Court Case Update
24th June was the fourth and final day of the ‘Preliminary Issues’ stage of our case against Gloucestershire County Council in the High Court. The purpose was to hear oral submissions by both parties highlighting key parts of the written summaries already provided. This was to have taken place 19th March but COVID has caused disruption to all court hearings.
The proceedings were held via a Zoom video-conference. The judge and both barristers were all visible and could speak while the observers, including a number of supporters and the press, were invisible and on mute. Our thanks to those of you who took the trouble to attend – and the time, because it was a very long day, starting at 10 AM and not finishing until 5PM. It was tiring for all concerned.
We thought we made our case well and we had thought there might have been a decision on the day. However, despite all the submissions and the arguments on the day itself, the outcome was inconclusive. The judge has reserved judgement and, while we do not have a date, we expect his decision will not be made for some weeks.
The ‘preliminary issues’ the judge has to decide upon are:
1) could CR4C have been a credible bidder had there been a re-tender back in 2015/16, as there should have been; and
2) did we bring our case within 30 days of discovering the Council’s breach of procurement law
If he decides in our favour, the case will move to the next stage to determine the substance of the case against the Council, which is that they broke procurement law by not re-tendering the contract, despite a 30% increase in costs. If he decides against us, we will have the opportunity to appeal.
Six hours of a virtual court hearing is too much to summarise but below is a sample of what our excellent barrister, Duncan Sinclair, had to say in his opening remarks to give you a flavour of proceedings.
It’s worth noting that Duncan and our solicitors, Shakespeare Martineau, have been working tirelessly and professionally for many months on a charity rate, at risk basis. On behalf of Community R4C, we should like to offer them our heartfelt thanks.
Tom Jarman Sue Oppenheimer
Notes for opening remarks by Community R4C barrister Duncan Sinclair on 24th June in the case of Community R4C vs Gloucestershire County Council
This case concerns the largest contract ever let by Gloucestershire County Council.
The value of the contract, and more specifically the huge change in value between first signature and amendment were kept secret.
You have seen that the Council met in open meeting November 2015 (months before contract signature) and one Councillor, Mr Jeremy Hilton, thought that the decrease in savings since the original signature was £37m. He called this
“a financial disaster for the Council”
The public including my clients saw that. BUT we now know from Mr Mawdsley’s evidence for the Council that between the original cost of the contract in 2013 there was an increase in cost of over £140 million. Indeed, it appears that if one adopts the figures of Mr Mawdsley to find a consistent figure for the position as at 2018 the cost may be still higher – over £160m. The result is that GCC agreed in early 2016 to the provision of the same services as agreed in 2013 by paying some 30% more.
We contend that increase in costs was unlawful. Indeed, absent narrow exceptions provided for in the Public Contracts Regulations 2015, it must be: the contract should have been terminated and retendered – see Regulation 72(9).
That is not a minor provision or mere technicality – it derives from the Pressetext case, and a redrafting of the EU and domestic legislation, in light of that case and the principles of the Remedies Directive, to cater for a right to a remedy in just this situation: one which the European Court and the Advocates General have referred to as one of the most severe breaches of procurement law: a complete failure to tender a new contract or a “direct award”.
The Council naturally does not want to have to demonstrate which narrow exception applies, and raises two essentially ‘defensive’ points, hence this hearing of two preliminary issues:
1) Did my clients know about the breach earlier, such that they are out of time? We say no. They didn’t know and they couldn’t know. Even many Councillors didn’t know then or until 20 December 2018. Was Mr Hilton, a Councillor at the time, the only one in the dark, referring to £37m as a financial disaster for the Council? No.
The evidence is consistent and compelling that all but a small cabal within GCC were in the dark. Upon release of the details there was an outcry, including amongst many councillors, MPs and others.
The Council resisted disclosure of even the first contract before the Information Commissioner’s Office and on appeal for 4 years; it resisted disclosure of any details of the 2016 contract through the ICO and by appealing - until it released documents on 20 December 2018.
2) Does CR4C have standing? The legal test being was it an economic operator which suffered or risked suffering damage. The legal terms ‘economic operator’ and ‘risk of damage’ or ‘risk of harm’ have been the subject of a great deal of legal consideration.
My client C4RC is a not for profit organisation that brings this case in the public interest. But charities, universities and other bodies have been found to be economic operators. My client has offered cogent evidence that it would have formed a consortium and bid for the putative contract.
It has, I submit, done more than enough to satisfy this court that the case should proceed to full trial. GCC contend it is too uncertain, that perhaps even we need to meet the burden on a balance of probabilities threshold. As to which, I make three main points:
- As put variously in the cases, this is one of the most serious breaches of procurement law: a failure to tender at all or a “direct award” to use the language often used in the European Courts [AG Kockott in Pressetest]. This is consistent with the need to ensure the right to a remedy and to ensure compliance with the procurement rules. To suggest an applicant can lawfully be excluded from a remedy, let alone from the ability to argue its positive case on remedy, on the basis of a balance of probabilities is wrong in law.
- We are confident having made inquiries that further direct (ie witness) evidence can be obtained from likely consortium partners and others that go to assist this Court in considering – and finding – at final trial that the prospects of not only bidding but winning a putative contract were very significant.
- In the absence of tender, a direct award situation, a party bringing an action necessarily will not have a complete tender document. We have approached the 3 days (now 4) for preliminary issues proportionately: 3 witnesses addressing (i) the shifting and still unclear case on limitation and (2) the (again) shifting and in important aspects still unlawful putative financial and other requirements. There is (unsurprisingly) more evidence going to the risk of loss than could be shoehorned into a hearing on preliminary issues.
Opening 2: CommunityR4C’s motivation in the public interest
C4RC brings this case for non-commercial reasons in the public interest. These include:
- Judicial recognition that GCC breached the law, ultimately signing a revised contract unlawfully that cost it over £140m more than the competitive result signed in 2013.
- There is an ongoing investigation by the Auditor to GCC, Grant Thornton, which has said in November 2018 that (in brief) the issues are too difficult and would need expert advice. A court judgment is more than expert advice, it is binding and of dispositive effect. The auditor may use its powers in light of the findings of the Court at full hearing.
- It is a matter of important principle that GCC obtains the best value for money available on behalf of taxpayers and this is only possible by compliance with the procurement rules.
- Finally, and importantly, if ultimately a breach of procurement law is found at final trial, there will be a solid basis for the UK Government/Courts to find that the uplift of £140m by UBB is unlawful state aid. Any overpayment to date will be recoverable from UBB (GCC may immediately have £10’s of millions to spend on public services) and any future overpayment will not be payable.