Foster v Eastbourne Borough Council & Anor [2004] EWCA Civ 36

Case No C1/2003/0919[2004] EWCA Civ 36
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN’SBENCH DIVISION
ADMINISTRATIVE COURT
(Mr Justice Moses)
Venue Royal Courts of JusticeDate Tuesday 3 rd February 2004
Strand,
London, WC2A 2LL
Before
LORD BROWN OF EATON-UNDER-HEYWOODLORD JUSTICE KEENELORD JUSTICE SCOTT BAKER
Between
James FosterAppellantEastbourne Borough CouncilRespondentsPeter Arkell (District Auditor)Respondent
(Transcript of the Handed Down Judgment ofSmith Bernal Wordwave Limited, 190 Fleet StreetLondon EC4A 2AGTel No: 020 7421 4040, Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Miss Cherie Booth QC & Mr Michael Curtis (instructed by Mayo and Perkins, Eastbourne, East Sussex) for AppellantMr Nigel Giffin QC (instructed by Bunkers, Solicitors, Hove, East Sussex) for 1 st RespondentMr James Maurici (instructed by Mayer Brown Rowe & Maw, London) for 2 nd Respondent
Judgment

Introduction

[1]This appeal is a further chapter in the long-running story involving Eastbourne Borough Council (“the Council”) and its former Director of Environmental Services, Mr Foster. The dispute between them has already led to three High Court hearings and one previous Court of Appeal hearing. The present appeal is brought by Mr Foster, the claimant in the present proceedings, against a decision of Moses J on 8 April 2003, when the judge refused to quash by way of judicial review a decision of the Council dated 22 April 2002. By its decision the Council, acting through its cabinet, refused to award any added years under Regulation 8 of the Local Government (Early Termination of Employment) (Discretionary Compensation) (England and Wales) Regulations 2000 (“the 2000 Regulations”), an award which would if made have enhanced Mr Foster’s pension benefits. The Story So Far[2]The history of this matter is, as the number of court hearings indicates, lengthy and complicated. Nonetheless, that history is of importance to any resolution of the present dispute. It begins with the employment of the appellant by the Council in the post of Director of Environmental Services as from 1 July 1993. At that date he was aged 43, having been born on 22 August 1949. He had by then spent a substantial number of years working for various local authorities.[3]In February 1998 external consultants recommended changes to the management structure of the Council. As contemplated by the relevant committee, these were to include the abolition of the directorate of environmental services and the distribution of its component services amongst other new Council directorates, which were proposed. Various options were to be made available to the existing directors, such as the appellant, including applying for one of the new director posts or alternatively taking redundancy and early retirement. After a number of discussions, the appellant opted for the latter. He spelt out what he was seeking by way of a redundancy and early retirement package in a letter dated 28 July 1998, a package which included him continuing in the Council’s employment until 31 August 1999. The significance of that date was that it would have taken him beyond his 50th birthday and thus rendered him eligible for a discretionary award of additional years service to be credited to him for the purpose of the calculation of his pension under the then equivalent of the 2000 Regulations. As will be seen, such an award of added years can only be made by a local authority to a person who is at least 50 on the termination date of his employment.[4]The relevant committee of the Council authorised the negotiation and agreement of a retirement package for the appellant along the lines which he had proposed, and on 25 August 1998 a written agreement (“the Compromise Agreement”) was entered into by the appellant and the Council. Under its terms, the appellant remained employed by the Council until 31 August 1999 on full pay, on which date his employment would terminate by reason of redundancy. He would be entitled then to the maximum “added years” for pension purposes, which under the then current policy was 10 years. He was entitled by clause 7 to continue his studies on a part-time basis at the University of Brighton but would spend the majority of his time dealing with the Coastal Protection Scheme, one of the matters which had fallen within the responsibility of his former directorate. During the last three months of his employment he would be on paid leave. Contemporaneously with the Compromise Agreement and in pursuance of clause 1 thereof, the Council gave written notice to the appellant, confirming that “your employment with the Council will end by reason of redundancy on the mutually agreed date of 31 August 1999”.