Ms Gibb, the Claimant, was formerly employed as the Chief Executive of the NHS Trust. During the time of her employment there had been an outbreak of C.difficile at Trust’s hospitals which had resulted in a number of deaths and attracted widespread condemnation from the public and press. The Healthcare Commission investigated the measures taken to control the outbreak and their subsequent report, which was shown to the Trust prior to its publication, was highly critical of the leadership of the Trust identifying significant failings which had resulted in the outbreaks. As a result the Trust Board took the view that they should encourage and, if necessary, force the Claimant to step down from her position prior to the publication of the report. A compromise agreement was agreed providing that the Claimant would receive £75,000 in lieu of notice (her contract required she have six months notice so this accurately reflected her entitlement to wages for that period) as well as a compensation payment of £175,000. Her successor however took the view that the agreement was ultra vires and withheld the payment until further notice. The Claimant subsequently received the £75,000 in lieu of her notice period, but initiated proceedings for the moneys owed by way of compensation, or alternatively damages, submitting that if such a payment was ultra vires she was entitled to an award of equitable damages. The Trust argued that it could not be obligated to make the compensation element of the agreement (£175,000) as this was outside its powers as an NHS Trust. In addition such a sum was irrationally generous being over £100,000 more than the Employment Tribunal could award were she to have made out a case for unfair dismissal.
The Court rejecting the claim reminded the parties that as a public body, the Trust’s powers were limited by statute and that these must be exercised in the public interest and in a way which was reasonable in the Wednesbury sense. Therefore any payment would be unreasonable if it could be established that no reasonable Trust, acting within its statutory obligations, could make such an offer. The doctrine of ultra vires existed to ensure protection for the public where a public body was acting outside of its powers and as such where expenditure, even on a lawful object, was irrationally generous then this would be ultra vires and void.
The Judge recognised the benefit of the compromise agreement to the Trust, both in terms of time and costs saved in defending proceedings in an employment tribunal, but also in terms of public relations as they could demonstrate decisive action in the face of the Healthcare report. However such benefits could not just be passed directly on to the Claimant and did not justify the excessive generosity of the compromise agreement, particularly as the payment did not reflect any contractual or statutory liabilities that might be owed to the Claimant, nor had it been assessed in terms of the usual issues considered when setting such awards, e.g. payment for a potential period out of work or loss of earnings, both of which were already compensated for within the £75,000 she had received in lieu of notice. The Judge was critical of the Trust’s earlier decision-making as having paid ‘no more than lip service to the need not to be seen to reward failure.’
The Judge also refused the Claimant’s application for equitable damages as her loss of benefit from the compromise agreement was not as a result of a breach of duty on the Trust’s behalf, but because the compromise was ultra vires and void. She had therefore not lost the right to pursue a claim for unfair dismissal (because she, like the Trust, was not bound by the terms of the void agreement) but had chosen not to exercise this right within the time limit. This loss was for her to bear because she was made aware, within the time limit for issuing such a claim, that the Trust did not intend to honour the agreement on the grounds that it was ultra vires.