Newlyn PLC v London Borough of Waltham Forest [2016] EWHC 771

Shining a light on Services Concession Contracts - High Court strikes out bailiff services procurement challenge

The Public Contract Regulations 2015 ("PCR 2015") came into force on 26 February 2015 and applies to the procurement of public contracts by contracting authorities.

The High Court has recently struck out a case on the grounds that the application of Regulation 117(b) of the PCR 2015. This means that the PCR 2015 does not apply to the award of services concession contracts within the meaning of the Public Contracts Regulations 2006.

Facts

Newlyn Plc (the "Contractor") provided enforcement agency and bailiff services to the London Borough of Waltham Forest (the "Council") in relation to council tax and non-business rates. The arrangement, however, expired on 2 February 2016 and subsequently the Council initiated a procurement exercise, with the aim of finding a new provider for such services. The Council issued an invitation to tender, but unfortunately, the Contractor failed to win the new work. The Contractor, feeling aggrieved, commenced proceedings against the Council challenging its decision on the basis that it failed to comply with the PCR 2015.

The High Court in its judgment considered two issues:

  1. was the PCR 2015 applicable? and
  2. what are the consequences of that finding for the Contractor?

Issue 1 - was the PCR 2015 applicable?

The Contractor's sole claim was that the Council failed to comply with the PCR 2015. The Council rejected this claim and issued an application to strike out on the grounds that the application of Regulation 117(b) of the PCR 2015. This meant that the PCR 2015 did not apply to the procurement of the contract because it was a "service concession contract" within the meaning of the PCR 2006. In order to determine this, Mr Justice Coulson had to firstly examine whether a services concession contract existed.

What is a services concession contract within the meaning of the PCR 2006?

A services concession contract is defined in the PCR 2006 as "a public service 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".

What does this mean in practice? The case of JBW Group Ltd v Ministry of Justice [2012] concerned contracts for the provision of bailiff services. In this case, the Court of Appeal in its judgment highlighted that as the contractor's remuneration for providing the services was fixed by reference to the costs it was able to recover from defaulting third parties and therefore it bore the risk involved in running the services, it was effectively "exploiting the services", and subsequently there was a services concession contract.

Having considered the facts in both cases, Mr Justice Coulson could ultimately find no distinction between JBW Group Ltd v Ministry of Justice [2012] from the present case.

Having determined that a services concession contract (within the meaning of the PCR 2006) existed, the second question Mr Justice Coulson had to consider was whether it fell within the PCR 2015.

Regulation 117(b) of the PCR 2015 states:

"Nothing in these Regulations affects services concession contracts within the meaning of the 2006 Regulations".

In light of Regulation 117(b) and JBW Group Ltd v Ministry of Justice [2012] Mr Justice Coulson concluded that the contract for enforcement agency services was a services concession contract within the meaning of the PCR 2006 and fell outside the PCR 2015.

Issue 2 - what were the consequences of this finding for the Contractor?

Notwithstanding Mr Justice Coulson's decision, the Contractor sought to challenge the Court's decision and requested permission to amend its claim form, so as to bring an application for judicial review on the basis that it had a legitimate expectation that the PCR 2015 would apply.

Mr Justice Coulson rejected the Contractor's request on the basis of "procedural and substantive" grounds. According to Mr Justice Coulson, given that the contract fell outside the PCR 2015, allowing a judicial review would have no positive impact for the Contractor, as "there would be no purpose in permitting the claim to continue in a new, but fatally flawed guise". Mr Justice Coulson further expressed that "in theory" permitting a judicial review is possible, but as a matter of law, such case would be doomed to fail from the start as it is "more fanciable than arguable".

Conclusion

This case reiterates that a Court is unlikely to permit a Part 7 claim to be amended to become a claim for judicial review. The procurement of contracts which fall outside of the scope of the PCR 2015 should be challenged by way of judicial review from the outset. Public bodies should also note that the Concessions Contracts Regulations 2016 ("CCR 2016") are now in force and apply to the procurement of service concession contracts (as defined in the CCR) with a value of over £4,104,394.