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Public sector breakfast club
July 2016, Exeter
Legal update
Jennifer Grigg
Agenda
• Changes to the Public Contract Regulations
• Automatic Suspension and Damages
• Ineffectiveness
Changes to the Public Contract
Regulations 2015
• Public Procurement (Amendments, Repeals and
Revocations) Regulations 2016
Regulation 72 - ModificationRegulations 72(1)(b) now reads:
“(b) for additional works, services or supplies by the original contractor that
have become necessary and were not included in the initial procurement,
where a change of contractor—
(i) cannot be made for economic or technical reasons such as
requirements of interchangeability or interoperability with
existing equipment, services or installations procured under the
initial procurement, and
(ii) would cause significant inconvenience or substantial
duplication of costs for the contracting authority,
provided that any increase in price does not exceed 50% of the value of the
original contract;”
Sixth Form College Corporations
are now excluded from some
Regulations
• Regulations 106 and 108 – Provision of information
on Contracts Finder
• Chapter 8 – Below Threshold Procurements
Automatic Suspension, Damages
and No For Profit Providers• Regulation 95 – Automatic Suspension
• Regulation 96 – Interim Orders
– “If regulation 95(1) were not applicable, it would be
appropriate to make an interim order requiring the contracting
authority to refrain from entering into the contract”
• American Cyanamid Principles:
- Is there a serious issue to be tried?
- what is the balance of convenience?
Kent Community Health NHS Foundation
Trust v NHS Swale Clinical Commissioning
Group and another [2016] EWHC 1393
(TCC)
• There is a serious issue to be tried
• The court will not and should not rule on which provider will best
serve the public, and will only comment on whether the
procurement process was flawed
• On the basis that the balance of convenience was finely balanced,
the court maintained the status quo
Implications
• The fact that a supplier is ‘not for profit’ does not mean that
damages can be an adequate remedy
• The court should consider the interest of the members of the
public who would be affected by the decision, but this is difficult
when faced by two bodies with the same responsibilities to the
public taking opposing views on what is best
• The risk of the contracting body paying twice for a service can only
be considered if the claimants success is “virtually certain”
Ineffectiveness
• Regulation 99 – Grounds for Ineffectiveness
1. Failure to advertise in accordance with the
PCR 2015
2. Breach of standstill requirements or
automatic suspension
3. incorrect award under a framework or DPS
• Regulation 100
“overriding reasons relating to a general interest require tat
the effects of the contract be maintained”
Lightways Contractors Ltd v.
Inverclyde Council [2015] CSOH 169
• Mini Competition held under Crown Commercial Services
Framework RM 869
• Winning bidder was a joint venture company and is part of the
same group of companies (Amey) as a supplier on the framework
• Lightways argues the contract has not been properly advertised
• Inverclyde argue it was an admin error and would be
disproportionate to rule ineffective
Lightways v. Inverclyde
• This is the first declaration of ineffectiveness to be granted in the
UK
• No decision on the civil financial penalty which must accompany
the order
• Inverclyde have been granted leave to appeal the decision
• The judge conceded that proportionality could be a relevant
consideration when applying Regulation 100
Procurement
• Membership of the EFTA and the single market
• Agreement on Government Procurement (GPA)
• Change in the law and ‘buy local’
• State Aid Rules and the Agreement on Subsidies
and Countervailing Measures
Data Protection
• No effect on the Data Protection Act 1998
• The upcoming General Data Protection Regulation
(GDPR) will take effect in May 2018
• Changes and ‘Adequacy’
• Data storage and Visa
Questions?
Case law update
Lynne Rathbone
What are we going to look at?
Some recent case law on:
• Oral variation of contract
• Disclosure of information under FOIA request
• Penalty clauses
Variation of contract
• If a contract contains an anti-oral variation clause,
is that sufficient to prevent the parties from
varying the contract by oral agreement or by
conduct?
