Newlyn Plc v London Borough of Waltham Forest (Rev 2)

INTRODUCTION

This is an application by the defendant, the London Borough of Waltham Forest (“WF”), to strike out the claim brought by the claimant, Newlyn PLC (“Newlyn”) pursuant to the Public Contract Regulations 2015 (“PCR”). Originally there was an alternative application to lift any automatic suspension that may have been imposed preventing WF from entering into contracts with the two successful tenderers. However, for reasons which will become apparent, there is no necessity for the court to consider that application at all.

I set out the relevant facts in Section 2 and the issues as I see them between the parties in Section 3. Thereafter, in Sections 4, 5 and 6, I work my way through those issues.

THE FACTS

WF is required to take steps to collect and enforce council tax, national non-domestic business rates and business improvement district levy debts that arise within the area of the borough. Like many local authorities, WF achieves this by contracting out their collection and enforcement obligations to bailiffs and enforcement agencies. They are known as enforcement agency services. The original arrangements pursuant to which these services were provided to WF expired on 2 February 2016. Newlyn were the incumbent provider.

In order to put in place new contractual arrangements, WF commenced a procurement exercise. On 12 January 2015, YPO placed a full notice in the OJEU for a dynamic purchase system. On 16 September, they placed a simplified notice in the OJEU. On 26 October, WF issued an invitation to tender (“ITT”). Newlyn were one of a number of contractors who responded and tendered for the work. The tenders were evaluated in November and December. On 4 January 2016 WF wrote:

Newlyn were unhappy about the rejection of their tender. There were a number of exchanges of correspondence. On 29 January 2016, Newlyn commenced these proceedings. One of the consequences of Newlyn’s challenge under the PCR has been that WF felt unable to enter into contracts with Equita and Marston.

THE ISSUES

The real issues between the parties arising out of WF’s application did not clearly emerge until the hearing today. They can be summarised as follows:

In deciding these issues, I have had regard to the factual material contained in the statements of Ms Gibbs of WF, dated 4 March and 29 March 2016, and the statement of Mr McCarthy of Newlyn, dated 23 March 2016. I have also been assisted by the helpful skeleton arguments from both counsel.

ISSUE 1: DO THE PCR APPLY TO THIS PROCUREMENT EXERCISE?

The sole basis for the pleaded claim against WF (as it presently stands), is said to be WF’s failure to comply with the PCR. WF say that the PCR do not apply to this procurement exercise so that the entire basis of the present claim is misconceived.

Regulation 117 provides as follows:

“117.

General saving in respect of certain concession contracts

Nothing in these Regulations affects—

(a)

…

(b)

services concession contracts within the meaning of the 2006 Regulations,

or procedures for the award of such contracts.”

A ‘services concession contract’ is defined by Regulation 2(1) of the 2006 Regulations as being “a public services contract under which a consideration given by the contracting authority consists of or includes the right to exploit the service or services to be provided under the contract.”

In JBW Group Ltd v Ministry of Justice [2012] EWCA Civ. 8, the Court of Appeal had to decide whether the provision of bailiff services to magistrates courts by a third party contractor was a services concession contract and therefore outside the PCR. They concluded that it was. One of the principal reasons for that conclusion was that the contractor performing the enforcement agency services retained part of the sums recovered, which went towards its costs and profit. In other words, the contractor had the right to exploit the services being provided.

On the face of it, it did not seem to me to be possible to distinguish JBW from the present case. That is because, in the present case, it is the contractor appointed by WF who retains the monies made from the enforcement of the council tax and other similar debts. I therefore asked Mr Patterson, counsel for Newlyn, whether he said that there were any grounds for distinguishing JBW. He confirmed that there were no such grounds.

For the reasons that I have already given, I consider that this concession was rightly made. In the light of Regulation 117 and JBW, I am therefore obliged to conclude that the proposed contract for enforcement agency services in the present case was a services concession contract and therefore outside the PCR.