[5]It was found by Mr Colin Mackay, Q.C., sitting as a Deputy High Court Judge in the first of the High Court hearings, that the appellant’s post as Director of Environmental Services disappeared on 28 September 1998 and that thereafter he ceased to attend the premises of the Council on a full time basis. He probably worked for only three days a week, almost entirely in connection with the Coastal Protection Scheme. However, as a result of a dispute between the appellant and the Council’s Chief Executive, it was further agreed that as from 10 February 1999 the appellant should be placed on garden leave, and from then on he performed no services for the Council. He continued to receive full salary and benefits until 31 August 1999.[6]By then the District Auditor had formed the view that the Compromise Agreement was ultra vires. In due course the Council accepted that that was so and instituted proceedings against the appellant, seeking to recover the amount paid to him by way of salary and benefits after the date of the Compromise Agreement or alternatively after 28 September 1998 when his post of Director of Environmental Services was abolished. This was the claim which came before Mr Mackay, Q.C., and on which he gave judgment on 20 December 2000. In his judgment it was recorded that it was common ground between the parties that:
“the purpose of seeking to extend Mr Foster’s employment for an additional year was to extend his employment beyond his fiftieth birthday, thereby bringing him within the eligibility requirements for certain premature retirement benefits which would not be available to him if his employment terminated when he was forty nine. It is also common ground that it lay beyond the council’s powers to enter into the compromise agreement, which was accordingly ultra vires and void ab initio.”
[7]The judge noted that there was authority for the proposition that the terms on which a local authority employed its officers were not permitted to be irrationally generous or unreasonably in excess of a fair or market rate for the job. He also commented that the purpose of the extension of Mr Foster’s employment to the 31 August 1999 was clearly to make him eligible under the applicable Regulations for the premature retirement benefits. Rix LJ, giving the lead judgment in the Court of Appeal on the appeal from Mr Mackay, Q.C., [2001] EWCA Civ 1091, summarised this aspect of the case at paragraph 8 as follows:
“The judge therefore seems to have thought, without finding, that the reasons which lay behind the parties’ acceptance that the compromise agreement was ultra vires were both that it provided Mr Foster with irrationally generous payments and also that it was entered into for an improper purpose.”
[8]In his judgment the judge decided that the 1993 contract of employment had terminated on 28 September 1998 and had been replaced by an arrangement which was of no legal effect. Consequently as from that date Mr Foster was under no contract of employment or in any other contractual relationship with the Council. The judge would have ordered restitution in full by Mr Foster of the money received by him after that date, had it not been for a defence of change of position, which it was held defeated the claim for restitution. The appellant had counterclaimed for a declaration that the Council was obliged to reconsider his position under the relevant early retirement regulations, but the judge found it unnecessary to deal with this, given his finding that the contract of employment did not endure past the appellant’s 50th birthday.[9]On 11 July 2001 the Court of Appeal in the decision already referred to held that the 1993 contract of employment had indeed terminated but not by agreement. There had been a repudiation of it by the Council and an acceptance by the appellant of that repudiation. Therefore that contract of employment had come to an end with the disappearance of the appellant’s former post. The compromise agreement was void. Nonetheless “the conduct of the parties still exists in the real world” (per Rix LJ, at paragraph 23), with the appellant continuing to work for the Council and consequently a de facto relationship of employment continued. As to the legal nature of that relationship, Rix LJ (with whom the other two members of the court agreed) said this at paragraph 43 of his judgment:
“Whether the obligation imposed by law in such a case is normally described as contractual, quasi-contractual or restitutionary, may not matter for the purposes of this case, since in any event I would consider that where, as here, the relationship between the parties is best described as a relationship of employment the law must necessarily impose a contractual solution. I do not think that that is even inconsistent with the parallel existence of restitutionary remedies. Thus, in this case, it is possible to say that in contract Mr Foster was entitled to claim reasonable remuneration for the work he did, or in other words a quantum meruit, while in restitution he was both prima facie obliged to return the sums he received under the void compromise agreement and at the same time entitled to a defence of change of position.”
