Case no: CO/4215/2000

IN THE high court of justice
QUEENS BENCH DIVISION
ADMINISTRATIVE COURT

Royal Courts of justice
Strand, London, wc2a 2ll

Friday 10 November, 2000

Before:

mr justice Turner

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The Queen ON THE APPLICATION OF

Garland

-V-

The Secretary of State for the Environment 
Transport and The Regions
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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
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Mr David Forsdick (instructed by Rowe & Maw) for the District Auditor
Miss Jane Mulcahy (instructed by Burgess Salmon) for the Applicant
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Judgment
As Approved by the Court

Crown Copyright ©

TURNER J
1.  On 16 July 1997 the respondent communicated his decision on the applicant’s appeal under the provisions of regulation N8 of the Local Government Superannuation Regulations 1986.  The questions which had been referred to the Secretary of State were
a.	Whether (the applicant’s) pension should have been reduced by the county council
b.	What payments should be used to calculate (the applicant’s) pensionable remuneration?

The Determination was
a.	that it was within the county council’s powers under the regulations as administrative authority to reduce (his) pension; and furthermore
b.	that (his) pension has been correctly calculated based on (his) pensionable remuneration.

2.  The Regulations in question provide that entitlement to benefit is to be decided by the last employing authority, in this case, the West Wiltshire District Council (the District Council).  But where there is a dispute as to the amount of any benefit, that is to be determined by the administering authority, in this case the Wiltshire County Council (the County Council); see Regulations N5 and N6.  On the hearing of the present application, the Secretary of State was not represented but did submit writtenobservations.  His position was essentially one of neutrality.  The effective other party to the proceedings was the District Auditor of West Wiltshire District Council (Richard Lott).
Application by Richard Lott to be joined as a respondent 
3.  Permission was granted to the applicant to apply for judicial review of the determination by the Secretary of State on 25 November 1999.  On 18 July of this year, the District Auditor, in the person of Richard Lott issued an application to be joined as respondent in these proceedings. It was agreed that this procedural application would be heard at the same time as the substantive application against the Secretary of State.  In reality, it is this application which lies at the heart of these proceedings because the District Auditor, unlike the Secretary of State, whose stance is neutral, claims that his position will be undoubtedly adversely affected if relief is granted to the applicant on the substantive application.  Why this should be so will become readily apparent in the light of the history which is set out below.
4.	Before reaching that stage, however, it has to be decided whether or not the District Auditor can properly be considered a person who is “directly affected” such that he was a person who “must be served” with the claim form; see Order 53 rule 5(3) of the Rules of the Supreme Court.  In the alternative, the court might  consider him to be  “a person who should be heard”; see RSC Order 53 rule 9.  In summary, his position is that he had a claim against the applicant arising out of the activities of the latter as chief executive of the District Council, which he had at all material times wished to pursue in his capacity as district auditor.  If the applicant succeeds in his claim for relief in these proceedings, the action which the District Auditor would have taken against the applicant is now no longer open to him because the audit for the year in question was closed in the light of the settlement referred to below. The District Auditor contends that a settlement of all outstanding matters between the applicant and himself was reached at a time when he was unaware of the fact that the applicant might yet seek to re-open his challenge to the determination of the Secretary of State of 16 July 1997. 
5.  Recognising the strict terms in which Order 53 rule 5(3) is expressed, counsel for the District Auditor reminded the court of the extent of the duties of the District Auditor.  Reference was made to the observations of Lord Denning MR in Asher v.  Environment Secretary [1974] Ch 208 at p219 where he said
 The district auditor holds a position of much responsibility.  In some respects he is like a company auditor.  He is a watchdog to see that the accounts are properly kept and that no one is making off with the funds.  He is not bound to be of a suspicious turn of mind … but if anything suspicious does turn up, it is his duty to take care to follow it up … in other respects, however, the duties of a district auditor go far beyond those of a company auditor.  He must see whether on the financial side the councillors and their officers have discharged their duties according to law.   … .   If he finds councillors or the officers … have expended money improperly or unreasonably, or allowed it to be so expended, it is his duty to surcharge them. 
6.  The question at issue on the procedural aspect of the case has no immediate bearing on the presentation of the substantive application, since it was not disputed that, if the District Auditor was not a person who was “directly affected”, it was for the court to determine whether or not he was a person who “should be heard”.
7.  It is convenient to dispose of this point of procedure at this stage.  The applicant relied on the decision of House of Lords in R v. Rent Officer Service ex parte Muldoon [1996] 1 WLR 1103, especially the passage in the judgment of Lord Keith of Kinkel at p1105C-G where he said
