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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Gibb v Maidstone & Tunbridge Wells NHS Trust [2010] EWCA Civ 678 (23 June 2010) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2010/678.html Cite as: [2010] EWCA Civ 678, [2010] IRLR 786 |
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION
MR JUSTICE TREACY
HQ09X00614
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE SEDLEY
and
LORD JUSTICE RIMER
____________________
Rose ![]() ![]() |
Appellant |
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- and - |
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Respondent |
____________________
Ms Jane McNeill QC and Mr Michael Ford (instructed by Brachers LLP) for the Respondent
Hearing dates : 17 & 18 March 2010
____________________
Crown Copyright ©
LORD JUSTICE LAWS:
INTRODUCTION
BRIEF FACTS
"1. This... action is brought pursuant to the terms of a contract entered into by the parties agreeing terms of severance of MsGibb
's employment on 5 October 2007 [sc. the compromise agreement]. The issues in the case are whether the compromise agreement was ultra vires and therefore unenforceable and whether the claimant has an alternative claim for damages if it was not enforceable.
2. MsGibb
was appointed as Chief Executive of the Trust and as its accountable officer in November 2003. Her contract gave her an entitlement to six months notice of termination. By the date of the termination of her employment Ms
Gibb
's basic salary was approximately £150,000. She also had a pension entitlement.
3. The background to the matter is that in 2006 there were outbreaks of the 'super bug' C.difficile at hospitals managed by the Trust. There was a significant number of deaths and widespread anger and anxiety expressed by relatives of those affected and by others. Substantial publicity had been given to the matter. The Healthcare Commission ('HCC') investigated the outbreaks and the measures taken to control and respond to them. The HCC produced draft reports in April and July 2007. Those drafts were shared with the Trust. Towards the end of September 2007 it was known that the final report would be published on 10 October 2007.
4. When published, the report's conclusions were highly critical of the leadership of the Trust. It recommended that the Trust's board must review the leadership of the Trust in the light of significant failings in order to ensure that the Trust was able to discharge its responsibilities to an acceptable standard. The report also indicated that the HCC considered the findings of its investigation to be 'extremely serious' and to constitute 'a significant failing on the part of the Trust which failed to protect the interests of patients'. It will be noted that the report itself post-dated the compromise agreement, but its conclusions were known to the Trust in mid-September, in advance of publication. The witness David Flory, called by the defendant, himself a former CEO of an NHS Trust who has seen many HCC reports, described it as the most critical report he had read.
5. One of the draft reports referred to had raised issues about MsGibb
's probity. As a result of that, the Trust commissioned a report from its legal advisors, Capsticks, to consider such allegations. On 31 July 2007 Capsticks presented its findings to the Remuneration Committee of the Trust. The Capsticks report made no adverse finding about Ms
Gibb
's probity and the Remuneration Committee unanimously concluded that having regard to that report, the Trust board should not remove Ms
Gibb
from her duties. The Committee also concluded that the current draft of the HCC report did not give grounds for the dismissal of Ms
Gibb
with respect to any other matter and noted its unanimous support for Ms
Gibb
from the executive members of the board. The Trust had, however, left the door open to reviewing this conclusion in the event that the final draft of the HCC report recommended that there should be change in the leadership of the Trust.
6. The local Strategic Health Authority ('SHA') which exercises a supervisory role in relation to the Trust was informed of the Remuneration Committee's conclusions on 2 August 2007. During August and September 2007 there were contacts between the Trust and the SHA. It is clear from the contemporaneous documents that the SHA, anticipating the likely conclusions of the HCC final report, was encouraging the Trust to review its leadership. By 21 September 2007, James Lee, the non-executive Chair of the Trust, had considered the matter with fellow directors and was recording in a letter to the Chairman of the SHA 'while no formal decision has yet been made, we have determined informally that the best course of action would be to encourage, or if necessary force our CEO to step down'.
7. The Trust sought written advice from Peter Edwards, a partner in Capsticks. Mr Edwards advised on 21 September 2007 that the Trust should seek a negotiated settlement with MsGibb
, but that if such a settlement could not be achieved within a reasonable time frame she should be dismissed without cause...
8. Mr Edwards' advice considered three options for terminating MsGibb
's contract and concluded with these words: 'In the light of these matters, my advice is that the Trust's financial exposure in this case is likely to be in the range from about £90,000 to £250,000, subject to confirmation of her notice period and salary. My advice is that a total package settlement that equated to twelve months salary and pension contributions would probably be about the norm for this type of case'.