ISSUE 2: WHAT ARE THE CONSEQUENCES OF THAT FINDING FOR NEWLYN

On the face of it, the conclusion that the PCR do not apply to this procurement exercise is fatal to Newlyn’s pleaded claim. That is because that claim is based solely on WF’s alleged failure to comply with the PCR. However, despite that, Mr Patterson sought to argue, that either because Newlyn had a legitimate expectation that the PCR would govern the procurement exercise and/or in any event, the court should not strike out the claim, but instead permit Newlyn to make some, as yet unformulated, amendments, so as to bring a claim for judicial review.

I consider that as a matter of law, I cannot exceed to Mr Patterson’s request. There are both procedural and substantive authorities that make plain that the court could not and should not turn this Part 7 claim into a claim for judicial review.

The procedural authority is R (on the application of Townsend) v Secretary of State for Work and Pensions [2011] EWHC 3434 (Admin). In that case, the original claim was, like the present claim, brought under CPR Part 7. The defendant said that that was inappropriate. The claimant agreed and sought to argue that the claim could be amended and then turned into a judicial review claim. Silber J refused that application and said at paragraph 13:

“I have not overlooked the submission made by Mr Townsend that I have inherent power to allow the case to proceed as an application for judicial review. Even if which I do not accept to be the case I did have such power, I would not think it appropriate to exercise it in this case. It is quite clear that the forms that are required under CPR 54.1 and the standard claim form for judicial review is a detailed document which is completely different from the information which has so far been put forward by Mr Townsend. It would be difficult to see how the pleadings could be easily amended. It is much better that the claimant starts again from the beginning with a proper judicial review claim form. I therefore conclude that notwithstanding the helpful submissions of Mr Townsend, the appropriate order is that the claim should be struck out as an abuse of process and I so order. It is very desirable that if an action is brought by means of judicial review, it is dealt with as speedily as possible.”

In reaching that conclusion, Silber J paid particular regard to the well-known case of O’Reilly v Mackman [1983] 2 AC 237 in which Lord Diplock said that a private law claim could not be turned into a claim by way of judicial review and said:

“it would…as a general rule be contrary to public policy, and as such an abuse of the process of the court, to permit a person seeking to establish that a decision of a public authority infringed rights to which he was entitled to protection under public law to proceed by way of an ordinary action and by this means to evade the provisions of Order 53 for the protection of such authorities.”

In an attempt to get round these cases, Mr Patterson relied on CPR 54.4 which provides that:

“The court’s permission to proceed is required in a claim for judicial review whether started under this Section or transferred to the Administrative Court.”

However it seems plain to me that this rule is of no relevance here. It is dealing with the permission stage, which is not required for a Part 7 claim like this. And the rule envisages the possible transfer of an existing judicial review claim, which does not exist here. Accordingly, I accept the general principle stated in Townsend that a claim started under Part 7 cannot be turned into a judicial review claim part way through the proceedings. There may be exceptions to that general rule, but in my judgment there is nothing to say that this is any sort of exceptional case.

More importantly perhaps, there are substantive authorities which, in my view, make plain that the course of action Mr Patterson suggests is inappropriate. Here, the decision to award the contracts fell outside the PCR. In my view, as these authorities make clear, that meant that this was not a decision which was amenable to judicial review. Any proposed amendments to the present claim, which could have made the allegations of irrationality and the like necessary for judicial review proceedings, could not ultimately succeed. I deal briefly with those authorities below.

R v Lord Chancellor’s Department ex parte Hibbit and Sanders 11 March 1993 (Divisional Court); [1993] COD 326, was an application for judicial review by an unsuccessful tenderer in respect of decision by the Lord Chancellor’s Department to award a contract for the reporting of court proceedings to the successful bidder. The application was based upon an alleged breach of legitimate expectation that the defendant would not, by post-tender discussions, invite some tenderers and not others to submit revised bids. The court held that the claimants had been unfairly treated but that the decision was not amenable to judicial review. It was held that the decision lacked a sufficient public law element, and that it was not a sufficient basis of claim that the Department was a public body carrying out governmental functions and appointing persons to a public office. A public body was free to negotiate contracts and something additional was necessary over and above the fact that the negotiator was a public body to impose on that body a public law obligation.

R (on the application of Menai Collect Ltd and others) v Swift Credit Services Ltd [2006] EWHC 724 (Admin) was a case about enforcement services. There, they were concerned with distress warrants and clamping orders. Having reminded himself (amongst others) of the authority of Hibbit, McCombe J (as he then was) said:

“47.

