public sector breakfast club, exeter - july 2016

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


• 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


• 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


• 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


• 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”


• 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.


• 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


• 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


• 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…”


• 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


• 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)


• 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


• 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

[email protected]

Jennifer Grigg| 01392 458 773

[email protected]

public sector breakfast club, exeter - july 2016

Government & Nonprofit