24th April 2019 ❘

Head Teacher Ordered to repay £1.4 million to Local Authority

The High Court has ordered a Head Teacher to repay almost £1.4
million to the London Borough of Brent, in respect of self-awarded
“bonus payments” (Brent London Borough Council v Davies and others
[2018]).

Copland Community School was a foundation
school in the London Borough of Brent. The school was funded by the
local education authority, through a delegated budget, which was
controlled by the school’s governing body and its Headteacher. Over a
period of six years, the school’s Headteacher authorised “bonus”
payments from the school’s delegated budget to teaching and non-teaching
staff, totalling £2.7 million, of which the Headteacher received
approximately £900,000.

Most of these “bonus” payments were
prohibited by the Local Authority’s financial regulations. In addition,
the Headteacher’s salary was not allowed to exceed the highest point on
the pay spine, as he well knew. The Headteacher sought to justify the
additional payments by classifying them as bonuses, or payments for
additional responsibilities.

The High Court decided that the
Headteacher owed a fiduciary duty to the Local Authority to use the
delegated budget in the interests of the school, and he was in breach of
such duty by authorising the “bonus” payments. The Court also concluded
that the Chair and Vice Chair of Governors were in breach of their
fiduciary duty in allowing the Headteacher to act as he did. They had
deferred to the Headteacher regarding the amount of the payments, and
the recipients, and were recklessly indifferent as to whether those
payments were in the interests of the school. In particular, they had
made no attempt to challenge the Headteacher or make any enquiries to
satisfy themselves as to the propriety of the payments.

In the
event, the Headteacher has been ordered to repay £1,395,839, whereas the
Governors appear to have escaped financial sanctions (at least for the
time being). This seems to be based on the finding that the Headteacher
was the substantive decision maker as to who should receive payment,
and in what amount, allied to the fact that he awarded himself “enormous
amounts” of money and is presumably in a position to repay at least
some of what is owed. That said, it would be very unwise for Governors
to assume they will always escape financial sanctions. Much will depend
on the facts of each case, and Governors would be well advised to pay
close attention to “bonuses” and “responsibility payments” going
forward.

This case is a big wake up call for those who decide pay
policies within schools. No-one should be in a position to decide their
own pay, and salaries and bonuses must be capable of justification by
reference to the value of the work carried out, and the benefit accruing
to the school as a result of such work. As one commentator has noted
“subjective feelings of just deserts for exceptional effort are no
foundation for unauthorised and irregular self-awarded payments”. The
warning shot has been fired. It would be wise to take heed.