Reducing the risk of Contractual Non-Performance

January 15th, 2016 by James Goudie KC in Decision making and Contracts

A contracting authority must verify the suitability of its potential service providers. That verification is intended, in particular, to enable the authority to ensure that a tenderer, if successful, will have the means necessary to perform the contract, and to enable the authority to be confident that, throughout the period of the contract, the successful tenderer will be able to use whatever resources it relies upon, including the capacities of other entities.

That gives rise to two questions: first, as to what proof the authority can call for that these resources will be at the economic operator’s disposal; and, second, as to the nature of the links between that operator and those other entities. EU policy is that the tenderer is free to choose the legal nature of the links it intends to establish with those other entities.

In a case from Latvia, C-234/14, the ECJ has on 14 January 2016 held that Directive 2004/18/EC precluded a Latvian local authority from requiring a tenderer, which relied on the capacities of other entities for the performance of the contract concerned, to establish links of a precise legal nature with those entities, so that only those particular links were capable, in the eyes of the authority, of proving that the contractor does in fact have the resources necessary to perform that contract. The municipality required the tenderer, before the award of the public contract, to conclude a cooperation agreement with those entities or to set up a partnership with them. That requirement was ruled impermissible.

 

 

Lessons from the NHS

January 11th, 2016 by James Goudie KC in Decision making and Contracts

Cases involving NHS bodies continue to be instructive for local authorities. See R(QSRC Ltd) v NHS Commissioning Board [2015] EWHC 3752 (Admin) on the ability to enter into an interim contract pending the completion of a procurement exercise, even if (paragraph 107) the procurement exercise has been considerably delayed,  provided (paragraph 103) that there is preference of an existing provider over other potential providers; and Keep Wythenshawe Special Ltd v NHS Central Manchester CCG [2016] EWHC 17 (Admin), at paragraphs 62-79 inclusive, on how a consultation exercise should be structured, the manner in which it should be carried out, when there should be a re-consultation, and influences on the requirements of fairness.

 

Termination of contract for breach

January 6th, 2016 by James Goudie KC in Decision making and Contracts

In BT Cornwall Ltd v Cornwall Council [2015] EWHC 3755 (Comm), a services provider brought a claim against the local authority and other public sector bodies for an injunction to prevent the termination of a potentially long duration £160 million agreement between them.  The claim failed. The agreement covered services such as health, transport, communications and public safety.  It also provided for the creation of new jobs for local residents.

The agreement contained a clause entitling the local authority to waive key performance indicator scores resulting from service failures if it was satisfied that a remedial plan was in place. There were substantial problems with performance.  A number of key performance indicators fell consistently below target level.  A backlog of work accrued.

The parties established an executive forum aimed at resolving the issues. Later, however, the local al authority stated its intention to terminate the agreement for material breach.  It also claimed that the service provider’s failure to meet its annual jobs guarantee gave rise to an obligation to provide a remediation plan, which it had failed to do.  The service provider claimed that a large number of faults had been caused by the local authority.  It also claimed that a separate agreement had been entered into for the backlog to be cleared, with the implication that the key performance indicator results which fell below breach level would not be used to justify termination, and that the local authority was in any event estopped from relying on breaches in terminating for material breach.

Knowles J held that the failure to create new jobs resulted at least in part from the local authority’s failure to secure a health contract, which would have accounted for 70 new jobs. There was no contractual requirement for a remediation plan.  Accordingly, the service provider was not in breach of the agreement in that respect.  Moreover, there was no evidence that the waiver clause in the agreement had been exercised nor was there any reason to imply a waiver.  The service provider was contractually obliged to resolve the backlog and was not entitled to protection from the consequences of its failure to do so.

Knowles J further held that there was no basis for a case on estoppel or affirmation. The fact that the local authority was prepared to engage with the executive forum and to work collaboratively with the service provider was not to be held against it and did not signal that it would refrain from taking action under the agreement.   There had been no material delay on the local authority’s part, and neither its actions nor the passage of time were to be taken as an election not to terminate for material breach.

In conclusion, the service provider had failed to provide the service it had promised to the required standard. There was no capriciousness or bad faith on the local authority’s part in expecting it to clear the backlog or take the contractual consequences if doing so resulted in further breaches of the key performance indicators.  Accordingly, the service provider was in breach of the agreement such as to justify termination.