That a person is directly affected by something connotes that he is affected without the intervention of any intermediate agency.  In the present case if the applications for judicial review are successful the Secretary of State will not have to pay housing benefit to the appellants either directly or through the agency of the local authority.  What will happen is that up to 95 per cent of the amount paid by the local authority to the applicants will be paid by the Secretary of State to the local authority after the end of the financial year.  The Secretary of State would certainly be affected  by the decision, and it may be said that he would inevitably or necessarily be affected.  But he would, in my opinion, be only indirectly affected, by reason of the collateral obligation to pay subsidy to the local authority.
8.  Given the overall interest which the District Auditor has in enforcing proper standards of financial administration, it is tempting to regard him as having a direct interest sufficient to entitle him to be regarded as a person who would be directly affected in the result of these proceedings.  It has to be remembered that if an order of judicial review is made of the decision of the Secretary of State, there will be no immediate effect on the District Auditor.  The position is that he is now unable to take effective proceedings under section 19 of the Act of 1982 because he has closed the accounts for the relevant year.  If the position of the two councils was to be preserved he needed to be in a position to take proceedings under the section.  Thus, in my judgment it can be seen that he is not a person who is ‘directly affected’ by the making of the order. 
9.  Accordingly, I entertain no doubt that the District Auditor is not a person who is “directly affected” within the meaning of the rules.  He is however, plainly, a person who “should be heard”.  The only practical effect of this decision may be that if the District Auditor is unsuccessful in persuading the court that no relief should be granted to the applicant, he will have no right to appeal against my decision.
The history
10.  The dispute has a long and, as will be seen,  somewhat chequered  history.  For a number of years the applicant had been chief executive of the District Council.  In about 1982, the applicant together with other officers of the District Council had set up a limited company by the name of Computer Systems Software Group (CSSG) under the sanction of a resolution of the Legal Sub-Committee of the District Council.  The object of the scheme was that the District Council should market, among other administrative authorities, computer software programmes which would be of benefit to those authorities.  Under the scheme as devised and operated by the applicant and two other officers (Perkins and Archer) bonus payments, in addition to their salaries, were made which were derived from the proceeds of the trading by CSSG.  It was the position adopted, and since maintained, by the District Auditor that the bonus payments were “contrary to law” within the meaning of section 19(1) of the Local Government Finance Act 1982.
11.  On 30 June 1989, the applicant retired. The District Council approved a pension which was based on his remuneration calculated, in addition to his salary, on the basis of five quarters worth of bonus payments received from CSSG.  The District Auditor called into question the legality of CSSG.  On 21 August 1990, the County Council which, under the Regulations, has the responsibility for administering the superannuation fund of the District Council, determined  that CSSG had had no authority to authorise any payments to officers of the District Council in addition to their salaries and that, as the result, there was no pension entitlement arising from those payments.  That letter went on to deal with other matters that were in dispute between the District Council and the applicant.  One of these was that the applicant had retained a car from his employment to which he was not lawfully entitled.  The consequence was that as the result of these decisions, the County Council determined that the applicant’s future pension payments were to be reduced.  A calculation of the applicant’s future entitlements was appended to the letter.
12.  A number of disputes arose between the applicant and the District Council. There was much correspondence between the District Council, the County Council and the applicant’s solicitors relating to these matters which are, however, of little relevance to the issues which arise on the hearing of the present application.  In a long letter dated 27 January 1994, the applicant’s solicitors dealt with those matters which were materially in dispute.  In section 2.2.1 of the letter they wrote 
On this basis Mr Garland will wish to see, as part of the compromise, that the County Council accepts that the bonus payments should have been included in his pensionable remuneration for the purpose of the necessary calculation.
At paragraph 2.3 they added
In summary … for the purposes of these discussions, Mr Garland is prepared to concede that the value of his car benefit was incorrectly calculated and that his pensionable remuneration should have been calculated based on four quarters bonus payments only in the final year of his employment.  He is not prepared to concede, however, that the bonus payments should be taken out of account in calculating his pensionable remuneration nor that he was not entitled to the “added years”.
2.4  We will leave it to the County Council to produce precise figures implementing any of the above.  We would, however, want such figures to be incorporated in any formal settlement document with the County Council.
            * * * *
6.1    Mr Garland will require that any settlement carried out on the basis that it is in full and final settlement of all or any claim which either or both of the District Council or the County Council may have against him in respect of matters arising from his employment by the District Council.
