Indemnity scheme for members

Report: 5
Date: 05 October 2006
By: the Chief Executive and Clerk

Summary

The Standards Committee is asked to consider and recommend to the full Authority an Indemnity Scheme for Members.

A. Recommendation

That the Standards Committee recommends the full Authority to:

1. Approve the Indemnity Scheme attached as Appendix A to the report; and
2. Gives delegated authority to the Deputy Chief Executive and Solicitor to the Authority as set out in the Scheme and in paragraphs 14 & 15 of the report.

B. Supporting information

1. Members of local authorities (including police authorities) can incur personal, civil and criminal liability whilst acting in an official capacity for the authority, including their actions on outside bodies to which they have been appointed by the authority.

2. The Local Authorities (Indemnities for Members and Officers) Regulations 2004 now gives authorities specific powers to grant indemnities and/or to take out insurance to cover the potential liability of members and officers in a wide range of circumstances.

3. The MPA already has an ‘Indemnity and Hold Harmless Agreement’ for employees (agreed by the Finance Committee in September 2004). The purpose of this report, therefore, is to propose an Indemnity Scheme for MPA members.

The Local Authorities (Indemnity for Members and Officers) Order 2004

4. The MPA can provide an indemnity in relation to any action or failure to act by a member which:

1. is authorised by the authority
2. forms part of, or arises from, any powers conferred or duties placed upon that member as a consequence of any function being exercised by that member at the request of, with the approval of, or for the purposes of the authority

5. An indemnity may also be provided in relation to an act or omission that is subsequently found to be beyond the powers of that member or the authority, but only to the extent that the member reasonably and genuinely believed that the act or omission was within his/her powers at the time he/she acted.

6. The authority cannot provide an indemnity in relation to any action or failure to act which:

1. constitutes a criminal offence
2. is the result of fraud or other deliberate wrongdoing or recklessness
3. results in a finding or admission that the member has breached the Code of Conduct or a finding
4. involves the alleged defamation of that member

7. In respect of a) and c) above, the authority can provide an indemnity in respect of legal representation to defend a criminal prosecution or an alleged breach of the Code of Conduct. However, if the member is subsequently convicted of that criminal offence or is found to have breached the Code of Conduct they shall reimburse the authority for costs incurred.

8. The indemnity can apply when a member has been appointed by the authority to serve on an outside body. It cannot apply where a member has voluntarily joined an external organisation without the approval of the authority.

9. The powers contained in this Order are discretionary.

Proposed Indemnity Scheme for Members

10. It is important that members should feel able to carry out their duties unconstrained by the worry that they will personally be liable and in the knowledge that they will receive the necessary support from the MPA. This should be the case even where members have acted beyond the scope of their or the authorities powers, provided they reasonably and genuinely believed at the time that they had sufficient authority to act as they did.

11. What the MPA cannot and should not do is to indemnify criminal or deliberately reckless acts, or breaches of the Authority’s Code of Conduct. It is reasonable however that, as provided in the Regulations, a member should be enabled to defend a prosecution or an alleged breach of the Code of Conduct, provided a subsequent conviction or finding of a breach results in repayment of those costs.

12. A proposed Indemnity Scheme for Members is attached as Appendix 1. This is in line with the powers given in the Order. It also closely mirrors the Greater London Authority’s Scheme – as 12 of the MPA’s members are drawn from the London Assembly consistency is needed so that those members do not have to operate under two different sets of rules.

13. It is important that the Scheme has provision for the Authority to decide not to grant an indemnity where it considers for any reason that it would not be reasonable to incur the costs involved.

14. It is proposed that decisions on the granting of indemnities should be delegated to the Deputy Chief Executive and Solicitor to the Authority, who is also the Monitoring Officer, with the following provisos:

1. he will consult with the Chief Executive and the Treasurer before coming to a decision
2. any request which he considers may set a precedent or is particularly sensitive may be reported to the Co-ordination & Policing Committee for decision
3. any proposal to refuse an application will be referred to the Co-ordination & Policing Committee for decision

15. The cost implications of any proposed indemnity should be considered at the outset and an initial ceiling on the level of indemnity agreed. Any further funding would require a further decision. As set out in 14 c) above, a proposal to refuse funding at that stage should be referred to the Co-ordination & Policing Committee.

16. The Scheme refers to indemnity or insurance. Due to the cost of premiums the MPA is self-insured for costs up to £10 million. In reality, therefore, the cost of indemnity will have to be met from the MPA’s own budgets.

C. Legal implications

The Local Authorities (Indemnities for Members and Officers) Order 2004 gives the Authority the power to introduce the Scheme attached as Appendix 1.

D. Race and equality impact

An Indemnity Scheme will assist the MPA to demonstrate that all members have equality of access to legal and other advice, should a they face allegations about their conduct in public office, within an open, transparent and accountable framework.