James Goudie QC

 

Invitation To Tender

December 22nd, 2015 by James Goudie KC in Social Care

In Enfield LBC v Secretary of State for Transport [2015] EWHC 3758 (Admin) the Council’s challenge to a train franchise decision by the SoS pursuant to the Railways Act 1993 to issue an Invitation to Tender containing a particular Train Services Requirement failed before Elisabeth Laing J. 

In connection with a major development, the Council hoped for an improved train service. The Judge found that (1) the SoS had not by his contradictory and confusing messages generated the legitimate expectation sought to be relied upon, (2) even if a legitimate expectation had been created, (i) the Council had not relied upon it to its detriment, and (ii) there were overriding public interests to justify departing from it, (3) the SoS had not acted with conspicuous unfairness, (4) he had not failed to take into account relevant considerations, (5) he had not taken into account irrelevant considerations, (6) he had not acted irrationally, (7) he had not acted unfairly in not allowing the Council to make further representations, and (8) he had complied with the Public Services (Social Value) Act 2012.  The SoS’s discretion was a broad one, in a complex, technical, quasi-commercial field.

 

Remedies

December 22nd, 2015 by James Goudie KC in Judicial Control, Liability and Litigation

In Leeds City Council v HMRC [2015] EWCA Civ 1293 the Court of Appeal held that the Upper Tribunal had been correct to hold that a local authority was not entitled to repayment of overpayments of VAT that were outside the 3 year domestic time limit.   Application of that time limit did not offend EU principles of effectiveness, equivalence, certainty and legitimate expectation.

In Beckford v Southwark LBC,UKEAT/0210/14/JOJ, Langstaff J held that the Court of Appeal announcement of a 10% increase in general damages in most tort actions applied to compensation in an Employment Tribunal for injury to feelings consequent upon discrimination.

 

Off-Street Parking Charges

December 21st, 2015 by James Goudie KC in Environment, Highways and Leisure

A local authority is not entitled to recover VAT on charges for off-street car parking.  The authority is as a matter of principle not a “non-taxable person” for VAT purposes when it charges members of the public for off-street car parking.  Otherwise, there would be “significant distortions of competition”.  So the Court of Appeal has held in the test case of Isle of Wight Council v HMRC [2015] EWCA Civ 1303.

Off-street car parking (“OSCP”) is provided and charged for pursuant to the Road Traffic Regulation Act 1984 (“the RTRA”), specifically Sections 32, 55 and 122. Any surplus of income over expenditure in respect of OSCP falls into the local General Fund (under Section 91 of the Local Government Finance Act 1988), a single undifferentiated fund from which most local authority activities are financed.  Unlike on-street car-parking receipts, there is no ring-fencing of OSCP which restricts the application of any surplus.

The Court of Appeal concluded that:-

  1. In a hypothetical world, in which VAT had never been imposed on OSCPP charges, those charges would have been lower: paragraphs 64-68;
  2. Local authorities are permitted to set OSCP charges with a view to at least covering the cost of operating loss-making of free of charge car parks: paragraph 69;
  3. When local authorities fix OSCP charges so as to give effect to the various traffic management, planning, economic and environmental policies properly to be taken into account in the provision of OSCP, it is entirely lawful and correct of them to have regard to the overall constraints of meeting the cost of providing OSCP: paragraph 70;
  4. The absence of any liability of local authorities to pay VAT on OSCP charges would permit the authorities to meet the cost of providing OSCP while charging less to those using that facility: paragraph 72; and
  5. If one supplier in the market for OSCP is able to have lower prices over time because of its special tax status that is likely significantly to distort competition: paragraph 76.

 

Public Sector Exit Payments

December 21st, 2015 by James Goudie KC in Decision making and Contracts

H M Treasury has issued a Consultation Paper, for response by 25 January 2016, on the final draft Regulations pursuant to the Small Business, Enterprise and Employment Act 2015 allowing for the recovery of public sector exit payments when a high earner returns to the public sector shortly after leaving. There are changes including as follows to the previous proposal. 

The Government proposes to replace the stipulation that exit payments are recovered when an individual returns to the same part of the public sector with the proposal that public sector exit payments are recovered when an individual returns to any part of the public sector. The amount paid back will be net of tax paid.