9. On or around the 25 September 2007 Mr Glen Douglas was offered the post of Chief Executive Officer of the Trust. His appointment was to follow the termination of MsGibb
's employment.
10. On 28 September 2007 at a meeting of the Remuneration Committee it was decided that MsGibb
's contract should be terminated for three reasons:
i) the further deterioration in the performance of the Trust.
ii) the state of the management team and the need for a different style of leadership given by a new leader.
iii) the strength of the findings of the HCC report and its recommendation that the Trust board must review its leadership.
11. The Committee also concluded that it was essential that MsGibb
's contract be terminated well in advance of the HCC report, which was to be published on 10 October 2007. The Committee decided to seek to terminate Ms
Gibb
's employment by way of a negotiated settlement. A draft compromise agreement had been prepared by Capsticks. The Trust also had advice provided by its HR Director, Terry Coode. It was decided that termination must take place in any event by 5 October 2007.
12. On 1 October 2007 MsGibb
met the Chairman of the Trust, Mr Lee, together with the Deputy Chair, Aaron Cockell. She was told of the Trust's decisions and that such decisions were final. She was provided with a draft compromise agreement and told that she had 96 hours in which to agree. Ms
Gibb
was then placed on immediate gardening leave.
13. MsGibb
consulted her Trade Union and its appointed solicitors, Russell Jones and Walker. There were discussions between the parties, leading to the executed compromise agreement which provided for a payment of approximately £250,000.00, representing £75,427.00 in lieu of notice and a compensation payment of £174,573.00. Amongst the terms of the agreement, Ms
Gibb
undertook to accept the immediate termination of her employment; not to pursue any internal grievance or bring any contractual or statutory claim against the Trust; not to make any statement potentially damaging to the Trust; and not to disclose the substance of the Compromise Agreement.
14. On 11 October 2007, Mr Glen Douglas, who had taken over the role of CEO of the Trust, received a letter from David Flory, Director-General of NHS Finance, Performance and Operations, which instructed Mr Douglas as the accountable officer of the Trust to withhold the severance payment to RoseGibb
until further notice.
15. Subsequently, in 2008, the Department authorised the Trust to make a payment to MsGibb
in respect of her six month notice period and the sum of approximately £75,000.00 was then paid to Ms
Gibb
without prejudice to the remaining issues in this case."
THE ISSUES
THE ULTRA VIRES ISSUE
(1) LAW
"34. It appears at first blush a remarkable proposition that a public authority can escape what on its face is a clear contractual liability to employees by asserting that the contract in question (here the application of the 1989 scheme to the plaintiffs in 1991) was excessively generous to the plaintiffs and thus outside its powers. It is not every day of the week that a local authority defends a private law claim against them by seeking to prove its own Wednesbury irrationality.
...
36... [O]ne may safely assume that no court is going to be astute to allow public authorities to escape too easily from their commercial commitments.
37. That should particularly be the case where, as here, legitimate expectations have been aroused in the other party (who clearly entered the contract in good faith), where the relationship between the parties is essentially of a private law character, where it is the authority itself which is seeking to assert and pray in aid its own lack of vires, and where that lack of vires is suggested to result not from the true construction of its statutory powers but rather from its own Wednesbury irrationality. The burden upon the authority in such a case must be a heavy one indeed. It does not seem to me that the respondent council came within measurable distance of discharging it here."
(2) THE JUDGE'S CONCLUSIONS
"64. I therefore find that the Trust would reasonably have assessed liabilities to the Claimant arising out of termination of her contract as being represented by a sum to represent the contractual period of notice, together with a sum equivalent to the maximum unfair dismissal claim, giving a total of approximately £145,000.
65. That finding still leaves a gap of about £100,000 to be considered."
The judge found (paragraph 67) that
"... the Trust's approach to the question of additional legal and management costs was flawed. Firstly because there was no proper financial analysis done, and secondly, because since [sic: the "since" is redundant] the Trust was working on the basis that there would in the absence of a Compromise Agreement be a situation of unfair dismissal with a maximum award."
He also found (paragraph 68) that there was a reluctance to dismiss the appellant, and that her many earlier years of good service together with the time it might well take her to find other employment played their part in fixing the terms of the compromise agreement, which accordingly did not represent payment for loss of office but for past service. In those circumstances the Trust had (paragraph 70) "paid no more than lip service to the need not to be seen to reward failure and to regard payments over and above statutory and contractual liabilities as exceptional", so that (paragraph 71) the compromise agreement was "irrationally generous and thus ultra vires".