• Globe Motors, Inc & Ors v TRW Lucas Varity Electric
Steering Ltd & Anor [2016] EWCA Civ 396
Variation of contract
• Contract included a standard anti-oral variation
clause (any variation must be in writing and signed
by the parties etc).
• Court of Appeal indicated (obiter) that inclusion of
such a clause will not prevent subsequent variation
of the contract orally or by conduct
Variation of contract
• Basic principle of contract law – that the parties
are free to agree their contract terms, and to
subsequently vary them by agreement
• Evidentiary issues aside (and excluding certain land
deals) … an ‘agreement’ to enter into a contract,
or to vary an existing contract, can be made orally,
by conduct or in writing
Variation of contract
• In Globe Motors, Counsel for TRW:
– argued in support of the ant-oral variation clause on
the basis of certainty of contract and avoidance of
frivolous claims of oral agreement by the parties
– cited earlier CA decision in United Bank Ltd v
Masood Asif [2000] EWCA Civ 456 (which upheld an
anti-oral variation clause) to support their position
Variation of contract
• Court of Appeal rejected those arguments stating:
– “the parties have freedom to agree whatever terms
they choose to undertake, and can do so in a
document, by word of mouth, or by conduct. The
consequence in this context is that in principle the
fact that the parties’ contract contains a clause
such as [the anti-oral variation] does not prevent
them from later making a new contract varying the
contract by an oral agreement or by conduct”
Variation of contract
• In making its obiter comments the court considered
(and sought to clarify) previous conflicting case law
in this area (High Court and Court of Appeal)
including United Bank v Asif and also World Online
Telecom Ltd v I-Way [2002] EWCA Civ 413
• Obiter comments - followed by subsequent CA
decision in MWB Business Exchange Centres Ltd v
Rock Advertising Ltd [2016] EWCA Civ 553
Variation of contractIn MWB, the Court of Appeal found that an anti-oral variation clause in
a written agreement did not preclude any variation of the agreement.
It endorsed the obiter comments made by the Court of Appeal in Globe
Motors, that including an anti-oral variation clause in a contract would
not prevent a subsequent variation of the contract, made orally or by
conduct.
Parties can include terms regulating how a contract can be varied, but
equally they can subsequently agree to vary or discharge the contract
by any means they may agree.
Variation of contract
• In MWB the Court of Appeal
– clarified law on effectiveness of variation clauses
– endorsed the obiter comments by the Court of
Appeal in Globe Motors and confirmed:
parties can include terms regulating how a contract
can be varied, and they can also subsequently agree
to vary or discharge the contract
Inclusion of anti-oral variation clause does not prevent
subsequent variation orally or by conduct
Suggestions?
• Still include an anti-oral variation clause in the
contract! Evidence of intention of parties
• Evidencing the terms of any variation (or lack thereof)
will be key
• Adopt good practice in contract management
• Set out clear contract management procedures and
make sure they are followed!
