Update: local government

The recent decision in Parkwood Leisure Limited v Alemo-Herron and Ors [2010] EWCA Civ 24 has bought to the forefront the divergent position of the tribunal in Whent and Ors v Cartledge [1997] IRLR 153 and the ECJ decision in Werhof v Freeway Traffic Systems Gmbh and Co KG, in respect of the application of TUPE and collective agreements (case C-499/04).

In Whent it was held that, following a TUPE transfer, where an employee's contract incorporates a collective agreement, the employee will be entitled to the benefit of any subsequent increases in salary that are set out in the collective agreement irrespective of whether the new employer was a party to any negotiations on the collective agreement. Conversely, in Werhof, the ECJ held that the new employer, in similar circumstances, is only bound by the terms that are in force at the time of the transfer.

In Parkwood, an employee who originally TUPE transferred from the London Borough of Lewisham to CCL Ltd and then subsequently to Parkwood Leisure Limited was under their original employment contract entitled to be paid in accordance with the terms of the collective agreement negotiated by the National Joint Council for Local Government Services (NJC). Following the transfer to Parkwood Leisure Limited, the NJC negotiated a new collective agreement, to which Parkwood Leisure Limited was not a party, for further pay increases. Parkwood Leisure Limited refused to recognise the pay increase and a claim for unlawful deduction of wages was brought.

It was held that in accordance with the ruling in Whent, employees are entitled to benefit from subsequent pay rises contained within collective agreements.

This ruling is significant for public sector entities wishing to outsource services involving a TUPE transfer of staff, where there is a public sector collective agreement that does not enable any individual employer to control the negotiations. It is likely that private sector contractors will only accept this risk by pricing for any potential increases within their cost proposals, thus increasing the cost to the public sector of outsourcing the services. Parkwood Leisure Limited lodged an appeal where the Court of Appeal has upheld the static interpretation of TUPE set out in the Werhof case.

Remedies regulations

The Public Contracts (Amended) Regulations 2009 (SI 2009/2992), implementing the Remedies Directive (2007/66/EC) came into force on 20 December 2009. These regulations raise two interesting points. First, there is a question of when the regulations apply. The OGC Guidance provides that they only apply to procurements commenced after 20 December 2009; however, as the directive makes no reference to excluding procurements made prior to this date, there does not appear to be any guarantee that procurements which commenced but had not concluded by 20 December will not be required to comply with the new requirements set out in the Remedies Directive.

Therefore, procuring authorities that have commenced a procurement before 20 December, but not concluded it, may wish to consider complying with the provisions of the regulations in respect of debrief and contract award to minimise the potential risk of challenge.

Second, and most significantly, the regulations amend the previous position that if a contract had been entered into, the only remedy for claimants was damages. Now, under the new regulations, the remedies available are that a contract may be declared ineffective or shortened, or the procuring authority could be fined.

The remedy that a contract may be declared ineffective is particularly significant in large outsourcings such as PPP projects as the new provisions are likely to impact and cause further issues in respect of funding within the sector, where the contracts are not certified contracts.

Contractors may be able to take comfort from the fact that a declaration for ineffectiveness cannot be made if there are overriding reasons in respect of the general interest that provide that the contract should be maintained, although economic interests will generally not be considered an overriding reason.

We are therefore likely to see an increase in the amount of litigation brought by unsuccessful bidders, where authorities have failed to comply with the new regulations, and additional due diligence and a possible reluctance by contractors to enter any high-value contracts given the risk of a contract being declared ineffective.

Extension of limitation period in procurement challenges

The recent case of Uniplex (UK) Ltd v NHS Business Services Authority (C-406/08), has wide-reaching implications for challenges bought under the Public Contracts Regulations 2006 and judicial reviews as this case effectively extends the period in which disappointed bidders can challenge procurement decisions.

The ECJ in this case was asked by the High Court to consider two questions in respect of the compatibility of the regulations and directive (89/665).

The first question was when time is deemed to run from. The regulations provide that any challenge should be bought 'promptly and in any event within three months from the date when the grounds for bringing proceedings first arose'. However, it was held that this was not in accordance with the directive. Instead it was clarified that time would only start to run from the date 'on which the claimant knew or ought to have known of the alleged infringement'.

As such, time will not commence when a decision is made and the unsuccessful bidder told of the decision, but rather from when the unsuccessful bidder has had the opportunity to review the reasons for their elimination from the procurement and been able to come to an 'informed' view on whether there has been an infringement. When a claimant may be said to be 'informed', however, remains unclear.

