Contracting authorities have been waiting for some time for the Court of Appeal's judgment in the case of Faraday. The outline facts set out below may well be familiar.

Faraday Development Limited (part of a consortium bid) was unsuccessful in a non-EU tender process. The tender process in question was run by West Berkshire Council (the Council) for the appointment of a development partner of for the regeneration of the London Road Industrial Estate in Newbury.

Faraday challenged the decision by the Council to award the development agreement to another tenderer, St Modwen Developments Limited (SMDL). In the first instance judgment the High Court concluded that the development agreement did not create an enforceable obligation on SMDL to carry out the redevelopment and so it was not a public contract for the purposes of the EU procurement rules. We commented on the High Court judgment back in October 2016.

However Faraday's recent appeal has been allowed. The Court of Appeal agreed that the development agreement was not a public works contract at the time it was concluded because there were no enforceable obligations. However, the Court decided that the arrangement had to be looked at as a whole and entry into the development agreement was unlawful. In entering into the development agreement, the Council was committing itself to entering into a public works contract in the future without complying with the public procurement legislation. This was in breach of both the Public Contracts Regulations and public law principles.

One of the most striking outcomes of the judgment is that the Court has made a declaration of ineffectiveness in respect of the development agreement and a civil financial penalty will be payable.[1]

It is also worth noting that the Council had sought to de-risk the remedy of ineffectiveness by publishing a “VEAT” (voluntary ex ante transparency) notice but the Court held that the wording of the VEAT was insufficient.

We will be publishing further analysis of the points raised in this key judgment shortly.

 

[1] A summary published by 11 KBW (a barristers’ chambers with two barristers involved in this case) says that the civil financial penalty has been agreed at the sum of £1.