Maidstone and Tunbridge Wells Trust’s decision not to pay its former chief executive an agreed payoff came under intense scrutiny today.

Jane McNeill QC, representing the trust, was closely questioned by judges at the Court of Appeal. The trust has already won a ruling in the High Court that it did not have to pay Rose Gibb £175,000 out of a £250,000 severance deal.

Ms Gibb left the trust days before the publication of a critical Healthcare Commission report into C difficile outbreaks at the trust.

But the actions of the trust - in particular what was in the mind of former non-executive directors - were re-examined by three appeal court judges. A key question is whether the trust was acting beyond its powers when it agreed the payoff and what would have happened if Ms Gibb had been sacked instead.

Ms McNeill contended that if Ms Gibb had been unfairly dismissed it is likely she would have settled for an amount around the maximum she would have got at an employment tribunal and the case would have gone no further.

This would have given her around £100,000 less than the severance deal. Ms McNeill agreed that had her total deal been around £150,000 - including the £75,000 she has received for pay in lieu of notice - this would have been difficult to challenge.

But she argued the High Court judge had been correct in deciding the full £250,000 payment was beyond the trust’s powers, and pointed out that no full business case had been drawn up before the deal was agreed.

“It’s clear from the minutes of the remuneration committee meeting that there were irrelevant considerations taken into account and there was a decision to pay in excess of statutory powers which was  motivated by generosity,” she said.

But Ms Gibb’s side argued the burden of proof should have been on Maidstone and Tunbridge Wells trust to show its former board members acted with irrational generosity in agreeing the severance payment.

Antony White QC told the Court of Appeal that the right test was whether an organisation could have reasonably arrived at the same decision as the trust’s remuneration committee, which agreed a £250,000 severance deal.

And he argued that the trust’s remuneration committee’s minutes showed members had taken account of factors such as the costs of trying to dismiss her and the adverse publicity when they agreed the deal - even if there was not a written a business case at the time.

Ms Gibb sat in court as Mr White described how the trust was then ordered not to make the payment by former health secretary Alan Johnson on what Mr White described as political rather than legalistic grounds.

Months later the trust told Ms Gibb that it would not pay her beyond her pay in lieu of notice because the former trust had acted beyond its powers in making the agreement. By that time the time limit for going to an employment tribunal had passed.

Mr White said: “This is a woman who has worked in the NHS, starting as a nurse, and worked her way up to the pinnacle. After dismissal you don’t work again in the NHS at that level.”

Ms Gibb had agreed not to speak out as part of the deal with the trust - which the High Court judge was dismissive of, he said. “The press interest which she was restricted from responding to because of the compromise agreement was of real magnitude. She was demonised by the popular press.

“It was in that real life context that she agreed to keep silent and not say that faults in the trust were structural. That was what the board did not want her to say.”

The trust’s current chief executive was present to listen to the court proceedings.