He concluded that the appellant’s employment with the Council continued until 31 August 1999, that being the date in respect of which the Council had given the appellant notice. His employment did therefore survive his 50th birthday, but the consequences of that were not something with which the Court of Appeal could deal. That matter was remitted to the court below.[10]As a result, in due course a number of issues concerning Mr Foster’s entitlement to enhanced redundancy payment and enhanced retirement benefits under the regulations came before the same judge, by now Mackay J. On 15 February 2002 he decided (inter alia) that the relevant regulations were the 2000 Regulations and not their predecessor; that the reason for the cessation of Mr Foster’s employment on 31 August 1999 was redundancy; and that that was not a consensual termination of his employment but a dismissal. The second of those conclusions (together with the rejection of a time limit argument) led the judge to conclude that the appellant “passes the gateway qualifications for an added years award under Regulation 8 of the 2000 Regulations”. (paragraph 29). In the course of his judgment the judge also commented that the real reason why Mr Foster left the employment of the Council on 31 August 1999 was that he was redundant:
“… The protracted nature of his exit was caused by an unlawful attempt to prolong his life as an employee for reasons which have already been canvassed. But in my judgment he was as redundant in August as he had been in the previous September and that was the real reason for his departure.”
[11]The judge granted a declaration that the Council was obliged to consider the appellant’s entitlement under the 2000 Regulations to an enhanced redundancy payment and enhanced retirement benefits. However, he refused a declaration that the Council was obliged to confer such benefits.[12]Thus it was that on 22 April 2002 the Council’s cabinet considered the appellant’s position under the 2000 Regulations. It had before it a report from its Chief Executive, which summarised the history of this matter, including the various findings and conclusions of the courts, and referred both to counsel’s advice and to comments received from the District Auditor. In the event, the Council decided to award the appellant enhanced redundancy payments but not to award him any added years for the purposes of pension calculations. As Moses J commented in his subsequent judgment, paragraph 6, it is plain that, in doing so, it took the view that it would have been unlawful to credit any added years:
“… The lawfulness of any such award lies at the heart of these proceedings. If it was lawful to make any such award, it is clear that the Council, acting on the advice of its own legal advisers, informed by the legal advice given to the District Auditor, who appears on the stage for the first time, had failed to exercise any discretion and the matter would have to go back for further consideration.”
The resolution of the cabinet states that its decision not to award added years under Regulation 8 was on the basis that “to do so would be irrationally generous taking account of all the matters set out in the Chief Executive’s report”. That report set out a number of factors to which the cabinet should have regard, including the Council’s adopted policy of awarding a six and two-thirds years “credited period” in cases where the retiring employee was dismissed by reason of redundancy. Those factors also included the appellant’s likely future employment prospects, his medical condition, and the fact that he had received full salary and benefits during a period of months when he was required to work only part-time and subsequently was not required to work at all. Paragraphs 6.3.5 and 6.4 of the report read as follows:
“6.3.5 The fact that, were the Council to award Mr Foster now benefits as generous as those which it purported to confer upon him under the unlawful Compromise Agreement, Mr Foster would be placed in a position as advantageous as he would have been in had the Compromise Agreement been performed. Such a result would almost certainly be impossible to reconcile with the High Court’s view that that agreement was irrationally generous. Again, this consideration obviously applies equally to the exercise of the Council’s discretion to award an enhanced redundancy payment pursuant to regulation 5 of the Discretionary Regulations, and to that extent the two discretions cannot be seen in isolation. 6.4 In accordance with paragraph 6.3.5, the advice to Cabinet is that awarding Mr Foster 10 added years would place him in the same position as under the unlawful compromise agreement and hence almost certainly be considered to be irrationally generous. The Council’s current policy allows 6 2/3rds to be awarded. Awarding 6 2/3rds places Mr Foster in a position which would give him a higher retirement grant than contemplated under the unlawful compromise agreement and an additional added years pension of about £4100. Legal advice to Cabinet is that this could also be regarded as irrationally generous. There is no logical reason for awarding any other ‘added years’ sum.”
