Consultation

December 21st, 2016 by James Goudie KC in Decision making and Contracts

The legislation on Combined Authorities (the Local Democracy, Economic Development and Construction Act 2009, as significantly amended by the Cities and Local Government Devolution Act 2016, requires that (1) there be “public” consultation and (2) that consultation be “in connection with the proposals” in a scheme, the consultation being a combined operation by the Combined Authority and the Secretary of State.

In R (Derbyshire County Council) v Barnsley, Doncaster, Rotherham and Sheffield Combined Authority (2016) EWHC 3355  (Admin), Ouseley J said, as regards the consultation being “public” (emphasis added):-

“38.    What the Act requires in my judgment is consultation, not with public authorities or bodies, but with the general public. The consultation must be with those who are judged to be affected to a degree which may make their views of significance to the Secretary of State’s decision. This is not a judgment with a sharp edge but involves degrees of impact on a variety of topics.

  1. The question is whether the consultation was “public” in view of the geographical limit placed in reality on the areas targeted for information and response, …
  2. To the extent that the Combined Authority limited the area targeted because that was the area which would constitute the new Combined Authority, and it therefore thought that it should not target residents beyond its area as a matter of law, it was wrong to do so. There is no such geographic limit. The words “public consultation” are very wide, and deliberately so. There is no purpose behind so artificial a limit in this Act.  There is no reason why a Combined Authority should not wish to find out the views of those outside the area who might be affected, now or in the future, or why the Secretary of State should not want to find out those views. …”

“43.    I also do not think that s113 requires a consultation exercise to be undertaken throughout the whole of a county council area simply because the whole county is to become a constituent member, or one of its district council is to become one, contrary to Mr Goudie’s submissions.  No such requirement is stipulated for, and again I judge that such a specific and large requirement, if intended, would have been made express by Parliament when amending the legislation to enable this sort of change to occur.”

“45.    As I have said, the words “public consultation” express a broad requirement.  This needs a judgment from the Secretary of State as to what areas or people require to be consulted for the purposes of s113, in relation to the effect of a particular scheme. The Combined Authority consultation, if it is to satisfy the Secretary of State that he need not undertake any further public consultation, needs to be based on a judgment as to the areas or people to be consulted, which is both lawful and sufficient to satisfy the Secretary of State that he need undertake no further public consultation.”

As regards consultation being “in connection with the proposals in the scheme”, Ouseley J found the Combined Authority’s consultation to have been flawed. The views of the public were not sought on the membership of the proposed expanded Sheffield City Region Combined Authority (“SCRCA”). The views of the public were not sought on whether Chesterfield Borough Council, in Derbyshire, should be a part of the Combined Authority.  Ouseley J said (emphasis added):-

“59.    … Fundamental to a consultation which would achieve the statutory purpose of s113 is that at least the major proposals in the scheme should be identified and be made the subject of consultation, with adequate, even if simplified, material provided to explain it so as to permit of sensible response. I do not think that a consultation is “in connection with the scheme”, merely because it asked questions which were connected to the proposals, if major issues were nonetheless omitted.

  1. Chesterfield BC’s new role in the SCRCA is one of the fundamental proposals or changes to be wrought by the scheme. Although various questions in the questionnaire touched on Chesterfield BC becoming a constituent member, no question actually asked whether respondents supported that or not. Respondents via the questionnaire could attach additional evidence, and so express the view that that should not happen, but their mind was not directed to that issue.”

“69.    For a consultation to be lawful, if questions are asked, they must be ones which can be properly understood by the general body of consultees and can therefore generate answers, which the consulting body can properly understand in its decision-making process. …”

“72.    … As the questionnaire was the major vehicle for public response, it ought to cover the major proposals of public controversy in the scheme. Put another way, the public were not in substance consulted about a major proposal of the scheme.”

“74.    The Secretary of State does not know the views of the public on whether Chesterfield BC should be part of the SCRCA in the same way he does of the public views given in response to the questionnaire on other topics. In my judgment something has gone seriously wrong with the consultation process in this respect because the major vehicle for public response arbitrarily omitted one of the major controversial proposals in the scheme.”

Ouseley J also considered the fairness of the consultation.  He distinguished the Supreme Court decision in R (Moseley) v Haringey LBC (2014) UKSC 56, [2014] 1 WLR 3947 (“Moseley”).  With regard to there being no reference in the consultation to the proposed North Midlands Combined Authority, Ouseley J said:-

“88.    … there was no need for the North Midlands proposal to be referred to as an alternative.  I see nothing in Moseley which, on either of the two approaches it contains, goes beyond requiring the consulting body to explain alternatives or possible alternatives which it itself has discarded. There is no suggestion of any obligation on the consulting body to put forward ways in which a different objective could be achieved by another body. The North Midlands proposal is not one which the Combined Authority could bring about.  It is not an alternative to the proposed scheme for the Combined Authority.  It is not an alternative way of achieving the same objective for the Combined Authority; it is not even a different objective for it. It would provide for participation in a different regional body for those proposed for inclusion in the Combined Authority. It is not incumbent, whether under the heading of fairness, or for specific compliance with s113, for the possibility of Chesterfield BC joining that other authority to be raised for consideration as an alternative in this consultation, or even mentioned as a basis for rejecting the proposed scheme. That possible option is one upon which an opponent can encourage opposition, but that does not make it an alternative of the sort envisaged by Moseley, which the proponent of a scheme should identify and refer to in the consultation about another proposal.”

