The Court of Appeal ruled this week that West Berkshire Council breached procurement rules when it awarded a “development agreement” to a developer.
The case examines the circumstances under which a decision by a public body to give work to a company becomes a “public works contract” and therefore governed by procurement rules.
The case was brought by Faraday Development and relates to a decision by West Berkshire Council to enter into an agreement in September 2015 for the disposal of land on an industrial estates in Newbury to another company, St Modwen Developments.
According to the ruling, Faraday, which held plots on the land that it had been given planning permission to redevelop, made a bid to the council in 2014 to redevelop the whole plot.
However, the council chose St Mowden’s bid instead. Although it had not run a procurement exercise, the council had been advised by estate agent Strutt & Parker that St Mowden had “more expertise”.
Faraday sued, saying that the “development agreement” between St Modwen and the council was the equivalent of an award of public work, meaning there should have been a procurement exercise.
Faraday lost at the High Court as the judge found that, as there was no “express obligation” when the development agreement was granted for St Mowden to carry out the work, it was not equivalent to an award of public work.
But in a ruling this week, a three-judge panel at the Court of Appeal disagreed.
In a ruling written by Mr Justice Lindblom, the court found that when the development agreement was made, both sides had committed themselves contractually to something that would, in future, constitute “public works”, without a procurement process.
“By entering into the development agreement, therefore the council effectively agreed to act unlawfully in future,” he said.
The ruling said that the remedy should be decided after another hearing.
Faraday Development v West Berkshire Council
Court of Appeal (Lewison LJ, Lindblom LJ, Flaux LJ) 14 November 2018