13.  It is apparent that the County Council communicated with the District Auditor on the question of the acceptability of the proposed settlement to him.  The District Auditor replied (25 March)   
So long as the District Council acts in accordance with legal advice, it is unlikely that I would wish to challenge the terms of the proposed settlement.  However, I would not  accept the legality of any arrangement which involved the inclusion of five quarters’ bonus payments in calculating salaries for pension purposes.  Subject to considering the terms of the legal advice to the District Council, I would contemplate not challenging a settlement which incorporated the inclusion of the final year’s bonus payments in the calculation.
In March 1997, the District Auditor issued a notice against the applicant to show cause, under the provisions of section 20 of the Act of 1982, in respect of the acquisition of a Mercedes car from the District Council as part of his retirement package. 
14.  The next occurrence of note was that the appeal to the Secretary of State was re-instated.  It is this determination of that appeal which forms the basis of the present application.  It is unquestionable that there are aspects of the determination which do not measure up to appropriate standards of rationality.  Thus in paragraph 10 of the determination the Secretary of State wrote
(He) has taken the view that there is some doubt as to whether the District Council should have reached the decision it made at the time.
 [It will be recalled that the limit of the District Council’s consideration was as to entitlement].  In paragraph 13 of the determination the Secretary of State wrote
… It is not disputed that the District Council was entitled to make bonus payments.  But in deciding the amount of the remuneration to be used in the final year for the purposes of Regulation E22, regard must be had to the period such payments relate to (sic).  The view is taken that only four out of the five payments can be attributed to the final year.
[It will be recalled that the limit of the County Council’s consideration was as to the amount of the pension calculation.]  Then, as has already been seen, the Secretary of State determined that the County Council did have power to reduce the pension, but concluded that it had been correctly  exercised and the correct calculation had been made.
15.  Some two months later, the applicant wrote to the Secretary of State indicating not only his dissatisfaction with the determination, but also reciting, as was the fact, that Messrs Archer and Perkins had commenced proceedings for judicial review to challenge the decision which had been made in their cases.  The applicant stated that due to illness, the precise nature of which it is unnecessary to identify, he would be unable to pursue his own application for judicial review “in parallel with the other two officers”.  He invited the Secretary of State to agree to be bound, so far as he was concerned with any decision reached in respect of those others.  Parenthetically, it should be noted that at the very time that the applicant was putting forward his illness as a reason why he could not contemplate undergoing the stress of proceedings for judicial review, he was, through his solicitors conducting negotiations for the settlement of the issue relating to the car.  This also involved giving instructions in relation to all other matters in dispute between the parties; as to the details of this see below.  The Secretary of State declined the request stating that he had no power which would enable him to accede to it.
16.  There then followed settlement in the proceedings between the applicant and the District Council.  This was what all parties aptly described as a ‘drop hands’ settlement under which both parties dropped all claims against the other, save that nothing in the order was to prejudice the applicant’s appeal to the Secretary of State.  On 28 October 1998 there was settlement of the dispute in relation to the applicant’s car.  The settlement was the culmination of another protracted sequence of correspondence passing between the District Auditor and the applicant’s solicitors.  Since this settlement is close to, if not at the centre of the current matter, it is necessary to refer to it in some detail.
17.  The background may, however, be summarised as follows.  On behalf of the applicant’s family, his solicitors wrote offering to settle the car dispute for a sum of money; 23 December 1997.  An increased offer was made in the same way in February of the following year.  In both these letters, the solicitors wrote on the basis that if there was to be a settlement, it should “finally bring to a close all and every aspect of this unfortunate saga”.  Solicitors acting on behalf of the District Auditor wrote (14 May 1998) to say that the District Council was prepared to accept the higher offer in respect of the car.  They added an important paragraph
On behalf of the District Auditor who issued a note of the provisional findings and views, I am authorised to say that, subject to receipt by the Council of the sum … , he is of the view that he does not have any duty to perform under section 20 of the Local Government Finance Act 1982 and that he does not intend to proceed further.  This will be confirmed in open correspondence which will also state that the District Auditor does (not) intend to take any further audit action against Mr Garland under section 19 and/or 20 of the 1982 Act in respect of matters which were the subject of his predecessor’s … three public interest reports.  The present District Auditor does, however, reserve his position in relation to the calculation of Mr Garland’s pension entitlement if this remains the subject of an appeal to the Secretary of State.
So far as material, the applicant’s solicitors replied (28 May)