[13]The view of the District Auditor, as recorded in the report, was that it would be unlawful for the Council to award any added years under regulation 8 of the 2000 Regulations. The report also noted that Mr Foster had accepted that the Compromise Agreement was unlawful as being made for the improper purpose of extending his employment to the age of 50 but not that the court had found it to be irrationally generous.[14]The recommendation of the report was that the cabinet should not exercise its discretion to make an award under regulation 8, and that recommendation was accepted. That was the decision which the appellant then challenged by way of judicial review, a challenge which was rejected by Moses J. The Statutory and Regulatory Framework[15]The 2000 Regulations are made principally under section 24 of the Superannuation Act 1972. Nothing in that section or in any of the other sections of that Act seems to provide any assistance in resolving the issues in this appeal.[16]Regulation 4(1) of the 2000 Regulations, insofar as relevant for present purposes, provides:
“4 – (1) These Regulations apply in relation to, or as the case may be, in consequence of the death of, a person – (a) whose employment is terminated - (i) by reason of redundancy; (ii) in the interests of the efficient exercise of the authority’s functions; or (iii) … ; and (b) who, on his final day of employment, is eligible to be a Scheme member (whether or not he is such a member) or would be so eligible but for a relevant disqualification, and in the following provisions of these Regulations “person” shall be construed accordingly, unless the context indicates that it has a different meaning.”
Part IV of the Regulations, within which regulation 8 falls, is entitled “Alternative Discretionary Awards for Those Aged 50 and Over”. Regulation 7 defines those who are eligible for such awards, namely those who satisfy the requirements in paragraph 2 of that regulation.

(d) , one of those requirements is:

“he is at least 50, but under 65 …”
The relevant parts of regulation 8 then state: “(1) An employing authority may award a credited period to an eligible person. (2) A credited period must not exceed whichever is the shortest of – (a) the difference between his total membership and 40 years; (b) 10 years. (3) An award may not be made later than six months after the termination date.” (i) by reason of redundancy; (ii) in the interests of the efficient exercise of the authority’s functions; or (iii) … ; and The Decision Below[17]There was a dispute before Moses J as to whether Mackay J, when sitting previously as a deputy High Court judge, had found the Compromise Agreement to be irrationally generous and hence ultra vires for that reason as well as on the basis that it had an improper purpose. Moses J took the view that that had been the finding, but in any event he himself concluded that it was plain that, viewed as a whole, the benefits conferred by that Agreement were irrationally generous. However, that did not dispose of the question of whether the award of all or some added years, viewed on its own, would have been unlawful or irrational.[18]Moses J emphasised that the discretion under regulation 8 only arises where a particular factual situation exists, namely where an employee has reached the age of fifty and is dismissed by reason of redundancy or the interests of the efficient exercise of the Council’s functions. He then added this at paragraph 34 of his judgment:
“In the instant case, as Mackay J found in the second judgment, Mr Foster was redundant, but he was redundant, as Mackay J found, in September 1998. At that stage he was only forty-eight. He was not, under the Regulations, entitled to added years. True, he was also redundant, as Mackay J found, in August 1999. But the only reason that he was redundant in August 1999, as he had been in September 1998, was by reason of what Mackay J described as the unlawful attempt to prolong Mr Foster’s life as an employee in order to achieve eligibility under the Regulations to added years. The Regulations do not permit of an award of added years to one who is only forty-eight. Nor, in my judgment do they permit of such an award where the continued employment is designed not to enable the employee to continue to be of service to the Council, but to trigger the operation of the Regulations and is thus itself part of the unlawful arrangement.”
In a similar vein, he continued at paragraph 37:
“… The Council was entitled to look at what in fact had happened. What in fact had happened was that, following reorganisation, Mr Foster was redundant in September 1998 before he was fifty whilst continuing in employment only by virtue of the artificial and unlawful extension of that employment. The Council was not obliged to ignore the compromise agreement or its effect. Nor, consistently with the decision of the Court of Appeal to which I shall return later, was it obliged to ignore reality. In those circumstances, permitting the fruits of that artificial extension would have been outwith the Regulations and, accordingly, unlawful or irrational.”
