It is being widely reported that the accounts published by Haringey Council reveal the amount that was paid to Sharon Shoesmith to settle her legal challenge to the decision to sack her back in December 2008 (note to the press: it was not an unfair dismissal claim; it was a judicial review).

I wrote about the case here when the fact of the settlement was first announced. At that time I had no idea what the level of the settlement would be. I thought it might be more than she would have got for an unfair dismissal claim but I completely took it for granted that it was a much lower figure than the £600,000 that had been suggested. Wrong again.

Because surely, that £600,000 was right at the top end of what the court could award? It represented full back pay for the years that had passed since her dismissal. When you settle a case you do so because there is a reasonable chance that the settlement might turn out to be a better deal for you than if you let it go all the way. But I really don’t see how that can be the case here.

Shoesmith’s argument would be that the circumstances of her dismissal rendered her practically unemployable. She lost a six figure salary and cannot recoup her loss by getting another job. She  relied on the case McLaughlin v Governor of the Cayman Islands – a case from the Judicial Committee of the Privy Council (broadly equivalent to a Supreme Court decision, but not technically binding)  in which Lord Bingham said:

“It is a settled principle of law that if a public authority purports to dismiss the holder of a public office in excess of its powers, or in breach of natural justice, or unlawfully (categories which overlap), the dismissal is, as between the public authority and the office-holder, null, void and without legal effect, at any rate once a court of competent jurisdiction so declares or orders. Thus the office-holder remains in office, entitled to the remuneration attaching to such office, so long as he remains ready, willing and able to render the service required of him, until his tenure of office is lawfully brought to an end by resignation or lawful dismissal.”

That approach would indeed suggest full back-pay for Shoesmith, running from her purported dismissal in 2008.  But Haringey had an argument too.  They could have argued that whatever procedure had been followed, the fact was that Shoesmith was unlikely to have remained in post for much longer. The sheer scale of the public outcry would have made her continued employment untenable and on that basis paying her full back-pay would be excessive. The Court of Appeal in giving its judgement accepted that the issue of compensation was not a straightforward. Two of the judges seemed to think that Haringey could have protected its position simply by giving Shoesmith contractual notice. Maurice Kay LJ said:

I am satisfied that the relief to which Ms Shoesmith is entitled should include a formulation which extends to compensation… It seems to me that the outer limits are, at the low end of the scale, a sum equivalent to three months’ salary and pension contributions (reflecting the contractual notice period) and, at the high end of the scale, a McLaughlin-type order. In the last resort, I would remit the case to the Administrative Court for this remaining issue to be resolved.

So this was not a case where the writing was on the wall and it was just a question of Haringey biting the bullet and paying up. There was a genuine issue to try – and the outcome was not a foregone conclusion. Haringey must have thought so too, for a while, because the Court of Appeal decision was given in May 2011 and the deal was not reached until October 2013 – just before the hearing on remedy was due to start. By that time most of the preparation would have been done. Why would Haringey settle at the very top end of the scale just before the hearing?

My assumption was that Shoesmith indicated before the hearing that she would accept far less than a McCloughlin-style order for full back pay and that was why Haringey was prepared to risk the bad press it would receive for reaching a settlement. However, if the press reports about the amount are correct then it seems that it was Haringey that bottled it.

I simply don’t get it.  Having come so far, surely the better option would have been to take a chance on the remedy hearing. It couldn’t have resulted in an award much higher than the amount paid in secret and Haringey would at least have been able to day that they were only paying out the amount ordered by the Court. What’s more, there would have been a reasonable chance that the amount awarded would be considerably less than full back pay.

If I were a resident of Haringey I would want someone to explain to me exactly why they spent two years preparing for a remedies hearing before simply surrendering before kick-off. It does seem like somebody somewhere has blundered.