Contract liability fears unfounded, says Govt

Chris Fogarty reports

The Government has moved to allay fears that local authority officers could be held personally liable if a contract with a private sector partner was later found to be invalid.

Although the Government is refusing to amend its Local Government (Contracts) Bill, it has insisted that fears that it will expose council officers to legal action are unfounded.

The Liberal Democrat MP Paul Burstow tabled an amendment to the Bill which would have expressly protected officers from liability if a contract was later to be found outside its powers.

But minister for London Nick Raynsford told Parliament earlier this month: "We do not wish to create a situation where council officers are exposed to the risk of litigation or liabilities simply through exercising their normal functions in good faith and a proper way."

Last year council officers at the London Borough of Waltham Forest were found to be financially liable for their part in a joint council/private sector company that collapsed.

Raynsford argued that in this case the problem arose because the council officers were acting as company directors and therefore were not covered by local authority indemnity.

Burstow accepted this explanation and dropped his amendment, but local government lawyers are still concerned and confused about liability.

At a conference organised by Eversheds in London last week, local authority solicitors questioned civil servant Colin Myerscough, one of the architects of the new legislation, on the indemnity issue.

They asked him what personal risks would be taken by council officers who signed the certifying certificates guaranteeing a contract was within a council's powers.

Myerscough said: "Provided the procedure has been done in a proper manner there seems no reason why officers should be pursued by councils, contractors, or auditors."

He said it was still to be decided just how a certifying process should be carried out and just who would sign to confirm a project was valid.

Myerscough joked that project officers, finance officers and heads of legal services were already arguing among themselves about who should and who should not sign the certificates.

Eversheds consultant John Bennett said he expected a "certifying style will evolve with caveats" that would seek to protect officers from claims. Officers would sign a certifying certificate with the rider, "on the basis of legal information I have been given by X firm," he suggested.