Council decides against challenge to report from watchdog on libel indemnity

A council criticised by an audit watchdog for giving its chief executive an indemnity to pursue a counterclaim in a libel case has decided not to try to challenge the auditor's finding of unlawfulness.

The Appointed Auditor (and Assistant Auditor General for Wales), Anthony Barrett, said in January that Carmarthenshire County Council had acted unlawfully by giving chief executive Mark James the indemnity in libel proceedings with local blogger Jacqui Thompson.

Councillors argued that James had been defamed in the course of his duties and that he was owed a duty of care.

Barrett said that the Welsh Government’s Local Authorities (Indemnities for Members and Officers) Order 2006 clearly banned such indemnities since it stated: “No indemnity may be provided under this order in relation to the making by the member or officer indemnified of any claim in relation to the alleged defamation of that member or officer but may be provided in relation to the defence by that member or officer of any allegation of defamation made against him”

But the council has been in a standoff with the Wales Audit Office over the lawfulness of the indemnity. In February and in response to the Wales Audit Office’s claims, the authority took the unusual step of publishing legal opinions it had previously received from two QCs, James Goudie and Tim Kerr of 11KBW.

Councillors sought to clarify the legal position again by obtaining clarification from the Welsh Government, but has decided to take no further action after recently receiving a report earlier this month from resources director Roger Jones and head of administration and law Linda Rees-Jones.

Their report noted that the 2006 Order also went on to say: “These powers are in addition to any existing powers that such relevant authorities may have.”

Jones and Rees-Jones then highlighted s. 111 of the Local Government Act 1972 which provides that “a local authority shall have power to do anything…which is calculated to facilitate, or is conducive or incidental to, the discharge of any of their functions”.

The report said it had been established in the case of R v Bedford Borough Council ex parte Comninos [2003] that granting such an indemnity was capable of being conducive or incidental to an authority’s employment function, although it should only be granted in “exceptional circumstances”.

Jones and Rees-Jones contrasted the WAO’s stance with the advice given by a “well respected public administration law QC” that s. 111 of the 1972 Act had survived the 2006 Order and was a power which could still be exercised in exceptional circumstances.

The report revealed the result of the council's bid to seek clarification from the Welsh Government. In a letter local government minister Lesley Griffiths said: “This is not a matter in which you should expect me to provide legal advice when the issue of statutory interpretation is clearly a matter for the courts.”

The minister revealed that she had nevertheless asked her officials to review the 2006 order and the accompanying guidance, Providing indemnities to members and officers of relevant authorities.

The section in the guidance relating to libel actions expressly states that the Comninos judgment had indicated that authorities might have a power to fund libel proceedings by virtue of s. 111 of the 1972 Act. It adds that “any such power is not removed by this Order” (which was highlighted by the senior officers' report).

In her letter Griffiths, however, also highlighted how the guidance “notes the risks of offering such indemnities by relying on s. 111 of the Local Government Act 1972.”

She said it was for the council to satisfy itself and others it had acted within the powers available.

Rees and Rees-Jones said in their report that the clarification letter had been shared with the Wales Audit Office, but the Appointed Auditor had responded by saying he had no further comment to make beyond what he had already set out in his public interest report.

The auditor added that he was satisfied that the issue had been resolved at the council’s EGM in February and no further action was required.

The report said: “[C]ontrary to the Appointed Auditor’s statement in his public interest report that ‘the provisions of the 2006 Order ... were introduced to remove any uncertainty which existed prior to the new orders’ and ‘It is my view that the 2006 Order represented an intention on the part of the Welsh Government (and Parliament before it) to regulate the granting of indemnities in respect of the bringing of defamation proceedings’…., the Minister’s confirmation that Welsh Government’s intention is as set out in its 2006 Guidance means that the 2006 Order was introduced as additional powers for local authorities as opposed to being an Order to remove the s. 111 (1) Local Government Act 1972 powers which already existed.” (The report’s emphasis)

The report continued: “The Minister states in her clarification letter that she has ‘nothing further to add to this guidance and neither (does she) think the guidance nor secondary legislation requires any amendment or clarification’. This statement is made in the specific knowledge that this Authority has granted an indemnity in accordance with Welsh Government’s Guidance.”

Speaking at the meeting earlier this month (9 July), Cllr Kevin Madge said it was time for the authority to “move on” from the issue.

In terms of the libel case itself, a High Court judge (Mr Justice Tugendhat) dismissed Thompson’s claim against Carmarthenshire and James in its entirety in March 2013 and also ordered her to pay £25,000 in damages after concluding that the chief executive’s counterclaim should succeed.

The Court of Appeal refused to give the blogger permission to appeal in her libel claim, but did give permission to appeal part of the counterclaim.

In May this year Thompson lost that appeal, over the meaning attributed to posts she made about a local authority’s chief executive.

Mark Smulian