Sense and sensitivity

The public interest report into the claim brought by Cheltenham Borough Council against its former managing director highlights the need for thorough and careful application of good governance principles when handling major, novel and difficult cases. Claire Lefort analyses what the auditor had to say.

On 2 March 2010, KPMG issued a Public Interest Report in relation to Cheltenham Borough Council’s handling of a claim against its former managing director, Christine Laird. The need for the report was as a result of the financial loss incurred and the level of public interest in how the situation arose.

Mrs Laird worked for Rhondda Cynon Taf Council (RCT) before she became the Managing Director of Cheltenham Borough Council in February 2002. After she joined the Council a local election took place which led to a change of political administration. Almost immediately there were signs of a strained relationship between Mrs Laird and a number of leading members in the new administration. Significant turmoil in the Council led to a number of significant disputes and grievances between Mrs Laird and the Council and between Mrs Laird and certain members and officers of the Council. These continued over three years until the Council finally terminated Mrs Laird’s contract of employment in August 2005.

In March 2006 the Council agreed to Mrs Laird’s ill-health early retirement with effect from August 2005 and the costs associated with handling and resolving these disputes were £307,000.00. The Council concluded that there had been flaws in Mrs Laird’s application for the post of Managing Director and decided that it had a fiduciary duty to try to re-claim the costs it had incurred.

In May 2007 the Council initiated legal action against both Mrs Laird and her previous employers RCT, although in November 2008 the action against the RCT was dropped and each side agreed to bear their own costs. The Council’s claim against Mrs Laird amounted to £982,000.00 and was considered by the High Court between January and April 2009. In June 2009 the Court issued its judgement that the Council’s claim had failed and the case was dismissed. The judge did, however, record that the case was “clearly a claim fit for trial”.

The Council has incurred total costs of £1,045,000 to date as a result of deciding to pursue the legal action against Mrs Laird and over the whole period of the dispute with Mrs Laird the Council incurred total costs of £2,132,000.

The principal line of enquiry for the audit review was: “Did the Council follow appropriate processes in deciding initially to take and continue to pursue the High Court action against Mrs Laird?”

In June 2006, the Council took the first formal stages to access certain key documents from RCT and Gloucestershire Occupational Health and then obtained Counsel’s advice on those documents. A briefing was given to members in September 2006 about the potential liability of a claim against RCT and Mrs Laird and although no explicit vote was taken, the Staff and Support Services Committee (a cross-party committee including senior members with responsibilities covering employment and constitutional matters) confirmed its intention that legal action should be progressed and the Council issued a joint claim for damages against both parties in May 2007.

As mentioned before, in November 2008 the Council dropped the action against RCT but the claim against Mrs Laird continued. In January 2009, officers tabled a detailed paper to the committee setting out the Council’s options and the committee decided to continue with the claim. It also authorised the Chief Executive to explore the potential for settlement, but Mrs Laird rejected the Council’s settlement proposals.

The review highlighted that there was some confusion throughout the handling of the case as to who the drivers were in pursuing the claim – members believed it was the officers, particularly the Borough Solicitor who was acting under delegated authority, whereas officers believed it was the members. In reality the focus, motivation and enthusiasm to continue with the claim against Mrs Laird had dwindled to a certain extent as the claim continued.

The public interest report recommended that delegated authority to the Borough Solicitor regarding decisions to instigate and continue legal action should have a financial limit together with when and from whom further sanction is required for financial expenditure above that limit.  Similarly other incidences where authority is delegated to individuals, there should be clarity over the extent of financial authority.

The review stated that it expected to see a strong corporate focus on leading and monitoring the directions being followed with regard to the Court case and noted that the Board of Directors were not directly monitoring progress or contributing to either members’ briefing or decision making.  It also noted that neither the Section 151 officer nor the Borough Solicitor were members of the Board of Directors and therefore even if the Board had been more involved, it may have lacked the automatic contributions of these two statutory officers.

As this was a significant matter, the review recommended that there should always be a detailed objectives and options appraisal which includes a process for taking forward and reporting back on decisions made by Committees to ensure that agreed actions are delivered and reviewed. Also the process should ensure that all relevant options are assessed when considering crucial decisions and reassessed throughout decision-making processes, which includes revisiting the overall objective and ensuring that the strategy being followed remains appropriate for delivering the objective. In addition, the review concluded that decisions should be taken based on a balanced range of success factors including service needs, legal issues, financial implications and risk. They should also be informed by appropriate risk scenarios or possible outcomes.

The review highlighted that with regard to handling insensitive or important issues, members may need to do more than simply note action taken and therefore it is incumbent upon officers to carefully draft recommendations so it is clear what will happen as a result.  Furthermore, issues were highlighted in relation to ensuring that minutes of meetings which related to significant and sensitive issues were recorded in detail as well as ensuring that those attending the meetings are properly recorded. Also for significant and sensitive matters, those voting for and against and abstaining should be recorded.

A number of recommendations were made in relation to the project management of all legal case work so as to ensure that there is a formally appointed instructing officer and a written scoping document and that all legal actions and defences should continue to be channelled through the legal team. In addition, it was recommended that significant legal casework should be supported by budget and monitored accordingly and that if further budget provision becomes necessary this should be considered through established virement processes.

Although several of the recommendations relate specifically to the circumstances arising in this particular case, they demonstrate the need to review the way in which legal case work involving significant and sensitive issues is handled. It also emphasises the necessity to review not only the legal risks associated with any significant legal action, but also the financial and reputational risks which may be associated with it. In many cases, it is often easy to lose focus and direction in proceedings which are long and drawn out, but it is important to maintain momentum, and proper reporting.

Claire Lefort is an associate in the local government team at Weightmans. She can be contacted via This email address is being protected from spambots. You need JavaScript enabled to view it..