Hinckley and Bosworth Borough Council (plaintiff) v Frank Shaw
| Jurisdiction | England & Wales |
| Judgment Date | 21 December 1998 |
| Neutral Citation | [1998] EWHC 2007 (QB) |
| Date | 21 December 1998 |
| Court | Queen's Bench Division |
| Docket Number | Case No. 1995-H-No.1451 |
[1998] EWHC 2007 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Case No. 1995-H-No.1451
Case No. 1995-H-No.1452
This is a judgment on issues relating to liability but not damages in two consolidated actions brought by Hinckley and Bosworth Borough Council ("the Council").
In the first action the Council claims the repayment of various sums which it has paid to Mr Frank Shaw since 31 July 1990 when he left his post as the Council's Director of Administration and Finance and Principal Chief Officer. The Council also claims various declarations. The essence of its case is that an agreement which it made with Mr Shaw on 4 January 1990 to increase Mr Shaw's salary considerably for the year ending 31 July 1990, and to pay him three months salary in lieu of notice on the termination of his employment on 31 July 1990, and to pay him a consultancy fee of £1,000 per month for five months from 31 July 1990, was beyond the powers of the Council and unlawful and void. The agreement to increase his salary for the final year of his service, made well into that final year was made for the improper purpose of increasing his redundancy and pension entitlements which were geared to it. It was and remains beyond the powers of the Council to pay Mr Shaw redundancy or pension benefits to the extent that the same have resulted from the unlawful increase in his salary. The payment in lieu of notice was an unlawful gift, since sufficient notice was given. The consultancy was a sham.
In the second action the Council claims from Mr Michael Coker, a solicitor, damages and indemnities for alleged negligence and breach of duty in respect of his advice or lack of advice in relation to the 4 January 1990 agreement and associated matters.
Mr Shaw contends that the 4 January 1990 agreement was both fair and lawful. His salary increase was genuine and more than justified. The Council was entitled to pay him money in lieu of notice. He held himself available to be consulted and he was consulted. In any event, he contends that it would be inequitable to order him to repay any money which he has received as a result of the agreement. Alternatively he alleges a setoff and counterclaim on the basis of alleged breach of warranty and breach of duty of care on the part of the Council.
Mr Coker denies any negligence or breach of duty towards the Council. He too contends that the agreement was lawful; alternatively that it was reasonable to believe that it was.
The Council seeks judgment against both Mr Shaw and Mr Coker. The actions largely stand or fall together in that the allegations of negligence and breach of duty against Mr Coker depend upon the Council establishing that it was beyond the powers of the Council to make the agreement upon which he advised, and that the damage alleged to have resulted from his alleged negligence consists of the payments made to Mr Shaw, pursuant to the agreement, which the Council also claims should be repaid by Mr Shaw. But the claim against Mr Shaw may succeed without proof of negligence on Mr Coker's part; and if Mr Shaw's defence that it is wrong to order him to repay money to the Council, or his setoff and counterclaim, succeeds, the Council's claim against Mr Coker may succeed without commensurate success in its claim against Mr Shaw. Moreover, the County Council has sued the Borough Council in respect of superannuation payments which it has made to Mr Shaw, based on his increased salary, and the Council seeks an indemnity from Mr Coker in respect of any liability to reimburse the County Council.
It is convenient to start by setting out the essential history and the principal issues between the parties, before turning to particular details in the evidence and my conclusions. Both Mr Shaw and Mr Coker gave evidence. They are both respectable men, but there is much at stake for each of them. The main events took place about nine years ago. Moreover, although Mr Shaw and Mr Coker gave evidence, the Councillors who negotiated the January 1990 agreement on the Council's behalf did not. In these circumstances, I have felt it particularly important, as did counsel, to pay heed to documents made in 1989 and 1990, and I make no apology for rehearsing extensive parts of them when setting out the history.
