Two senior and long term employees of the Council proposed voluntary early redundancy. After discussions, their contracts were varied with enhanced pay so that they would also have enhanced pensions and redundancy payments. Such enhancing agreements were not part of any long term policy of the Council, but were negotiated ‘one-off’ at a time when the employees had already given many years of service without any expectation of the benefits conferred by the agreements.
Held: the payments made by the authority to staff were ultra vires and unlawful, being merely a ruse to inflate pension and redundancy payments, and were negotiated one-off payments.
Bell J said: ‘The council is a statutory corporation, created by the Local Government Act 1972, and its powers to act are limited to those functions which are conferred on it, particularly in relation to this case by sections 111 and 112, so Mr Ground relied on the case of Allsop (supra) saying that the increase in salary was clearly a ruse to provide Mr Shaw with more than the Acts and regulations allowed by way of redundancy and superannuation payments on his true salary, i.e. what his salary would have been over the last years of service without the increase made for the improper purpose of providing him with terms of redundancy and early retirement which he would accept, but which were above what the statutory provisions and regulations would allow . . In my judgment all these arguments come back to the same fundamental question of whether the agreed salary increase for Mr Shaw was lawful or not. Asking (as the first issue in respect of the action against Mr Shaw asks) whether the agreement dated 4 January 1990 was ‘beyond the powers of the council’ is just another way of asking whether it was contrary to law. In my view the authorities to which I have referred make it clear that a pay increase which is made by a statutory local authority like the council for the purpose or main purpose of enhancing an employee’s redundancy or retirement benefits is unlawful and beyond the powers of the council to make and an agreement to make it is void, because it is not in reality a decision made in the exercise of the council’s power to fix rates of pay, but for the extraneous or collateral purpose of increasing the employee’s redundancy or retirement benefits beyond what the Acts and regulations would allow, but for the increase in pay. The fact that the pay increase can be justified and seen as reasonable in itself does not save it if its real purpose is to enhance redundancy or retirement benefits.’ and ,br />’In all those circumstances I have no hesitation in finding that the salary increase in Mr Shaw’s salary was made entirely for the extraneous, collateral and, indeed improper purpose of increasing Mr Shaw’s redundancy and pension entitlements to figures which he found acceptable, beyond the figures which the Acts and regulations would otherwise have allowed, and that it was for this reason an unlawful increase which no reasonable council could make. It was illegal and beyond the powers of the council to make and avoid.’
 LGR 9
England and Wales
Applied – Roberts v Hopwood HL 1925
The district auditor for Poplar Council had surcharged council members for making payments of a minimum wage of andpound;4 a week to their lowest grade of workers. This was notwithstanding that the cost of living had fallen during the year from 176% . .
Cited – The London Borough of Barking and Dagenham v Watts ChD 26-Feb-2003
The applicant local authority appealed a finding by the pensions ombudsman that it was unlawful for it to have stopped paying to the respondent the enhanced part of her pension benefits.
Held: The enhanced pension scheme was not unlawful, . .
Cited – Eastbourne Borough Council v James Foster CA 11-Jul-2001
An employee’s job ceased, but he continued to be employed by the same employer on different tasks, but the new arrangement was void as ultra vires. The question arose as to whether his employment had been terminated at the time of the change in such . .
Cited – London Borough of Tower Hamlets v Wooster EAT 10-Sep-2009
EAT AGE DISCRIMINATION
UNFAIR DISMISSAL – Polkey deduction
Council employee seconded to registered social landlord – Secondment comes to an end, so that he is formally redundant – Employee aged 49 and . .
Lists of cited by and citing cases may be incomplete.
Updated: 16 May 2022; Ref: scu.180119