It is our understanding that Mr Garland’s appeal to the Secretary of State was disposed of by a letter dated 16 July 1997 received from the Department of the Environment Transport and the Regions.  We do not understand, therefore, why the District Auditor considers he needs to reserve his position in relation to the calculation of Mr Garland's pension entitlement.  Please will you explain?
The District Auditor’s solicitor requested sight of the letter from the Secretary of State of 16 July 1997.  On 23 June, the solicitors wrote
On the basis that there was (and will be) no appeal against the decision of the Secretary of State … the District Auditor does not intend to take audit action in respect of Mr Garland’s pension.
There was then a telephone conversation between the solicitors which was recorded by the District Auditor’s solicitors as follows
Garland will not take further action re pension.  There will be no appeal. … .  (Applicant’s solicitor) will confirm the position in without prejudice correspondence and we will submit draft letter for consideration.
This conversation was followed by the applicant’s solicitors letter of 30 June which  indicated no dissent from the telephone understanding of the District Auditor’s solicitor.  On 28 October, the Solicitors for the District Auditor wrote the letter which concluded the settlement on the basis which had been discussed in the preceding correspondence.  
18.  As appears from a letter from the Treasury Solicitor, dated 10 June 1999, he consented to an order quashing the determinations in the cases of the other two officers.  However, the Treasury Solicitor said that it would be necessary for the applicant to bring proceedings in his own name and indicated that had the application been made in time, he would also have consented on behalf of the Secretary of State to the determination being quashed.  It was also said that, in the special circumstances of the case, no point would be taken about time since, as the result of what had occurred (a reference to the applicant’s illness), the applicant had “been placed at a serious disadvantage in comparison with his two former colleagues”.  In due course the County Council indicated that it “saw no reason why it should intervene (in the present proceedings for judicial review) in a case which the DETR acknowledges is very similar”.
19.  The applicant’s solicitors wrote to the County Council on 5 August 1999, referring to the successful application made by Messrs Perkins and Archer, and continued
Mr Garland has recently completed a course of (treatment).  He now hopes to be sufficiently well to pursue his claim and has corresponded with the Treasury Solicitor.  … the Treasury Solicitor indicates that he would not oppose the making of a decision in similar terms to Mr Archer and Mr Perkins in respect of Mr Garland.  However, he indicates that you are not willing to review the situation in the absence of a court order. …
Please confirm:-
(i)	what you would require before acting on the Secretary of State’s decision;
(ii)	what other steps you think might “absolve you … from the consequences of departing from [your] current interpretation of the [Secretary of State’s] decision”;
(iii)	whether, if you require judicial review or other proceedings to be issued, you will meet our client’s costs;
(iv)	whether, if judicial review proceedings are issued, you intend to intervene.
You will appreciate the need for Mr Garland to issue any required proceedings as soon as possible to prevent further delay.
20.  A possible inference from the phraseology of this letter is that throughout the period from the date of the determination by the Secretary of State (16 July 1997) up to that date, it had been the applicant’s intention to challenge it, in the same manner as his two former colleagues had done.  It is evident that neither the applicant nor his solicitors had not only provided no information which would negative such an inference, on the contrary the indications were all the other way.
21.  The response of the County Council was to the effect that it would not co-operate with the applicant in the manner that he, or his solicitors, had hoped that it would.  Moreover, the County Council, informed both the District Council and the District Auditor of its decision.  It is to be noted that it was to be another four months before the present application for judicial review was launched.  Solicitors for the District Auditor wrote to the Treasury Solicitor expressing concern that they had not been kept informed about the applicant’s intentions with regard to a challenge to the determination by the Secretary of State and inviting him to oppose the application for judicial review.  The Treasury Solicitor eventually responded by letter dated 23 May 2000 to the applicant’s solicitor and copied to the District Auditor’s solicitors.  So far as material, that letter was in the following terms:
My clients take the view that it is unfortunate that the evidence in support of your client’s application did not give a fuller picture of the settlement which had been reached with the District Auditor.  The Secretary of State is unable to resolve the question … whether there was an agreement between your client and the District Auditor which might operate to prevent these proceedings, but it would have been better had the issue been before the court at the permission stage.  The Secretary of State takes the view that this further material should now be made available to the court, but provided that that is done the point would be for the District Auditor to take. … .
Subject to the court receiving further evidence, and assuming that there are no further significant developments or revelations, the Secretary of State does not intend to play any part in the hearing, but I confirm …. that the Secretary of State does not seek to rely on the detriment to good administration as provided for in section 31(6) of the Supreme Court Act 1981.