 

 

 

Housing

December 21st, 2016 by James Goudie KC in Housing

In R (Plant) v Lambeth LBC (2016) EWHC 3324 (Admin), Holgate J said, with respect to Section 21(1) of the Housing Act 1985 (general powers of management):-

“61.    I accept the submission of Mr Goudie QC that this provision confers a very broad discretion upon a local housing authority to manage its houses, without providing any lexicon of the matters which it is to treat as relevant.

  1. Thus, although, it is for the Court to determine whether a consideration is legally capable of being relevant, the general principle is that it is for the decision-maker, in this case LLBC, to decide (a) whether to take a relevant consideration into account and, if it does so decide, (b) how far to go in obtaining information relating to that matter. Such decisions may only be challenged on the grounds that it was irrational for the authority not to take a legally relevant consideration into account or, having done so, not to obtain particular information …

 

  1. The test is whether, in the circumstances of the case, no reasonable authority would have failed to take into account the specific consideration relied upon by the Claimant, or to obtain further information. Lord Scarman held in Findlay that this test is satisfied where, in the circumstances, a matter is so “obviously material” to a particular decision that a failure to take it into account would not be in accordance with the intention of the legislation, ‘notwithstanding the silence of the statute’ …”

Holgate J then referred, at paragraph 64, to Lord Brightman’s observations in Pulhofer, and continued:-

“65.    It is also important to keep in mind the point that Parliament has entrusted the general function of managing the housing stock within the Borough to a democratically elected body, which can be expected to well understand the potentially competing interests of the residents of one estate in comparison to others.”

With respect to Article 1 of the First Protocol to the ECHR, and the loss of a secure tenancy and the Right to Buy, Holgate J said:-

“183 … I agree with the submission of Mr Goudie QC that it is an intrinsic feature of a secure tenancy that it is granted subject to statutory termination on a number of grounds (and not merely redevelopment) which, by definition, will cause the secure tenant to lose the potentiality of choosing to rely upon a right to buy his home at some point in the future. Indeed if that should happen, the suitable accommodation which must be available to him may, or may not, carry with it a statutory right to buy.

  1. It follows that the “possession” which is held by a secure tenant does not include an absolute right to exercise a right to buy, irrespective of whether he continues to have a secure tenancy of that dwelling. Instead, the potential exercise of that statutory right to buy is conditional upon the tenant continuing to hold the secure tenancy of his property. That tenancy may be brought to an end by the operation of the 1985 Act, which includes the redevelopment ground. This limitation which is placed upon the continued existence, and exercise, of the right to buy is imposed upon the tenancy with its bundle of rights and obligations (the “possession”) by the legislation which created the legal notions of a secure tenancy and a right to buy. This analysis applies irrespective of whichever of the statutory grounds in Schedule 2 is relied upon in order to bring the tenancy to an end. The limitation placed by the 1985 Act upon the exercise of the right to buy, namely that the secure tenancy continues to subsist, is important because the argument raised … relates to persons who have not yet exercised the right to buy but may do so in the future. …”

“186.  … Here the secure tenants have not yet exercised the statutory provisions which enable them to own their properties. Those statutory provisions, which insist upon the continuing subsistence of the secure tenancy if they are to be relied upon, subjected the tenant’s rights from the outset of the secure tenancy to restrictions or qualifications which might subsequently be enforced against him. Accordingly, A1P1 is not engaged …”

 

 

 

TPOs

December 15th, 2016 by James Goudie KC in Planning and Environmental

“The legislative regime for tree preservation orders does not stand apart from the comprehensive statutory scheme for land use planning. It is an integral part of that statutory scheme, and an important one”: per Lindblom LJ at paragraph 38 in Barney-Smith v Tonbridge and Malling Borough Council (2016) EWCA Civ 1264.

There are two means by which a LPA can achieve formal protection for trees and control over work to trees which have been given such protection: (1) the imposition of conditions on the grant of planning permission; and (2) the making of TPOs. “They can be used in combination with each other, or separately.” That is left to the LPA’s discretion.  An authority’s power to make a TPO, and the consequent statutory protections for the tree(s) included in the TPO, “complement” its functions in making decisions on proposals for development, including its power to impose conditions on grants of planning permission.  See also per Elias LJ at paragraph 60.

 

Interpreting permission

December 12th, 2016 by James Goudie KC in Planning and Environmental

R (Skelmersdale Limited Partnership) v West Lancashire Borough Council (2016) EWCA Civ 1260 concerned a claim for Judicial Review of a planning permission granted by the Council for a new retail-led development on a strategic development site of about 5 hectares in the Skelmersdale Town Centre. The challenge was with respect to a condition of the permission, which related to occupation of the retail floorspace, and the meaning of the word “commits” in that condition. Sales LJ (with whom Briggs LJ agreed) said:-

“15.    Guidance as to the interpretation of the terms of a grant of planning permission is given in the judgment of Lord Hodge JSC in Trump International Golf Club Scotland Ltd v Scottish Ministers [2015] UKSC 74; [2016] 1 WLR 85, at paras. [33]-[34]. As Lord Hodge explains, there is only limited scope for the use of extrinsic material in the interpretation of a public document such as a planning permission ([33]), but reference to some extrinsic materials, such as the application for permission, may be legitimate ([34]).

