Your problem is directory permissions.
You need execute access for everyone (o+x) on the directories leading to the UserDir.
ie. /home/e-smith/files/users/person/home/public_html must be accessable. ie have at least -rwx--x--x permissions on all of those dirs, not just the public_html dir.
One problem youll come to is if your using samba to create the webpages etc, it uses set create permissions for files and directories, see /etc/smb.conf for these.
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Damien