Finally, the judge considered an argument that this conclusion would conflict with the decisions of the Court of Appeal and Mackay J, but he decided that it would not. He stated at paragraph 41 of his judgment:
“Rix LJ, to my mind, was not purporting to rule on entitlement to added years under the Regulations any more than was Mackay J in finding that the gateway to an award was open. That is a question of construction of the Regulations and of public law, having regard to the meaning and purpose of the Regulations. As I have said, the meaning and purpose of the Regulations was to enable the Council to compensate for lost years one who has attained the age of fifty and has been dismissed in the interests of the efficient working of the Council. In reality, when that situation arose, Mr Foster had not reached fifty and, but for the artificial arrangement designed to overcome that obstacle, would not have been eligible for an award of added years. The Court of Appeal’s conclusion that reality demanded that a continuing employment until fifty must be recognised does not carry with it recognition under the Regulations of an unlawful and artificial extension of his employment. Accordingly, this application fails.”
[19]Two things are evident about the judge’s decision. First, his finding that an award of added years would have been unlawful was not based on the “irrational generosity” of such an award but rather on the scope and purpose of the 2000 Regulations and his conclusion that the appellant fell outside them. Secondly, that finding by its very nature meant not merely that an award of the maximum number of added years would be irrational and unlawful but that any award of added years would be so. The Issues[20]A considerable number of issues are raised by the parties to this appeal, but the principal one, unsurprisingly, is whether the judge was right in the reasoning set out above. Associated with that is a submission by the appellant that it was an abuse of process for an argument about the lawfulness of an award to be raised before Moses J, when such a point could and should have been taken before Mackay J when he was considering the appellant’s eligibility under the relevant regulations. Logically that issue requires consideration before one turns to the principal issue, as I have described it. Abuse of Process[21]Miss Booth, Q.C., for the appellant submits that the purpose of the remitted hearing before Mackay J was inter alia to consider whether the appellant was eligible to be considered for an award of added years. The judge decided that he was eligible under the 2000 Regulations. Any argument that it would nonetheless be unlawful for the Council to make such an award on grounds of irrationality or the like should have been raised at the hearing before Mackay J. It was too late to do so before Moses J, and it was and is an abuse of the process of the court for the Council to oppose the application for judicial review on such grounds. Reliance is placed on Henderson –v- Henderson [1843] 3 Hare 100 and Johnson –v- Gore Wood and Co [2002] 2 AC 1. A substantial waste of court time and unnecessary costs has resulted.[22]The appellant recognises that the District Auditor was not a party to the earlier proceedings before Mackay J, but it is argued that he was aware of them and could have applied to have been joined as a party. No distinction should be drawn between his position and that of the Council.[23]At one stage in the course of the argument it was suggested on behalf of the appellant that the point which found favour with Moses J conflicted with the findings of Mackay J. That does not seem to me to be right. As Mackay J made clear by his use of expressions such as “gateway condition” (paragraph 7) and “gateway qualifications” (paragraph 29), he was considering the regulatory criteria for eligibility for a discretionary award. That is a different issue from that which formed the basis of Moses J’s decision, namely that to allow the appellant to enjoy the fruits of the artificial extension of his employment by the Compromise Agreement would have been outside the scope of the Regulations, and consequently unlawful and irrational. Nonetheless, that does not affect the main argument advanced by the appellant about abuse of process, that is to say, that this contention about the unlawfulness and irrationality of any award of added years could and should have been raised before Mackay J. Indeed, Mr Giffin, Q.C., for the Council accepts that it could have been. Does that render the raising of this issue in the present proceedings an abuse of process?[24]It was made clear by the House of Lords in Johnson –v- Gore Wood and Co that whether raising an issue which could have been raised in previous proceedings amounts to an abuse of process depends on all the circumstances of the case, including the public and private interests involved. The fact that such an issue could have been raised before does not make the subsequent raising of it necessarily abusive. As Lord Bingham of Cornhill said at page 31D, “a broad, merits-based judgment” is required.