(3) DISCUSSION
"We knew that our case for dismissal was weak. We knew that [the appellant] would fight and fight hard. We knew she had already briefed her personal legal advisers. We knew she had amassed a significant and powerful audit trail. We knew that if we fought, the management would be significantly distracted from their principal purpose. We had been advised that we had a poor chance of winning the case. We had been advised that we could not begin to rebuild the management team until any dispute was resolved. It was therefore abundantly clear to the committee that the costs of building and fighting any case, both tangible and intangible, would be very significant indeed. Since the assessments we had received implied a risk of £250,000 excluding any internal management time, the conclusions of the committee were completely logical and supportable..."
"I am writing to confirm that it remains [the Department's] position that the Trust should defend the action taken by [the appellant] and not enter into a process of negotiation which culd [sic] result in further payments being made to [the appellant] over and above the contractual entitlement she has already received. I am conscious that this course of action may involve the Trust incurring some additional costs. If indeed this materialises then I would be prepared to reimburse this to the Trust."
"An employee has a right under s.54 of the Employment Protection (Consolidation) Act to have a claim of unfair dismissal decided by an Industrial Tribunal. Such a claim is not simply for a monetary award; it is a claim that the dismissal was unfair. The employee is entitled to a finding on that matter and to maintain his claim to the Tribunal for that purpose. He cannot be prevented from exercising that right by an offer to meet only the monetary part of the claim. If that were so, any employer would be able to evade the provisions of the Act by offering to pay the maximum compensation. If employers wish to compromise a claim, they can do so by admitting it in full but they cannot do so by conceding only part of it."
On all the facts it must, at the least, be highly problematic to suppose that the Trust might have been prepared not only to offer the maximum amount recoverable through tribunal proceedings but also to admit that the appellant's dismissal was unfair.
THE RESTITUTION ISSUE
"My lords, there is no general doctrine of unjust enrichment recognised in English law. What it does is to provide specific remedies in particular cases of what might be classified as unjust enrichment in a legal system which is based upon the civil law."
At paragraph 16 of his judgment Mann J held as follows:
"Having considered the wide ranging material put to me by [counsel]... it seems to me that it has not been established that the authorities have yet moved to a position in which it can be said that there is a freestanding claim of unjust enrichment in the sense that a claimant can get away with pleading facts which he says leads to an enrichment which he says is unjust... A claimant still has to establish that his facts bring him within one of the hitherto established categories of unjust enrichment, or some justifiable extension thereof."
"Although it is impermissible to accord any validity to the compromise agreement and I agree that it therefore follows that no reliance can be placed on any promise or representation that merely reflects an alternative legal foundation for binding the council to an undertaking that it had no power to give, nevertheless the conduct of the parties still exists in the real world and cannot be ignored for all purposes. Thus, to take what I suspect would be an uncontroversial example, payments made under a void agreement, even though made in the belief that the agreement was a binding contract, have been really made, and can be taken into account for the purposes of a claim in restitution. That claim may or may not succeed, but the payments cannot be swept aside in the same way that the void agreement is reduced into nothingness by the doctrine of voidness ab initio. Similarly, services provided in exchange for those purposes have been made in the real world, and, even though the conventional scheme under which payments and services have been exchanged has vanished into thin air, the provider of those services may be entitled to have them taken into account for the purpose of a claim to a quantum meruit or quantum valebat. Indeed, in this case, the council accepts that, but for the fact that a defence of change of position rendered the enquiry mute, Mr Foster would have been entitled to be rewarded for his services on just such a basis."
"a failure on the part of a claimant to take proper care of his own interests is not a ground for holding that the consequent enrichment of a third party is not unjust."
The Court of Appeal agreed: [2004] 2 All ER (Comm) 289. This marches with what was said by Lord Hoffmann in Banque Financière de la Cité v
Parc (Battersea) Limited [1999] 1 AC 221 (to which I have already referred) at 235E – F:
"But there is, so far as I know, no case in which it has been held that carelessness is a ground for holding that a consequent enrichment is not unjust."
See also Kleinwort Benson Ltd v
South Tyneside MBC [1995] 4 All ER 972 per Hobhouse J as he then was at 985:
"What contracts or other transactions or engagements the plaintiffs may have entered into with third parties have nothing to do with the principle of restitution."
The Court of Appeal approved this approach in Kleinwort Benson Ltd v
Birmingham City Council [1997] QB 380.
"The effect of the judge's ruling is that although the Trust was willing to pay a substantial sum of money for the benefits conferred under the compensation agreement, and has received and retained these benefits, the claimant has no remedy. That is unjust."