• Properly document discussions and any changes
• Consider limiting the authority of representatives
Freedom of information
• Freedom of Information Act 2000 (FOIA)
• S1 General right of access to information held by
public authorities
– (1) Any person making a request for information to a
public authority is entitled –
(a) to be informed in writing by the public authority
whether it holds information of the description
specified in the request, and
(b) if that is the case, to have that information
communicated to him
Freedom of information
• Barnes v Information Commissioner and Stoke on
Trent City Council (EA/2015/0222) (14 April 2016)
(Information Tribunal)
• Whether the minutes of a Local Safeguarding
Children Board (LSCB) are held by the Council for
purposes of FOIA and therefore subject to
disclosure
Freedom of information
• Background – in 2014 FOIA request was made by the
appellant to Stoke on Trent City Council (Council):
– “Please provide copies of the minutes of the S-o-T
Children and safeguarding board meetings and any
executive or sub meetings held in the last two years
held by the LA representatives of that board. I
would be interested in any information held by your
organisation regarding my request…”
Freedom of information
• Council refused the request, relying on s3(2)
exemption, stating that the information was held
on behalf of the LSCB and therefore not subject to
FOIA disclosure requirements
• s3(2) For the purposes of this Act, information is
held by a public authority if –
– (a) it is held by the authority, otherwise than on
behalf of another person
Freedom of information
• Not easily deterred, the appellant (over 2 yrs)
– Requested an internal Council review (which upheld
the original Council decision to refuse disclosure)
– Complained to the Information Commissioner (who
after thorough investigation upheld the decision of
the Council to refuse disclosure)
– Appealed the Information Commissioner decision to
the Tribunal (who upheld the Council and
Commissioner’s decisions and dismissed the appeal)
Freedom of information
• It wasn’t disputed that the LSCB was not a ‘public
authority’ for the purposes of FOIA
• Question was in what capacity the Council was
holding the LSCB minutes – on its own behalf or on
behalf of the LSCB
• Tribunal confirmed that unless the information is
held by the Council for its own purposes then it is
not discloseable under FOIA
Freedom of information
• Tribunal accepted Council position that:
– scrutiny role of (council) members of LSCB is an
activity they perform on behalf of LSCB not on
behalf of Council
– Council was able to distinguish between a member’s
Council duties and their role on the LSCB
Freedom of Information
– members’ expectation were such that minutes are
held by the Council on behalf of LSCB and are to be
used purely for purposes of fulfilling their statutory
function as members of LSCB
– non-member Council officers would not have access
to the LSCB minutes
– LSCB minutes were not otherwise published or
disclosed
Suggestions?
• Clearly the way in which information is held and
used by the Council is, and will continue to be,
subject to close scrutiny
• Where information is held by the Council on behalf
of another body, strict policies and procedures
must be put in place and adhered to in order to
distinguish it from information held by the Council
for its own purposes and to protect it from FOIA
disclosure requirements
Penalty clauses
• Where a contract term provides for some remedy
that takes effect on breach, as an alternative to
standard right of action for damages (most usually
payment of a specified sum) it may be deemed an
unenforceable ‘penalty’ if it falls foul of the rule
against penalties
• So what are the rules?
Penalty clauses
• The previous test (‘old test’) – ie. is it a genuine
pre-estimate of loss and therefore compensatory
or is it really a deterrent and therefore likely to
be deemed a penalty clause - was established by
Lord Dunedin in Dunlop Pneumatic Tyre Co Ltd v
New Garage and Motor Co Ltd [1915] AC 79 and
stood true for a hundred years…
Penalty clauses
• … until the 2015 Supreme Court judgement in
Cavendish Square Holdings BV v Talal El Makdessi
[2015] UKSC 67 which introduced a ‘new test’
• The new test looks at whether the clause is ‘out of
all proportion’ to the innocent party’s legitimate
interest in enforcing it
• Why? In complex cases may be clear that a breach
will cause loss/damage to your business but may be
difficult to quantify what the loss will be
Penalty clauses
• New test –
– is the clause out of all proportion to the innocent
party’s legitimate interest in enforcing it?
– focus is on whether the clause is ‘unconscionable’ or
‘extravagant’ not whether it is a ‘genuine pre-
estimate of loss’
– possible for a clause to be commercially justified
and yet still be a deterrent against specific breach
Penalty clauses
• Cavendish Square: (share purchase with deferred
payments and restrictive covenants) provided that if
the sellers breached certain restrictive covenants the
buyer did not have to pay any future payments of the
price, and that the sellers would lose their put options,
were NOT unenforceable penalties as the buyer had a
legitimate interest in ensuring the observance of the
restrictive covenants to protect the future goodwill of
the business it was purchasing
What now?
• Old test will still apply in the majority of cases –
genuine pre-estimate of loss?
• New test may be applied by the courts in complex
cases – gives more flexibility in certain
circumstances
• In the recent banking case of Edgeworth Capital v
Aabar Block [2016] EWCA Civ 412 – court followed
new test – clause was enforceable/not a penalty
Questions?
Contact us…
Lynne Rathbone| 01392 458 739
Jennifer Grigg| 01392 458 773