[25]What is of particular relevance in the present case is that the issue of the lawfulness of an award of added years was first raised not in these present court proceedings but in the Council’s consideration of the exercise of its powers under the 2000 Regulations. It was raised in the Chief Executive’s report to the cabinet because he was under a duty to advise the Council on the legal matters relevant to its consideration of its discretion under the 2000 Regulations. It is not now argued by the appellant that any form of estoppel operated to prevent the cabinet from considering whether it would be unlawful to make an award of added years. That body, acting on behalf of the Council, decided that an award would be unlawful. What has then happened is that the appellant has sought to challenge that decision by judicial review. In those circumstances, I for my part cannot accept that it is an abuse of process for the Council to seek to defend its decision as having been a proper and lawful exercise of the powers vested in it. To conclude otherwise would in effect to be ruling that the Council was not entitled to consider whether it would be unlawful to make an award, thereby creating a form of estoppel. Moreover, the issue of the lawfulness of an award had already been raised by the District Auditor. It was clearly a relevant matter for the Council to consider. In those circumstances, the Council as a public body exercising its powers would only have been justified in ignoring the issue of the lawfulness of an award and leaving that out of account if there had already been a court decision which determined that an award would, in public law terms, be a legitimate exercise of those powers. As I have already said, in my view there had been no such decision at the date when the cabinet met in April 2002. That body was entitled to consider that issue. Once that position has been reached, I find it impossible to conclude that it was an abuse of the process of the court for the Council to seek to defend its decision as to the unlawfulness of an award when the subsequent judicial review proceedings seeking to quash that decision took place. Unlawfulness of an Award[26]I turn therefore to the principal issue, namely whether the judge was right to conclude that an award of added years would have been unlawful because the appellant, though technically eligible under the 2000 Regulations, fell outside them when their meaning and purpose was considered. It is contended on the appellant’s behalf that that purposive approach to construction of the Regulations is unjustified. The local authority, submits Miss Booth, should in such a case simply look at the facts as they exist at the end of the employee’s employment. In the case of the appellant, he was by then 50, he had been employed by the Council up to that point and he was redundant. The fact that the extension of his employment to that point in time was the result of an unlawful agreement should be ignored, because the agreement is and was void ab initio. What matters is that the appellant was still lawfully employed up until that date.[27]In those circumstances the appellant argues that he was eligible for an award under the 2000 Regulations, and that that is an end to the matter. He in fact crossed the 50 year threshold not by virtue of the Compromise Agreement but because he was, as the Court of Appeal has found, employed under a lawful contract. The Council should not have taken the Compromise Agreement into account because that Agreement was void. His employment at the age of 50 took place because of the new employment relationship identified by the Court of Appeal and not because of the void Agreement.[28]Furthermore, Miss Booth draws attention to the finding of the deputy judge that, had the Compromise Agreement never been concluded, the appellant would have carried on in a “protected post” until such time as he was able to make his exit from the Council on terms acceptable to him. It is submitted that, had there been no Agreement, he would have continued in the Council’s employment, probably in a second-tier post, but on the same salary as he had previously enjoyed. If in due course he had been made redundant from that post, he would undoubtedly have been eligible for an added years award.[29]I can see that this last point may have some bearing on the issue of “irrational generosity”, had that been the principal basis on which Moses J reached his decision. But it does not have any bearing on the argument whether the situation which in fact existed when the Council made the decision now under challenge was one which fell within the scope and contemplation of the 2000 Regulations. As Mr Giffin emphasised in argument, if the appellant had gone down the “protected post” route, one cannot know whether in due course he would have been rendered redundant and so have qualified for an added years award under the 2000 Regulations. It cannot be assumed that a genuine second-tier post was likely to become redundant in the foreseeable future, especially given the fact that there had only recently been a major restructuring of the Council’s administration. One would be moving into the realms of speculation. In short, had this course of action been the one pursued, the appellant might never have qualified under the 2000 Regulations. It is an argument, therefore, which can have no real force in the debate on the main issue.