  1. In fact, however, I consider that the judge was plainly correct in his interpretation of the word “commits” in condition 5(ii), without the need for reference to these extrinsic materials. Lord Hodge explains at [34] that the interpretation of a condition in a planning consent involves asking “what a reasonable reader would understand the words to mean when reading the condition in the context of the other conditions and of the consent as a whole”; “This is an objective exercise in which the court will have regard to the natural and ordinary meaning of the relevant words, the overall purpose of the consent, any other conditions which cast light on the purpose of the relevant words, and common sense.”

 

Localism versus Populism

December 12th, 2016 by James Goudie KC in Planning and Environmental

In Holder v Gedling Borough Council (2016) EWHC 3095 (Admin), concerned with whether there were “very special circumstances” justifying a wind turbine in the Green Belt, Green J said, at paragraph 69, that the Written Ministerial Statement of 18 June 2015 on proposed wind energy developments does not endorse a principle that a vocal minority has the ability to exert decisive or dominant influence in a manner which would not otherwise occur.  Ultimately it is the Committee that takes into account objectors’ views and then balances and reconciles the competing arguments. Its decision reflects “real democratic decision making”.

 

In-House Award

December 9th, 2016 by James Goudie KC in Decision making and Contracts

The chief claim to fame of the Italian municipality of Sulmona was that it was the birthplace of Ovid. Moving from Roman times to now, and from poetry to prose, and indigestible prose at that, it is now the subject of a Judgment of the ECJ on 8 December 2016 in Undis Servizi Srl v Comune di Sulmona, Case C-553/15.

The case concerns the award of a public contract, to Gogesa Spa, without any public tendering procedure, on the basis that it was an “in-house” award. That exemption is of course subject to two conditions, first that the local authority exercises over the contractor control similar to that which it exercises over its own departments, and, second, that the contractor carries out the “essential part of its activities” with the authority or authorities to which it belongs, the two Teckal conditions.

By decision of 30 September 2014, the municipal council of the Municipality of Sulmona awarded the contract for management of the integrated cycle of municipal waste to Cogesa, a wholly public capital company owned by several municipalities of the Regione Abruzzo (Abruzzo Region, Italy), including the Municipality of Sulmona. The latter holds 200 shares out of the 1,200 representing the company’s total share capital, that is to say, a holding of approximately 16.6% of that capital.

On 30 October 2014, although the contract for services with Cogesa had not yet been concluded, the local authorities with shares in Cogesa entered into an agreement to exercise jointly over that body a control similar to that exercised over their own departments (“the Agreement of 30 October 2014”).

By Integrated Environmental Authorisation No 9/11, the Abruzzo Region required Cogesa, in accordance with the principles of self-sufficiency, proximity and subsidiarity, to treat and recover the urban waste of certain municipalities of that region which were not shareholders of that company.

Undis, a company with an interest in the contract for services at issue, brought proceedings against the decision to award that contract for services and against the decision approving the inter-municipal agreement project. Undis claimed that the two conditions required for that contract of services to be awarded on an “in-house” basis had not been met.

More specifically, Undis claimed that the condition requiring the contracting authority to exercise over the successful tenderer, legally separate from that authority, control similar to that which it exercises over its own departments had not been met. It argues that the Municipality of Sulmona is a minority shareholder of Cogesa, that the Agreement of 30 October 2014 was entered into after the decision to award the contract for services at issue, and that that company’s statute confers on the company’s constituent bodies a degree of independence incompatible with the concept of ‘similar control’. Undis added that the condition requiring the successful tenderer to perform the essential part of its activities with the contracting authority or authorities had also not been met. According to Undis, Cogesa’s financial statements covering the years 2011 to 2013 indicated that only 50% of its overall activity had been performed with shareholder local authorities, given that activities carried out for the benefit of non-shareholder municipalities had to be included in that overall activity.

The Italian Court referred the following questions to the ECJ for a preliminary ruling:-

(1)      When the essential activity undertaken by the controlled body is assessed, must an activity imposed on it by a non-shareholder public administration and undertaken in favour of non-shareholder public bodies also be taken into account?

(2)      When the essential activity undertaken by the controlled body is assessed, must the contracts awarded to shareholder public bodies before the requirement of similar control became applicable also be taken into account?

On the first question, the ECJ said:-

“In accordance with the case-law of the Court, the main objective of the rules of EU law in the field of public contracts, namely the free movement of goods and services and the opening-up of undistorted competition in all the Member States, implies the obligation to apply the rules regarding the procedures for the award of public contracts provided for by the relevant directives, where a contracting authority, such as a local authority, is planning to enter into a written contract for pecuniary interest with a separate legal body, whether or not that body is itself a contracting authority (see, to that effect, judgments of 18 November 1999, Teckal, C‑107/98, EU:C:1999:562, paragraph 51, and of 11 January 2005, Stadt Halle and RPL Lochau, C‑26/03, EU:C:2005:5, paragraphs 44 and 47).

The Court has emphasised that any exception to the application of that obligation must be interpreted strictly (judgments of 11 January 2005, Stadt Halle and RPL Lochau, C‑26/03, EU:C:2005:5, paragraph 46, and of 8 May 2014, Datenlotsen Informationssysteme, C‑15/13, EU:C:2014:303, paragraph 23).