The statutory context
22.  The following sections of the 1982 Act are relevant to these proceedings.
15(3)  The auditor shall consider whether, in the public interest, he should make a report on any matter coming to his notice in the course of his audit in order that it may be considered by the body concerned or brought to the attention of the public, and shall consider whether the public interest requires any such matter to be made the subject of an immediate report rather than to be made at the conclusion of an audit.
* * * * * *
19(1)  Where it appears to the auditor carrying out an audit of any accounts under this part of the Act … that any item of account is contrary to law he may apply to the court for a declaration that the item is contrary to law except where it is sanctioned by the Secretary of State.
(2)	On an application under this section the court may make or refuse to make the declaration asked for, and where the court makes a declaration, then, subject to sub-section (3) below, it may also –
(a)	order that any person responsible for incurring or authorising any expenditure declared unlawful shall repay it in whole or in part to the body in question …
20(1)  Where it appears to the auditor … -
(a)
(b)	that a loss has been incurred or deficiency caused by the wilful misconduct of any person,
he shall certify that the sum … is due from that person and … both he and the body in question may recover that sum for the benefit of that body … .
The case for the District Auditor 
23.  It was the case which the District Auditor wished to run in regard to the bonus payments which the applicant had received as the result of the activities of CSSG was that they were an “item of account” which had been made or entered “contrary to law” and, therefore, that they could not properly be taken into account when fixing the level of the applicant’s pension.  It was his case that he intended to seek to recover payment of bonuses which had been made and seek a declaration that they, and any future such payments, were or would indeed be contrary to law.  It would follow that if he were successful in that respect, no question of lawful pensionable remuneration based on those payments could have arisen.  Because of the terms of the correspondence leading up to, and the terms of the settlement itself, he had not sought to challenge the lawfulness of the bonus payments.  On the assumption that the determination imperfectly expressed as it undoubtedly was, of the Secretary of State, remained undisturbed, then, the applicant would not have been awarded a pension enhanced by bonus payments.  Relying upon the correspondence and the settlement, the District Auditor certified the accounts for the District Council in the relevant year.  Those accounts cannot now be re-opened.  His contention was, therefore, that the applicant should not be granted the relief which he seeks in these proceedings, notwithstanding that Messrs Perkins and Archer had been successful in their challenge in circumstances which were of striking but not total similarity.
24.  It is part of the case for the District Auditor that the applicant’s position with regard to the payment of bonuses and the pension was not to be equated with that of his two former colleagues.  This is because of the position which he occupied while employed by the District Council in that he was the person who instigated the unlawful payments from which he had benefited, whereas the others had merely been the recipients of such payments.
25.  At the hearing of the oral application for permission to bring these proceedings against the Secretary of State, the District Auditor had not been notified.  He later made application to be added as a respondent.  I have already determined that he should not be made a respondent but is, nevertheless, a “person who should be heard”.	
The applicant’s case
26.  Examination of the decision reveals it to be a flawed document because the Secretary of State had not provided intelligible reasons.  In giving reasons which were on their face inconsistent with the provisions of the Regulations the Respondent acted irrationally.  The Secretary of State has not only not sought to defend the decision as and in the terms in which it was made, but has also submitted to judicial review of the decisions which he made in the similar cases of Perkins and Archer.  On the hearing of the present application it was never in issue between the applicant and the District Auditor that the decision was vulnerable to being quashed on these grounds.  The question is whether the matters relied upon by the District Auditor should deny the applicant the relief to which he was otherwise plainly entitled.
27.  It was contended that ‘the applicant has had to wait a considerable period before being able to bring his claim for judicial review’; see skeleton ¶ 13.  The point which was being made here was that the applicant was unable to proceed with his judicial review claim because of the illness from which he had been suffering.  The respondent does not contest this, the District Auditor does not accept that this is a full explanation.  It is possible to anticipate my decision on this point by saying that I do not consider that it is necessary to decide whether this is a full or proper reason for the delay, since it is not determinative of the result of these proceedings.
28.  It was submitted that both the applicant and his solicitor had considered that the focus of the settlement reached between the District Auditor and himself had related to the car,  accordingly, contrary to the submission of the District Auditor, there had been no misrepresentation about the applicant’s position in regard to his pension when the application for permission in respect of the Secretary of State’s determination was made.  The letter from the District Auditor’s solicitors of 28 October 1998 (see above paragraph 16) had been no more than a statement of intention on behalf of the District Auditor which was incapable of being a contractual promise.  Again, it is possible to anticipate my decision because I do not consider that it is necessary to determine whether or not there was misrepresentation or simple ineptitude on the part of the applicant’s advisers in not referring to the settlement when making the original application for permission.  At its most favourable to the applicant and his solicitors, the non-disclosure of the settlement is indicative of a narrow and rather naϊve understanding of the effect of the negotiations which led up to the eventual settlement.  In particular the contents of the  letter of 23 June 1998 from the District Auditor’s solicitors to the applicant’s solicitors do not lie easily with the contention which was advanced.
29.  It was submitted that, in accordance with principle, although there is no general power for an administrative decision which has been validly made to be revisited by the decision maker, there is power to review or to revoke a decision which is on its face invalid.  Reference was made to Wade and Forsyth Administrative Law 8th Edn p235, in support of the proposition that the Secretary of State could have revised his original and invalid decision.  This may well be a correct view.  Since, however, nothing in the present application turns on the correctness or otherwise of this view, it is unnecessary to give it further consideration.  The court is not concerned with the question whether or not the decision of the Secretary of State to refuse to revise his original incorrect decision was itself correct, but with the sole question whether, had this application been made timeously and other considerations apart, it would have granted the applicant the relief he seeks.  
