s case was based on the allegation that Williams, “consciously and acting in bad faith”:

• Interfered in its contractual relations with Welch, a civil engineering business that had been engaged to carry out highways works as part of a major project known as the Interconnector Project and had initially used Perma-soil before switching; and
• Caused or was part to the authorisation by Flintshire of the use of a product manufactured by a rival, SM Recycled Ltd (“SMRec”), the directors of which he knew.

The claimant company alleged that Mr Williams: was motivated by hostility to the company as a result of the refusal of a request he made to purchase the business; was motivated by [a desire for] personal gain; intended to cause damage to the company and knew that his actions would cause damage to the company or, alternatively, was reckless as to the risk of causing damage to the company.

The company argued that the inevitable and intended consequence of the engineer’s actions was the diversion of business to SMRec. If it had not been for Mr Williams’ misfeasance, it would have continued to supply Perma-soil for the remainder of the Interconnector Project. It pleaded losses of more than £500,000.

HHJ Keyser QC, sitting as a judge of the High Court, dismissed all the allegations after a four-day hearing.

He concluded that there was no documentary evidence to connect Mr Williams with the formation of SMRec or to show that it made payments to him, as alleged. “In circumstances where the company [the claimant] has not demonstrated that Mr Williams and his wife lead a lifestyle that is not explicable by legitimate sources of income, the absence of documentary financial evidence to support the claim is significant.”

HHJ Keyser QC said several matters, when taken together, created a very strong suspicion that Mr Williams had some financial interest in, or benefit from, SMRec. “However, despite these strong suspicions, and after considerable reflection, I am unable to find that the evidence supports a positive finding, on the balance of probabilities, that Mr Williams had a financial involvement in SMRec.”

The judge said advice or information given by Mr Williams in his role as senior street works engineer – that SMRec’s soil stabiliser was substantially similar to Perma-soil and could properly be used in its place – was “well within the scope of his functions as a public officer and was an exercise of a public power for the purposes of the tort of misfeasance in public office”.

HHJ Keyser QC found as a fact that Mr Williams was not motivated by any intention to injure the company. The allegation that he was so motivated was “wholly implausible”, and so the tort of ‘targeted malice’ was not established.

The judge went on to find that none of the requirements for the second form of tort – that Mr Williams’ conduct was unlawful in that it was for the purpose of personal gain, that he knew that it was unlawful in that respect, and that he knew that the unlawful conduct was likely to cause injury to the company – were satisfied on the evidence.

HHJ Keyser QC said it was correct to say that it was not necessary to prove actual financial gain, with the desire for prospective gain sufficing. However, “in practical terms, in the circumstances of this case, a failure to demonstrate actual benefit leaves the case on motivation in terms of hoped-for benefit high and dry. The company has not proved that Mr Williams acted for the purpose of personal gain.”

The judge said it would not even suffice to establish that Mr Williams had, or hoped to have, a personal financial benefit from the business of SMRec.

He also noted that the burden upon the claimant company was to prove illegality and bad faith, not a mere conflict of interest.

“The difficulty is stark, because the company has made no genuine efforts to establish, and has certainly not succeeded in establishing, that SMRec's product was any different from its own…... Therefore it is not in a position to show that approval for use of the new product in place of Perma-soil, or advice that it was suitable for use in place of Perma-soil, could not have been given for entirely proper purposes,” he said.

Amongst other things, this meant there was a difficulty in showing that Mr Williams had acted for an improper purpose at all. “The fact that improper considerations might present themselves as a motive for action does not itself show that one is motivated by those considerations. There is no good reason to suppose that Mr Williams could not properly have given the advice that (as I find) he gave. Why should one therefore suppose that he gave the advice for any but proper reasons?”

The judge also said there was a difficulty in showing that: an improper purpose, if present, made the conduct unlawful; Mr Williams knew that his action was unlawful by reason of an improper purpose or was reckless as to its legality; and Mr Williams knew that the company would suffer injury by reason of unlawful conduct.

HHJ Keyser QC went on to conclude that the alleged unlawfulness of Mr Williams’ conduct did not, so far as the evidence showed, cause any loss to the company. “It may be assumed for the moment that the use of SMRec's soil stabiliser in place of Perma-soil caused some loss to the company. But as there is no demonstrated reason why Welch should not have been free to use SMRec's product, any such loss was not caused by misfeasance on Mr Williams' part.”

The judge added that he would only have offered £34,000 in damages had the claimant proved its case.

Paul Stagg of 1 Chancery Lane appeared for the council and Mr Williams.