Given that a public authority has the possibility of performing the tasks conferred on it in the public interest by using its own administrative, technical and other resources, without being obliged to call on outside entities not forming part of its own departments (see, to that effect, judgment of 11 January 2005, Stadt Halle and RPL Lochau, C‑26/03, EU:C:2005:5, paragraph 48), the Court justified the recognition of the exception for so-called ‘in-house’ awards, by the existence, in such a case, of a specific internal link between the contracting authority and the contractor, even if the latter is an entirely separate legal entity (see, to that effect, judgment of 8 May 2014, Datenlotsen Informationssysteme, C‑15/13, EU:C:2014:303, paragraph 29). In such cases, it may be considered that the contracting authority, in actual fact, uses its own resources (see, to that effect, judgment of 8 May 2014, Datenlotsen Informationssysteme, C‑15/13, EU:C:2014:303, paragraph 25) and that the contractor is almost part of its internal departments.

That exception requires, in addition to the contracting authority exercising over the contractor a control similar to that which it exercises over its own departments, that that contractor performs the essential part of its activities for the benefit of the contracting authority or authorities which control it (see, to that effect, judgment of 18 November 1999, Teckal, C‑107/98, EU:C:1999:562, paragraph 50).

Thus, it is essential that the contractor’s activity be principally devoted to the controlling authority or authorities; the nature of any other activity may only be marginal. In order to determine whether that is the case, the court having jurisdiction must take into account all the facts of the case, both qualitative and quantitative. In that regard, the relevant turnover is the turnover that that contractor achieves pursuant to the award decisions taken by that or those controlling authorities (see, to that effect, judgments of 11 May 2006, Carbotermo and Consorzio Alisei, C‑340/04, EU:C:2006:308, paragraphs 63 and 65, and of 17 July 2008, Commission v Italy, C‑371/05, not published, EU:C:2008:410, paragraph 31).

The requirement that the person at issue performs the essential part of its activities with the controlling authority or authorities is designed to ensure that Directive 2004/18 remains applicable in the event that an undertaking controlled by one or more authorities is active in the market, and therefore liable to be in competition with other undertakings. An undertaking is not necessarily deprived of freedom of action merely because the decisions concerning it are controlled by the controlling municipal authority or authorities, if it can still carry out a large part of its economic activities with other operators. By contrast, where that undertaking’s services are mostly intended for that authority or those authorities alone, it seems justified that that undertaking should not be subject to the restrictions of Directive 2004/18, since they are in place to preserve a state of competition which, in that case, no longer has any raison d’être (see, by analogy, judgment of 11 May 2006, Carbotermo and Consorzio Alisei, C‑340/04, EU:C:2006:308, paragraphs 60 to 62).

It follows from that case-law that any activity of the contractor which is devoted to persons other than those which control it, namely persons without any relationship of control in regard to that entity, including public authorities, must be regarded as being carried out for the benefit of a third party.

Consequently, in the light of that case-law, in the dispute in the main proceedings, the local authorities which are not shareholders of Cogesa must be regarded as third parties. According to the information in the decision to refer, there is no control relationship between those local authorities and that company, with the result that the specific internal link between the contracting authority and the contractor, which according to the case-law of the Court justifies the exception for “in-house” awards, is lacking.

Therefore, in order to determine whether Cogesa performs the essential part of its activity with the local authorities which control it, the activity which that company devotes to non-shareholder local authorities must be regarded as being carried out for the benefit of third parties. It is for the referring court to examine whether that latter activity can be regarded as merely marginal in comparison with the activity of Cogesa with the controlling local authorities, in accordance with the Court’s case-law on so-called “in-house” awards.

That finding cannot be invalidated by the fact, mentioned by the referring court, that Cogesa’s activity carried out for the benefit of the non-shareholder local authorities is imposed by a public authority, which is also not a shareholder of that company. Although it imposed that activity upon Cogesa, it is apparent from the information in the decision to refer that that public authority is not a shareholder of that company and does not exercise any control over it within the meaning of the Court’s case-law on so-called ‘in-house’ awards. In the absence of any control by that public authority, the activity which it imposes on Cogesa must be regarded as an activity carried out for third parties.”

On the second question, the ECJ said:-

“By this question, the referring court asks in essence whether, for the purpose of determining whether the contractor performs the essential part of its activity for the shareholder local authorities which jointly exercise over it control similar to that which they exercise over their own departments, the activity of that contractor performed for those local authorities before such joint control took effect must also be taken into account.

In that regard, it must be noted that, according to the case-law of the Court, in order to assess the condition concerning the performance of the essential part of the activity, the national courts must take into account all the facts of the case, both qualitative and quantitative (see, to that effect, judgment of 11 May 2006, Carbotermo and Consorzio Alisei, C‑340/04, EU:C:2006:308, paragraphs 63 and 64).

In the present case, it follows from the information in the decision to refer that Cogesa had already carried out activities for the local authorities which control it prior to the conclusion of the Agreement of 30 October 2014. Those activities must certainly be taken into consideration when they are still in existence at the time of the award of a public contract. Furthermore, activities completed before 30 October 2014 may also be relevant for the purpose of assessing whether the condition concerning the performance of the essential part of the activity is met. Past activities may be indicative of the importance of the activity that Cogesa is planning to carry out for its shareholder local authorities after their similar control has taken effect.

In the light of the foregoing, for the purpose of determining whether the contractor carries out the essential part of its activity for the shareholder local authorities which jointly exercise over it control similar to that which they exercise over their own departments, account must be taken of all the circumstances of the case, which may include the activity carried out by that contractor for those local authorities before such joint control took effect.”