The previous starting point was that recovery would apply only to individuals earning at or over £100,000. The Government now proposes to set the minimum salary at which the recovery provisions apply at £80,000 per annum.

The Government proposes to remove the full recovery period during which exit payments should be repaid in full on returning to a public sector body. As such, the taper begins from the first day after a public sector employee has exited.

 

Parks Constabulary

December 21st, 2015 by James Goudie KC in Environment, Highways and Leisure

A Council’s Parks Constable is in service as a “member of a constabulary maintained by virtue of an enactment” within the meaning of Section 200(2) of the Employment Rights Act 1996. He or she is therefore precluded from bringing a claim for unfair dismissal.  By parity of reasoning, Trade Unions representing Parks Constables are precluded by Section 280 of the Trade Union and Labour Relations (Consolidation) Act 1992 from pursuing claims for a declaration and a protective award.  In Wandsworth LBC v Viking, UKEAT/0234/13/LA, the EAT (Slade J) has held that the above holds good notwithstanding Articles 8, 11 and 14 of the European Convention of Human Rights.

The Claimants were dismissed for redundancy. It was not suggested that their selection for redundancy was for any reason which would affect their reputation, their private or professional relationships.  Redundancy, said Slade J, can be regarded as “perhaps the least blameworthy reason for dismissal”.  None of the authorities supported the proposition that dismissal of itself engages Article 8.  In her judgment the claims did not engage Article 8.  Article 14 was inapplicable because Article 8 was not engaged.  It added nothing in the circumstance where the facts of the case were not within the ambit of Article 8.  There were no Article 8 rights to be safeguarded.

As regards Article 11, the right claimed was a remedy for failing to consult the Trade Union, UNISON, over proposed redundancies. Collective bargaining over employees’ interests falls within Article 11.  Loss of employment through redundancy affects employees’ interests.  Collective bargaining over job losses falls within Article 11. While the means of affording unions their Article 11 rights are left to Member States, Article 11 requires that they be given the means of enforcing those rights.  The UK has chosen consultation as the means of Trade Unions protecting employees’ interests in a redundancy situation.  Unlike representation of other local authority employees, the Claimants had been deprived of that right.  Accordingly, subject to Article 11.2, Article 11, taken together with Article 14, was engaged by the claims for protective awards.

The question therefore was whether the restriction on the exercise of rights by members of the police was lawful. This requires the restriction to be, amongst other things, proportionate.  The EAT was not in a position to rule on proportionality.

 

Social Care

December 21st, 2015 by James Goudie KC in Social Care

In R (MM) v Hounslow LBC [2015] EWHC 3731 (Admin) the Council was the local authority responsible for (i) assessing and (ii) meeting the needs for care of an autistic child.  It was alleged that they had failed in both respects.  As Sir Brian Keith explained, the legal framework is well established. Local authorities are under a duty to “take reasonable steps to identify the extent to which there are children in need within their area”: see para 1(1) of Schedule 2 to the Children Act 1989. Guidance on how the needs of such children, including the needs of their families, should be met has been issued over the years. That guidance may be departed from only where there is good reason to do so. Its core feature is that the assessment of a child’s needs should not be an end in itself. Rather, it is a process which will lead to an improvement in the well-being of the child, and the conclusion of the assessment should result in a realistic plan of action, identifying the services to be provided, allocating responsibility for such action as needs to be taken, laying down a timetable for that action, and specifying the mechanism by which that action can be reviewed

A number of authorities have stressed the three stages which should inform the whole process: identifying the needs of the child, producing a care plan which specifies how those needs are to be met, and providing the services which the care plan has identified should be provided. That last stage is a critical element in the process. Once the first two stages of the process have been passed, the duty of the local authority to make provision for the needs which have to be met becomes absolute.

Sir Brian added that there are four other points that need to be made. First, the plan of action has to be a realistic one. It should not be just a vague statement of good intent. Secondly, the needs of parent carers are an integral feature of such an assessment, since providing services which meet the needs of the parents is often the most effective means of promoting the welfare of children in need, particularly disabled children. Thirdly, the maximum timeframe for the assessment to be produced, so that it is possible to reach an informed decision about what needs to be done next, should be no longer than 45 working days from when the assessment was commissioned. Fourthly, a new regime governing the functions of local authorities in respect of children with disabilities, including the provision of their social care needs, had been introduced by the Children and Families Act 2014, but was not material for the present case.