Having regard to the authorities so helpfully cited to me by both counsel, I would resolve the principal challenge to the decision in the Defendant's favour both on the facts and on the law for the reasons given. In my view, for the reasons advanced by Mr. Coppel, the Board did have before it the material information required for it to take its decision and Mr. Matthews’ statement on behalf of the Region was not inaccurate. Further, the tender evaluation process was an essentially commercial process, notwithstanding the nature of the services which are to be the subject of the contract. The manner in which the Defendant chose to inform itself as to the merits of the tenders was designed to be as objective as possible. It is not every wandering from the precise paths of best practice that lends fuel to a claim for judicial review. It is, I think, for this reason that the examples given of cases where commercial processes such as these are likely to be subject to review are such as they are in the reported cases, namely bribery, corruption, implementation of unlawful policy and the like. In such cases, there is a true public law element. Here, as in Hibbit, the fact that the decision sought to be reviewed is the placing of a contract with one bidder as opposed to another adds force to the contention that there is no relevant public law obligation in issue: see per Waller J at p. 26.”

Although Mr Patterson drew my attention to the case of R (on the application of Gamesa Energy UK Ltd) v National Assembly for Wales [2006] EWHC 2167 (Admin), in my view that case was unhelpful to Newlyn and said much the same as McCombe J said in Menai Collect. That claim was also based on a legitimate expectation argument. It was refused. The important passages of the judgment of Gibbs J are as follows:

“77.

Under those circumstances I find that there are no sufficient public law aspects to the challenge to make it amenable to judicial review. I reach this conclusion as a matter of judgment on the facts in this case and within its overall context. I do not go so far as to say that a public law challenge to a tendering or pre-qualification process on the basis of irrationality could never be entertained. I think that the circumstances under which it could be entertained must be rare. I find that the process in this particular case is not susceptible to judicial review having regard to the subject matter of the decision challenged and the grounds of challenge and upon the application of the principles to be discerned in the authorities to which I have been referred.

…

79.

On a broader policy level, there may be sound reasons why matters of this sort should not generally be open to challenge on the ground of irrationality. To hold otherwise would enable challenges to be mounted on the basis of an attack on particular aspects of tendering processes by one potential bidder where those tendering processes are conducted by public bodies, such challenges being mounted on the basis that a particular aspect or aspects of such processes as they affect that bidder are unreasonable. Such challenges would be permissible even if the body were acting in good faith and as between the bidders there was a level playing field. The extension of public law into matters of that kind could be regarded as creating an unreasonable impediment to impose upon a public body in circumstances such as the present ones: circumstances under which I have found, having regard to the authorities, that no sufficient public law considerations are engaged.”

It seems to me that each of the three authorities noted above are directly in point; the same considerations apply here. Thus, having concluded that the decision was outside the PCR, and having regard to the particular nature of the proposed contract in this case, I conclude that any application for judicial review in this case would be doomed to fail as a matter of law. Thus, there would be no purpose in permitting this claim to continue in a new, but fatally flawed, guise.

I should add for completeness that, because the PCR do not apply, there is no question of any automatic suspension preventing WF from entering into contracts with Equita and Marston.

ISSUE 3: IS NEWLYN’S CLAIM MORE THAN FANCIFUL OR BETTER THAN ARGUABLE?

General

Now let us assume that I am wrong on the matters of law noted above, and that, subject to amendment, the claims made by Newlyn are - in theory - capable of being pursued by way of judicial review. The next question is whether those claims are more than fanciful or better than arguable.

Mr Patterson puts his proposed judicial review claim in two ways. First he says that Newlyn had a legitimate expectation that the PCR would apply and so therefore he could mount a judicial review claim based on the PCR. Alternatively, he said that he could make a claim based on irrationality in accordance with ordinary Wednesbury principles.