Second, the ECJ was asked whether a requirement for 'promptness' in bringing proceedings was consistent with the directive.

It was held that while the requirement for 'promptness' was in accordance with the directive requirements for tenderers to challenge promptly, the assessment of 'promptness' afforded the national court too much discretion, giving rise to lack of certainty contrary to the directive's provisions. It was therefore held that such a provision should be precluded. The OGC have issued a policy note on this case supporting the ECJ's interpretation and is reviewing the regulatory provisions to ensure they are clear.

This ruling could have profound implications in practice for procuring authorities as there will be greater uncertainty as to whether a challenge period has passed. This is significant in large projects where ordinarily we would expect to see that the project programme has factored in a three-month challenge period before any major works are carried out. This ruling could mean that future projects are carrying out major works while at risk of challenge as they cannot extend the programme to take account of an additional but unknown period for challenge.

Disability and public authority decision-makers' duty

The recent decision in R (Boyejo and Ors) v Barnet London Borough Council and R (Smith) v Portsmouth City Council [2009] EWHC 3261 (Admin) highlighted the need for local authorities to ensure that any decision makers have due regard to the obligation to take account of a disabled person's disability when discharging their functions.

In this case it was claimed that both Barnet and Portsmouth respectively failed to take account of a disabled person's disability in accordance with the requirements of section 49A (1) of the Disability Discrimination Act 1995 when considering replacing residential staff employed in sheltered accommodation with non-residential staff, together with failing to consult with the disabled people in contravention with the authorities' disability-equality schemes.

Section 49A of the Act imposes a general duty on all local authorities to have due regard, among other needs, to a disabled person's disability, to try to eliminate disability discrimination and to encourage participation by a disabled person in public life in discharging their functions.

It was held that both authorities had failed to take account of these provisions. Although both local authorities were deemed not to have had due regard to the Act, the lack of reference to the Act in the reports was not held to be conclusive evidence of a failure to take account of the Act's provisions. It was held that local authorities, in considering the provisions of the Act when making any decisions, should show that 'the duty is exercised in substance with rigour and an open mind'.

It was also held that the fact that Barnet and Portsmouth had a disability equality scheme in place raised a legitimate expectation that disabled persons would be consulted in any decisions that would affect them.

In the case of Barnet, appropriate consultation was deemed to have taken place, although in the case of Portsmouth the consultation they had carried out was not sufficient or appropriate to have due regard to the opinions of those affected.

This ruling is a reminder for all public sector entities of the importance of keeping clear records of all discussions and ensuring compliance with the procedures in terms of legislative requirements, statutory codes and internal procedures and policies, in respect of disability and in all decisions, as there is an ever-increasing number of claims and challenges being brought against local authorities.

Immunity from planning enforcement action can be obtained by deceit

The surprising outcome in the Court of Appeal decision in Welwyn Hatfield Council v Secretary of State for Communities and Local Government and Anor [2010] EWCA Civ 26, as reported on solicitorsjournal.com on 3 February 2010, essentially appears to endorse deceiving the planning authorities in order to obtain consent.

Mr Beesley applied for planning consent for a barn that was granted in December 2001. In breach of the permission, Mr Beesley erected a dwelling and from August 2002 lived there with his wife. In August 2006, Mr Beesley applied for a certificate of lawful use of the building (CLEUD) as a dwelling.

The council refused the application and Mr Beesley appealed.

The Court of Appeal held that Mr Beesley had clearly deceived the planning authority in originally applying for planning permission. Mr Beesley had, through his deception, been in breach of sections 171B(1) and (2) of the Town and Country Planning Act 1990 as the planning permission was granted for the erection of a barn, but a dwelling house was built. As such the construction had not been carried out in accordance with the granted planning permission. It was also held that the planning permission specified the use was for a barn and that the building had been used as a dwelling in contravention which constituted an unapproved change in use.

However, the Court of Appeal clarified that, in respect of the two breaches, any enforcement action was required to be brought within four years and that in this instance the council was time-barred.

The end result, which was the quashing of the council's decision to refuse to grant Mr Beesley a CLEUD, is interesting insofar as, in the words of Lord Justice Mummery, it saw that a 'public authority deceived into granting planning permission by a dishonest planning application, could be required by law to use an official certificate to the culprit consolidating the fruits of the fraud'.