30.  It was contended that there was an element of administrative unfairness arising from the fact that the County Council had refused to treat the applicant in the same way as Messrs Perkins and Archer after they had successfully obtained judicial review of the Secretary of State’s determination.  It was contended that their cases were in all relevant respects identical to that of the applicant.  The submission was that in accordance with the principle that all people in a similar position should be treated similarly, the applicant should not be denied the relief which the others (Perkins and Archer) had obtained; see R v. Hertfordshire County Council ex parte Cheung (transcript 26 March 1986).  At p7 of the transcript Sir John Donaldson MR said
I wholly accept the proposition that if a test case is in progress in the public law court, others who are in a similar position to the parties should not be expected themselves to begin proceedings in order to protect their positions.  I say this for two reasons.  First it would strain the resources of the public law court to breaking point.  Second, and perhaps more important, it is a cardinal principle of good public administration that all persons who are in a similar position shall be treated similarly.  Accordingly, it could be assumed that the result of one test case would be applied to them by the authorities concerned without the need for proceedings and that, if this did not in the event occur, the court would regard this as a complete justification for a late application for judicial review.
In the present case, it was submitted that since the Secretary of State had consented to the applications made on behalf of the other two, in circumstances which were indistinguishable for those of this applicant, then the court should grant the relief sought.
31.  It was accepted that in deciding whether or not to grant relief, the court could take into account the extent to which strangers to the decision who have acted in the belief that that decision is valid should be considered.  But in this case it was submitted that the District Auditor had not acted in the belief that the decision of the Secretary of State was in fact valid.  The argument was to the effect that the District Auditor would not face any adverse consequences if the Secretary of State made a correct determination in favour of the applicant since he had raised no objection to that course when the County Council accepted, in the cases of Archer and Perkins that it “was then able lawfully to pay additional pension to” them in accordance with the re-made decision and “the District Auditor agreed this also”; see letter from the County Council to the applicant’s solicitors 25 August 1999.  So, it was submitted that, the District Auditor had not acted on the basis that the decision, which is the subject of challenge, had been validly been made.  It was then contended that, in truth, no settlement had been reached between the applicant and the District Auditor.  The basis of this contention was an apparent reservation referred to in the course of a telephone conversation between the solicitors for the applicant and the District Auditor respectively.  It went no further than this that on the District Auditor’s behalf it had been said
There could theoretically be circumstances in which brand new information would cause the District Auditor to reinvestigate the matter but this appeared unlikely and could never be ruled out entirely.
32.  Moreover, the District Auditor’s letter in which he agreed not to pursue the matter further in respect of the car was a statement of mere intention and not one which gave rise to a contractual term.  Then it was said that if the decision of the Secretary of State was a nullity, and could not therefore form any part of a bargain which bound the applicant in any way.  What I apprehend that this contention was intended to convey was that given that the Secretary of State did not seek to defend his decision, there were reasons of public policy why, if there were otherwise a valid agreement, it should not be enforced.  No authority was, however cited in support of this proposition.
33.  Finally, it was submitted that the position of the District Auditor in seeking to prevent the applicant from obtaining the pension to which he claims to be entitled, the applicant would be deprived of property contrary to the first protocol of the European Convention on Human Rights and if the court did not give him the relief to which he was entitled it would not be acting conformably with its obligations under the Convention.  The first protocol provides that
Every natural or legal person is entitled to the peaceful enjoyment of his possessions.  No one shall be deprived of his possessions except in the public interest and subject to the conditions provided by law and by the general principles of international law.
[Such] provisions shall not, however, in any way impair the right of the State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.
34.  Since, it was submitted that the right to a pension was a right to property, if the applicant were to be refused relief to which he would have been entitled, as would be the case if the Secretary of State re-made his decision in appropriate form, then the applicant would be unlawfully deprived of his right to the same pension as had been awarded to Archer and Perkins. It was not in the public interest that the applicant, who was in the same position as his two colleagues, should not be treated in the same way. It followed that it was in the public interest that the Secretary of State should re-make his decision in a lawful way.
35.  With regard to the final way in which the applicant framed his case, it was submitted on behalf of the District Auditor that to be valid the applicant had to prove that he should be entitled to take advantage of the representation made by him, or on his behalf, which would have the effect of enabling him to enforce a right which he would not otherwise have enjoyed.  That was clearly not in the public interest.  It was an attempt to avoid facing up to the problem which confronted the applicant under section 19 of the Act of 1982.  It was submitted that if the applicant were permitted to succeed on this ground it would mean that he would be entitled to go behind a freely made compromise.  That was something that would plainly be detrimental to the public interest.  In reality, the applicant’s submissions if correct would mean that the High Court would not be able to do justice through a controlled exercise of discretion in cases in which the ECHR could be prayed in aid.  Such could not be the true effect of the incorporation of the Convention.  