The ECJ ruled as follows:-

“In the context of the application of the Court’s case-law on direct awards of so-called “in-house” public contracts, in order to determine whether the contractor carries out the essential part of its activity for the contracting authority, including local authorities which are its controlling shareholders, an activity imposed on that contractor by a non-shareholder public authority for the benefit of local authorities which are also not shareholders of that contractor and do not exercise any control over it must not be taken into account, since that activity must be regarded as being carried out for third parties.

For the purpose of determining whether the contractor carries out the essential part of its activity for the shareholder local authorities which jointly exercise over it control similar to that which they exercise over their own departments, account must be taken of all the circumstances of the case, which may include activity carried out by that contractor for those local authorities before such joint control took

 

Liability for council tax

December 7th, 2016 by James Goudie KC in Council Tax and Rates

Leeds City Council v Broadley [2016] EWCA Civ 1213 concerns liability to pay Council tax to the City Council in respect of dwellings let on assured shorthold tenancies. The issue is whether Mr Broadley or his tenant is “the owner” of the dwellings within the meaning of Section 6 of the Local Government Finance Act 1992 (“the 1992 Act”) when that dwelling had no resident for the period in dispute.  Liability turns upon the true construction and effect of the common form of tenancy agreement made between Mr Broadley and his individual tenants and upon how the 1992 Act applies to the agreement as so construed. The form of agreement is of a type that has long been in common currency. The crucial question is whether the tenant in these cases at the relevant times had “a material interest”, i.e. “a leasehold interest which was granted for a term of six months or more”.

The Court of Appeal construed the agreements as single grants for a fixed term of 6 or 12 months followed by a periodic tenancy thereafter. The Court of Appeal concluded that the agreements granted “a term of six months or more” constituting a “material interest”. McCombe LJ said (para 19):-

It is pursuant to that grant that the tenant holds throughout the tenancy, whether during the fixed term or thereafter, Accordingly, in my judgment, the Tribunal and the judge were correct in finding that the tenant’s liability continued while those tenancies subsisted as periodic tenancies and even if the tenant had gone out of occupation.”

 

Sustainable development

December 5th, 2016 by James Goudie KC in Planning and Environmental

In Trustees of the Barker Mill Estates v Test Valley Borough Council (2016) EWHC 3028 (Admin) Holgate J has said that the Judgment in Wychavon District Council v SoS for CLG (2016) EWHC 592 (Admin) had been wrongly decided.  That had stated that the NPPF contained a general presumption in favour of sustainable development.  However, said Holgate J, the only presumption in favour of sustainable development was, as stated in Cheshire East Borough Council v SoS for CLG (2016) EWHC 571 (Admin), that within the scope of paragraph 14 of the NPPF, which requires that Local Plans should meet “objectively assessed needs” unless either “… any adverse impacts of doing so would significantly and demonstrably outweigh the benefits, when assessed against the policies in the Framework taken as a whole; or specific policies in this Framework indicate development should be restricted”.

 

Housing benefit

December 5th, 2016 by James Goudie KC in Housing

Housing benefit is “a means tested benefit provided under section 130 of the Social Security Contributions and Benefits Act 1992 and subordinate regulations”. Its “purpose is to help claimants with their rental costs”. There is “a prescribed mechanism for determining in each case the appropriate maximum housing benefit”.

The two conjoined appeals in Birmingham City Council v SoS for Work and Pensions and Birmingham City Council v SA (2016) EWCA Civ 1211 about entitlement to housing benefit were concerned with the power of a housing authority such as the City Council to determine that the net eligible rent payable in respect of accommodation, and thus the amount of housing benefit payable in respect of that accommodation, be restricted. The City Council contended that the Upper Tribunal (Administrative Appeals Chamber) adopted an incorrect approach under Regulation 13(3) of the Housing Benefit Regulations 2006 (S.I. 2006/213) (“the 2006 regulations”), in the form substituted by paragraph 5 of Schedule 3 to the Housing Benefit and Council Tax Benefit (Consequential Provisions) Regulations 2006 (S.I. 2006/217) (“the consequential provisions regulations 2006”), when considering, in the case of claimants in “exempt” accommodation, whether their rent was “unreasonably high by comparison with the rent payable in respect of suitable alternative accommodation elsewhere”. In particular, the City Council submitted that the Upper Tribunal erred in effectively applying, as criteria of comparability, the availability and amount of public funding which would have enabled the landlords in question to reduce the rents they charged.

When granting permission to appeal, Sales L.J. observed that the appeal raises this issue: whether, under Regulation 13(3)(b) it was “appropriate to take into account the degree of public subsidy received by the owner of the accommodation occupied and by the owner of any other accommodation said to be a suitable alternative; and in particular, how the [2006 Regulations] should be applied for the purposes of comparison in relation to accommodation owned by a charity, by a registered social landlord and by a private landlord”. A “registered social landlord” would include, for example, a housing association.

The Court of Appeal allowed the City Council’s appeals in both cases. There was, said Lindblom LJ, with whom Black and Beatson LJ agreed, a danger of overcomplication.  He said (para 30):-

“The concept whose meaning is in dispute in this appeal – the concept, in regulation 13(3)(b), of the rent payable for the claimant’s dwelling being “unreasonably high by comparison with the rent payable in respect of suitable alternative accommodation elsewhere” – envisages, I think, a relatively straightforward procedure which is neither unduly burdensome nor unduly complex. On its face, it requires a simple comparison between rents.”

