Crawford v Jenkins [2014] EWCA Civ 1035 (24 July 2014)

A parish council made unlawful overtime and termination payments to its clerk. A fellow councillor brought an action against those who authorised them. The Court of Appeal held the payments were unlawful but that the councillors had not engaged in willful misconduct.

Facts

The case concerned payments made by Avening Parish Council (APC) to its clerk and Responsible Financial Officer (RFO), Mrs Jenkins. In 2011, certain councillors, including the respondents Mr Jenkins and Mr Parsons, authorised two payments to her. The first was a payment of £7,750 for approximately 1000 hours of overtime she claimed to have worked. Her contract of employment did not provide for overtime pay. The second was a payment of £10,000 upon her resignation, described as a ‘consultancy fee’ but which the appellant, Mr Crawford (another councillor), contended was an unlawful termination payment. The councillors had sought and received advice from the Gloucestershire Association of Town and Parish Councils (GAPTC) before making the payments, although the nature and effect of this advice were contested.

Mr Crawford, a local government elector for the area, brought proceedings against the respondent councillors under the Audit Commission Act 1998, seeking a declaration that the payments were unlawful and an order that the respondents repay the amount to the council, alleging they were guilty of ‘wilful misconduct’.

Issues

The primary legal issues before the Court of Appeal were:

1. Whether the payments for overtime and the ‘consultancy fee’ were unlawful because they were ultra vires (beyond the powers of) the Parish Council under the Local Government Act 1972.
2. If the payments were found to be unlawful, whether the respondent councillors were guilty of ‘wilful misconduct’ under section 17 of the Audit Commission Act 1998, thereby rendering them personally liable to repay the sums to the council.

Judgment

Legality of the Payments

The Court of Appeal, led by Lord Dyson MR, overturned the High Court’s decision and held that both payments were unlawful. Lord Dyson reasoned that the council’s powers were strictly limited by statute.

Regarding the overtime payment, he stated:

In my judgment, the judge was wrong to hold that the Council had the power to make the overtime payments. I accept the submission made on behalf of the appellant that the Council had no power to make these payments, because they were not authorised by Mrs Jenkins’ contract of employment. There was no express or implied term of her contract which entitled her to be paid for overtime.

On the £10,000 ‘consultancy’ payment, the court found it was, in reality, a discretionary termination payment which the council had no power to make. It was not a genuine payment to settle a potential legal claim, nor could it be justified under the general power of competence in section 111(1) of the Local Government Act 1972. The payment was considered an unauthorised ex gratia payment.

Wilful Misconduct

Despite finding the payments unlawful, the court concluded that the respondent councillors were not guilty of wilful misconduct. This was the central point of the judgment. ‘Wilful misconduct’ requires more than simply acting unlawfully; it involves a subjective awareness that one is acting unlawfully or, at the very least, a reckless disregard for the legality of the action.

Lord Dyson found that the councillors had acted in good faith, believing they were acting in the best interests of the council and on the basis of advice received. He concluded:

In my judgment, the respondents’ state of mind in the present case was far removed from any of the kinds of conduct which have been held to amount to ‘wilful misconduct’. They acted openly and in good faith. They were honestly trying to do their best for the Council in what they saw as a difficult situation. Most importantly, they believed that they were acting lawfully. They may have been naive and foolish, but they were not guilty of wilful misconduct.

The court held that even if the councillors were negligent in relying on flawed advice, negligence alone does not constitute wilful misconduct. There was no evidence that they deliberately broke the law or were reckless as to whether their actions were lawful.

Implications

This case serves as a significant authority on the scope of local government powers and the test for personal liability of councillors. It clarifies that councillors making payments outside their statutory authority act unlawfully. However, it sets a high bar for establishing ‘wilful misconduct’ under the Audit Commission Act 1998. The judgment confirms that councillors who act in good faith and honestly believe they are acting lawfully, even if their belief is mistaken or naive, will not be held personally liable for unlawful expenditure. The decision underscores the critical distinction between an unlawful act and a wilfully unlawful act, protecting volunteer councillors from punitive personal liability where they have acted honestly, albeit incorrectly.

Verdict: The appeal was allowed in part. The court issued a declaration that the payments made by the council were unlawful, but dismissed the claim that the respondent councillors were liable for the loss, as they were not found to have engaged in wilful misconduct.

Source: Crawford v Jenkins [2014] EWCA Civ 1035 (24 July 2014)