Mr Shaw was born on 4 July 1935. He is a barrister. He is also an associate of the institute of Public Finance. In September 1974 he joined the Council as its Principal Legal Officer. In August 1981 he was appointed to the Chief Officer post of Treasurer and shortly after that he became the Director of Administration and Finance, running what had been two separate departments. In July 1983 he took over the vacant post of Principal Chief Officer, thereby becoming Principal Chief Officer and Director of Administration and Finance. The Council did not like the title "Chief Executive", used by other authorities, but that was effectively what Mr Shaw was, as well as having departmental responsibilities for administration and finance.
In about December 1988 the Council's Director of Development resigned and a management team of the remaining Chief Officers, including Mr Shaw, was asked to consider the Council's organisation and structure. The management team made proposals which included an offer by Mr Shaw to take early retirement and voluntary redundancy in December 1989. I accept his evidence that this was the first time that he considered early retirement, and that he made it clear that he was willing to continue in the Council's employment.
In the event, the management team's proposals, including Mr Shaw's offer of early retirement, were not accepted, and a new Director of Development was appointed in about March 1989.
According to Mr Shaw, during the week of 24 to 28 July 1989 he started to work on a report setting out the need for a review of the salaries of senior officers and of organisation within the Council. This was known to the Council, but on 31 July 1989, before Mr Shaw had completed his report, Councillor Smalley telephoned him to discuss his early retirement.
Three options were identified, according to Mr Shaw.
First ("Option 1"), Mr Shaw could retire early with virtually immediate effect, to enable reorganisation to take place. Mr Shaw made it clear that this was not acceptable to him, for fear that others would think that he had been forced to leave in a hurry because of some fault on his part.
Second ("Option 2"), Mr Shaw should take early retirement with effect from about October 1989. This possibility was identified by Mr Shaw as acceptable to him in principle, on the basis of his current salary of £30,732 per annum.
Third ("Option 3"), Mr Shaw should take early retirement with effect from October 1990 and should be responsible in the meantime for implementing the changes required by the Local Government and Housing Bill which was then before Parliament, with Royal Assent expected in October 1989. According to Mr Shaw he made it clear that he would require a substantial salary increase if that option was adopted, and the appointment of at least a temporary officer to assist him, in view of the increased workload. His duties were already heavy.
According to Mr Shaw, on the following day, 1 August 1989, he told Councillor Smalley that in the event of Option 3 being adopted he considered that an increase of 20% in his salary would be appropriate. He suggested a further option ("Option 4") that he would retire on a date to be fixed, after May 1991. If that option was adopted, he would agree to forego any salary increase because he would be able to accept appointments as Returning Officer for the May 1991 local elections and Census Officer for the 1991 census, and he would receive fees for both those offices. He would still require the appointment of a temporary officer, as with Option 3, but only until October 1990. He made it clear to Councillor Smalley that his preference was for Option 4 but that Options 2 and 3 were also acceptable.
According to Mr Shaw, he met three members of the Policy and Resources ("P and R") Committee, including Councillors Smalley, on 3 August 1989, before the P and R Committee meeting fixed for that day. The three members told Mr Shaw that the Council wanted him to retire on 31 May 1990, a date which was not envisaged under any of the four previous options; that a 20% increase in salary was acceptable to the Council in view of Mr Shaw's increased workload and additional responsibilities; that the appointment of additional staff to help him would be further considered, but that it was not looked on favourably.
According to Mr Shaw, he responded by saying that he would have to consider the proposed new retirement date of 31 May 1990 and that if no additional staff were to be appointed he would regard a salary increase of 33.33% per annum appropriate. The controlling group of the Council held 30 of its 34 seats and Mr Shaw thought that the councillors were not coming clean about what was being discussed behind the scenes.
I have referred to Mr Shaw's account of discussions between 31 July and 3 August 1989. The Council did not call Councillor Smalley or anyone else to contradict Mr Shaw's account, but it did put in issue whether Mr Shaw made any claim for a salary increase at that time. There is no documentation expressing or recording such a claim. This is an issue to which I must return.
Although Mr Shaw did not complete his proposed end of July report on review of salaries, in the light (he said) of his discussions with Councillor Smalley, he had on 27 July...
To continue reading
Request your trial