Lindblom LJ continued:-

“40.    It seems to me therefore that the concept of a rent being “unreasonably” high in regulation 13(3) is that the rent is unreasonably high for the claimant to have to pay, rather than unreasonably high for a particular landlord to charge. An “unreasonably high” rent under regulation 13(3) will be a rent higher than the rent one could reasonably be expected to pay in what Evans L.J. in ex parte Gibson described as the “relevant active market in property of the relevant description, type or class” – the “ascertainable market rent”. I see no justification for reading into this concept artificial constraints on the relevant market in which that other accommodation exists, or on the market rent for such accommodation. If there is a “relevant active market” and an “ascertainable market rent” for suitable, alternative accommodation – supported by evidence of the range of rents being paid for accommodation of the appropriate type, occupied with the appropriate security of tenure, in the appropriate general location – the comparison between rents must be objective, realistic and complete.

  1. To manipulate the comparison of rents by excluding, for example, all but the levels of rent payable for suitable alternative accommodation which happens to be provided by a landlord in the private sector without the benefit of subsidy, or some other external source of funding, will render the exercise subjective, unrealistic and partial. It shifts the comparison from one between rental levels for accommodation of sufficiently similar type and tenure in the relevant area to one between rents only in one part of the market, and then, within that part of the market, to rents charged by landlords who happen to be funded in a particular way. This is to distort the market, and to produce a false and unreliable comparison. The same may be said of an approach that modifies the comparison of rents by making hypothetical adjustments for the individual circumstances of a particular landlord. Again, this is liable to produce a flawed comparison by reducing or eliminating real disparities between rents for relevant accommodation in the relevant market. Discovering the reasons why a particular landlord came to lose or to forego public funding, exploring the possibility of its being able to charge a lower rent if it were to operate in a different way, or speculating about its circumstances changing in the future, may not always be an impossible or even a difficult task. Such questions may not, in every case, require detailed scrutiny of a landlord’s accounts, or close investigation of the way it runs its business. Here, in the Upper Tribunal’s view, they did not. But they bring to the exercise of comparing rents under regulation 13(3)(b) a degree of artificiality which, in my view, is not merely unnecessary but also inappropriate.
  2. I think this understanding of regulation 13(3) sits well with the legislative intent. It recognizes the aim of protecting the public purse from excessive payments of housing benefit in cases where rents are, comparatively, “unreasonably high”. And it does not offend the purpose of protecting claimants from homelessness.
  3. In a case where a claimant was paying a rent that was, comparatively, “unreasonably high” – except where paragraph (4) applied and suitable alternative accommodation was not available to him – the authority would be able to reduce his eligible rent by an “appropriate” amount. Claimants within one of the special categories in paragraph (4), as SA and SS were, would be protected against any deduction in their eligible rent, in two ways: first, by the requirement that suitable “cheaper” alternative accommodation is, in fact, “available”; second, that it is reasonable to expect him to move from the accommodation he is in. In exercising the discretion in paragraph (3), the authority is not obliged to reduce the eligible rent by the full amount of the difference between the rent the claimant was paying for the accommodation he was in and the rent he would pay for suitable alternative accommodation elsewhere. The requirement is simply that, in judging what an “appropriate” reduction would be, it must have regard, in particular, to the cost of the suitable alternative accommodation. In Mehanne the House of Lords emphasized the breadth of the authority’s discretion (see paragraphs 8 to 13 in the speech of Lord Bingham, at p.544C to p.546C; and paragraphs 19 to 27 in the speech of Lord Hope of Craighead, at p.547B to p.549F). Relevant considerations could include any personal or financial circumstances of the claimant bearing on his “housing situation” (paragraph 13 in Lord Bingham’s speech).
  4. It follows, in my view, that the Upper Tribunal fell into error in the approach it took in the appeals of SA and SS. Its comparison of rental levels under regulation 13(3)(b) was not a true and full comparison between the rent payable by SA and SS for their accommodation in Roshni’s refuge and the rent payable for other accommodation of comparable type and tenure in the “relevant active market”. It effectively applied as criteria of comparability the availability and amount of public funding, or subsidy, which would enable the landlords in question to reduce the rents they charged. In undertaking the comparison, it adjusted upwards the real rent being charged by the only landlord whose accommodation it ultimately relied upon as comparable – “comparator 3” – to arrive at a range of hypothetical rents, on different assumptions of its own as to the percentage proportion of the landlord’s “accommodation costs” recouped from, respectively, subsidy and rent. This was not, in my view, an exercise consistent with the requirements of regulation 13(3).
  5. The Upper Tribunal was clearly anxious to reflect in its decision the fact that Roshni was a charity, providing – without the benefit of public funding – accommodation for women who had suffered domestic violence, and that, without subsidy, charities of this kind could not afford to operate refuges, leaving “victims of violence either homeless or at risk at the homes they wished to leave” (paragraph 33 of the interim decision and paragraph 3 of the final decision). It was aware of the very high demand for Roshni’s accommodation. It found that Roshni was meeting a need which “funded charities” were not able to meet or meet in full. And it was satisfied that Roshni had lost public funding as “the result of cutbacks and not of any failings on its part” (paragraph 35 of the interim decision and paragraph 13 of the final decision). All of these considerations it saw as relevant to the comparison of rents under regulation 13(3)(b). I do not think it was right to do so. Where concerns such as these go to the risk of vulnerable claimants finding themselves without accommodation suitable for them, the legislative scheme allows for them – in the discretion given to the authority under regulation 13(3), and in the provisions in regulation 13(4) and (9)(b). Where they go to the difficulties of private sector landlords – charities among them – providing accommodation in refuges without the advantage of public subsidy, the legislature has not identified them as relevant to the comparison of rents under regulation 13(3)(b). And in my view they do not bear on that exercise.”