36.  If or to the extent that the applicant sought to rely on the assertion that he had a legitimate expectation that he would succeed in the application for judicial review so that he would be awarded his pension on the basis that it was to be enhanced by the bonus addition this can be shown to be wrong.  The District Auditor had always indicated an intention to go by way of section 19.  The only reason that he did not keep that option open was that he had been assured, or it had been represented to him, that nothing would be done to seek to disturb the, admittedly, unlawful or invalid decision of the Secretary of State.  The point made by The District Auditor  was that the applicant could never have had a legitimate expectation of being awarded a pension based on the inclusion of bonus payments in the pension calculation.  Additionally, the fact that after the settlement was effected the District Auditor had closed the accounts meant that he was no longer in a position to take action under section 19.  On this analysis, what the applicant had lost was the chance, amounting it must be said to a near certainty, that he would have succeeded on his appeal to the Secretary of State against the prospect that the District Auditor would not have done what throughout he had said that he would do, namely proceed by way of section 19.  
37.  In response to a question from the court, it was submitted that absent bad faith on the part of the District Auditor, there was no requirement that the court should evaluate the prospects which the District Auditor might have had if he had gone by that route.  Insofar as there was any evidence on the topic, there is the fact that both District Council and County Council had accepted the conclusions set out in the original report.  The District Auditor was entitled to seek relief from the court in the event that there was anything which he considered was unlawful or improper.  In Hazell v. Hammersmith and Fulham LBC and Others [1990] 2 QB 697 at p768 Sir Stephen Brown P said
Section 19(1) of the Local Government Finance Act 1982 re-enacts section 16(1) of the Local Government Act 1972.  That section differed in its, effect from its predecessor section (section 228(1) of the Local Government Act 1933) but the expression “contrary to law” may be traced back to at least section 247(7) of the Public Health Act 1875.  The decided cases since that date have clearly illustrated grounds upon which the items of account may be held to be contrary to law.  Such a conclusion may be reached where the items of account relate to payments which were not authorised by duty of the authority, or were contrary to the duty of the authority, or were beyond the powers of the authority, or were made in the exercise of discretion vitiated by misdirection, consideration of irrelevant matters, failure to consider relevant matters or gross unreasonableness: … In short, the auditor is entitled to seek relief if he can show that an item of account is for any reason unlawful or improper.
38.  By reference to the report in question, it was submitted that the applicant had already received payments totalling some £122,000 (£82,000 as bonus payments and £40,000 by way of pension payments) to which he was not properly entitled.  By accepting the settlement based on the Mercedes, the applicant was no longer at risk of having to repay any part of the sum of £122,000, but the applicant surrendered his right to challenge the computation of his pension on the basis set out in the letter from the County Council of 21 August 1990.
39.  In reply, the applicant reiterated the submission that it would be unjust to him if he were not accorded the same rights as Archer and Perkins on the footing that his position was in all material respects in the same position as theirs. A new argument was raised on the meaning of the phrase “except where it is sanctioned by the Secretary of State” as it appears in section 19(1) of the Act.  It was submitted on the applicant’s behalf that if an item were to be sanctioned under this section, the District Auditor would have to treat payments so authorised as having been legally made; see R v. Grain, ex parte Wandsworth Guardians [1927] 2 KB 205.  In that case, there had been a prior sanction by the relevant Minister in respect of gratuities paid to a local authority officer.  Although they might have been illegally made without the sanction, the effect of the sanction was not to give the local authority “power to turn an illegal payment into a legal one, but only conferred a power to remit”; see p213 of the report in that case.  It was submitted that inferentially, by the decision letter the Secretary of State who had been apprised of the dispute between the applicant and the District Auditor, had sanctioned the payments to which the District Auditor was raising exception.  That being the case, so it was submitted, the District Auditor could not now raise objection to the application and the claim for relief.  
40.  This may be thought to have been a surprising submission.  The issue before the Secretary of State had been whether or not the applicant’s pension entitlement had been correctly calculated in accordance with Regulation E22 and Schedule 1 of the 1986 Regulations.  The Secretary of State had not been asked to provide any sanction in respect of the pension on the basis that it had been incorrectly calculated.  The grounds of appeal made no reference to the matter of sanction and the impugned decision letter did not purport to make any finding or record any decision on that matter.
41.  Ever since the late 1880’s it has been recognised that while there may have been an illegality in certain circumstances, it would not be appropriate to visit the consequences of that illegality on the councillors or officers of the local authority concerned.  Accordingly  the power of sanction has long existed.  The principles upon which it may be exercised  are conveniently set out in the Encyclopaedia of Local Government Law (2000) and are to the following effect:
The power of sanction is intended to be used in those cases where the expenditure is incurred bona fide but in ignorance of the strict letter of the law, or inadvertently without the observance of requisite formalities, or under such circumstances as make it fair and equitable that the expenditure should not be disallowed by the auditor … We do not regard the Act as intended to supply the want of legislative or other authority for particular expenditure or classes of expenditure, and as justifying us in giving prospective sanction to recurring expenses.
See Annual Report of the Local Government Board 1887-88.  The current position is contained within a Departmental Note dated 25 July 1997.  Under cover of a letter of the same date which states
As required by statute, each application for sanction applications is to be decided on its merits, having regard to any policies on sanction applications which the Government has adopted, and to the circumstances of the individual case concerned.  In her written answer, the Minister made it clear that it is the Government’s policy to continue the approach previously followed, namely, that the power to sanction should not be used too widely.
Paragraph 7 of the Guidance is as follows:
Since the introduction of the sanctioning power in 1887, there has been a consistent set of principles guiding its use.  The Annual Report 1887-88 said - [as set out above]
This remains the Secretary of State’s policy today.  Each application (emphasis added) for sanction is decided on its merits having regard to the principles in this Note.  It is the Secretary of State’s policy that the power to sanction should not be exercised too widely.

