In 'Brent London Borough Council (Appellant) v Risk Management Partners Ltd. (Respondent) & (1) London Authorities Mutual Ltd. (2) Harrow London Borough Council (Interested Parties) (2009)' [EWCA Civ 490] the Court of Appeal held that the actions of Brent London Borough Council (Brent), specifically in relation to its decision to abandon a tender process for insurance cover in favour of a mutual insurer in which it was a participating member, were beyond the authority granted to it by Parliament.
Brent, as previously reported, began, but then abandoned, its tender process for insurance cover (in relation to property, terrorism and liability risks) in order to obtain cover from a mutual insurer (London Authorities Mutual Ltd: LAML), in which it was itself a participating member. Interested parties in this mutual insurer numbered ten London local authorities, amongst them Brent and Harrow London Borough Council. Brent's decision to abandon the tender process was taken because it believed the move to LAML would reduce its insurance premiums and result in improved risk management. Risk Management Partners Ltd. had, however, submitted a tender for the insurance work but were informed of Brent's decision to award the insurance contract to LAML (who had taken no part in the public procurement exercise), resulting in legal action being brought by the private company.
Brent's participation in LAML, influenced by its desire to obtain cheaper insurance premiums, was deemed by the Court of Appeal to be in breach of the requirements of the Public Contracts Regulations 2006. The judge ruled that Brent's participation in LAML, specifically relating to the provision of insurance to other boroughs, and provisions by which it paid for (or guaranteed) certain capital payments to fund the mutual, went beyond incidental and was not within Brent's powers as conferred upon it by the Local Government Acts of 1972 and 2000.
The appeal was accordingly dismissed. The claimant company was entitled to damages following Brent's breach of the relevant Regulations.