 

Main Work Requirement

December 2nd, 2016 by James Goudie KC in Decision making and Contracts

Case C-298/15, UAB “Borta”, in which Advocate General Sharpston gave her Opinion to the CJEU on 1 December 2016, concerns a tender specification for the award of a public works contract for constructing a quay at the port of Klaipėda (Lithuania). The specification in question contains provisions governing tenders submitted by joint-activity partners. These require each partner to perform a proportion of the contract equivalent to its contribution to establishing the partnership’s professional experience, at the level of the award of the public contract.

The Lithuanian Court asked whether EU law precluded a provision, such as Article 24(5) of the Lithuanian law on public procurement, referred to in the specification, which required that, in the case of public works contracts, the tenderer should itself carry out the “main work”, as identified by the contracting authority.

Advocate General Sharpston said:-

“43.    According to settled case-law, Articles 49 and 56 TFEU preclude any national measure which, even though it is applicable without discrimination on grounds of nationality, is liable to prohibit, impede or render less attractive the exercise by nationals of the European Union of the freedom of establishment and the freedom to provide services guaranteed by those provisions.

  1. As regards public contracts and the freedom of establishment and the freedom to provide services, the European Union is concerned to ensure the widest possible participation by tenderers in a call for tenders, even where directives on public procurement are not applicable.

That is in the interest of the contracting authority itself, which will thus have greater choice as to the most advantageous tender which is most suitable for its needs.

One of the principal functions of the principle of the equal treatment of tenderers and the corollary obligation of transparency is thus to ensure the free movement of services and the opening-up of undistorted competition in all the Member States.

  1. Subcontracting contributes to those objectives as it is likely to encourage small and medium-sized undertakings to get involved in the public contracts procurement market and therefore to increase the number of potential candidates for the award of public contracts.
  2. In the present case, a provision such as Article 24(5) of the Law on public procurement clearly limits the possibility for undertakings established in other Member States to exercise their rights under Articles 49 and 56 TFEU, in so far as it precludes them, if they tender for the contract, from either subcontracting all or part of ‘the main work’ as defined by the contracting authority or proposing their own services as subcontractors for that part of the contract. As the Commission correctly submits, Article 24(5) of the Law on public procurement therefore restricts the freedom to provide services and the freedom of establishment.
  3. However, such a restriction may be justified in so far as it pursues a legitimate objective in the public interest, and to the extent that it complies with the principle of proportionality in that it is suitable for securing the attainment of that objective and does not go beyond what is necessary in order to attain it.”

“49.   A contracting authority may legitimately seek to ensure that a public work contract will be effectively and properly carried out.

That applies in particular where the works in question are deemed necessary for safeguarding national security, which, according to Article 4(2) TEU, is among the essential State functions that the European Union must respect.

Thus, a tenderer may be required to produce evidence that it actually has available to it the resources of the entities or undertakings on which it relies, which it does not itself own, and which are necessary for the performance of the contract.

Accordingly, the contracting authority is entitled to prohibit the use of subcontractors whose capacities could not be verified during the examination of tenders and selection of the contractor for the performance of essential parts of the contract.

  1. However, the restriction on the freedom to provide services and freedom of establishment that Article 24(5) of the Law on public procurement involves does not appear proportionate to that objective.
  2. First, that restriction applies even where the contracting authority is in fact in a position to verify the technical and economic capacity of subcontractors during the contract award procedure. An alternative to that restriction would (for example) have been to require the main contractor to identify subcontractors when submitting his tender and to demonstrate both that he will actually have available to him the resources of those subcontractors necessary for the performance of the contract and that those subcontractors are suitable for carrying out the tasks he intends to entrust to them.
  3. Second, Article 24(5) is also both too rigid and too vague to satisfy the proportionality test. Although contracting authorities appear to enjoy flexibility when defining, for each contract, what ‘the main work’ is, the restriction on subcontracting resulting from that provision is defined in particularly broad terms. It applies regardless of the subject matter of the public works contract and is binding upon contracting authorities when they conclude any type of public works contract, even when they may consider that there is no obvious reason for imposing such a restriction at all.
  4. As the Commission submits, the restriction on subcontracting in Article 24(5) of the Law on public procurement differs in that regard from Article 79(3) of Directive 2014/25. That provision merely enables a contracting authority, in particular, to require that certain critical tasks be performed directly by the tenderer itself. Contracting authorities may thus assess whether such a limitation is opportune, depending on the circumstances. It follows that, even if, as the Lithuanian Government submits, Article 24(5) of the Law on public procurement were to be regarded as transposing Article 79(3) of Directive 2014/25 into Lithuanian law, that transposition would be incorrect.”

“57.   The principles that I have set out above regarding subcontracting are equally relevant to joint-activity partners pooling their capacities.

  1. As I see it, a requirement such as that laid down in paragraph 4.3 of the tender specifications is liable to limit the flexibility of joint-activity partners. It not only affects how they agree to share responsibilities at the time of submitting their common tender but also precludes them from modifying each partner’s contribution to the works contract at a later stage if the contract is attributed to them.
  2. Thus, the requirement in paragraph 4.3 of the tender specifications is capable of having a dissuasive effect on economic operators established in other Member States. It will affect operators wishing to establish themselves in the Member State concerned through the establishment of a permanent consortium, possibly composed of national and foreign companies. It will also affect operators wishing to offer their services by joining consortia of that kind already in existence, in order to be able to participate more easily in public tendering procedures launched by the contracting authorities of that Member State.

