In Gibb v Maidstone and Tunbridge Wells NHS Trust the Court of Appeal held that the Trust was bound by the terms of a compromise agreement it had entered into with its former Chief Executive.
Interesting, and somewhat perversely it was the Trust which sought to argue that it had acted irrationally in an attempt to wriggle out of an arguably excessive pay off it had agreed under the terms of the compromise agreement with its outgoing CEO.
Trusts, as do all public bodies, have a duty to act “reasonably”. This is known as “Wednesbury reasonableness.” If it does not its decision can be set aside on the basis that it is acting outside its authority. One aspect of this is that is that a public body must not act “irrationally generous” when paying its employees, or paying off its ex employees.
In this case the Trust sought to argue that its pay off to its CEO was just such an “irrationally generous” payment and so should be set aside.
However, the Court, who seemed entirely non plussed by the Trust’s attempt to rely on its own irrationality decided that compensation was not outlandish having regard to the fact that the agreement would have spared the Trust public controversy and the near certainty of a adverse tribunal finding that the CEO had been unfairly dismissed, which would also have had a detrimental effect on morale and management resources.
Justifyably the Court was damning of the Trust’s waste of resources in dismissing the CEO without any fair reason, agreeing to such an inflated payment and then litigating the matter to try and renege on the deal, stating that “perhaps those responsible will now reflect that…all this money, both compensation and costs could have been spent on improving hygiene and patient care in the Trust’s hospitals.”