Westminster city council. Mistakes and misdemeanours

Westminster City Council has spent more than £50,000 on a series of independent investigations which have concluded that no individual person or department could be blamed solely for a £7m mistake that took six years to spot.

Instead, blame for the fiasco over unpaid lessees' bills has been spread across the housing, finance and legal departments. Yet it is not clear just what, if anything, Westminster's law-yers did wrong.

Westminster Council's current problems began in the mid-1970s when it started selling houses on the basis of long leaseholds, under terms which required the lessees to pay for services and repairs. By 1987 there had been more than 1,500 sales, but the council's billing system was in trouble and a backlog was building up.

In September 1988 section 20B was added to the Landlord and Tenant Act 1985, which required lessees to be notified of all service charges within 18 months of the work being done. If proper notification was not received the lessees would not have to pay. And that is exactly what happened.

Although the then city solicitor, Matthew Ives, had written to advise the city treasurer, David Hopkins, of the change in law a month before it entered the statute books, reduced staff numbers and errors plus a fivefold expansion in the sale of leasehold properties meant that billing was effectively crippled from 1987 to 1994. Lessees were getting £7m of free work courtesy of local taxpayers.

The council launched an internal investigation into the blunder, before hiring independent consultant Geoffrey Price early in 1995 and then another consultant, Eric Dear, after it emerged Price was himself under investigation by the Audit Commission. Their findings went before a special policy and resources committee meeting on 23 January.

A council paper on the two reports says that as a legal notice was at the heart of the lessees issue it would be “easy” but “unjust” to blame the subsequent fiasco on the legal department. It adds that solicitors advised of the law change and the council's directors of housing and finance should have ensured it was implemented. But it concludes that all three departments should share the blame for the £7m in losses.

Westminster Labour councillor and Russell Jones & Walker solicitor Andrew Dismore claims investigations have focused on the legal issues to cover up the wider political implications for ruling Conservative councillors. He says: “I see it as a political issue rather than a management issue.”

He argues that the lawyers are convenient scapegoats and claims the actions of Conservative councillors contributed to the problem. But asked to comment directly on the way the legal department handled the problem, Dismore replies: “I do not comment as a lawyer, only as a politician.”

The reverse is true for Westminster's deputy City solicitor Donal Kerrigan. “I do not think I want to comment on the political aspects,” he says. “There is no pointing to in the report of political interference.”

Kerrigan says his staff carried out their job by providing the correct advice to the relative departments. “If there is a criticism it is possibly that we were not as proactive as we should have been. We simply gave the advice and did not follow through,” he says.

But Price's report says that while the full implications of section 20B should have been reviewed or discussed, much of the management responsibility for doing this lay with the housing and finance departments.

The current city solicitor Colin Wilson, who joined the council in 1989, told the investigators that he would have expected his staff to be notified by officers in the housing department if there was a problem implementing legislation.

There is, however, criticism in the final council report that a legal officer did not pass on her concerns to managers that the council was failing to properly implement section 20B.

But the Lawyer understands that the legal officer in question highlighted the problem in the notices with staff in other departments and was assured it was being dealt with. She took the view that if the finance or housing departments had problems they would seek further legal advice.

As no staff member personally benefited from what happened and many of those involved (including the legal officer) have left the council, future disciplinary or legal action against Westminster staff is seen as pointless.

Meanwhile, it appears that the £7m lesson for Westminster's legal department is that in order to avoid taking the blame for others' mistakes, not only does it have to advise on changes in the law, but it must also ensure that they are implemented.

Kerrigan comments: “If you advise an individual client you can do no more than give the advice and indicate it should be followed.”