Having said all that, Sir Brian stated that it is important not to expect so much from those who prepare these assessments that we risk taking them away unnecessarily from their front-line duties. Judges should not subject such assessments to an over-zealous textual analysis which might be more appropriate to a document drafted by a lawyer in the context of a legal dispute.

 

Byelaws

December 21st, 2015 by James Goudie KC in Elections and Bylaws

R (Barda) v Mayor of London (2015) EWHC 3584 (Admin) concerned Byelaws made by the Greater London Authority with respect to erecting and maintaining fencing around Parliament Square Garden (“PSG”), and their compatibility with Article 10 (freedom of expression) and Article 11 (freedom of association) of the European Convention of Human Rights.

Garnham J said, at paragraphs 90 and 91, that it follows from the authorities that place, manner and form of assembly and expression of views may be important in determining whether there has been an infringement. However, they are not necessarily so. The caselaw is certainly not authority for the proposition that a protester’s choice of place and form must always be respected. The authorities responsible for PSG must not always accommodate a protest in precisely the form the protester prefers.  The Court must take account of the form, place and mode of the protest along with all the surrounding circumstances in deciding whether the actions of the State constitute a real interference with the exercise of the rights.

The Judge found that there was an interference. The question therefore was whether that interference was justified.

The scope of the GLA’s powers to manage and regulate PSG was broad. Those powers were more than sufficient to permit the erection of fences as a means of managing and regulating the use of PSG.  The interference also pursued a legitimate aim. The fact that the aims changed over time and sometimes covered more than one objective was nothing to the point. The care and maintenance of the physical space, the prevention of disorder, the protection of the rights of others (both those who also wanted to protest and those who simply wanted to enjoy the amenity of the gardens) are all legitimate aims. Those were genuine aims of the GLA at various points during the history.  All of that meant that the critical question was whether the interference was proportionate.

The burden of proof of justification was on the Defendant. This was not a Wednesbury challenge where a degree of deference was due to the decision maker. The Court has to put itself in the position of the GLA at each material stage and ask whether the GLA have satisfied the Court that their response was proportionate given what they knew at the time. It would not be correct to take into account what has become known since the decision being considered, but which could not have been known at the time.

The Judge addressed five issues that were relevant to justification: first, the extent of the interference; second, prior restraint; third, prior authorisation; fourth statutory sanctions and controls; and fifth public liability insurance.

As to the first, although there was an interference, it was far from total. There was some interference with rights of expression and assembly, but that interference was limited.

As to the second, the fencing did amount to a form of prior restraint. However, this was partial restraint.

Third, it is not a breach of Articles 10 or 11 to require prior authorisation for demonstrations or protests.

At paragraph 107, Garnham J said:-

“Those organising demonstrations, “as actors in the democratic process”, should respect the rules governing conduct of demonstrations by complying with the regulations in force. A failure to do so demonstrates a disregard of the rights and freedoms of others and of the need to manage those competing rights sensibly if they are to be enjoyed to the greatest extent possible. Of course the Convention imposes obligations on contracting states not individuals, but if the individual does not play his part a greater latitude must be allowed to the state in the way it responds.”

At paragraph 108, Garnham J said:-

“Failure to obtain authorisation will not negate the rights under Articles 10 and 11. However, in my judgment, it will be relevant in judging the proportionality of the State’s response.”

As to the fourth point, statutory sanctions, the Judge said that the corollary of the State’s entitlement to require prior authorisation was the right of the State to impose sanctions if that authorisation is not obtained. Sanctions were not limited to those provided by the Police Reform and Social Responsibility Act 2011.  That Act does not establish an exclusive scheme for responding to demonstrations in PPSG. The power for the GLA to make Byelaws governing the management and regulation of PSG remains. The Judge also made observations in relation to public liability insurance; and concluded that justification was established.  He said:-

“123.     In my judgment, of central significance in this case was the measured and graduated approach adopted by GLA to the threats of periodic occupation of PSG. Alternative responses, including polite requests, then removals, then arrest and prosecution of individual protesters, were tried without success. The Square was roped off, then part of it was fenced off, then most of it was fenced off. When the likelihood of occupation diminished then the fencing came down.

  1. The response waxed as the threat to the Square increased and waned as it subsided. In my judgment, it was the very definition of a proportionate response.”

 

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