Foster v Eastbourne Borough Council & Anor

A local authority cannot treat formal eligibility under the Local Government (Early Termination of Employment) (Discretionary Compensation) (England and Wales) Regulations 2000 as conclusive where employment was artificially prolonged to trigger an enhanced benefit. A void ultra vires agreement remains a relevant fact in public law. The authority may consider its purpose and effect when exercising the discretion. It would be unlawful and irrational to confer the fruits of an improper arrangement through a substitute employment relationship. Whether a later issue is an abuse of process depends on all the circumstances and requires a broad, merits-based assessment of public and private interests.

The appellant, a local authority director, entered into a compromise agreement under which his employment continued until after his fiftieth birthday and he was to receive added pension years. The agreement was later accepted to be ultra vires and void. In an earlier appeal, the Court of Appeal held that his original contract had ended but that a de facto employment relationship continued until 31 August 1999: [2001] EWCA Civ 1091.

On remittal, Mackay J found that the termination was by reason of redundancy and that the appellant satisfied the gateway conditions for consideration under the 2000 Regulations. The Council subsequently awarded enhanced redundancy payments but refused added years under regulation 8. Moses J refused judicial review of that decision. The appeal concerned abuse of process and whether the Council could lawfully refuse any added years despite the appellant’s formal eligibility.

Disposition. Keene LJ delivered the leading judgment. Scott Baker LJ and Lord Brown agreed. The appeal was dismissed.

1. Abuse of process. Whether an issue that could have been raised in earlier proceedings is abusive depends on all the circumstances, including public and private interests, and requires a broad, merits-based judgment. The Council was entitled to consider the lawfulness of an award when exercising its statutory discretion and to defend that decision in judicial review proceedings. No earlier judgment had determined that an award would be lawful.
2. Regulatory gateway. The findings that the appellant was redundant and formally eligible under the Local Government (Early Termination of Employment) (Discretionary Compensation) (England and Wales) Regulations 2000 did not determine whether exercising the regulation 8 discretion would be lawful. Gateway eligibility and the scope and purpose of the power were separate questions.
3. Void agreement. A void ultra vires agreement cannot be enforced and creates no private-law rights. It nevertheless exists as a matter of fact. Its terms and effects may have legal consequences, and a public body exercising statutory or regulatory powers must take relevant facts into account. Invalidity does not retrospectively erase the history of the transaction.
4. Application. The appellant’s employment had been artificially prolonged to secure eligibility for added years. Awarding the benefit would therefore achieve the improper purpose of the void agreement by another means. The substitute quantum meruit employment relationship identified in the earlier appeal did not alter that conclusion. The principles in Minister of Agriculture and Fisheries v Matthews and Rhyl Urban District Council v Rhyl Amusements Ltd were applied. Craven-Ellis v Canons Limited was distinguishable because no improper purpose arose there.
5. Irrational generosity. It was unnecessary to decide the detailed argument because any award would have been unlawful and irrational. An award of the full ten years would additionally have been irrationally generous, although a lesser award would not necessarily have been so.

The appeal was dismissed. Costs and consequential orders were adjourned for 14 days unless agreed.

1. Court of Appeal (Civil Division) dismissed the appeal against Moses J’s refusal of judicial review.
2. High Court, Administrative Court (Moses J, 8 April 2003) refused to quash the Council’s decision of 22 April 2002.
3. Earlier Court of Appeal proceedings held that the original contract had ended but that a de facto employment relationship continued until 31 August 1999: [2001] EWCA Civ 1091.
4. High Court proceedings on remittal resulted in findings that the termination was by reason of redundancy and that the appellant satisfied the gateway qualifications for consideration under the 2000 Regulations.