I am not persuaded that there is an arguable case on legitimate expectation. There are references in the tender documents to the PCR. However it is difficult to convert those references, which are not unfairly described by Mr Barrett as ‘stray’, into a legitimate expectation. Obviously the absence of a proper pleading on that point does not help. But I am inclined to accept Mr Barrett’s submission that there is no representation here that is “clear, unambiguous and devoid of relevant qualification” as required by Lord Hoffman at paragraph 60 of his speech in R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs [2009] 1 AC 453. Moreover, there is no evidence from Mr McCarthy of actual or detrimental reliance, which is again a pointer to this not being a proper case of legitimate expectation. But in any event, even if, contrary to that view, this could be presented as case of legitimate expectation, it would still require Newlyn to demonstrate irrationality on the part of WF during the tender evaluation process.

This is on any view, a very difficult task. Mr Patterson’s skeleton argument properly describes it as “a significant hurdle”. I agree with that description. In my judgment, on an analysis of the particular allegations being made by Newlyn, I am bound to conclude that Newlyn do not get close to getting over such a hurdle.

The Detailed Allegations

The Page Limit Point

The ITT said:

“5.2.1

Maximising Collection

Describe your process from receipt of liability order to the return of a case to the local authority. You should detail the actions taken by your company at each stage and include timelines between stages and timelines for any arrangements offered and broken. Please provide this information separately for:

Council Tax

Business Rates

Business Improvement District Levy

Answers for each area detailed above should be limited to one side of A4 papers font size of Ariel 11.”

Newlyn provided three pages but then an additional nineteen pages in answer to this part of the ITT. All the other tenderers simply provided the three pages indicated by the ITT. WF had no regard to the additional nineteen pages provided by Newlyn and Newlyn now complain about that.

No grounds were advanced as to how or why the decision to ignore material not asked for was irrational. All tenderers were treated the same. In my view, all that happened in this instance was that WF complied with the evaluation process which they had set out in the ITT. They required one sheet of paper for each of the three areas; they were entitled to have regard to one sheet of paper for each of those areas. Accordingly, in my view, this allegation is hopeless.

The References Point

The ITT (at paragraph 5.2.1) asked for details of three references where the tenderer had provided a similar service within the last three years. The pleaded criticism is that this part of the ITT obliged WF to take up each reference provided and they failed to do so. Although that case now seems to have been abandoned, it is unclear what remains. Ms Gibbs explained why the taking up of references was neither proportionate nor reasonable. Again, although it is said that the decision not to take up the references was irrational, that has not been explained further.

In my view it is clear on the face of the ITT that WF were not obliged to take up all or any references. In my experience, it is not uncommon for a tender evaluation to be based on the identities of the references provided, rather than the actual taking up of those references personally. Again and in any event, all the tenderers were treated the same. Again therefore, it does not seem to me that any arguable case as to rationality has been made out.

The 0-5/0-4 Point

As to the question of scoring methodology, section 5.3 of the ITT and Annex F (which were both expressly concerned with the scoring system) made plain that the relevant scoring methodology was a system involving marks between 0 and 4 for each category. That was the scoring applied to each tender. The complaint is that, because of a separate reference in a schedule to a range of 0-5, the process was not transparent.

In my judgment, that allegation too is hopeless. The 0-5 reference was clearly a typographical error. Had it been of any genuine concern to Newlyn, they could have raised a query about it at the time of the tender. Again, all the tenderers were treated the same and the 0-4 range was used, in accordance with the ITT. Again therefore, there can be nothing in any alleged irrationality case.

Price

Although Mr McCarthy’s statement does not address it, there was a further point at paragraph 56(d) of Mr Patterson’s skeleton argument, which complained that, although the ITT said that 10% of the marks would go on price, this was unreasonable because the contract was going to be of no cost to WF. But as Mr Barrett pointed out, there was a particular percentage commission on some services which could have been filled in by the tenderer, and therefore the question of price was a matter to which WF were entitled to have regard. There was therefore nothing in this point.

Summary on Issue 3

Even if the complaint now made by Newlyn was somehow capable of giving rise to a judicial review claim in theory, the particular matters raised in the pleading seem to me to be incapable of sensible argument, whether on a legitimate expectation basis, or on ordinary judicial review grounds (assuming, for this purpose, that there is a difference between the two). Thus there is no point in allowing the basis of this claim to be amended because, in my view, it would still fail.

CONCLUSIONS

For all the reasons set out above, I strike out Newlyn’s claim. It is unarguable in law and on the facts.