42.  Procedurally and substantively, it would thus be at odds with the stated policy of the Government that sanction should be granted without either application being made or recognition that that was what was being applied for.  The Note itself lays down the procedure for making applications which have to be made to a separate division within the Department of the Environment Transport and the Regions.  As no such application has been made, this argument, in my judgment, is wholly misconceived.
Discussion and result
43.  The position, as I find it to be, is as follows.  At all material times it was the opinion of the District Auditor that the payments made, and proposed to be made, to all three officers were illegal.  Although the District Auditor for purposes of his argument was initially prepared to treat all three equally on examination the position of the applicant was significantly different from that of the other two.  He was the initiator of the scheme and probably its architect.  There was never any indication that once the District Auditor had written his report and communicated it to the local authorities concerned he gave any indication that he had changed his mind.  The reasons advanced for not proceeding by way of section 19(1) are, in my judgment entirely valid.  The facts in the present case are far removed from those in Cheung (above).  It was not only wise, but also proper, for him to delay litigating the issues which he wished to raise until after disposal of both criminal and civil proceedings against the applicant.  
44.  In my judgment, the District Auditor was misled, by the contents of the letters sent to him by the applicant’s solicitors, into believing that the question of the applicant’s appeal to the Secretary of State was no longer live.  It is unnecessary for me to decide whether those letters were written either by the solicitors, or at the applicant’s suggestion, in bad faith, although it might be difficult to resist the conclusion that they were.  The coincidental nature of the timing of the conclusion of the settlement, for such I am satisfied that it was, and the re-opening of the question in relation of challenge to the decision letter is an unhappy one.  With the knowledge, or belief, that that issue was no longer live, the District Auditor was entitled to decide whether in the exercise of his discretion he would pursue the applicant for the return of the pension payments already made, and to be made, if the appeal to the Secretary of State were to be properly determined or that he should close the accounts for the relevant year.  It is only in the light of the existing challenge that the issue relating to past and future payments re-surfaced for his consideration.  I can see no basis upon which it would be equitable as between the applicant and the District Auditor for the former to be entitled to succeed on his appeal and for the District Auditor not to be entitled to pursue the applicant under section 19.  As, by reason of the settlement, it is no longer possible for the District Auditor to take action to challenge the propriety of basis of the pension calculation, it would be unjust for the court to exercise its discretion in the applicant’s favour and grant him the relief which he seeks.
45.  The applicant had never established the right (to a pension in a particular amount) which he claims.  It was, as he was well aware, always in issue between the District Auditor and himself whether any part of the bonus payments was capable of ranking for pension or not.  When he agreed to settle on the basis that he did, he effectively surrendered the right which he now asserts under the first protocol to the ECHR; see paragraph 33 above.
46.  A further ground for refusing to grant relief is the applicant’s delay in challenging the decision letter in judicial review.  The fact is that, despite his illness he could perfectly well have joined with Archer and Perkins in their challenge.  The circumstances of their challenge and that of the applicant was, on the basis of his submissions to this court, identical with theirs except as to the figures.  But as important, is the fact that while that challenge was being mounted, the applicant was apparently not so ill as not to be able to provide his solicitors with all the information and decisions which were required in connection with settlement of the dispute over the Mercedes car. 
46.  In the result the relief which the applicant seeks by this application must be refused.