Council loses dispute over definition of procurement exercise

Lancashire County Council has lost a Court of Appeal case over whether a procurement was under a ‘public contract’ or not.

Lord Justice Coulson said in his judgment in Lancashire County Council v Brookhouse Group Ltd [2024] EWCA Civ 717 that the council’s actions and been “astonishing” and “a flagrant breach” of its obligations.

The case in the High Court had concerned the Public Contracts Regulations 2015 and whether the short time limit (30 days) or the long limit (six months) within those applied to bringing these proceedings.

He said one unusual feature was that, although Brookhouse Group - the claimant in the litigation, but the respondent to this appeal - alleged that the contract in question was a public contract covered by the PCR15, Lancashire maintained it was not.

The dispute concerned the Cuerden Strategic Regional Investment Site of 65 hectares in the Preston and South Ribble area, which is owned 71-29% by the council and Brookhouse respectively.

In 2012, Lancashire started a competitive tender procedure to procure two regeneration property partners for sites including Cuerden.

Brookhouse expressed interest but only after the deadline had passed and the council later entered a strategic partnering agreement covering the site with Eric Wright Group, worth some £140m.

In 2019, Lancashire and Brookhouse tried to agree on their jointly owned site’s development. No agreement was reached and Lancashire said it would enter into a development agreement with Eric Wright Group, which eventually took place in July 2022.

Coulson LJ said: “It is the council’s case that they entered into the development agreement pursuant to the terms of the [strategic partnering agreement], and that no competition pursuant to the PCR15 was necessary or required.”
Lancashire was concerned that although Brookhouse knew what had happened, a published contract award notice would alert other companies that might want to challenge the award and so it issued nothing.

In September 2022, Brookhouse made a claim against the council, which responded by saying it was not obliged to hold a public competition for the development agreement and could instead rely on the exclusivity provisions in the partnering agreement.

Brookhouse then applied to strike out those parts of the council’s defence that relied on Regulation 93(2)(a), which specifies the 30 day period for appeals.
Lancashire in turn applied to strike out Brookhouse's claim in its entirety on the basis that it was statute barred.

Martin Bowdery KC, sitting as a deputy High Court judge, granted Brookhouse's application to strike out parts of Lancashire’s defence and dismissed the council’s cross-application.

Coulson LJ said Lancashire’s case before him was that although there had been no competition, ‘the relevant reasons’ should be given a wide interpretation so as to cover an explanation to a hypothetical economic operator as to why there had been no competition.

He said: “In my view, this argument must fail for four principal reasons.” The first was that it “entirely ignores” the proper construction of the relevant regulations.

Lancashire could have reduced the long-stop period of six months to 30 days, but only had it published a relevant contract award notice, which it chose not to do because that would “alert other economic operators and they did not want that to happen”.

Coulson LJ continued: ”In my view, on the assumption we must make that the PCR15 apply to this case, that decision was a flagrant breach of the council’s obligations under the PCR15 in respect of transparency, fairness, and the requirement to treat each economic operator equally.

“Although Brookhouse were told that the development agreement had been let, it does not appear that any other economic operators were informed.

“The council were therefore in breach of their obligations under Part 2 of PCR15, in respect of any other economic operator that might have had standing to bring a claim.”

He noted Brookhouse’s counsel had called Lancashire’s reasoning astonishing “and I am bound to agree with him.

“In those circumstances, it would be wholly wrong to construe Regulations 93(5) and 93(6) in a way which would allow the council to avoid their wider obligations to all relevant economic operators, much less to do so by ignoring the fact that Regulation 55(2) presupposes that there had actually been a public competition in the first place”.

He also found there was no question of this regulation extending to a hypothetical economic operator.

Coulson LJ concluded: “I consider that, on the assumption that the PCR15 applied to the present case, the applicable time limit was six months.

“That is a conclusion based primarily on the proper construction of the relevant parts of PCR15, and also on a rejection of the other arguments put forward by the council to try and get round that straightforward construction. In those circumstances…I would dismiss this appeal.”

Lady Justice Nicola Davies and Lord Justice Newey both agreed.

Mark Smulian