THE CONTRACT ISSUE
"This was a case where the employee commenced proceedings for wrongful dismissal, (having previously successfully complained to an Industrial Tribunal of unfair dismissal), alleging that, because of the manner in which he had been dismissed, he had suffered a mental breakdown and was unable to work. It was held that the matters of which complaint was made were solely within the jurisdiction of the Industrial Tribunal since Parliament had provided a remedy for the conduct of which Mr Johnson complained. It was not for the judiciary to construct a general common law remedy for unfair circumstances attending dismissal. To summarise Lord Millett at paragraphs 78 to 80 of Johnson the implied term of trust and confidence which is an inherent feature of the relationship of employer and employee does not survive the ending of the relationship. The implied obligation cannot sensibly be used to extend the relationship beyond its agreed duration."
"the loss of the right to pursue a claim for unfair dismissal does not as I have held earlier in this judgment arise either from the fact of the ultra vires Compromise Agreement or from the assurances given on the 1 October, it arises from the Claimant's own failure to commence unfair dismissal proceedings in time when aware that the Defendant was refusing to honour the agreement on the grounds that it was ultra vires." (paragraph 117)
I have on the facts already rejected this finding in the context of the unjust enrichment issue, where the judge first made it.
CONCLUSION
Lord Justice Sedley:
"Dans ce pays-ci, il est bon de tuer un amiral de temps en temps pour encourager les autres."
It seems that the making of a public sacrifice to deflect press and political obloquy, which is what happened to the appellant, remains an accepted expedient of public administration in this country.
"The Healthcare Commission considers the findings of this investigation to be extremely serious, and to constitute a significant failing on the part of the trust, which failed to protect the interests of patients …"
"The NHS allowed me to be demonised by the popular press, and my family to be 'terrorised' by the press following my children (then aged 5 and 3) in cars to school, photographing us in moving vehicles, the press chasing us home, the press residing outside my home with long-range cameras, telephoning and harassing me and my family. This harassment included personal comments made about me by the Secretary of State, who without any reference to the Trust, or informing me, made public announcements regarding my severance value and its non-payment. This I believe was part of the process of using me as a scapegoat in order to be seen by the public to be dealing with the report …"
The ultra vires doctrine today
"[T]he Doctrine of Ultra Vires is constantly cropping up in unexpected quarters and manifesting its effect in an unforeseen and unwelcome manner. One of its first onslaughts was upon the time-honoured maxim of the Common Law that a man cannot stultify himself – that the lunatic, the fool, the drunkard, and the knave, who have made a contract, shall not subsequently repudiate the same by alleging that neither they nor their agents had at the time sufficient brains or authorisation to make it. This maxim the Doctrine of Ultra Vires soon demolished, and corporations may set up their own incapacity whenever it is inconvenient for them to carry out their engagements."
"The desire for simplification is a perennial weakness of the human mind, even the mind of judges; and the temptation to take a statement of principle out of its context of fact is one always to be resisted … by those who fully understand the proper use of precedent in the judicial method."
"I think it is relevant to refer to the character of this luncheon. I have before me the items in the bill. Amongst the list of wines are two dozen champagne – Ayala 1885 - a very good branch – at 84s a dozen; one dozen Marcobrunn hock – a very nice hock; one dozen Chateau Margaux – an excellent claret; one dozen fine old Dublin whiskey – the best whiskey that can be got; one case of Ayala; six bottles of Amontillado sherry – a stimulating sherry; and the ninth item is some more fine Dublin whiskey…. There is an allowance for brakes; one box of cigars, 100; coachmen's dinner; beer, stout, minerals in siphons, and ice for wine. There is dessert and there are sandwiches, and an allowance for four glasses broken – a very small number broken under the circumstances …
The Solicitor-General in his most able argument – I have always to guard myself against his plausibility – appealed pathetically to common sense. He asked, really with tears in his voice, whether the members of the Corporation should starve; he drew a most gruesome picture; he represented that the members of the Corporation would really traverse the Wicklow Hills in a spectral condition unless they were sustained by lunch. I do not know whether he went so far as Ayala, Marcobrunn, Chateau Margaux, old Dublin whiskey and cigars. In answer to the Solicitor-General, we do not say that the members of the Corporation are not to lunch. But we do say that they are not to do so at the expense of the citizens of Dublin."
Conclusions
Lord Justice Rimer:
Note 1 A historical account of the background to the case can be found in the late Professor Michael Taggart’s essay, ‘Reinventing administrative law’, in Public Law in a Multi-Layered Constitution, ed Bamforth and Leyland (2003), ch.12. [Back] Note 2 In Judicial Review of Administrative Action in the 1980s, ed M. Taggart (1986), 1, 15. [Back]