[30]One turns, therefore, to the appellant’s principal argument on this, which is in essence that one should wholly ignore the void Compromise Agreement and consider solely the fact that he met the formal criteria for eligibility under the Regulations. It is of course well-established that a contract which is void because it was ultra vires cannot be enforced: Ashbury Railway Carriage and Iron Company –v- Riche [1875] L.R. 7 H.L. 653. As Hobhouse LJ put it in Credit Suisse –v- Allerdale Borough Council [1997] Q.B. 306, such an agreement does not confer any legal rights on either party: page 350E. On the other hand, the property in money paid under a void contract can pass to the payee, even though the money may subsequently be recoverable, and so even in private law terms such a void contract is not wholly devoid of effect: see WestdeutscheLandesbank Girozentrale –v- Islington London Borough Council [1996] A.C. 669, per Lord Goff of Chieveley at page 689H. A similar point was made by Robert Walker LJ in Guinness Mahon and Co Ltd –v- Kensington and Chelsea Royal London Borough Council [1999] QB 215, yet another interest swap transaction case, where he said at 240C:
“Where a supposed contract is void ab initio, or an expected contract is never concluded (as in Chiillingworth –v- Esche [1924] 1 Ch 97, [1923] All ER Rep 97), no enforceable obligation is ever created, but the context of a supposed or expected contract is still relevant as explaining what parties are about. An advance payment made in such circumstances is not a gift, and is not to be treated as a gift.”
[31]But all of this is concerned with the effect of a void contract on private law rights. As Hobhouse LJ recognised in the Allerdale case, public law is concerned with different matters. Just because a void contract does not give rise to private law rights does not mean that as a matter of public law a local authority is required, or indeed entitled, to ignore the fact that it existed or to ignore its terms. In Hobhouse LJ’s words (page 350E), such an agreement “exists in fact but not in law”, and it is a fact which a public body exercising statutory or regulatory powers must take into account if it is a matter relevant to its decision. Public law has on other occasions had to grapple with the consequences of an action which turned out to be invalid. In Boddington –v- British Transport Police [1999] 2 AC 143, the House of Lords was concerned with an argument that a railway byelaw was ultra vires and invalid, and in the course of their speeches both Lord Browne-Wilkinson and Lord Steyn (with whom Lord Hoffmann agreed) made the point that an unlawful byelaw was nonetheless a fact which in certain circumstances could have legal consequences. As Lord Browne-Wilkinson put it (page 164C) “The subsequent recognition of its invalidity cannot rewrite history as to all the other matters done in the meantime in reliance on its validity.”[32]In the same way, the fact that the Compromise Agreement in the present case was ultra vires and void does not mean that the Council or the courts should pretend that it never existed. In the phrase used by Mr Mackay QC in his judgment, the law does not require one “to airbrush it out of existence as if it had never been”. Nor in my view does it require the Council or the courts to ignore the fact that the appellant was under the age of 50 when he became redundant and that his employment to the age of 50 in fact occurred as a result of the Compromise Agreement. All this is part of the history of this matter. To recognise it in no way conflicts with the Court of Appeal’s finding that as a matter of private law the appellant was (after 28 September1998) employed by the Council under a notional contract of employment for a quantummeruit, because the Compromise Agreement was void.[33]Once this position has been reached, the appellant’s case faces formidable obstacles. If his argument were to prevail, he would achieve the very result which was agreed by the parties to be the ultra vires purpose of the Compromise Agreement. It cannot be right that he should be put in the same position which was to be achieved by that Agreement and which led to the conclusion that the Agreement had an improper purpose, namely that of enabling him to qualify for an added years award to which he was not in truth entitled. It would be absurd if the same result were to be achieved as had been intended by the Agreement and which led to that Agreement being ultra vires, merely because the court has declared the Agreement void and put a notional contract of employment in its place. It would be achieving by a different means the same improper purpose, and that is something which the law cannot contemplate: see Minister of Agriculture and Fisheries –v- Matthews [1950] 1KB 148 and Rhyl Urban District Council –v- RhylAmusements Ltd [1959] 1 All ER 257. It would, as Moses J put it, be “permitting the fruits of that artificial extension” of the appellant’s employment to be obtained. This would have been more obvious if the Council had made an award of added years to the appellant before the ultra vires nature of the Compromise Agreement had been recognised: the award would have fallen with the Agreement. But it cannot make any difference that the Council’s decision post-dated such recognition of the Agreement’s ultra vires nature.