E. Financial implications

It is not possible to assess the financial implications of introducing the Scheme as this will be entirely dependent on whether any members find themselves in a situation where they need to request an indemnity. The cost of any indemnity will have to be met from the Members’ Expenses and Allowances budget.

F. Background papers

None

G. Contact details

Report author: Simon Vile, MPA.

For information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

Appendix 1

Indemnity scheme for members

1. The Authority will, subject to the exceptions and conditions set out below, indemnify each of its members against any loss or damage suffered by the member arising from his/her action or failure to act in his/her capacity as a member of the Authority.

2. This indemnity will not extend to loss or damage directly or indirectly caused by or arising from:

1. any criminal offence, fraud or other deliberate wrongdoing or recklessness on the part of the member;
2. any act or failure to act by the member otherwise than in his/her capacity as a member of the Authority, or
3. failure by the member to comply with the Authority’s Code of Conduct for Members.

3. The Authority will, subject to the exceptions set out below, indemnify each of its members against the reasonable costs which he/she may incur in securing appropriate legal advice and representation in respect of any civil or criminal proceedings or Code of Conduct proceedings to which he/she is subject.

1. “Criminal proceedings” includes any interview or investigation by the Police, and any proceedings before a criminal court, in the United Kingdom. This indemnity will only apply to criminal proceedings where the member has secured the specific approval of the Deputy Chief Executive and Solicitor of the Authority to such application.
2. Code of Conduct proceedings means any investigation or hearing in respect of an alleged failure to comply with the Authority’s Code of Conduct for Members under Part 3 of the Local Government Act 2000.
3. This indemnity shall not extend to any advice or representation in respect of any claim or threatened claim in defamation by the member.
4. Where a member is given an indemnity in respect of defending him/herself against any criminal proceedings or Code of Conduct proceedings, the indemnity is subject to a condition that if, in respect of the matter in relation to which the member has made use of this indemnity:
   • the member is convicted of a criminal offence in consequence of such proceedings, or
   • a Case Tribunal or Standards Committee determine that the member has failed to comply with the Code of Conduct for Members and the conviction or determination is not overturned on appeal

the Member shall reimburse the Authority for any sums expended by the Authority on the indemnity.

4. The Authority reserves the right to determine that in any specific proceedings or case it would be unreasonable for it as a public body to indemnify a Member in the particular circumstances and therefore that the Authority refuses to make indemnity and indemnity will not extend to any of the costs incurred or to be incurred in such proceedings.

5. Where the member requests an indemnity, he/she shall provide the Authority with such information as the Authority may reasonably require in respect of such proceedings and the likely costs for which the member may claim reimbursement under this indemnity.

6. Where the Authority arranges insurance to cover its liability under this indemnity, the requirement to reimburse in paragraph 3 shall apply as if references to the Authority were references to the insurer.

7. For the purpose of these indemnities, a loss or damage shall be deemed to have arisen to the member “in his/her capacity as a member of the Authority” where:

1. the act or failure to act was within the powers of the Authority and of the member;
2. the act or failure to act was outside the powers of the Authority, or outside the powers of the member, but the member reasonably believed that the act or failure to act was within the powers of the Authority or within the powers of the member at the time that he/she acted or failed to act, as the case may be; or
3. the act or failure to act occurred not in the discharge of the functions of the member as a member of the Authority but in his/her capacity as a member of another organisation, where the member is, at the time of the action or failure to act, a member of that organisation in consequence of his/her appointment or nomination as a member of that organisation by the Authority; or

8. The Authority undertakes not to sue (or join in action as co-defendant) a member of the Authority in respect of any negligent act or failure to act by the member in his/her capacity as a member of the Authority, subject to the following exceptions:

1. Any criminal offence, fraud or other deliberate wrongdoing or recklessness on the part of the officer; or
2. Any act or failure to act by the member otherwise than in his/her capacity as a member of the Authority.

9. These indemnities and undertaking will not apply if a member, without the express permission of the Authority or of the appropriate officer of the Authority, admits liability or negotiates or attempts to negotiate a settlement of any claim falling within the scope of this indemnity in circumstances which may give rise to liability on the part of the Authority.

10. These indemnities and undertakings shall apply retrospectively to any act or failure to act which may have occurred before this date but that are the subject of proceedings or action in progress at the date the policy is agreed or commencing after that date and shall continue to apply after the Member has ceased to be a member of the Authority as well as during his/her membership of the Authority.

11. The Deputy Chief Executive and Solicitor to the Authority has delegated authority to make decisions on the granting of indemnities, with the following provisos:

1. he will consult with the Chief Executive and the Treasurer before coming to a decision
2. any request which he considers may set a precedent or is particularly sensitive may be reported to the Co-ordination & Policing Committee for decision
3. any proposal to refuse an application will be referred to the Co-ordination & Policing Committee for decision

12. The cost implications of any proposed indemnity should be considered at the outset and an initial ceiling on the level of indemnity agreed. Any further funding would require a further decision. A proposal to refuse further funding at that stage should be referred to the Co-ordination & Policing Committee.

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