Such specification therefore constitutes a restriction within the meaning of Articles 49 and 56 TFEU.”

“61.   I have already indicated that the objective of ensuring proper performance of a public contract can justify a (non-discriminatory) restriction to the freedom to provide services and freedom of establishment.

Partners acting under a joint-activity agreement may be able to satisfy collectively the condition(s) relating to professional capacity (including professional experience) stipulated by the contracting authority when they submit a tender. That however offers no guarantee that each partner will then actually be entrusted with those specific tasks for which its professional capacity has been verified prior to the award of that contract. Articles 49 and 56 TFEU do not therefore in principle preclude a contracting authority from requiring tenders submitted under joint-activity agreements to specify how the various tasks will be distributed among the partners, from verifying the capacity of each partner to carry out the tasks for which it will be responsible and from monitoring that, following the award of the contract, each partner duly performs those tasks for which its professional capacity has been demonstrated.

  1. However, paragraph 4.3 of the tender specifications at issue here is not suitable for ensuring attainment of that objective.
  2. That paragraph requires there to be an arithmetic correspondence between the contribution of each partner to the professional experience requirement in paragraph 3.2.1 and the ‘volume’ (or money value) of tasks effectively carried out by that partner when performing the contract.
  3. As the Commission correctly submits, that specification is unrelated to the specific works or services required to perform the public contract at issue properly. For example, each partner under a joint-activity agreement might be able to demonstrate that it has acquired experience in seaport quay construction or reconstruction over the last 5 years. Collectively, the partners thus fulfil the professional experience requirement in paragraph 3.2.1 of the tender specifications. However, each of them might specialise in a different aspect of seaport quay construction, such as dredging harbour basins, laying foundation works, building grooved steel walls, or supplying and installing seaport quay equipment. The requirement set out in paragraph 4.3 does not preclude an individual partner from carrying out specific tasks for which it actually has no such experience (although, in arithmetical terms, those tasks might correspond to its contribution in fulfilling the requirement in paragraph 3.2.1 of the tender specifications and thus comply with paragraph 4.3 thereof).
  4. I therefore consider that the objective of ensuring proper performance of the public contract cannot, in a situation such as that in the main proceedings, justify the restriction on freedom to provide services and freedom of establishment which results from paragraph 4.3 of the tender specifications. That is all the more the case since even tasks which represent a small proportion of the total value of the contract may be critical to its proper performance.”

“69.    Did the principles of equal treatment and of non-discrimination on grounds of nationality flowing from Articles 49 and 56 TFEU, and the consequent obligation of transparency, preclude the Seaport Authority from modifying clause 4.3 of the tender specifications as it did?

  1. The Court’s case-law interpreting Article 2 of Directive 2004/18 offers useful guidance to answer that question. According to that provision, ‘contracting authorities shall treat economic operators equally and non-discriminatorily, and shall act in a transparent way’. That provision is therefore based on the principles of equal treatment and non-discrimination and the obligation of transparency which arise from the TFEU.
  2. Thus, the Court has held that both the principle of equal treatment and the obligation of transparency which flows from it require the subject matter of each contract and the criteria governing its award to be clearly defined from the beginning of the award procedure.

Equal treatment requires tenderers to be afforded equality of opportunity when formulating their bids. That implies that the bids of all tenderers must be subject to the same conditions.

Furthermore, the obligation of transparency is intended to preclude any risk of favouritism or arbitrariness on the part of the contracting authority. It means that all the conditions and detailed rules of the award procedure must be drawn up in a clear, precise and unequivocal manner in the contract notice or specifications so that, first, all reasonably informed tenderers exercising ordinary care can understand their exact significance and interpret them in the same way and, second, the contracting authority is able to ascertain whether the bids submitted satisfy the criteria applying to the contract in question.

  1. Therefore, a contracting authority cannot, even by means of corrections, change the meaning of the essential contractual conditions as they were formulated in the specifications, upon which the economic operators concerned legitimately relied in taking the decision to prepare to submit a tender or, on the other hand, not to participate in the procurement procedure concerned.
  2. The same principles apply where a contract not governed by Directive 2004/18 has a clear cross-border interest. …”

“78.    In the circumstances of the present case, I … conclude that the prohibition on discrimination on the grounds of nationality and the obligation of transparency which flow from Articles 49 and 56 TFEU preclude changes of the tender specifications such as those at issue in the main proceedings, which introduce restrictions concerning the demonstration of professional capacity by joint-activity partners that were plainly not included in the original version of the specifications.

  1. That conclusion is not called into question by the fact that the changes took place before any tender was submitted or by the fact that the Seaport Authority both published the changes in the Official Journal of the European Union and extended the deadline for submitting tenders. As I have explained, the successive amendments of paragraph 4.3 of the tender specifications by the Seaport Authority entailed an essential modification of the conditions under which a tender could be submitted by joint‑activity partners, without objective justification.
  2. Finally, I would emphasise that the analysis I offer here flows from the specific situation in the main proceedings. It therefore does not in any way prejudge how the principles of equal treatment and non-discrimination and the obligation of transparency arising from the TFEU would apply in different circumstances.”