[34]The Court of Appeal’s identification of a substitute contract of employment in place of the Compromise Agreement is not inconsistent with this conclusion. The case relied on by Rix LJ as “the closest parallel” was that of Craven-Ellis –v- Canons Limited [1936] 2 KB 403, where the plaintiff was held to be entitled to be paid for his work as managing director on a quantummeruit, even though his appointment to the post was void because he did not hold the requisite qualifying shares in the company. As that brief summary of the case reveals, it was not one where the contract of appointment was void because of any improper purpose. No question, therefore, arose of an improper purpose being achieved as a result of the substitute arrangement, the “inference which a rule of law imposes”, to use Greer LJ’s words in that case. That issue simply did not arise in that case.[35]The appellant was no more within the scope of the 2000 Regulations than he would have been, had the decision on an award been made before the unlawful nature of the Compromise Agreement been recognised. In reality, his employment was artificially prolonged so as to seek to render him eligible for an award when he would not have been eligible but for that prolongation. That situation is not altered by the Court of Appeal’s identification of a substitute quantummeruit contract. The purpose of the 2000 Regulations was not to enable an award to be made to someone in the appellant’s position. It follows that I agree with Moses J that it would have been irrational and unlawful of the Council to have made any award of added years to the appellant.[36]That being the conclusion which I have reached, it becomes unnecessary to consider in any depth the submissions made about “irrational generosity”. I would only say that to have awarded him the full amount of added years which he seeks would have been irrationally generous for the reasons given by the judge below. He would in effect, as Miss Booth concedes, have been put in the same financial position as would have resulted from the Compromise Agreement, and since it was accepted in oral argument that the Agreement was irrationally generous, it must follow that such an award would have been ultra vires for the same reason. That does not mean that any number of years awarded below the maximum would necessarily have been irrationally generous, but in the light of the conclusion I have already reached on the unlawfulness of any award, it is unnecessary to deal with the detailed financial arguments canvassed before us. For the same reason I do not propose to cover the various matters advanced in the respondents’ notices.[37]I agree with the conclusions reached by the judge below and it follows that I would dismiss this appeal. Lord Justice Scott Baker:[38]I agree Lord Brown of Eaton-under-Heywood:[39]I too agree. I confess initially to have found Ms Booth QC’s arguments, admirably summarised in paragraphs 26, 27 and 28 of Keene LJ’s judgment, rather more persuasive than my Lords found them. After all, the Council was just as responsible for the Compromise Agreement as the appellant himself and, as Mr Mackay QC observed in his initial judgment of 20 December 2000:
“Although [Mr Foster] is of course assumed, by a necessary legal fiction, to have known of the void nature of the transaction, there is no suggestion that he actually did know or that he did anything other than fight his corner in the negotiation as hard as he could, legitimately as he believed it. His hands are clean.”
[40]Given Mr Mackay’s further finding as summarised in paragraph 28 of Keene LJ’s judgment, it seems clear that, but for the Compromise Agreement, the appellant would have carried on working in a “protected post” either until he was made redundant in circumstances clearly entitling him to an added years award or on a longer term basis at full salary - in either event, therefore, to substantially greater advantage than in fact he has achieved.[41]Those considerations notwithstanding, I find the reasoning by which Keene LJ has come to his conclusion on the principal issue entirely convincing. A decision by the Council to award the appellant added years would itself, I now accept, have been open to challenge by the District Auditor. It follows that the judge below was right and that Mr Foster’s appeal must accordingly fail.

Order

appeal dismissed; any hearing into costs and any other consequential orders adjourned for 14 days, unless in the meantime agreement is reached between the parties on all those matters. (Order does not form part of the approved judgement)

Cited in 1 later judgment